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Jan 18, 2013

Pareto efficiency and charter schools

Is there the right balance between charter and district schools? It is raised over and over again across the country where legislators of different levels consider the limits the growth of charter schools.

On one extreme of the debate some argue for unrestricted growth of charter school, citing parent choice and unrestrained competition. This in effect, may lead to disappearance of district schools, or perhaps reducing them to special service providers. I don’t believe this would be a good policy outcome. Dismantling an entire public institution is risky; it inevitably wastes a lot of resources invested in it. There is also something to be said about having the provider of the last resort. The district schools do not close, accept all, and provide safety net if charter or private schools close. Additionally, district schools provide competition for charter schools in the labor market through the conditions and pay levels of their unionized labor. Without them, charters would be tempted to keep down pay and increase work day. The district schools are better at delivering some services that require significant concentration of resources (just a few examples would be severe and profound disabilities, athletics, career and technical education). Larger districts may be better at providing teacher induction and professional development; they tend to have better facilities. There is also a theoretical argument against viewing education as a market of consumer goods.

One the other extreme, there are people who say that charter schools should be completely abolished, for they drain resources from districts, and in effect remove the best students, leaving only the neediest in districts. That is also not a positive policy outcome, because the proposal addresses none of the benefits provided by charter schools. Good charter schools provide better alternatives to families. They are also intended as laboratories of innovation, and many do innovate. Charter schools provide an important pressure for district schools to innovate or lose students to competition. More broadly, our educational system becomes more and more heterogeneous, splintering further and further to serve different needs of various populations. It now included district and charter public schools, a number of schools of choice within districts, parochial and secular independent schools, homeschooling, and online schools. It is more than likely that district schools will have to learn to co-exist and collaborate with all of those forms of education. In many instances, charter schools can serve special populations much better than the district schools (young parents, the deaf and hard of hearing, for example). In any case, it would be an extremely poor policy to eliminate already existing and effective schools. As I said to one of charter school principals recently, don’t let any of my doubts prevent you from actually giving good education to even one child.

The question of the right balance is then not trivial. Is there a point of no-return, after which a public district will collapse under the weight of its obligations and diminishing resources? I am not aware of any scholarship that helps answering this question, nor do I think we have precedents where that actually happened. Finally, the answer may be very different for a large public school district and a small one. While it would be tempting to suggest a specific number (10%? 40%) of students to be allowed into charters, I don’t think anyone really knows. It is important, however to establish that a question is answerable, before trying to answer it.

One possible principle to apply here is what economists call the Pareto Efficiency. It is basically, a situation where no one can be made better off without making someone else worse off. In other words, the ideal Pareto balance is when not one more student can take his or her funding into a charter school, without damaging the remaining district students’ chances to get good education. But even to begin to talk about the Pareto balance requires a common understanding of the end game. If we only agreed that both charter schools and district schools are here to stay, then our contentious conversations would move from the realm of politics to the real of policy, where they belong. The Pareto efficiency may not lead us to a universal answer, but it can be an important way of considering evidence. For example, when debating adding another charter, we can ask – what will happen to the district if another 200 students left? Not in theory, not in the realm of abstraction, but specifically? What effect it will have on finances, staffing, facilities, etc.

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