Sunday, October 18, 2009

More on vouchers and school choice

I have blogged earlier about the utility of vouchers as a means to promote school choice for students and thereby increase competition among schools and improve educational standards. Economists like Gary Becker have claimed that vouchers are more efficient and effective alternative to subsidized public schools. Karthik Muralidharan has this excellent articulation of the effectiveness of the voucher program in improving educational outcomes.

However, evidence from the evaluations of school voucher programs in Latin America suggests that the verdict is far from conclusive. Further, it can also be argued that school choice and vouchers, while improving choice for children, is less likely to improve the general educational standards.

Theoretical analysis of social and public interventions by governments, with its defined set of various logically consistent outcomes, will tend to exclude those outcomes that are an unpredictable (or unexpectedly emergent) result of the multi-dimensional interaction between the myriad agents, institutions, and the larger environment. There are far too many factors (to always accurately factor in), whose complex interaction unleashes unpredictable dynamics that tend to deflect outcomes from those expected or forecast.

In the case of voucher interventions, it may be too facile to assume that once we provide choice, parents - rich and poor - will send their children to the better schools (private or public) and in the process incentivize schools to remain competitive and also have a mix of rich and poor children. This works on the assumption that parents school choice decision is a function of only school quality (defined mainly by student performance records) and affordability (in terms of fees) is the only constraint facing them.

However, in practice it has been found that there are a myriad other constraints facing parents when they make school-choice decisions. For example, some of the commonest entry barriers to private schools, faced by children from poor families include large and unaffordable expenditures on school uniforms and books, extra-curricular activities and so on. Then there are the institutionalized social and cultural constraints associated with studying in such environments, that are more debilitating on children from underprivileged families. Geography, in so far as the good private schools are likely to be situated closer to or within richer areas and away from the poorer areas, may also play an important role in determining school choice.

These socio-economic environment specific constraints exhibit varying strengths, which in turn plays a crucial role in determining outcomes. In the real world, they can even dwarf the beneficial effects of school choice. Here is just one illustration of how these factors interact to produce sub-optimal or even adverse consequences.

In an environment where government schools are impervious to competitive pressures (say teachers have assured employment and schools cannot be closed down) and where societal forces (say, caste or religion) exert considerable influence, vouchers may achieve limited success and could even be detrimental. It could end up "crowding out" the best and brightest among the poor children in the locality away from the government schools and into the private school, thereby depriving these government schools off the valuable positive externalities generated from the presence of these children. (Note: In case of these children, some of the aforementioned constraints are overcome through scholarships, the positive externalities enjoyed by the private school due to their presence etc).

The government school would therefore be deprived off its best talents and the resultant positive externalities on the remaining children. In the circumstances, the vouchers could end up making private schools more competitive and leave the government schools even more impoverished. The private school, by attracting the best talent, becomes even more segregated (performance-wise) from the government schools, and a two-track schooling system, with even greater outcome disparity, emerges.

The result is that the final outcomes mirror the different versions of Schelling's chessboard experiment, with its distinct pattern of segregation. The good private schools will end up cherry-picking from the full range of students, rich and poor, and thereby benefit from the presence of good students and good teachers, while the government schools, especially in the poorer areas, will be left with the remaining students.

The aforementioned example is yet another instance of market failure that leads to outcomes that lets efficiency trump over fairness. In the process of allocating schools based on individual choice, it is presumed that the most efficient set of outcomes emerge. However, this efficiency overlooks the strong possibility of unfairness in the emergent outcome, an eventuality which often leaves government schools and its students short-changed.

All this does not mean that vouchers are ineffective, but only highlights the importance of socio-economic constraints that play a vital role in determining the final outcomes. It is therefore important that the socio-political and economic environment in which vouchers are implemented is carefully analysed and factored into any such policy decision. In other words, vouchers require a complementary set of policies for their success.

As I have blogged earlier, urban areas, with its more competitive government schools, smaller geographical limitations, favorable communal and racial mixtures, and much larger spectrum of choice, are a more likely context for successful implementation school vouchers. The costs associated with the possible failure of a voucher program (in improving standards in government schools) is far smaller in urban environments than in rural areas.

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