Hard Lessons: Public Schools and Privatization.

By Carol Ascher, Norm Frucher, and Robert Berne. New York, NY: Twentieth Century Fund Press, 1996. Pp. xi, 144. $9.95.

Can increased reliance on the market mechanism improve the quality of America's system of public education? These two books offer contrasting answers to this question, which is increasingly asked as education policy currently captures more public attention than all other policy issues. As economists we respect the power and efficiency of decentralized market forces in promoting efficiency. These two books, though neither is written by an economist, offer insights and perspectives on the application of market principles to public education that will profit economists interested in education policy.

Paul Hill, long associated with the Rand Corporation's educational studies, and his coauthors Lawrence Pierce and James Guthrie, offer a market-based school reform proposal, which they term "contract schools," as an alternative to such other market-oriented school reforms like vouchers, charter schools, and the contractual management of entire school districts. "Contract schools" would be run by private or nonprofit groups literally under legal contract to the local school board, which would retain responsibility for specifying the type of schooling to be supplied (the "output") but leave most of the internal workings of the school (the "inputs") to the contractor. The school board, as the representative of the public, will focus its efforts on specifying educational goals, choosing contractors, and monitoring their performance. Contractors will focus on supplying the educational services they have agreed to supply.

To an economist's eyes, the benefits of this arrangement are obvious; decentralized decision-makers will be able to run schools freed of the political and administrative constraints that bind the typical school principal. To this "supply-side" reform, Hill, Pierce, and Guthrie add a "demand-side" reform in the form of parental choice of schools. Contractors must not only satisfy the contract they have made with the school board, they must also attract enough students to break even, as their payment depends on the number of students who choose their school.

Although the elements of market-based school reform are present in the contract school proposal, Hill, Pierce, and Guthrie go to great lengths to distinguish their proposal from voucher systems or even the form of public school choice proposed by John Chubb and Terry Moe in their famous book Politics, Markets and America's Schools. As they see it, the difference is the greater degree of control over school output exercised by the school board. Hill, Pierce, and Guthrie want to limit parental choice of schools to options explicitly approved by the school board as the public's representative. Part of the reason for this is mistrust of parental ability to choose appropriate schools (paternalism) and part is the desire to satisfy the public interest in schooling as well as parents' interests (externalities).

Hill, Pierce, and Guthrie's argument is enriched by their detailed knowledge of the inner workings of U.S. school systems, particularly with regard to teachers; their assignment to schools, their compensation, their training and professional development, and the incentives they face. Decentralizing these teacher personnel decisions allows the leaders of individual schools to seek to hire the teachers they want and to reward them for their contributions to the school's mission. Unlike the current system, contracting will allow penalties for bad performance and rewards for good performance.

A final element of the Hill et al.'s proposal involves school finance equity. Although one could certainly envision decentralizing the production of schooling without centralizing its finance (as Chubb and Moe's proposal does), one suspects that Hill and his coauthors recognize that linking contract schools to school finance equality may improve its political palatability among those who normally oppose market-based reforms. Here the analytic subtlety apparent in the rest of the book is less in evidence, as the authors ignore the academic debate about school finance equalization and propose complete statewide financing of public schooling. At the very least, recent work by economists such as Caroline Hoxby and Thomas Dowries on the effects of centralized school finance, and the example of California, in which centralized finance has been accompanied by drastic reduction in school quality over the past two decades, should be cited to bring the same balance to their discussion of this issue that the authors brought to their analysis of the efficiency effects of alternative reforms.

Ascher, Frucher, and Berne's short book is a look backward rather than forward. It attempts an evaluation and assessment of past experiences with privatization, broadly defined, in public schooling. That assessment is mostly negative. Evaluations of the Office of Economic Opportunity's experiments in performance contracting and vouchers in the early 1970s reveal inconclusive outcomes, political constraints, and less than clean experimental design. More recent privatization episodes, in Baltimore, Hartford, and Chelsea, Massachusetts, seemed to yield less than their supporters hoped for yet more than their detractors feared. Again, political constraints and the active opposition of teachers' unions limit the potential of any decentralizing school reform to show dramatic improvements especially in the short run. The ongoing voucher-like Milwaukee Choice Program has been subjected to several intense academic evaluations with results ranging from no effect to a significant improvement in test scores. Although Ascher, Frucher, and Berne downplay the positive evaluations, most economists would probably agree that there is enough positive evidence to warrant continued experimentation. The authors dislike privatization on other grounds (its supposed diminution of student diversity and its nondemocratic decision-making, as examples), so one senses that they were not disappointed to find few clear positive evaluations of past privatization episodes.

Should an economist interested in school reform read these two books? A stronger case can be made for the Hill, Pierce, and Guthrie book as it offers a detailed analysis of the application of decentralized market-like mechanisms to public education. The book tries to be objective, offering the drawbacks of its own policy prescription as well as an evaluation of competing reforms. It is a book fully in the spirit of Chubb and Moe, with perhaps less hard analytic evidence to buttress the argument. The Ascher, Frucher, and Berne book is less successful as an objective evaluation of past privatization efforts and as such will be less useful to economists of education.

William R. Johnson University of Virginia