Is Public Schooling a Public Good? An Analysis of Schooling Externalities

By Corey A. DeAngelis of Cato. Excerpts:

"schooling easily fails both parts of the economic definition. If one student occupies a seat in a classroom, another child is prevented from sitting in the same seat. In addition, if students are added to a given classroom, the teacher is less able to tailor the educational approach to each child, which could reduce the average amount of personalized education received by each student. Because of this, schooling fails the nonrivalrous part of the definition. Second and perhaps most important, because it is not difficult to exclude a person from a school—or any other type of institution with walls—schooling fails the non - excludability condition. If someone does not pay me to educate the student, I can simply deny the student services. Fortunately, schools will never suffer from a true free-rider problem because they are not true public goods. That is precisely why private schools and tutoring services operate effectively today without government operating or funding them."

"While education itself seems to have net positive externalities, the case is less clear for the system of traditional public schooling we have in the United States today. After all, if the traditional public schooling system is reducing overall levels of education, or producing education very inefficiently, it would be considered a demerit good—a good that has net negative externalities. In this analysis, I examine all the theoretical externalities around the traditional public schooling system in the United States today."

"A meta-analytic and systematic review of 19 experimental voucher studies around the world finds that, on average, private schools increase math scores by 15 percent of a standard deviation and reading scores by 27 percent of a standard deviation. 20 Out of the 17 voucher experiments in the United States, 11 find statistically significant positive test-score effects for some or all students, four find no statistically significant effects, while two find negative effects. 21 The meta-analysis from 16 of the U.S. experimental studies finds that, on average, private schooling does not have a statistically significant effect on reading scores, but it increases math scores by around 7 percent of a standard deviation."

"The scientific evidence on longer-term edu - cational outcomes such as high school gradua - tion rates is less abundant. Foreman’s summary of three rigorous studies linking private school choice programs to high school graduation finds positive effects. 23 The only U.S. experi - ment on the subject finds that attending a private school through the D.C. Opportunity Scholarship Program increased the likelihood of high school graduation by 21 percentage points. 24 The one quasi-experimental study on the subject finds that attending a private school using the Milwaukee Parental Choice Program increases the likelihood of high school graduation by 3 percentage points. 25 The final study included in the review finds that Milwaukee private schools graduate voucher students at a rate 12 percentage points higher than Milwaukee public schools; however, this study is merely observational."

"this analysis takes a conservative approach by comparing the taxpayer costs associated with traditional public schools to the policy- relevant counterfactual: the taxpayer costs in - curred from a private school choice program.

We can examine the taxpayer effects of private school choice programs by looking at how current school choice laws affect statewide educational funding formulas. As shown in Forster’s review of the evidence, 25 out of 28 studies find that private school choice programs save taxpayer money, while 3 studies find no statistically significant fiscal effects. 27 Spalding finds that 10 voucher programs in the United States generated a cumulative savings of at least $1.7 billion between 1990 and 2011. 28 Since the 2016 Forster review, all other fiscal impact studies of private school choice programs that I know of have found taxpayer savings.

This savings happens for two main reasons: (1) school voucher laws usually mandate that the voucher amount must be a fraction of the total per pupil expenditure in traditional pub - lic schools; and (2) private school tuition fees are often below the state-mandated maximum voucher funding amount. As shown by EdChoice, the average state- funding amount allocated toward voucher students is around 59 percent of the per pupil funding in traditional public schools."

"An improved education could strength - en the character skills necessary to follow the law and tolerate the views of others. Further - more, an educational setting can improve social cohesion through increasing racial diversity and integration."

"As shown in a review of 11 experimental and quasi-experimental studies, DeAngelis finds that private school choice programs in the United States increase these types of civic outcomes. 31 None of the studies reviewed find negative effects. The only study linking private school choice to adult criminal behavior finds that the Milwaukee Parental Choice Program leads to a 7 percentage point reduction in felo - nies and a 6 to 9 percentage point reduction in misdemeanors for male students.

DeAngelis also finds that effects of private school choice are null to positive for toler - ance of others, positive on charitable giving, positive on volunteering, and null to positive on political participation. 33 Wolf ’s review of 21 quantitative studies similarly finds that private school choice increases civic outcomes overall. 34 Forster’s review of the empirical evidence also finds that private school choice in the United States has null to positive ef - fects on civic values and practices. 35 Nine out of the 10 quantitative studies linking private school choice to racial integration find statis - tically significant positive effects, while one study finds no effects. 36 Notably, Egalite, Mills, and Wolf find that, by using the Louisiana Scholarship Program, 82 percent of student transfers increased racial integration for their former public schools and 45 percent of student transfers improved racial integration in their new private school."

"For the societal effects of government schooling’s ability to educate the populace, I examine two outcomes: test scores and high school graduation. Overall, Shakeel, Anderson, and Wolf find that private school choice pro - grams increase reading scores by 4 percent of a standard deviation and math scores by 7 per - cent of a standard deviation. 39 Consequently, I estimate one model based on reading scores and the other based on math scores. However, the effect on reading scores is not statistically significant, so the externality associated with an educated populace is zero in the first model.

For math scores, I follow previous research linking standardized effect sizes with esti - mates found by Eric Hanushek. 40 Hanushek estimates that a one-standard-deviation in - crease in student cognitive ability leads to a 13 percent increase in lifetime earnings. Ad - ditionally, only 70 percent of learning gains are retained from year to year. 41 By multiply - ing those two estimates together, I can find the learning gains relative to the average U.S. worker. 42 I use Bureau of Labor Statistics data to find average earnings for U.S. employees ($49,630) and assume that current students will work between the ages of 25 and 70, or 46 years. 43 When I calculate the net present value of lifetime earnings, I assume a 1 percent year - ly growth in average salaries and a 3 percent annual discount rate. Based on these assump - tions, the net present value of lifetime earn - ings for the average U.S. worker coming from the public school system is $1,234,957. Using Hanushek’s estimates, the average lifetime earnings for U.S. students with access to 13 years of private school choice is $1,341,225.

Thus, the reduction in lifetime earnings for each student experiencing 13 years of government schooling is $106,268 ($1,341,225 – $1,234,957). Multiplying this result by the number of students in government schools reveals an overall negative effect on lifetime earnings of $5.364 trillion ($106,268 × 50.477 million). Of course, one can argue that the lower amount of earnings is accrued to the individual rather than the rest of society. However, the decrease in earnings reflects a $5.364 trillion (in 2017 dollars) reduction in production within society overall. Since the lower level of production results from a less-educated populace and harms the rest of society as a whole, it is a negative externality of government schooling.

Alternatively, I can calculate this particular externality through the effects of private school choice programs on graduation rates. While the experimental study in Washington, D.C., finds that private schooling increases the likelihood of graduation by 21 percentage points, I use the much less substantial 3 percentage point increase in graduation rates found in the Milwaukee voucher analysis in order to provide a conservative estimate. 44 I also use evidence from Levin, finding that each high school graduate produces around $277,000 (in 2017 dollars) in social benefits derived from additional tax revenues and reductions in health, crime and welfare costs. 45 Combining findings from Cowen (et al.) and Levin, I find that government schooling results in about 1,514,310 fewer high school graduates (50.477 million U.S. students multiplied by a 3 percentage point reduction in likelihood of graduation). This reduction leads to negative social effects of around $419.464 billion (1,514,310 fewer graduates multiplied by $277,000 in social costs each)."

"average private school tuition was around $10,740 per student in 2011–2012, or around $11,633 in 2017 dollars. According to the Digest of Education Statistics Table 236.60, av - erage public school per pupil expenditure was $11,991 in 2011–2012, or around $12,988 in 2017 dollars. In other words, it costs around $1,355 more ($12,988 – $11,633) to educate a child in a government school each year, on average. Over 13 years, this costs society an additional $17,615 per child. This costs taxpayers an additional $889.152 billion for 50.477 million children."

"The only quasi-experimental study linking private school choice to crime finds that private schools reduce the likelihood that male students will commit felonies by 4 percentage points in Milwaukee. 48 Assuming these benefits only accrue to about half of the 50.477 million U.S. students (the males), we should expect around 1.01 million fewer elons. McCollister, French, and Fang find that the social cost of a felony is around $23,242 in 2017 dollars. 49 Thus, a 1.01 million increase in the number of felons, produced by govern - ment schools, leads to around a $23.474 billion increase in social costs. In order to provide conservative estimates, this analysis ignores the positive effects of the Milwaukee voucher program on reducing misdemeanors."