Specialization in a Competitive Education Industry: Areas and Impacts

Even in relatively backward societies, extensive division of labor and specialization of function is required to make effective use of resources. --Milton Friedman (1962: 12) In most of the economy, competition forces producers to specialize. And it is well known that specialization within firms and by firms is a cornerstone of high productivity and innovation. But education economists give school differentiation little attention; there is little discussion of the degree to which various K-12 reform proposals might prompt the development of specialized schooling options. This article argues that increased specialization by schools either in what is taught or how it is taught has significant policy ramifications. Parental choice debates and research suffer from the intellectual inertia that results from the minimal specialization present in the current K-12 system, especially in the attendance zone public schools that enroll the vast majority of school-age children. The academic literature, influential newsletters, and the popular media virtually ignore the contrast between an economy fill of competing business firms that often differ almost as much as their customers, and schools that differ much less than children. The reform debate, especially the discussion of parental choice, is much the worse for its inattention to specialization. The literature only barely recognizes that the relative uniformity of the K-12 system is sufficiently unusual to warrant some explanation. For example, none of the many esteemed members of the Koret Task Force on K-12 Education, whose aim was to "describe and assess the current state of American education," thought the system's relative uniformity was worthy of mention (Mot 2001: xxi). The lone, noteworthy exception is an article by Byron Brown (1992) that argues that the "comprehensive uniformity" of the current system is a result of popular will and political agreement. (1) Another explanation is that the existing relative uniformity is a default outcome that results from the public school system's public finance monopoly (Quade 1996) and the political strife over education policy (Arons 1983), not something that occurs independent of those factors (Merrifield 2001: 107-9). This article aims to show how attention to the specialization issue would change the school reform debate, how it would help academic researchers greatly improve their models, and why it would make parental choice policies more attractive, especially proposals that would establish a competitive education industry (CEI). To set the stage, the next section reviews the essential elements of a CEI. Keystones of a Competitive Education Industry Because the issues described in economics principles textbooks do not penetrate the school reform debate very often, this section briefly reviews the essential elements of a competitive education industry (CEI). Careless use of the term "competition" in the context of K-12 reform discussions is a serious problem. Even some economists have alleged that modest additions to the competitive fringe of a "dominant firm" (the public school system) with a huge price advantage, or that slight reductions in that advantage among a few select families, (2) would establish competition. Noneconomists are even less likely to differentiate between policy options that introduce some limited rivalry and options that would foster genuine competition. In a nutshell, genuine competition results from low entry barriers, market-determined prices, and a minimum number of informed and mobile parent-consumers. Low entry barriers are the most critical element of genuine competition. Low formal and informal barriers tie each school's market share to efficient provision of services that are superior in some valued attribute(s). Free entry does not exist if the government favors some schools. In the United States, and many other countries, the key entry barrier is informal, the result of discrimination against parents who prefer private schools. …