Posts Tagged ‘school choice’

community colleges vs for-profit colleges

Wednesday, May 27th, 2015

Please excuse my persistence, but I am posting a second portion of the interview with Harvard economist Claudia Goldin. The interviewer asked Professor Goldin why, in the United States, is there such a proliferation of for-profit colleges? Ms Goldin explained that the for-profits have advantages over community colleges that permit them to charge higher tuition charges and still attract students. These advantages are very important for poorly prepared, poorly funded, working students.

If you go to a community college, you may encounter various barriers; the courses you want are all full, or they’re only offered at times when you can’t attend because you have to work. Plus, many students arrive unprepared and might not have taken (or understood) algebra, for example. So they have to take remedial courses; they have to pay for these courses and find time to attend them, and yet they get no credit for them toward graduation.

But if they walk across the street to the school they’ve seen advertised on public transportation or on late-night TV, they will find a school that is going to help them apply for their Pell Grant and a student loan. It’s going to provide career counseling and it’s not going to make them take remedial courses. For-profits really know how to get people in the door. But students end up with very big bills, and those loans have to be paid off at some point.

But, do graduates of for-profit schools do well in the job market? Goldin’s finding is precisely what I would expect (No!), so is not very interesting, at least to me. What is interesting is the design of the research project set up to answer the question. Here is the intuition, in the words of Ms Goldin.

We don’t have IRS [income tax] records matched with where a person earned their degree. So what I did with David Deming, Noam Yuchtman, Amira Abulafi, and Larry Katz was to conduct an audit study. We sent out resumes designed to look like real resumes, but we varied them by where the person went to college, either a for-profit college (online or brick-and-mortar), a nonselective public college (where the students in many ways are indistinguishable from the ones who go to for-profit colleges), or a selective public college. We sent them out for two major types of jobs, business jobs and health jobs, and within those types, to jobs requiring or not requiring degrees. We then compared callback rates. Callback rates aren’t perfectly mapped onto what people eventually earn, but if people don’t get called back they’re not going to do well in the job market. We found the callback rates for business jobs were considerably lower for the candidates from the for-profit schools, particularly the online ones.

Interview/Claudia Goldin“, Federal Reserve Bank of Richmond, Econ Focus (Fourth Quarter 2014), pp. 24-28.

The research that Professor Goldin summarizes is circulating as NBER Working Paper No. 20528, issued in September 2014.

There is more of interest in the full interview, which I recommend you download and read.

free schools (friskola) in Sweden

Thursday, August 28th, 2014

Six years ago, while updating an essay on education published in Economic Affairs (December 2004), I reviewed a radical reform begun by Sweden in 1992. Sweden’s embrace of free choice and competition impressed me. Here are highlights from pp. 14 and 15 of the 2008 update.

Prior to 1992, Sweden’s school system allowed for little choice. Government assigned pupils to their closest school, and parents had little to say in the matter, short of moving to a different neighbourhood. Very few private schools existed; most were faith-based and accounted for less than one percent of students in compulsory schooling, which in Sweden is nine years starting at age 7.

In 1992 everything changed. Anyone can now open a school, and municipalities are required to finance it on the same per-pupil terms as a government school. ….

There are no restrictions on ownership of private schools. Schools can be and are run by religious groups (Christian, Jewish, Muslim), teachers’ co-operatives, parents’ co-operatives or for-profit corporations. If a registered school attracts and retains students, it receives funding from the students’ respective municipalities. Sweden has created a market for schooling, but it is a very egalitarian market because there is no price competition and each consumer has the same access to schools. Precisely because Sweden does not allow private schools to charge fees or select students, its system has attracted criticism from libertarian groups …..

By no means all Swedish parents have deserted government schools, but the private share of enrolment has increased, and came to exceed 10 percent in 2008. Surprisingly few of the new private schools are faith-based, but many are run for profit, some as chains of schools. ….

Three econometric studies [2003, 2005, 2007] have examined the effect of introduction of school choice on the quality of education in Sweden …. All three studies exploit the fact that private schooling varies by municipality, and all find that everyone gains from competition—pupils who remain in government schools as well as those who choose a private option. The reason this happens is that government schools, faced with competition from private schools, must improve their performance or lose pupils and funding.

Larry Willmore, “Basic education as a human right redux“, MPRA Paper 40478, 28 July 2008.

The private share of enrolment has reached 20% – double the proportion of students enrolled in 2008. Nonetheless, writes FT journalist Helen Warrell, many Swedes are questioning the merits of their schooling reform.

Two decades on from the audacious experiment in opening up state education to the market, a fifth of pupils, or about 312,000 children, attend [independently run free schools, known as] friskola. Of these, two-thirds go to institutions run by companies rather than co-operatives or charities ….

No other European country has entrusted so much of its children’s education to private companies. ….
Swedish schools
But as friskola have proliferated, Sweden’s confidence in for-profit schools has been shaken. Traditionally top of the class in education, Sweden has tumbled in international test rankings, with the OECD’s most recent Pisa results showing scores falling dramatically in reading, maths and science to a position well below the average for developed nations. …. [Pisa is the Programme for International Student Assessment that the OECD administers to fifteen-year old students every three years.]

One of … [the for-profit schools], Rytmus, specialises in music and has a cult following among Swedish teenagers. Lars Ljungman, its headmaster, spent 20 years teaching in the public sector before taking over the free school two years ago.

“I was curious to find out what it would be like because within the public schools it was always said that [the education companies] were so greedy, that they didn’t give to the students,” says Mr Ljungman. “I was thinking about whether I would have less money to spend on my students but on the whole, I have more to distribute for my pupils and teachers.” ….

However,… one Rytmus teacher is less complimentary. “These companies are like parasites, nothing more nothing less,” the teacher says. The expansion of the highly popular Rytmus model … is financially driven …. “Rytmus is like KFC, it is a brand. Expansion is just a way of making more profit. It is about ‘reaching future customers’.” ….

Mr [Jonas] Sjöstedt [leader of the Left party] says there is no question that profitmaking businesses are at fault for the national crisis now known as the “Pisa shock”.

“They’re not [running schools] because they like kids or because they’re interested in education,” he says. “They are doing this because they’re interested in fast money.”

Mr Sjöstedt … admits [though] that drawing a definite link between the poor Pisa results and the increase in private provision is “more complicated”.

“It’s not always the fact that the private schools get worse results … but they do harm [to the system] because traditional municipality schools have to adapt to a market system and they often lose their best pupils,” says Mr Sjöstedt.

This is the most common complaint about free choice in schooling ….. Critics contend that middle-class parents are likely to be drawn to the newer free schools, leaving poorer children stuck in poorly performing older institutions.

Helen Warrell, “Free schools: Lessons in store“, Financial Times, 28 August 2014.

Ms Warrell’s report, though interesting, omits important information and leaves many questions unanswered. A major omission is the fact that privately-run schools receive the same funding per-pupil as municipal schools, and are not allowed to charge top-up fees. Nor are schools, with rare exceptions, allowed to discriminate among applicants for admission.

There is no economic reason, then, for wealthier parents “to be drawn to the newer free schools, leaving poorer children stuck in poorly performing older institutions.” If the attraction of private schools results from advertising and branding (“like KFC”) why, then, should advertising attract a disproportionate number of children from wealthier households? Why do government schools lose their best students to private schools? Do the best students tend also to have wealthy parents?

The stark division of rich from poor, bright from dull, if true, is an anomaly of the reformed Swedish system.

Cochrane on MOOCs

Wednesday, April 2nd, 2014

I often listen to Russ Roberts’ weekly podcast. It is precisely one hour-long, and I almost always learn something. Russ is a very civil – an excellent interviewer who respects alternative views. This week’s podcast examines the experience of a well-known Chicago economist who recently taught his very first MOOC (massive open online course). Download or listen to the podcast at the link below.

John Cochrane of the University of Chicago talks to EconTalk host Russ Roberts about the experience of teaching a massive open online course (MOOC)–a class delivered over the internet available to anyone around the world. Cochrane contrasts the mechanics of preparing the class, his perception of the advantages and disadvantages of a MOOC relative to a standard in-person classroom, and the potential for MOOCs to disrupt traditional education.

Cochrane on Education and MOOCs“, EconTalk Episode Hosted by Russ Roberts, 31 March 2014.

Eight follow-up questions (an EconTalk Extra by Amy Willis) are here.

Next Monday’s EconTalk features GMU economist Bryan Caplan on Education, Signaling, and Human Capital, a topic that also interests me.

Sweden’s finance minister on the US budget debate

Wednesday, April 20th, 2011

Questions for Sweden’s finance minister, Anders Borg, on the US budget mess, and comparisons with Sweden.

Queston: Have you been following the budget debate here in the United States? What’s your sense as an outside observer?

Response: When you look at fiscal restructuring — what the U.S. needs to do — it is very clear that they need to increase taxes and cut expenditures. The most obvious thing to do would be to introduce a VAT. Look at the U.K. They are run by a Tory government — they increased the VAT. Look at Greece — it’s a Social Democratic government, they’ve increased VAT. All of these countries have increased VAT because it’s a broad-based tax with low costs and limited impact on growth.

It’s also quite clear that the U.S. doesn’t have control over its healthcare sector. The cost control of Medicare and Medicaid doesn’t really work. We’ve all seen the Congressional Budget Office projections so it is quite obvious that you need to strengthen the revenue side, but also have much better control of the expenditure side.

Question: I’m not sure to what degree people in Sweden are aware of this, but in U.S. political debates, your country is often used as a kind of code word for socialism, high taxes and a generous welfare state. Do you think this view Americans have of Sweden is still accurate?

Response: During [the Moderate Party’s] period in government, we’ve cut taxes quite substantially. For ordinary people, we’ve cut them the most. We’ve also been restructuring our social welfare system. But our idea is that you can keep social cohesion by giving priority to education, healthcare. Everyone, regardless of income can get good healthcare and good education. We think that we are modernizing the Swedish model, making it more flexible, and trying to keep as much social cohesion as we can.

Joshua Keating, “Sweden’s finance minister on the Portugal bailout, Europe’s recovery, and America’s budget mess“, Passport (FP blog), 18 April 2011.

HT: Mark Thoma.

Sweden’s education reforms effectively amount to a voucher system (without tuition top-ups, residence restrictions or entrance exams), in which public schools compete with private schools on an equal basis. More on the reformed Swedish school system here.

free schools

Friday, February 25th, 2011

Why won’t UK Conservatives, led by David Cameron, use public money to fund private, for-profit schools?

The avowedly social democratic Swedes allowed this when they opened up their school system 20 years ago. Today almost three-quarters of their free schools are run on a for-profit basis. These companies succeed because they are entrepreneurial, and treat parents and pupils like valued customers. ….

Of course such free schools can fail, as can a local authority school. But the answer to this is regulation, not prohibition. All schools should get the same amount of funding per pupil, and must agree not to charge extra fees or select by ability. They should then be held to account for the content and quality of the education they provide. Free schools are run on licence, and licences can always be revoked.

To argue the case on its merits is to miss the point, however. The ban on profitmaking schools has little to do with good policy, and everything to do with politics.

Julian Astle, “Profitable lessons for Cameron’s schools revolution“, Financial Times, 24 February 2011.

The political reality, according to this columnist, is that Mr Cameron’s party “hates the idea”.

Julian Astle is director of CentreForum, a liberal think-tank based in Westminster, London.

Information on Sweden’s educational reform is available here.

China fact of the day

Wednesday, January 19th, 2011

The school system in mainland China is more market-oriented (allows more consumer choice) than the school system of the world’s largest capitalist economy.

[A]s compared with parents in the United States, Chinese parents have more choice of schools for their children. They are not subject to paying a real estate tax, to finance the usually only public school available to their children. The Chinese schools are financed partly by general tax revenue and partly by tuition. There are several public and private schools available to most urban families. The schools are not obliged to accept any student below the standard they set, and thus have different academic standards. Parents have a choice of primary and secondary schools; and schools, public and private, can choose their students.

Gregory C. Chow, China’s Economic Transformation (second edition, Blackwell Publishing, 2007), p. 402.

This might explain. in part, Shanghai’s outstanding performance in PISA, the OECD’s global test of 15-year-old students’ skills in reading, maths and science. In Chinese universities, in contrast, standards are low; as a result, large numbers of graduates are unemployed or underemployed.

Gregory Chow (1929-) is professor emeritus of political economy and econometrics at Princeton University. He is best known for invention of the “Chow test”, a statistical test for structural change in a regression.

Mr Chow grew up in Guangdong province in South China, and moved with his family to Hong Kong in 1937, when the Japanese invaded China. In 1942 he and his family moved to Macao after the Japanese occupation of Hong Kong. The Chow family returned to Guangdong province in 1945 and Gregory entered Lingnan University, transferring after one year to Cornell University. He went on to graduate school at the University of Chicago, where he completed an economics PhD in 1955. He taught first at MIT, then briefly at Cornell before moving to Princeton in 1970.

Swedish simplicity in finance and schooling

Monday, October 4th, 2010

Scott Sumner is full of praise for Sweden, including its radical 1992 reform of education, which grants freedom of choice to all parents of school-age children.

[W]hen it comes to politics and economics, I definitely think less is more.  I was reminded of this when frequent commenter Malavel sent me a new Swedish regulation requiring at least 15% down-payments on all mortgages.  That’s it, no bells and whistles, just 15%. ….

Sweden also has an income tax that is much simpler than ours (yes, I know that’s faint praise), where many (most?) taxpayers simply receive a bill in the mail.  Their vouchers for education don’t require you to live in Milwaukee, or enter a lottery.  Everyone in the country is eligible, and their kids are free to go to any approved school; public, not-for-profit, or for-profit.

Scott Sumner, “Scandinavian simplicity”, The Money Illusion, 3 October 2010.

Sumner notes that the universal voucher system of course “has problems just like any other system”, then cites the following as an example:

One of the first independent schools, Botkyrka Friskola, was started by an ex-communist in a low-income, immigrant suburb of Stockholm. With an emphasis on individual student responsibility, familial involvement, and efficient use of technology, it now has over 2000 students waiting for one of its 240 places and a continuous stream of educators interested in imitating its success.

Public Vouchers and Public Controls

Though public vouchers are invigorating the Swedish education system and broadening the educational choices available to families, they have come with some strings attached. The first of these is the government’s demand that independent schools select their pupils on a first-come, first-served basis. Special exceptions are granted only for siblings of current students, students with special needs, and those who live in the immediate vicinity of the school. Most independent schools are happy to accept students on this basis and would have done so even without this regulation.

The condition makes it difficult, however, for a school to establish a particular learning environment and does nothing to guarantee the equal access it was set up to ensure. Per Svangren, the principal of Botkyrka Friskola, hoped his school would become a challenging, multicultural environment for immigrant families poorly served by the local municipal school but, as its reputation grew, Swedish families in neighbourhoods with better schools began applying early. The school had to take the students who applied first, so it was forced to reject those whom its leaders believed would not only benefit most but also contribute most to the school’s unique environment. As a result, a fundamental aspect of the school’s mandate was compromised. Though they would be rare exceptions, (as experience in Denmark demonstrates) schools established for the academically gifted or those for a particular learning disability are impossible in this environment. It is a loss to Sweden that its politicians prohibit families from choosing a specialized education for their children and prohibit schools from making such educational alternatives available for them.

Fraser Institute, “The case for school choice: Sweden”, Critical Issues Bulletin, September 1999.

You might think that the Fraser Institute, as a libertarian think tank, would be full of praise for the Swedish voucher system. You would be wrong. As I wrote two years ago:

If applicants exceed vacant spaces for a school [in Sweden], those first in the queue are the first to be admitted. Education is financed in part by municipal taxes, so per pupil expenditure does vary by municipality. But the grant per pupil does not vary by school and no school is allowed to charge top up fees regardless of the size of the municipal grant. ….

Precisely because Sweden does not allow private schools to charge fees or select students, its system has attracted criticism from libertarian groups such as the Fraser Institute.

Larry Willmore, “Basic Education as a Human Right Redux”, presented to a conference in Ljubljana, Slovenia, 26 July 2008.

I should clarify that not everything in Sweden is simple. The country’s reformed retirement income system, for example, is anything but simple.

Herbert Gintis on schooling

Monday, February 22nd, 2010

And now, a pro-choice argument from the political left. Herb Gintis, like Tom Paine, understands that meaningful choice is possible only when parents have the means to pay for the schooling of their choice. Government finance is needed, but there is no compelling reason to limit this to government-run schools.

Education is one of the few areas of economic life where the model of “regulated competitive delivery” has not penetrated to an appreciable extent. In most market economies the whole range of educational services is delivered by government monopolies, although families who can afford to do so are permitted to opt for private schools. (p. 11)


The government must provide some services monopolistically, because the market failures involved in competitive delivery are excessively costly. Examples include tax collection, police protection, national defense, and regulatory agencies. In each case we can provide compelling reasons why competitive delivery would not work. No such reasons can be given in the case of educational services. Indeed, … competitive delivery of educational services should better meet the private needs of parents and children, while fulfilling the educational systems traditional social functions as well.

People have rather prosaic goals for schools: reading, writing, history, math, and science, punctuality and self- discipline. When they are dissatisfied with what they are getting, they would doubtless benefit from having the power to induce the school to change, using the threat of taking their “business” elsewhere. The existing educational system disempowers parents by obliging them to initiate a complex political dynamic (influence the school board, affect the outcome of a local election, initiate a court battle) against great odds to induce their providers to change. (p. 18)

Herbert Gintis, “The Political Economy of School Choice”, Teachers College Record, 96:3 (Spring 1995).

Herbert Gintis (1940-) is coauthor, with Samuel Bowles, of Schooling in Capitalist America (Basic Books, New York, 1976), and a founder in 1968 of the Union for Radical Political Economics. He is currently Professor at Central European University (Budapest) and External Professor at Santa Fe Institute in the USA.

From the Thought du Jour archive.

Pliny the Younger on schooling

Monday, February 22nd, 2010

Yesterday I posted the views on schooling of Thomas Paine and Adam Smith. Today I turn to an earlier writer, one whose views are remarkably similar to those of Adam Smith.

[K]ids and schools did not just appear on the scene five decades ago, and neither did the debate over school governance. That point is most sharply driven home by a letter from a successful lawyer, outlining his views on schooling. He was born in the early sixties in a small town and lamented the fact that it didn’t have a high-school, so he decided to found one himself. But rather than fully endowing the new school, which he could easily have afforded to do, he chose to supply only a third of the necessary funds. In his letter, he explained his decision this way:

I would promise the whole amount were I not afraid that someday my gift might be abused for someone’s selfish purposes, as I see happen in many places where teachers’ salaries are paid from public funds. There is only one remedy to meet this evil: if the appointment of teachers is left entirely to the parents, and they are conscientious about making a wise choice through their obligation to contribute to the cost. People who may be careless about another person’s money are sure to be careful about their own, and they will see that only a suitable recipient shall be found for my money if he is also to have their own… I am leaving everything open for the parents: the decision and choice are to be theirs-all I want is to make the arrangements and pay my share.

What’s remarkable about his letter isn’t so much its contents as its context. As I said, it’s author was born in the early sixties–not the early 1960s or the early 1860s, but the early 60s of the first century A.D. His name was Pliny the Younger, and he was a citizen of the Roman Empire.

Andrew J. Coulson, “Forgotten Lessons”, June 13th, 1997.

Andrew Coulson is Director of the Cato Institute’s Center for Educational Freedom, and serves on the Advisory Council of the E.G. West Centre for Market Solutions in Education at the University of Newcastle, UK. He is author of Market Education: The Unknown History (Transaction Publishers, 1999).

Lifted from the Thought du Jour archive.

Tom Paine on schooling

Sunday, February 21st, 2010

One does not ordinarily think of Tom Paine [1737-1809] when considering education or schools. As the author of Common Sense and the American Crisis papers, he was a revolutionary, not only a radical in the eyes of the English, but a traitor. ….

[I]n Part 2, Chapter 5 of The Rights of Man, he places himself squarely in the company of Adam Smith and Thomas Jefferson, among others, when he urged the education of students by providing for the costs of their schooling directly through the students themselves. While the term “voucher” didn’t come into common usage until after its introduction by Milton Friedman in the 1950s, the concept is the same. ….

In Paine’s words, … “Public schools do not answer the general purpose of the poor…. Education, to be useful to the poor, should be on the spot and the best method, I believe, to accomplish this, is to enable the parents to pay the expenxe themselves with the aid mentioned above.”

David W. Kirkpatrick, “Tom Paine on Education”, 17 February 2010.

I was previously unaware of Paine’s writings on this subject, but the views of Adam Smith are well-known – for example:

The public can facilitate this acquisition [of basic education] by establishing in every parish or district a little school, where children may be taught for a reward so moderate that even a common labourer may afford it; the master being partly, but not wholly, paid by the public, because, if he was wholly, or even principally, paid by it, he would soon learn to neglect his business.

Adam Smith, Wealth of Nations (1776), book V, chapter 1.

Tom Paine’s views were clearly more radical than those of Adam Smith. (I am not sure about Thomas Jefferson.) Paine, unlike Smith, favoured full public funding of schooling, so long as payments are channelled through parents, who can ‘vote with their feet’ when schools fail.