Choice and competition actualise parents' wishes

This blog is part one of a response to James Park's article on markets in education at the progress@HSE blog. James Park has a very thoughtful critique of markets in education over on the  blog. The critique runs roughly as follows, although I would encourage you to read it for yourselves. Firstly, he claims that market proponents focus too much on entry and exit mechanisms used by parents to create incentives for schools, and so we neglect the benefits of students, parents and teachers being able to apply their influence in an ongoing way too. We might call this influencing factor 'voice', as used by the great economist Albert O. Hirschman. Voice is certainly important, but whether it has positive or negative effects can depend on the strength of exit mechanisms. When schools resemble monopolies and are able to financially tolerate exit, for example when they have access to subsidies irrespective of their performance, then they lack the incentives to maintain standards. Furthermore, pushier, more vocal parents – who also tend to be rather well off financially – are often the first to leave when school quality slips. When exit is not potentially fatal for a school, then parents' leaving actually rids them of their more annoying, zealously reforming and vocal parents first, leading to a further deterioration in quality. You can obviously never force more vocal parents to remain in low-quality schools – proximity-based admissions leads to exit by means of moving houses or paying for private education. The possibility of exit always exists among the rich simply because they can afford it. This is why encouraging all funding to follow pupils is so important, and why minimum income guarantees ought to be abolished - these market-based reforms mean that preventing parents exiting becomes a priority, and therefore that parents more likely to exercise their positive vocal influence will be dissuaded from leaving. Indeed, Hirschman noted the tendency of parents in higher quality schools to stay and exercise their influence rather than leaving. Thus, if powers of exit have teeth, and are able to raise quality to some extent, they also further entrench the influence exerted on them by voice, raising quality still further. There are other market reforms that can add teeth to voice. For example, Hirschman also noted the tendency of parents to stay and exercise their influence in schools that they considered to have a higher price. Thus, when voucher reforms mimic the purchasing of education, and parents are aware of the costs, they may again be more likely to exert their influence on schools without leaving. Similarly,potential top-up fees would also play a role here. Increasing the number of innovative new entrants can also potentially increase the power of voice. When the problem with existing schools is that their internal structures do not allow teachers, parents and pupils to exercise their powers of voice to good effect, then new and innovative schools have the opportunity to lead a positive change. If free schools of any shade are able to find ways to maximise their accountability to all those involved, and if parents recognise the value of good corporate governance from the information they have on schools, then new schools that strengthen the powers of voice will proliferate. The effects of competition then come into play to reform the existing schools too - under threat from new entrants due to their better responsiveness to voice, they will be forced to reform their own governance structures. Thus, strengthening entry and exit through market reform has the positive effect of strengthening voice too. Second, Park is concerned about the impact that the market's process of creative destruction might have on schools. As new schools replace the old, sucking away their per-pupil funding, there is the risk that institutional knowledge will be lost, and that parents may come to regret being attracted to the gimmickry of new entrants. However, his own example of parents' distrust of big-brand chains in schooling indicates that parents are less prone to gimmickry than he gives them credit. This example also highlights the central importance of high-quality information, so that parents are able to make informed decisions and not be needlessly repelled from existing good schools. It is also important to stress the importance of competition effects in raising the quality of all schools. It is the threat of creative destruction that encourages existing schools to maintain standards, to innovate, and to improve their quality. A free market is a market in which creative destruction can occur, not necessarily one in which there is actual constant churn and upheaval. Schools must not be insulated from that threat - otherwise the incentives to innovate and improve are weakened. But where they fail to maintain quality even despite the numerous advantages of incumbency, then new entrants should rightly replace them swiftly. Finally, Park has a general uneasiness with our supposedly 'mechanistic' and 'dehumanised' view of education. We’re not sure this is an entirely fair assessment. When talking about systems rather than individual cases, then a certain level of abstraction is necessary. More importantly, the beauty of a market-based system is that schools will conform to the demands that parents and pupils place upon them. If parents think that profit will erode trust, then they will not choose those schools. If parents want the 'human' and the 'organic', then unlike under the current system, they might actually get it. The supposedly mechanistic systems we describe are merely the structures by which people can satisfy their own values, irrespective of what they are.