Competition and education

Published 10:22 pm Wednesday, October 1, 2014

The numbers definitely indicate that Alabama’s K-12 education system is in desperate need of improvement. For instance, a recent U.S. Chamber of Commerce state-by-state comparison recently gave Alabama F’s in 9 of 11 categories. The percentage of Alabama 9th graders graduating from high school in 4 years is among the lowest in the nation. And only 20% of Alabama students score ready for college in all four tested subjects on the ACT college entrance exam.

The latest contribution to the Johnson Center’s Improving Lives in Alabama project by Dr. John Merrifield and Jesse Ortiz of the University of Texas at San Antonio considers how to improve K-12 education. Last week I discussed the authors’ documentation of the failure of class size reductions and increased spending to improve education. This week I turn to their vision for reform.

School reformers offer many proposals, from vouchers and tax credits to charter schools, school choice and even home schooling, and often become diehard defenders of their favored reform. Merrifield and Ortiz emphasize that Alabama’s long term goal should be a competitive education market. Our economy relies on competition to supply the vast majority of goods and services and keep costs under control. Competition can also work for education.

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Competition provides incentives for suppliers to tailor products to the wide-ranging interests and tastes of consumers. As an example, consider the variety of apps available for smart phones. Vigorous competition will then result in a diverse menu of choices for students and parents. The options will likely involve modes of instruction and perhaps entire schools with specialized curricula. Merrifield and Ortiz reference a sports-themed school in New Zealand which taps students’ interest in sports to motivate learning about math and other subjects. The availability of a menu of options is critical for specialized schools to work, as the sports theme would bore many students.

Funding is the key to competition. School choice has always existed for wealthy families able to afford private school tuition. But the playing field is not level: tax-supported public schools charge no tuition, while parents must pay for private or home school options out-of-pocket, in addition to paying taxes to support public schools. A level playing field, achieved through either tax credits for tuition or vouchers for children from poorer families, will jump start real competition.

The tax credit or voucher should be set equal to the entire amount of per pupil public school spending, and not just the portion from state funds as under the Alabama Accountability Act. Schools should also be free to charge tuition in excess of the tax credit amount, with parents adding on dollars. Competitive prices are set by the market; requiring schools to accept the voucher or credit as full tuition introduces a type of price control. A diverse menu of schooling options including more expensive options than our traditional public schools should not be ruled out by law. Prohibiting tuition add-ons particularly hurts students from middle or lower income families. Suppose tuition to a top private school was $4,000 more than the tax credit or voucher amount. Many parents might be able to pay the extra amount but be unable to pay the entire tuition. High tuition also provides an incentive to imitate highly successful schools.

A competitive market for education could still include a role for public, or more accurately, government-run schools. The menu should definitely include schooling options which do not charge tuition beyond the tax credit or voucher amount, which government schools could ensure. Merrifield and Ortiz argue that many current public school teachers would benefit significantly from a more competitive education market. Outstanding teachers who attract and retain students would be in great demand in a competitive market. The excellence of America’s public universities, as the international renown of America’s higher education system demonstrates, can serve as a model for our elementary and high schools.

Competition supplies Americans with food, clothing, shelter, and other necessities of life. Some people will say that education is “too important” to be left to the market. But Alabama’s children deserve an education of comparable quality as the clothes they wear to school.

Daniel Sutter is the Charles G. Koch Professor of Economics with the Manuel H. Johnson Center for Political Economy at Troy University and host of Econversations on TrojanVision. Read more about Improving Lives in Alabama at


About Dan Sutter

I am the Charles G. Koch Professor of Economics with the Manuel H. Johnson Center for Political Economy at Troy University.

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