I have nothing but good things to say about voucher programs, like those in Milwaukee and Cleveland, that are limited to a small number of low-income participants. They greatly benefit the limited number of students who receive vouchers, enable fuller use to be made of existing excellent private schools, and provide a useful stimulus to government schools. They also demonstrate the inefficiency of government schools by providing a superior education at less than half the per-pupil cost.

Proper Scale

But such programs are on too small a scale, and impose too many limits, to encourage the entry of innovative schools or modes of teaching. The major objective of educational vouchers is much more ambitious. It is to drag education out of the 19th century – where it has been mired for far too long – and into the 21st century, by introducing competition on a broad scale. Free market competition can do for education what it has done already for other areas, such as agriculture, transportation, power, communication and, most recently, computers and the Internet. Only a truly competitive educational industry can empower the ultimate consumers of educational services – parents and their children.

What is needed for a truly competitive educational industry is an unrestricted voucher of substantial size, such as that put forward in Proposition 38, scheduled for the ballot this fall in California . That proposition provides for a scholarship of $4,000, or half of the average per-pupil funding in government schools, whichever is greater. The scholarship will be available to all students in government schools in the first year after the proposition is passed, and will be phased in over four years for students already in private schools, so that it will cover all students in the state.

For the first time, tax money dedicated to educating the children of California would go to the intended beneficiary – the student – to be controlled by the people most interested in the student’s welfare – the parents – and not to an intermediary institution, such as a school or school district. Instead of schools choosing students, as they do now for the 90% of students who go to government schools, students and their parents would choose the school.

What would a competitive educational industry look like? I do not know, nor does anyone else, any more than anyone could have predicted what would happen to the telecommunications industry after the break-up of Ma Bell.

One thing we can be sure of is that a competitive educational industry would be very different from the present private school industry. That industry is selling something for which a competitor – a government school – is offering a close substitute without specific charge. Only two kinds of schools have been able to succeed under those conditions: (1) highly expensive elite schools, some for-profit, others non-profit, and some highly endowed; and (2) parochial and other low-tuition, non-profit schools.

The elite schools appeal to the very rich who can easily afford to pay twice for schooling their children, once in taxes and again in tuition. The parochial and other low-tuition, non-profit schools are in a position to subsidize the schooling they provide and – by keeping tuition fees low – can attract parents who are so dissatisfied with government schools that they are willing to pay twice out of their meager incomes for schooling their children. (There is also a sizable home-schooling industry. Incidentally, is there any other case in which the homemade “product” is greatly superior to the professional product? What an indictment of the government school system.)

Neither of these segments has any incentive to be innovative and experimental. The passage of Proposition 38 would change that situation completely. It would create a potential market with millions of potential customers able to pay at least $4,000 – which is more than most existing private schools charge. That would attract the kind of innovative private enterprise that has been so productive in every other field. Schools would be established that specialized in meeting every kind of substantial demand.

Innovative uses of computers and the Internet would offer new paths to learning. New methods of teaching would replace the old, and costs would go down just as surely as quality would go up. This happened when parcel and message delivery was opened up to competition, when the telephone monopoly was dismembered, when air travel was deregulated, when Japanese competition forced the U.S. automobile industry to change its ways, and on and on. Government schools would have to meet the competition or close up shop.

The teachers’ unions that today control the government school monopoly would not relish that competition, even though they would have twice as much per pupil to spend as the size of the voucher. That is why they are going to such lengths to oppose Proposition 38, spending millions of their members’ money on frantic political opposition.

Indeed, they are almost the only ones who stand to lose from a competitive educational market. The potential winners are far more numerous. Students would benefit from an improvement in the quality of their education. Teachers, especially good teachers, would benefit from the wider market for their services. Existing private schools would be in a far better competitive position, and could use the additional funds to improve still further the education they provide. Educational entrepreneurs and their financial backers would benefit from the new field opened to their talents.

Taxpayers would benefit from a decline in government spending on schooling, since vouchers equal only half of spending in government schools. Employers would also benefit from a larger pool of better-schooled potential employees. Finally, institutions of higher education would benefit as the need for remedial courses for entering students declined.

Every technological and economic advance since time immemorial has ended up benefiting the poor disproportionately. That would be no less true of the educational revolution that would be triggered by the passage of Proposition 38. As fewer youngsters in the inner cities dropped out of school and more acquired the skills needed for remunerative employment, economic levels would rise, street violence decline, and crime become less attractive to the young.

Social Impact

Failing schools are not the only reason for the parlous state of the inner cities, but they have played an important role. Far and away the biggest winner of an educational revolution would be society as a whole. A better-schooled work force promises higher productivity and more rapid economic growth.

Even more important, improved education would narrow the gap between the wages of the less-skilled and more-skilled workers, and would fend off the prospect of a society divided between the “have and the “have nots,” of a society in which an educated elite provides welfare for permanent class of unemployables.

Reprinted with permission of Dow Jones and Company, Inc.@2000. All rights reserved.