About this site

I was a Governing Board Member of the San Carlos School District, elected November 2007 and again in November 2011. This site was originally used for the purpose of communicating with school district constituents, however now it is used for surfacing ideas and expressing opinions on various subjects in education, politics, business, or otherwise.

Please note that any opinion express here is purely personal and does not necessarily reflect the position or opinion of anyone else or any organization with which I am, or have been, associated.

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The Education Competition Myth (and Why a Voucher System is Doomed to Fail our Kids)

It continues to be a great debate within the education community as to whether competition is a good thing or a bad thing. In fact, our current administration appears to be promoting an agenda of expanding “voucher” programs that are based on this notion that bringing choice and competition to the education world will improve the entire sector. There are those that argue that competition just works, regardless of the arena, and the pressure to perform better is a rising tide that will lift all boats. On the other hand, many educational leaders suggest that educators aren’t affected by these sorts of pressures, and that competition actually harms students. Unfortunately this debate misses the larger point in that the very premise of the debate itself is flawed. The question is not whether competition works or doesn’t work; the question is whether it can exist at all. For a healthy and effective competitive environment to exist, there are a number of prerequisites, and each of these needs to be examined in order to answer this fundamental question. For this analysis, these conditions are grouped into five different areas: (a) Customer Switching Capability, (b) Provider Capacity, (c) Clear Success Metrics, (d) Acceptance of Losers, and (e) Level Playing Field.

Customer Switching Capability
The first required condition for competition to exist is the ability for customers to change providers with minimal friction. Said another way, competition is based on the premise that “customers vote with their feet,” meaning they can easily pick (and change) the services and products that they feel best serve their needs. Implicit in this premise is the ability for customers to seamlessly change their provider without incurring extra cost, hassle, or some other side effect from making such a switch.

If customers cannot vote with their feet, then competition will have no effect. Let’s use an example of where such friction can exist. If you try two restaurants, and you decide that the one twenty miles away from you is superior to the one a block away from you, you may still make the trip and go to the farther one. The reason you can do this with minimal friction is that you don’t eat there every day, making the cost for the extra travel trivial. On the other hand, if you were somehow required to only eat at one restaurant each and every day, it would suddenly be a burden to drive back and forth to the farther restaurant. If physical distance (and associated time required) is a factor in consuming any product or service, friction is created proportionately to both that distance and the frequency in which that distance must be traveled to consume the product.

Schools, unlike restaurants, must be “consumed” every day by design. So, the choice of any family to pick schools is inherently limited — in many cases, the cost is just too high to travel every day to a distant school. So, even if there is a “choice” per se, there practically may not be one. And, even if changing schools were possible and practical, it can only be done at limited times. The disruption and potential harm caused by frequent school switching limits the ability of competitive forces to affect a change. Admittedly, one of the ways families can vote with their feet is by moving homes, but since where someone lives is the result of many factors (and practically, a family can only move a limited number of times), great friction still exists, and any competitive pressure would operate only over a long period of time, if at all.

So, here’s the rub – if physical distance is at all a factor, these very high “switching” costs make it unrealistic to believe that even if one school were obviously better than another, most families would have the seamless ability to pick the “better” school. What happens instead is the classic “cherry picking” effect whereby parents who have the means (time, money, or other resources) are better able to commit to sending their child to a different school, while those without the means in practice have no such choice. So, if the bulk of your “customers” can’t really switch, competitive pressure is limited and very slow at best.

Even for the parents who can exercise this choice, the situation is not all positive. If we give an incentive for them to travel to a more distant school, we potentially make it more difficult for them to actively participate in their children’s education — by volunteering at school, working on the PTA, and just being present on campus, especially in the lower grades. Often one of the main factors separating high performing schools from their lower performing counterparts is the partnership a school has with its parents. Choice associated with greater physical distance only hampers this partnership.

Provider Capacity
Another condition of successful competition is the requirement that the competitors can add capacity to meet the new demand (and/or raise prices) from these new customers who vote with their feet. That’s relatively easy for most businesses, but fairly difficult for a school whose service capacity is largely based on its physical capacity (and certainly a public school can’t regulate demand by price). And there is a limit to the number of schools that can practically locate in the same community before the student population is so fragmented among those schools that the diseconomies would dwarf the potential benefit of competition (making it more akin to a “natural monopoly,” analyzed in more detail below). So, at best, even if competitive pressures were to exist and customers could switch seamlessly, the actual providers — the schools –could only change very slowly to meet such demand.

Clear Success Metrics
The next condition of competition is to have a scoreboard. In business, this is fairly simple. A corporation’s duty is to maximize shareholder value. So, putting any other measure aside, one wins by increasing one’s stock price and providing a strong return to investors.

This is not true in schools. People often point to standardized test scores, but as metrics they are limited in many ways, including the fact that standardized tests measure only a small fraction of the value that schools deliver, and test scores more often reflect the population of the students than the quality of the school or its teaching. And perhaps most importantly, the value provided by schools is created — and is only evident — over a very long time horizon, making it extremely difficult to effectively compare institutions. Yes, all things being equal, higher scores are better than lower ones, but a singular reliance on them is not only deficient, but dangerous — at the end of the day, it doesn’t actually tell you how a school is teaching, and certainly does not indicate how your child is learning.

Lastly, we must ask to whom such value is delivered. As a stockholder in a company, it is fairly clear that I personally receive value when my stock’s price goes up, whereas the stakeholders in the success of public schools are much more diverse. Of course, the student receives a bulk of the value but so does everyone else in the community. In fact, the entire value proposition of public education is based on the notion that the public is better off when it pays to educate all of its future adults. How do we measure the value flowing to everyone else? This conundrum reflects the very nature of a “public good” and why we fund the service through tax revenue rather than through direct purchase from the consumer. I am the first to say that we need a better set of metrics to measure the value being created by schools, school districts, and even individual teachers. But even if we could objectively measure all of those things, it is extremely difficult to have an accurate scoreboard that measures the multiple dimensions of value delivered to the multiple beneficiaries over the long-term. Based on all of this, parents really don’t have full, complete, and comparative information (and often have incorrect or incomplete information) to make informed “buying” decisions that theoretically apply such competitive pressure.

Acceptance of Losing
Lastly, if competition breeds “winners,” it must also be acceptable to have “losers.” If one retailer goes out of business, I’ll buy from another. In schools, even if we knew with certainty that a school was underperforming (despite the problems with measurement and the time horizon mentioned above), do we want the school to lose? Losing often takes years, and we may find out years later that, although we put competitive pressure on the schools and eventually migrated most students to a better school, we sacrificed those kids that didn’t (or couldn’t) defect to the “better” school. It’s a pain if I spend some money on a product that didn’t work and then the company goes bankrupt, but it’s a tragedy to fail certain kids waiting on the pressure of the free market to work its magic. Kids only go through school once — we rarely get a “mulligan.” Unlike what is inevitable in business, we need all schools to win, so the relevant question may be how can we create an environment that allows all schools to be winners.

Level Playing Field
One of the fallacies of comparing business to public schools is that the former can pick its customers, whereas public institutions need to serve everyone. Inherent in the notion of competition is that you’re competing for someone — a certain sub-set of the population. If schools could freely compete like businesses (let’s say in a purely voucher system), there would be a big segment that no one would fight for. Those kids and their families would be left unserved or underserved.

But there is a good analogy in the private sector — natural monopolies. Natural monopolies are companies like utilities where the cost of creating competition is actually higher than the value of such competition (imagine five companies running electrical wires to your house – the massive inefficiency would dwarf the value of competitive pressure). That is why certain companies like utilities are allowed to keep their monopoly status but are regulated instead.

In markets where natural monopolies exist but “alternate” providers were allowed to compete, amazing unintended consequences emerged. When AT&T was broken up in 1984, the resulting seven “Baby Bells” were each required to provide service to every household in the country (”universal service”), while at the same time the market was deregulated to allow other providers to compete while not being subject to the same restrictions. The Baby Bells had to effectively “cross-subsidize” the costlier (often rural) customers with the more lucrative business customers, while the new firms didn’t need to. Guess what happened? New start-up telephone companies grabbed the lucrative business market, offering a better value as they weren’t forced to cross-subsidize. This wasn’t competition on a level playing field. Sound familiar? In many ways, this is exactly what private schools and charter schools do in relation to the overall public school system. They don’t create competitive pressure — rather many schools just cherry pick and create a larger burden on the public entity, which is required to serve all children, many of which require substantially more resources. This doesn’t mean there isn’t a place for charter or private schools – it just means it’s naïve to think that they are operating on the same level playing field. Certainly one can point to specific examples where the existence of a charter or private school made the community put pressure on the public schools to improve, but due to the lack of so many fundamental conditions for true competition, such examples will always be the exception rather than the rule.

Conclusion
Nothing herein should suggest that pressure to improve doesn’t — or shouldn’t — exist in public schools. It absolutely must to motivate school boards, superintendents, administrators, principals, and teachers to do the best job they possibly can. And just because we can’t define “winning” very well doesn’t mean that we don’t hold teachers, principals, and school districts accountable. But this is the fundamental role of our local political system. Each community needs easily accessible and useful information with multiple measures of success, and community members must stay involved and hold its schools accountable though their elected representatives. As public schools are certainly a “public good,” only this public and political process can provide public schools with the requisite funding to achieve the best outcomes and develop the best set of policies to promote excellent teaching and learning.

This is why any voucher system in education is doomed to fail. It is based on a faulty premise that competition can both exist and create pressure on the entire system to promote better outcomes for all. At best, it will give the illusion of choice where little actually exists, but at worst it will further distort the playing field and drain resources from the schools that need them the most and discriminate against those families with the least ability to make such a “choice” (effectively providing a subsidy to private schools and others that can “cherry pick” their students). So, instead of pitting every school against one another, let’s give all schools the resources — and then hold them accountable — to ensure that they are doing the best they can to help all of their students reach their potential and provide the “public good” benefit to all of us from a well-educated citizenry.

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