School Vouchers in a Purely Competitive Marketplace

What if I told you that a simple change in public policy could result in a solution to our current unemployment problem, and our current education problem? Is that something you might be interested in?

Its a tall order so you are dubious right off the bat. Well, let me disabuse you of your doubt.

Here's the short answer, we give the option for every student in America to take their $10,000.00 worth of government funded education money (voucher) and use it in any educational capacity they and their family sees fit. At the same time, we drastically ease restrictions on what qualifies to receive this voucher in return for educational services. The purpose? Every member of the young, college educated, unemployed work force, can choose to open a school. The result? A purely competitive education market, funded by government spending, through individual students, with small class sizes and unheardof teacher/student repport. Here is how:

Any one who was awake during introduction to microeconomics in college knows that probably the most utilitarian way to distribute goods and services in a society is through a purely competitive market. A purely competitive market has many small firms, all producing relatively homogeneous goods or services, has low market entry/exit barriers (cost of starting or selling the business), and perfect information for buyers and sellers. Market equilibrium is achieved, which means that the good or service is sold at the lowest possible price, and the good or service is produced at the highest possible quantity. This education plan can achieve perfect market conditions.

Here is what it means in an abstract example. Producing a marble has a certain cost. The cost associated with this unit for a includes the worker's wage, the cost of the marble making equipment and the rent for a marble making shop. Because there is this cost, a certain price must be payed for the production of that marble, or none would be produced. If the price is above the cost for the marble shop, it will produce marbles. If the price is below the cost, the shop will not produce marbles. That is how we figure out that at a certain price, a certain quantity will be produced.

We know the average price of education around the country, payed by tax revenue, is about $10,000.00 per student per year. That money must pay for teacher's salaries, teacher's union dues, administrator's salaries, ganitorial service, security, counselors of every stripe, athletic coaches, school building costs, books, utilities, computers, librarians, school district administrators, school board members, attorneys, accountants, busses, bus drivers, insurance, school supplies, and other education costs that I haven't thought of. This means that the money which is allocated to the essential education function, teacher time, is a low percentage by the time the money has to pay all the other costs listed above. If we want to improve education, we need to increase the quantity and quality of the essential education function, teacher time.

The only way to increase the quality and quantity of a good, is to raise the marginal profit available to producers of the good. I know what you just thought, schools shouldn't worry about profit. Profit in economics is the difference between price and cost - if the price is above the cost there is posiive profit - if the price is below the cost, there is negative profit. In order for more or better education to be produced you could either raise the price of education, or lower the cost of education. Raising the price is easy, you say, just tax people more. Education is priceless isn't it? I'm not averse to raising taxes to pay for education, but there is a better way to get more bang out of the $10,000.00 per student already being payed by the generous taxpayers. Remember all the stuff that the $10,000.00 has to pay for? I'm referring to everything below "teacher's salaries" above.

Not much of the $10,000.00 actually makes it to the teachers, and here is how I know that. Say the average class size in the United States is 30. Its probably much higher, but I like even numbers in my examples. $10,000.00 times 30 is $300,000.0o per year, per classroom. How much of that does the teacher receive, $30,000.00 maybe - probably less in reality but lets try to keep it simple. So, the essential function of education is payed for by 10% of the whole price of education. The bang for our education buck is %10. My plan can get this number much, much higher, by making education much much cheaper.

Imagine a school that is run entirely by one person, a recent college graduate named Steve. Having tested the waters in the presently hopeless labor market, Steve was only able to find work as a waitor. Nothing against waiting tables, but Steve graduated summa cum laude and was hoping to use his brain at work and make some difference in the world.

Instead of waiting tables, Steve enrolls in a program to test the viability of a new education program. In order to establish a school, all Steve would have to do is rent a space, which could be in his own house, if he had room in his house which could be suitably situated as a small classroom. Steve would have to buy a few computers, buy a few books, build a few desks, get high speed internet, and maybe take some kind of general knowledge test to ensure he is able to teach the basics. The details if the test and accompanying license are not important here. It is enough to say that a recent college graduate intent on being a teacher at the high school level should have sufficient understanding of calculus, lab science, computer science, literature, writing, history and civics.

Steve takes the plunge and decides to do it. He is confident that he can make a living by enrolling only seven students. The limit is 10 students per teacher. If he is a good enough teacher to keep his seven students all year, he will make $70,000.00, before expenses. If he is frugal and wise, his net wages could easily equal $50,000.00 per year. Steve doesn't think its a bad deal at all considering the next best use of his time would earn him around $25,000.00 waiting tables, if he is lucky. He spends 6 to 7 hours with his seven students each weekday. He teaches each subject, in a manner he sees fit. His students are tested often, in tests administered to students from each school like Steve's, so their parents know how Steve is doing, as well as how their kids are doing.

Utilizing internet resources, most of which are free, such as wikipedia, and Google books, Steve can teach his students any subject he wants, and any subject the students want. Think of how cool it would be for students to guide their own education, based on their own aptitudes and interests? Of course there would still be a required core curricula, of math, English, science, and civics.

If the parents of Steve's students didn't think he was a good teacher, or thought he was a little too creapy, or if the student didn't meld well with Steve's teaching style, they can easily transfer to a different Steve-like school without any trouble. Steve knows this, so he tries very hard to be a good teacher.

Thats it. Thats the plan that could revolutionize education. It establishes a market for education which is regulated by perfect competition. It could be available to every child, unlike current voucher programs which are scarcely available. It costs no more than we are currently spending on education, and it will increase the role of parents in their kids education.

Does anybody believe that will actually work? If not, why? Let me know.