I just finished reading Julian Betts’s essay “The Economic Theory of School Choice” in his (excellent and remarkably inexpensive) edited collection Getting Choice Right. For the most part I don’t expect to find really new ideas about school choice in what I read, so it was a thrill to find something I hadn’t encountered before. The contributors all assume (correctly in my view) that school choice is an inevitable feature of the education system, so the issue is how to get it right—in other words, how to make it as efficient and equitable as possible (self-styled opponents of school choice tend to support the de facto status quo, a school choice system riddled with inefficiencies and inequities).
The most obvious barrier to a school choice being efficient and to it being equitable is the fact that in a choice system schools get to choose students, leading, one presumes, to a concentration of advantaged students into popular schools. Defenders of choice usually offer three solutions to this problem; lotteries (preventing schools from choosing); quotas (allowing them to choose but limiting their ability to select for advantage) and weighted student funding (allowing them to choose, but giving them incentives to choose disadvantaged children, and compensating schools which get landed with high concentrations of disadvantage). (I suggest a combination of these in my proposal at the end of School Choice and Social Justice).
So what’s new in Betts’s paper?
He suggests a fourth solution, adapted from energy and communications deregulation, which incidentally deals with a difficulty in the third solution. The problem with weighted student funding is figuring out how to set the weights—the idea is that a central planner decides how to compensate for disadvantage, but the truth is that no-one really knows how much weight to give (the proposals are mostly off-the-top-of-our-heads). Betts suggests this: first fund the schools equally on a per-student basis. Then distribute trade-able rights to admit highly advantaged students; and allow schools to auction those rights. Schools would then be forced to figure out how much they valued the money they were spending relative to the highly advantaged children they wanted. We don’t know what the outcome would be. At one end of the spectrum you’d have schools with high concentrations of advantage and not much money; at the other end of the spectrum high concentrations of disadvantage and loads of money. It would probably take a few years for administrators to work out what the real costs of disadvantaged children were; but they would have a powerful incentive to work it out.
There are numerous pitfalls in the proposal, including the incentives for administrators to mislabel kids, and for sellers of rights to collude, but Betts provides plausible solutions to these. He only proposes it at the district level, but of course it is more attractive as a regional or statewide proposal (imagine the suburban districts around Milwaukee having to buy the rights to admit highly advantaged children from Milwaukee public schools). As a public proposal, I imagine that its dead in the water, but that’s ok—that’s what I was told about admissions lotteries in the UK when I first suggested them in 2000.
Anyway, just thought I’d share my enthusiasm about a new idea.