1. Copyright ©2013 Cengage Learning. All rights reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible web site, in whole or in part. First page 14 th edition Gwartney-Stroup Sobel-Macpherson To Accompany: “Economics: Private and Public Choice, 14th ed.” James Gwartney, Richard Stroup, Russell Sobel, & David Macpherson Slides authored and animated by: James Gwartney & Charles Skipton Full Length Text — Micro Only Text — Part: 6 Special Topic: 10 Special Topic: 8 Education: Problems and Performance

2. Copyright ©2013 Cengage Learning. All rights reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible web site, in whole or in part. First page 14 th edition Gwartney-Stroup Sobel-Macpherson Educational Spending and Student Performance

3. Copyright ©2013 Cengage Learning. All rights reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible web site, in whole or in part. First page 14 th edition Gwartney-Stroup Sobel-Macpherson Educational Spending and Student Performance In recent decades, Americans have been concerned about the poor performance of students and rising costs of education. The numbers tell the story.

4. Copyright ©2013 Cengage Learning. All rights reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible web site, in whole or in part. First page 14 th edition Gwartney-Stroup Sobel-Macpherson Average SAT Test Scores The achievement scores of U.S. students dropped in the ‘70s, changed little in the ‘80s, and have risen modestly since. Combined SAT Score 1960197019751980198519901995200020052009 960 980 1000 1020 1040

5. Copyright ©2013 Cengage Learning. All rights reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible web site, in whole or in part. First page 14 th edition Gwartney-Stroup Sobel-Macpherson Cross-Country Comparison Math Scores The mathematics achievement scores of eighth grade American students lag behind those of many other countries. Canada Australia Germany South Korea Belgium Poland Average 8 th Grade Mathematics Achievement Score: 2009 Ireland Netherlands U.K. Japan 529 527 520 538 507 508 U.S. 502 508 522 514 539 Hungary 503

6. Copyright ©2013 Cengage Learning. All rights reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible web site, in whole or in part. First page 14 th edition Gwartney-Stroup Sobel-Macpherson Real Spending Per Pupil Real spending per pupil on public elementary and secondary schools more than doubled during the 1970-2008 period. Real Spending per Elementary & Secondary Pupil (in 2008/2009 dollars) 1970197519801985199019952000 $ 2,000 $ 4,000 $ 10,000 $ 8,000 20082005 $ 6,000

7. Copyright ©2013 Cengage Learning. All rights reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible web site, in whole or in part. First page 14 th edition Gwartney-Stroup Sobel-Macpherson Cross-Country Comparison of Spending Per Pupil Spending per primary student in the United States is among the highest in the world. Spending Per Primary School Pupil, 2005 Source: OECD, Education at a Glance, 2001. Hungary Korea France Germany Australia U.K. Japan OECD Average Belgium Italy $ 4,438 $ 4,691 $ 5,014 $ 5,365 $ 5,992 $ 6,252 $ 6,361 $ 6,648 $ 6,744 $ 6,835 $ 9,156 U.S.

8. Copyright ©2013 Cengage Learning. All rights reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible web site, in whole or in part. First page 14 th edition Gwartney-Stroup Sobel-Macpherson Economics and the Structure of the Educational System

9. Copyright ©2013 Cengage Learning. All rights reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible web site, in whole or in part. First page 14 th edition Gwartney-Stroup Sobel-Macpherson Economic analysis indicates the structure of the educational system may well be a contributing factor to its high cost and poor student performance of recent decades. Education is largely provided by government-operated firms with substantial monopoly power. Competition is largely absent; educational consumers have limited choice among schools. Because it is costly for parents and students to shift away from low-quality schools, they are in a weak position to discipline and direct schools. Economics of the Educational System

10. Copyright ©2013 Cengage Learning. All rights reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible web site, in whole or in part. First page 14 th edition Gwartney-Stroup Sobel-Macpherson Public school administrators have a strong incentive to expand their budgets by seeking additional funding from budgetary agencies, but have a weak incentive to cater to the views of parents and students. This structure is likely to result in higher schooling costs and a disconnect between the quality (and structure) of schools and the preferences of educational consumers. Economics of the Educational System

11. Copyright ©2013 Cengage Learning. All rights reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible web site, in whole or in part. First page 14 th edition Gwartney-Stroup Sobel-Macpherson Questions for Thought: 1.“The best strategy to reverse the decline in student performance in recent decades is to increase spending on education.” -- Evaluate this statement. 2.“Public school administrators have strong economic incentives to operate efficiently.” -- Evaluate this statement.

12. Copyright ©2013 Cengage Learning. All rights reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible web site, in whole or in part. First page 14 th edition Gwartney-Stroup Sobel-Macpherson Ways to Expand the Options of Consumers

13. Copyright ©2013 Cengage Learning. All rights reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible web site, in whole or in part. First page 14 th edition Gwartney-Stroup Sobel-Macpherson School Vouchers Rather than financing schools directly, the government gives parents a certificate equal to the government’s per-pupil educational expenditures (or some portion of it). Parents can then use the voucher to finance their child’s education at the public or private school they think is best for their child. Charter Schools: Publicly funded, but independent of the traditional public school system, these schools operate under a contract (“charter”) with a government agency. Because they are largely independent, they provide characteristics that offer parents and children a wider range of options. Ways to Expand the Options of Consumers

14. Copyright ©2013 Cengage Learning. All rights reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible web site, in whole or in part. First page 14 th edition Gwartney-Stroup Sobel-Macpherson Plusses & Minuses for School Vouchers Advantages to School Vouchers: A voucher plan would put competition to work to improve schools. A voucher system would also encourage diversity, which would allow a larger number of Americans to choose a type of schooling that is more consistent with their preferences. Objections to School Vouchers: Beneficiaries would be high income families. Racial imbalance might increase. Funds would be drained away from public schools, causing them to further deteriorate. A voucher plan targeted towards low- and middle-income families would eliminate these objections.

15. Copyright ©2013 Cengage Learning. All rights reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible web site, in whole or in part. First page 14 th edition Gwartney-Stroup Sobel-Macpherson Differences between Charter Schools and School Vouchers Charter schools differ from school voucher programs in some particular dimensions. Religious schools are not permitted to be charter schools, while vouchers are sometimes permitted to be used at such schools. Charter schools are not permitted to charge tuition as all of their students are subsidized by public funds.

16. Copyright ©2013 Cengage Learning. All rights reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible web site, in whole or in part. First page 14 th edition Gwartney-Stroup Sobel-Macpherson The Effect of Structural Change

17. Copyright ©2013 Cengage Learning. All rights reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible web site, in whole or in part. First page 14 th edition Gwartney-Stroup Sobel-Macpherson Charter schools and voucher programs are structural change designed to harness the competitive process and direct it toward improvement in the quality of schooling. To date, charter schools and voucher programs … Appear, on balance, to have had modest beneficial effects on student achievement. Have resulted in greater parental satisfaction. Parents with children in charter schools and voucher programs indicate a higher level of satisfaction with their children’s schools than parents with children in traditional public schools. The Effect of Structural Change

18. Copyright ©2013 Cengage Learning. All rights reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible web site, in whole or in part. First page 14 th edition Gwartney-Stroup Sobel-Macpherson Questions for Thought: 1.Should parents have the right to choose which school their children attend? Discuss. 2.Suppose that statistical studies indicated that additional choice did not change student performance, but that it did improve student and parental satisfaction with schools. Would these findings strengthen the case for school choice?

19. Copyright ©2013 Cengage Learning. All rights reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible web site, in whole or in part. First page End of Special Topic 10