CHAPTER 7 Education Copyright © 2010 by the McGraw-Hill Companies, Inc. All rights reserved. McGraw-Hill/Irwin

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

7-3 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

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

7-5 Does Government Intervention Crowd Out Private Education? Quantity of Education Quantity of all other goods A B i e0e0 epep ii x Private School quantity of education Public schooling “crowds out” education

7-6 Does Government Intervention Crowd Out Private Education? Quantity of Education Quantity of all other goods A B i e0e0 epep ii x Public schooling increases quantity of education

7-7 Does Government Intervention Crowd Out Private Education? Quantity of Education Quantity of all other goods A B i e0e0 epep ii x Public schooling does not increase quantity of education

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

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

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

7-11 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

7-12 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

7-13 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

7-14 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