More on education vouchers

Liberals, following the arguments of Milton Friedman, claim that school choice through the use of vouchers would improve outcomes. Parents would use the vouchers and vote with their feet, thereby encouraging competition among private and public schools and improving learning outcomes. But do they?

The latest evidence to the contrary comes from Sweden. In the early nineties, Sweden instituted far-reaching reforms by introducing school vouchers, which has paved the way for Sweden having more children going to private for-profit schools today than in any other developed country. However, despite encouraging early signs, evidence from the latest PISA ratings show a steep decline in the performance of Swedish children.

This prompted a massive external regrading exercise of the nation-wide standardized tests administered in 2010 and 2011 on over 50000 students of all grades in over 700 schools. The objective was to examine the quality of grades achieved by students in the standardized tests, which, unlike the SAT tests, are graded locally, often at the same school where test takers are enrolled. A study of the results by Bjorn Tyrefors Hinnerich and Jonas Vlachos found,

In Sweden, according to the study by Hinnerich and Vlachos, the scores issued by external evaluators were indeed harsher than those assigned by internal graders. And after accounting for things like a school's location, along with basic student characteristics, it turned out that the external evaluators had downgraded the scores for students at voucher schools much more than for students at government ones. In fact, a sizeable portion of the much-vaunted out-performance of voucher school students could be chalked up to nothing more than easy grading. More surprising still, the voucher school grade inflation is almost as high for math and science (where you'd think an answer is either right or wrong) as it is for Swedish. 

So why did competition fail to generate the desired outcomes?

In Econ 101 we learn that markets work their magic when buyers and sellers are well-informed about what's getting bought and sold, and can therefore transact with one another without fear of getting conned. The apparent failure of the Swedish schooling experiment is a lesson in the inability of markets to solve problems where it's hard to compare the educational "product" that's offered, and the outcomes you can observe are subject to manipulation. It's also a reminder that the cold, hard calculations of markets aren't necessarily suited to the realm of education. Governments don't shut schools because they fail to turn a profit. Private equity firms do. The parents of more than 10000 students learned this difference the hard way last year, whern the Danish private equity group Axcel abruptly announced its exit from the Swedish school market, stating that it could no longer cover the continued losses.