The Real Problem with Highly Regulated 'School Choice'

By Guest Blogger 02/01/2013

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A Fordham Institute paper released this week seeks to answer the question: do private schools really refuse to participate in heavily regulated school choice programs? Its summary, written by Chester Finn and Amber Winkler, tells us that “many proponents of private school choice… take [this] for granted,” citing two examples—one of them being the Cato Institute, whose Center for Educational Freedom I direct. The authors even cite a relevant commentary by former Cato policy analyst Adam Schaeffer.

The only problem is that the cited commentary says precisely the opposite. Describing Indiana’s heavily regulated voucher program, Schaeffer writes: “Because participating schools will have a significant financial advantage over non-participating schools, lightly regulated [non-participating] schools will face increasing financial pressure to participate.” This captures Schaeffer’s concern as well as my own (which I expressed over a decade ago in the political economy journal Independent Review): The problem is not that private schools won’t participate in heavily regulated school choice programs. The problem is that they will. Hold-outs will be in the minority, and will gradually be driven out of business by their subsidized counterparts due to the uneven fiscal playing field (much as America’s once-dominant private schools were marginalized by the spread of “free” state-run schools).

We know this because there is extensive evidence to that effect from all over the world and across history. Everywhere that private elementary and secondary schools are eligible for government subsidies, the share of unsubsidized school enrollment falls. The higher the subsidy and the longer it has been in place, the more the unsubsidized sector is generally diminished. The Dutch enacted a heavily regulated nationwide voucher program nearly a century ago. Unsubsidized private schooling remains legal, but has been reduced to a statistical asterisk—now making up less than one percent of enrollment, compared to roughly 70 percent for subsidized private schools.

Our reason for concern over this pattern is also grounded in empirical evidence: it is the least regulated, most market-like private schools that do the best job of serving families. That is the consensus of the worldwide within-country research, which I reviewed and tabulated for a 2009 paper in the Journal of School Choice. The new Fordham paper does not discuss this evidence—nor has any other Fordham paper ever discussed it, to my knowledge.

Despite imputing to Cato scholars the exact opposite of the view we hold, the “Red Herring” paper does include some interesting data. In particular, it offers a new corroboration that voucher programs are more heavily regulated than tax credit programs (a difference whose magnitude and statistical significance was previously established here). This will make it even harder for objective observers to cling to the notion that vouchers and credits are functionally equivalent (though there are of course other important differences beyond this one). And it points the way to a solution to the problem of market-suffocating regulation under school choice programs: pursue school choice through education tax credits rather than vouchers or charter schools.

—Andrew Coulson

This commentary was adapted from one that originally appeared on

Comment on this article
  • Karl Wheatley says:

    “Our reason for concern over this pattern is also grounded in empirical evidence: it is the least regulated, most market-like private schools that do the best job of serving families.”

    It would be interesting if your study, at the link provided, gave clear evidence of that claim, but it doesn’t.

    A more likely explanation for the studies you review is that in countries in which the government has not taken providing or regulating public education seriously, private schools are the better option, the smarter and more motivated families go there, so the results are better. That doesn’t mean that the private schools themselves are performing any better under such circumstances, only that the circumstances are more favorable to attracting better students.

    Beyond that, the criteria for including studies in the analysis was very weak, and there’s no reason to expect findings from developing countries with weak tradition of public education to teach us what to do in a superpower country with a strong tradition of public education.

    In contrast with the claims you make, charter schools in the U.S. seem to do better when there is stronger regulation. More generally regarding free markets, in the 2009 PISA, they found that when adjusting for student background characteristics, schools that had to compete for students did no better than those that didn’t. Competition makes some things better, it makes other things worse, and it’s a wash in other areas.

  • Andrew J. Coulson says:

    Dear Dr. Wheatley,

    If you do decide to read the study you are critiquing, you will find that it includes a section dealing with your first objection, beginning at the bottom of page 46. As documented therein, the data do not support the theory that the consistent and significant private sector advantage is due to a small cadre of “smarter and more motivated parents.”
    Your second comment is to discount the consistent pattern that arises from 65 different within-country studies because you prefer the finding of a single cross-national study that points in the other direction. To each his own. Personally, I’m rather partial to findings that have been repeatedly reproduced by many different teams of researchers, and to studies that avoid introducing uncessary between-country confounding variables that are very difficult to control for.

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