Asymmetric Information, Parental Choice, Vouchers, Charter Schools and Stiglitz
From the Journal of Education Finance, Fall 2012
by Kern Alexander
The story goes that tuition voucher schools and charter schools are creatures of the spirit of capitalism1 and that public funding of them will increase competition, making all schools more efficient and academically better, especially public schools. For that theory to work it is hypothesized that parents as “rational people will make choices as to the education of their children in perfect markets.” In the realm of economics, this reasoning is called the “rational expectations hypothesis” or the “efficient markets hypothesis.”2
The “efficient markets” notion applied to schools via parental choice means that parents will, in their wisdom, utilize public money to send their children to private schools and that ipso factothe education level of the nation rises commensurate with the level and intensity of competition among parents in choosing private, clerical and/or corporate charter schools. For the education level to rise requires, of course, that parents will make rational decisions relative to quality education. Essential to the concept is that parents have the knowledge necessary to make informed educational choices. In a perfect market, information is presumed to “flow like water–faster than water,”3 and it is necessary that those things irrelevant to quality education, or even detrimental to it, are not present in parental decision making. If parental choice is not based on quality education and instead the school choices are rooted in race, religion, wealth, ethnicity, etc., then you will have “imperfect competition.” Imperfect competition would result in the overall decline in the quality of education.
In the economic marketplace, “rational expectations,” serve as the engine to improve the economy. At bottom, these expectations of individuals and corporations foster efficiency, production costs fall and profits increase. Improvement of educational quality via a scheme of parental choice, however, is much more complex. If the state seeks to drive its economic progress by means of the wisdom of parental choice, it must be sure that the parental choices add to some worthwhile store of knowledge for the next generation. That education in which public money is invested must be calibrated to the end of producing productive knowledge, the “training of intellect” is designed to “stimulate the mind of the individual The Horace Mann League: Asymmetric Information, Parental Choice, Vouchers, Charter Schools and Stiglitz:
The story goes that tuition voucher schools and charter schools are creatures of the spirit of capitalism1 and that public funding of them will increase competition, making all schools more efficient and academically better, especially public schools. For that theory to work it is hypothesized that parents as “rational people will make choices as to the education of their children in perfect markets.” In the realm of economics, this reasoning is called the “rational expectations hypothesis” or the “efficient markets hypothesis.”2
The “efficient markets” notion applied to schools via parental choice means that parents will, in their wisdom, utilize public money to send their children to private schools and that ipso factothe education level of the nation rises commensurate with the level and intensity of competition among parents in choosing private, clerical and/or corporate charter schools. For the education level to rise requires, of course, that parents will make rational decisions relative to quality education. Essential to the concept is that parents have the knowledge necessary to make informed educational choices. In a perfect market, information is presumed to “flow like water–faster than water,”3 and it is necessary that those things irrelevant to quality education, or even detrimental to it, are not present in parental decision making. If parental choice is not based on quality education and instead the school choices are rooted in race, religion, wealth, ethnicity, etc., then you will have “imperfect competition.” Imperfect competition would result in the overall decline in the quality of education.
In the economic marketplace, “rational expectations,” serve as the engine to improve the economy. At bottom, these expectations of individuals and corporations foster efficiency, production costs fall and profits increase. Improvement of educational quality via a scheme of parental choice, however, is much more complex. If the state seeks to drive its economic progress by means of the wisdom of parental choice, it must be sure that the parental choices add to some worthwhile store of knowledge for the next generation. That education in which public money is invested must be calibrated to the end of producing productive knowledge, the “training of intellect” is designed to “stimulate the mind of the individual The Horace Mann League: Asymmetric Information, Parental Choice, Vouchers, Charter Schools and Stiglitz: