The School Choice Paradox: Competition vs. Monopoly

The School Choice Paradox: Competition vs. Monopoly

Secretary of Education Betsy DeVos recently released a list of proposed priorities for her department’s competitive grants program. Number one is “Empowering Families to Choose a High-Quality Education that Meets Their Child’s Unique Needs.” In other words—no surprise—school choice initiatives remain at the top of the Secretary’s agenda.

DeVos’s argument for school choice, like most everyone else’s, hinges on a faith in competition to improve education. In an open marketplace full of choices, according to advocates, schools compete with one another to attract students. This competition drives up the quality of education all around, as parents choose only the best performing options for their kids. As in any competitive environment, if a school wants to survive, it had better stand and deliver.

The hardest of hardcore school choicers want to minimize government involvement to the greatest extent possible, leaving it entirely up to the competitive market’s invisible hand to ensure that every child has access to a good education. School choice advocates, including DeVos, who characterize the public school system as a dead-end monopoly, believe that government regulations, such as open admissions requirements, price controls, accountability mandates, and reporting requirements, only impede a dynamic market’s ability to improve efficiency and quality.

But these school choicers ignore the basic truth that unregulated markets tend not toward greater competition but toward monopoly. If we turn our education system into an unregulated market, where government has no role to play in ensuring the public good, then we risk trading one type of monopoly for another. School-choice models counting on competition to improve education undercut themselves if they eliminate the government’s role in ensuring competition through regulation.

It’s not difficult to make the case that a laissez-faire market breeds monopolies and oligarchies. Just look at the robber barons in the days before antitrust legislation. Better yet, consider the current status of the US economy: after decades of deregulation, only a handful of companies now dominate media, telecommunications, finance, tech industries, oil, transportation, defense contracting, agriculture, retail, and other key sectors.

Companies don’t want competition: they want to eliminate competitors and have the market all to themselves. It takes government policy to keep that from happening. From the New Deal to the 1970s—the decades of the U.S.’s greatest economic growth and income equality—the federal government developed and enforced policies to limit the consolidation of competitors, enforce fair trade practices, protect consumers, and otherwise regulate markets to reduce barriers to entry, ensure competition, and discourage the rise of monopolies. Systematic deregulation, which began under President Carter and has continued largely without pause through every administration since, has resulted quite demonstrably not in more competition but in less.

It therefore doesn’t take a great leap of imagination to see the same thing happening in education, if school choice policies premised on the benefits of a free market don’t ensure competition through regulation. School choice champions such as DeVos, who rail against the public monopolization of schools, should be just as adamant about guarding education against the private monopolization so evident in other deregulated markets. If education were to go the way of, say, finance or agriculture, it would be dominated by a handful of private, too-big-to-fail companies with proprietary curricula and an incentive to increase returns to shareholders rather than safeguard the public good. Imagine Pearson owning 80 percent of all K-12 schools, free to decide for themselves what to teach, to whom, and toward what end.

What sorts of policies are required to ensure that the market-based education system we are surely headed towards stays competitive? At the minimum, school choice policies must:

Limit bigness. The consolidation of competitors must be constrained, even at the expense of greater efficiency. Unchecked mergers and acquisitions, justified on the basis of increased efficiency, have been the signal route by which a small number of players have eliminated competition and achieved too-big-to-fail status in under-regulated industries.

Keep public schools competitive. As more private players enter education, traditional public schools will serve as a bulwark against the concentration of private power. Currently, however, district schools often are not allowed to compete on equal footing. For example, in many cases charter schools are free to weed out students who lower test scores or cost more to educate. In contrast, traditional public schools must educate everyone who comes through the door, including the students expelled from charter schools. Little wonder then when district schools look worse both financially and academically in comparison to their competitors. School choice policy designed to ensure competition must make sure that traditional public schools aren’t disadvantaged, with their funding siphoned away to help their competitors, and rivals playing by more favorable rules.

Straighten out accountability. As it stands, both the presence and absence of accountability requirements distort incentives, resulting in a market that is neither fair nor efficient. In states such as Michigan, where there is no strong performance-based accountability for charter schools, the incentive is simply to attract as many students as possible. Charters compete fiercely to fill seats, even in poor urban and rural areas, because each enrollee garners around $7,600 in public funds. Schools are not required to show results, however, and so they are not incentivized to actually deliver a high quality education to their students. As a result, the state has lots of charters, but they rank near the bottom of all schools nationwide.

In contrast, in states where all schools are held accountable by student performance measures, charters have a disincentive to serve populations least likely to generate high test scores—namely, the rural and urban poor. Evidence indicates that “for-profit charters are less likely than other types of schools to locate in low-income neighborhoods and educate low-income students.” In other words, there’s no percentage in the market for poor kids.

Public accountability for publicly-funded schools is an obvious tenet of good stewardship. But in a market-based system, policymakers must recognize and remedy the incentive distortions accountability requirements can create.

Require reporting. The competitive market model depends on parents making informed choices. Policy aimed at ensuring competition must define the information essential for fairly comparing competitors and require that schools report it regularly and truthfully. Parents should be able to compare options based on consistent and reliable criteria.

Pitting schools against one another in a competitive marketplace may indeed be a way to improve education. But if we decide that a market-based model is the answer, then we must also be wise about how that market operates. We have no lack of examples of what happens in markets absent government-enforced restrictions on the concentration of power. If we’re committed to reforming our education system through market-based competition, then we must also commit to government regulations that ensure the market works for the public good.

© 2017 BetterRhetor Resources LLC

(This post has also been published in Age of Awareness.)


When Is School Choice a Bad Choice?

When Is School Choice a Bad Choice?

With Betsy DeVos as head of the Department of Education, it is a sure bet that school choice initiatives will be at the top of national school reform efforts in the coming years. DeVos, a longtime  advocate for alternatives to traditional public schools—including charter schools, vouchers, education savings accounts, online schools, and other ideas—will no doubt support President Trump’s plan to direct $20 billion a year away from traditional public schools and towards school choice programs.

School choice is one of the rare political initiatives that has fans on both the right and left. Unfortunately, there is still no definitive answer as to what kinds of alternatives work best, or even whether policies promoting school choice can improve education nationally. After 25 years of experimentation with charter schools, the results are mixed. Some charters have outperformed traditional public schools, while others have offered no improvement at all. In some cases, charter schools have merely lined the pockets of their founders while failing students utterly. There are similarly mixed results for school voucher programs.

Underlying school choice is a faith in the workings of a competitive market to generate better outcomes. Competition pressures all schools to improve by giving parents, through the exercise of their choice, the power to hold their kids’ schools accountable, so the thinking goes.

The special problem the free market presents in the case of education, however, is that when competitors and experiments fail, children suffer. At stake in a marketplace of education alternatives is not the viability of some consumer gadget, but the life chances of real kids who may never recover from falling behind.

Of course, as school choice champions will be quick to note, children suffer no less tragically when their “monopolistic” traditional public schools fail them, and they have nowhere else to turn.

Education policy based on market principles by definition expects some schools to fail—and, though this point often goes unvoiced, it therefore expects some children to be casualties of those failures. Recognizing this risk, and seeking to mitigate it, is therefore incumbent upon parents, educators, and others, who might reasonably ask: When does policy make school choice a bad choice?

We have enough experience at this point to consider at least a few guidelines:

School choice is a bad choice when it encourages profiteering.

Over $600 billion in federal, state, and local funds go to K-12 public education each year. That’s a tempting pot of public money that many private interests would like to lay hands on. These interests have not been shy about lobbying for models and mechanisms that would siphon some of that money their way, nor in fighting against regulations that would require them to meet accountability standards or make financial disclosures—all in the name of enhancing school choice.

In Secretary DeVos’s home state of Michigan, for example, The Detroit Free Press found widespread abuse, a lack of accountability, and poor academic performance throughout the state’s charter schools, two-thirds of which are run by for-profit management companies.

Online charter schools, dominated by for-profit companies such as Pearson and K12 Inc., have had an “overwhelming negative impact,” according to recent studies, with the majority of students showing “far weaker academic growth in both math and reading compared to their traditional public school peers.”

As with any business, the for-profit entities that contract to run public charter schools have an incentive to maximize revenue while minimizing costs. It’s no surprise then that many seek to enroll all the students they can, while getting by with as few teachers, facilities, and instructional resources as possible. For-profit charters are also motivated to avoid accommodating students with problems or disabilities, since these students can bring down both financial and academic performance measures. When it comes to educating a community’s children with public funds, a for-profit model can conflict with the best interests of students, parents, teachers, and taxpayers.

School choice is a bad choice when it is a tool for advancing ideology rather than education.

In some cases, school choice is promoted by people and entities who see it as but one element in a larger ideological vision for society—a vision in which public services are privatized to the largest extent possible while government is reduced to the bare minimum. When this ideology is the engine behind school reform measures, the goal becomes less about improving education than about devaluing and defunding traditional public schools.

The Mackinac Center for Public Policy, for example, is a Michigan think tank that pushes for deregulation and privatization in many areas of society, including education. The center champions school choice in its rhetoric, but its stated endpoint for education policy is “no government schools,” a stance that favors the elimination of choices rather than their expansion.

Belief in the market is so strong, and enmity towards regulation so fierce in this ideology, that its evangelists resist any sort of government-enforced accountability; for them, “choice and competition engender accountability.” There is no body of evidence supporting this laissez-faire model, only a ferocious faith that it alone can solve the nation’s education problems. There is evidence, however, that school choice without government regulation does not improve education and can harm disadvantaged students

When education policy is set by the belief that any nontraditional school is a better choice than a traditional public school simply because it is not operated by a government entity, then ideology has overtaken evidence-based reasoning. That possibility is worth paying attention to in the current school reform climate, since Secretary DeVos has been a major funder of the Mackinac Center and her husband has served on its board of directors.

School choice is a bad choice when it promotes racial and economic segregation.

In many areas of the country, traditional public school districts replicate entrenched racial and economic divides. Wealthy neighborhoods tend to have well-funded public schools stocked with wealthy kids, while schools in poorer locations are starved for funds and populated mostly by poor kids.

Charter schools and vouchers can help relieve some of the problems of traditional public schools for disadvantaged people, as they have in Oakland and elsewhere. Studies show, however, that charter schools and other school choice programs, whatever the intention behind their authorization, can also reinforce segregation.

A study by the National Bureau of Economic Research, for instance, concluded that “charter schools in North Carolina are increasingly serving the interests of relatively able white students in racially imbalanced schools.” Meanwhile, a judge found that Nevada’s recent experiment with a universal school voucher program mostly benefited wealthy families who already had access to good public schools.

Policies that push for school choice as a means for improving education opportunities need to ensure that mechanisms are in place to make the programs and schools truly accessible to the people who would benefit most. Without an accompanying means of transportation, for example, the choice of a private school on the other side of town may in practice be no choice at all.


While it remains to be seen whether school choice will be a good choice while Betsy DeVos is Secretary of Education, it is worth noting that of the roughly $620 billion spent annually on K-12 public education, less than $60 billion comes from the federal government; the lion’s share of school funding is state and local. Thus, while the proposed $20 billion in federal funds for school choice programs is nothing to sneeze at, its overall impact will be comparatively modest.

The most meaningful choices about school choice will continue to be made at the local and state level. So for anyone interested in making sure that school choice policy in fact leads to good choices, efforts will probably have the most impact closest to home.

© 2017 BetterRhetor Resources LLC

(This post has also been published in BRIGHT Magazine.)