CHAPTER 7 Education Mc GrawHillIrwin Copyright 2010 by

Real Annual Expenditure Per Pupil in Public Elementary and Secondary Schools Source: US Bureau of the Census [2009, p. 151] 7 -2

Justifying Government Intervention in Education • Is Education a Public Good? • Does Education Generate Positive Externalities? – The Conventional Wisdom – The Case Against the Conventional Wisdom – The Case of Higher Education • Is the Education Market Inequitable? – Commodity Egalitarianism 7 -3

What Can Government Intervention in Education Accomplish? • Should public education be free and compulsory? • Should government produce public education? 7 -4

Quantity of all other goods Does Government Intervention Crowd Out Private Education? A x ii Public Private schooling School i “crowds quantityout” of education B ep e 0 Quantity of Education 7 -5

Quantity of all other goods Does Government Intervention Crowd Out Private Education? A x ii i Public schooling increases quantity of education B e 0 ep Quantity of Education 7 -6

Quantity of all other goods Does Government Intervention Crowd Out Private Education? A x Public schooling does not increase quantity of education ii i B ep e 0 Quantity of Education 7 -7

Does Government Spending Improve Educational Outcomes? Real Annual Expenditures on Private and Public Schools, All Levels of Education (2007) SOURCE: Organization for Economic Cooperation and Development [2007 a]. 7 -8

Does Government Spending Improve Educational Outcomes? • Comparative educational outcomes • Empirical Evidence: Does Spending on Education Improve Student Test Scores? 7 -9

Public Spending and the Quality of Education • Empirical Evidence: Does Reducing Class Size Improve Student Test Scores? – – Measuring costs Measuring benefits Project STAR California 7 -10

Does Education Increase Earnings? • Link between higher spending on education and earnings • Elementary and secondary education outcomes • Influence of age and economic status • Spending on the margin 7 -11

New Directions for Public Education. Charter Schools • Charter Schools - public schools operating under special state charters that permit experimentation and allow independence • Empirical evidence – Diversity of choice – Student outcomes 7 -12

New Directions for Public Education. Vouchers • Vouchers – financial grants to families that can be used to pay their children’s tuition at (nearly) any school • Argument in favor – Vouchers create competition in educational marketplace • Arguments opposing – Parents might not be well-enough informed to make good choices – Moving children to private schools might reduce positive externalities of education – If good students escape bad schools, weaker students left behind may received even worse educations – Inequitable • Empirical evidence on the effect of vouchers 7 -13

New Directions for Public Education. School Accountability • School accountability – monitoring student and school performance via standardized tests • No Child Left Behind Act (2001) • Empirical evidence on the effectiveness of school accountability 7 -14