Carol Platt Liebau: More on Vouchers

Friday, August 17, 2007

More on Vouchers

Coyote here.

Schooling, like other service-intensive businesses, has high fixed costs. This means a small decrease in sales leads to substantially worse economic performance.

This is relevant to a blogger's recently expressed concerns that many failing public school parents are so hopeless that they will not use the vouchers and that the programs will therefore not have any meaningful effect.

If only 10%-15% of voucher-eligible parents move their children to different schools, the school experiencing the departure will suffer a disproportionately large economic shock. (For example, if three children in a class of 25 leave, revenue goes down 12%, but the cost of the teacher, space, utilities, etc., remains the same. Likewise, the school enjoying the influx will get a large economic boost. If class size goes from 20 to 23, revenue goes up 15%, but costs largely remain the same. (There are refinements to this argument since the supply curve is "lumpy": at some point the successful school will have to hire another teacher and expand to keep class-size reasonable, but I stand by the basic point)). A market punishment/reward, therefore, need not involve a large number of students to be effective.

In addition, the outflow will demonstrate to the hopeless that there is hope. People will see where the grass is greener and start to follow.

I also believe the poor do understand and respond to economic signals. Witness what happened to birthrates in the relevant demographic with the 1996 Welfare Reform Act.

The teachers' union must certainly believe vouchers will have a meaninful effect or the unions or they would not fight the programs so hard.

Finally, what's wrong with experimenting with different types of voucher programs if the schools are failing and the parents currently hopeless?


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