The evolving public education market

An education savings account ensures that Anna Ragusa of North Carolina can continue to receive needed therapies during social distancing.

Public education has historically been a poorly managed, underperforming market. The pandemic is driving changes that could, over time, lead to market improvements that will benefit families, students, educators and the public.

In effective and efficient markets, consumers control their purchasing power, monopolies do not exist, the barriers to entry and exit are appropriate (i.e., not too high or too  low), information needed to make good decisions is available to suppliers and customers, and the public good is well served.

None of these features exist in public education today. About 90 percent of public education services are controlled by a single supplier – government. This market domination constitutes a monopoly. Almost all purchasing power is controlled by government.

When families have no control over their public education dollars, new suppliers are discouraged from entering the market. That’s because most families cannot afford to pay both school district taxes and the cost of education services from non-government suppliers. This barrier to entry is why there has been so little supplier diversity and innovation in K-12 education over the last 170 years. Giving families control over their education dollars would unleash demand and create a market that would attract more suppliers.

While the availability of information in public education has gotten better over the last 25 years, families and schools still lack the quality and quantity of information they need to make good decisions. These market flaws are causing taxpayers to get a poor return on their investments in public education.

Some of these market deficiencies are starting to be addressed as families respond to the pandemic by asserting more control over their children’s education. Affluent families are using their own funds to create and access alternative schooling models, including micro-schools, homeschooling cooperatives and pandemic pods. And a few governors are using federal stimulus dollars to fund scholarships so low-income families may have these same opportunities.

 If this trend continues and more families gain greater control over their public education dollars, the barriers to entry for new, more diverse suppliers will be lowered and the creativity and innovation we are starting to see will increase. Using Education Scholarship Accounts (ESAs) to give families more flexibility over how they spend their public education funds will also open the market to providers such as tutors, counselors and therapists.

 In healthy markets, more desirable supply attracts more consumers, which then attracts even more desirable supply, which then attracts even more consumers. This type of virtuous market cycle is emerging in a few communities and could start to erode the government’s monopoly on supply and further the development of a healthy public education market.

 The unbundling of education services will also accelerate the improvement of a better public education market. Government has historically used its monopoly to force parents to access all their education services from a single provider (e.g., the neighborhood public school). While the unbundling of these services has been occurring slowly over the last three decades as families increasingly use programs such as virtual schools and dual enrollment, the pandemic is encouraging suppliers to accelerate this unbundling.

 Some private schools are offering childcare services for families who want to access a virtual instructional program but need out-of-home childcare. Some school districts are providing breakfast and lunch programs for low-income families who are homeschooling. And some community organizations are providing extracurricular activities, such as theatre and sports programs, that are no longer available at some neighborhood schools.

 We have almost two centuries of data showing that a dysfunctional public education market is not capable of delivering systemwide excellence and equity. The work required to develop the infrastructure necessary to support an effective and efficient public education market is daunting. But this horrific pandemic has provided us an historic opportunity we should not let pass.