Introduction to Economics                                                     Lesson of 22 August 2006



State-supplied free, universal and compulsory education for all children is a feature of many, if not most, developed nations.  This has led in many instances to the creation of school systems run, or supported, by the state.  In Australia’s case, each state has created a state-run school system, both at primary and secondary level, which systems function and co-exist together with non-state, fee-paying schools.

In recent years state school systems have been subjected to considerable criticism from a variety of sources.  There has been a perception that the quality of education offered in state schools has declined and there has been a drift in numbers from the state schools to the various private alternatives.  This is despite the fact that the state system offers a free, or near free, service, funded by taxpayers, whilst that provided by the private system has to be paid for personally with no taxation allowance.

Apart from the alleged decline in quality in state- school education, critics have pointed to the alleged inherent lack of responsiveness of state schools to the wishes of the relevant consumers, which in this case are the students and, [even more so] their parents.  The producers of the service, namely the teachers, principals and administrators of the state school system are not directly responsible to the consumers.  They are employed, paid, promoted and their position protected by the state.  Since typically, as in Victoria, students are assigned to a school by virtue of their residential zone, each school is assured of a supply of students.  The teachers, principals and administrators of the state system, unlike the private school alternative, are thus largely spared the burden of attracting and retaining students.

One consequence of any direct responsive connection between the wishes of producers and of consumers is to lead to an imbalance; an over or under supply.  State schools might offer more of what is not desired by the consumers, such as for instance sex education, and not enough of what is, such as religion.  Such imbalances are wasteful and inefficient.

In an endeavour to overcome some of the perceived problems in the state school system, a number of reforms have been proposed.  One such proposal is education vouchers.  Credit for their formulation is generally attributed to the leading Chicago School American economist, Milton Friedman, who certainly coined the phrase “education voucher” in the context of two separate school systems, state and private, although suggestions that the state should provide some form of universal educational subsidy go back much earlier in time, including to John Stuart Mill, the C19 British economist and political philosopher and Thomas Paine, the C18 British/American pamphleteer. 



An education voucher is an authorisation issued by the state for a pre-determined amount of money payable by the state to an approved education supplier on behalf of a named student [or their parent] for educational services supplied to such student.  Although details vary depending on the actual proposal, it is generally envisaged that each student should receive an identical amount to be used for the purpose of their education at any approved school or education supplier that the student [or their parent] chooses, regardless of locality and whether state or privately operated.



The introduction of vouchers would increase the freedom of choice available to students to choose their own education.  This would be particularly helpful to the financially poor who presently, unlike middle and upper class students, are unable to pick and choose where they reside so as to enable themselves to gain access to the more desirable state schools, which generally speaking tend to be located in the more affluent [and expensive] areas.

The movement of students away from the less desired schools and towards the more desired would tend to introduce an element of competition.  A school faced with a major drain of pupils would be forced, no matter how reluctantly, to examine its practices in an endeavour to ascertain why it was being shunned and thereafter possibly take some steps to improve itself or risk its own demise.  Ultimately this would lead to greater efficiency and less waste.

The availability of funds should enable a number of new and innovative educational establishments to be set up, which presently does not occur.  Although a few for-profit schools do exist, such as Taylors, it is extremely difficult to set up or maintain a commercial operation when the product is being given away by your competitor.  The vast bulk of the presently existing so-called private schools are supported, and in many cases subsidised, by churches and religious groups.

The provision of vouchers would be a more equitable method of financing universal education.  Presently all are taxed to provide a service, which many do not avail themselves of but rather choose to pay to be provided elsewhere.  Whilst it would not address the complaints of the childless or the home-schoolers, vouchers would address the argument of those who complain that they should be compensated for sparing the state the expense of educating their children, for which service they have paid for in their taxes.



State schools exist only partly to teach the 3 Rs.  Arguably state schools exist, at least as much, to provide a common educational experience for all and to inculcate a desired universal set of civic views and attitudes, to discourage separation and divisiveness, assimilate immigrants and promote harmony.  Vouchers, to the contrary, are likely to preclude this common experience and to encourage division and the setting up of ethnocentric and diverse religious schools.

Vouchers would enable the more able students to desert or be poached from the struggling schools, where they are needed to provide hope and encouragement to the less able.  Ultimately the struggling schools would be reduced to the least able students or those who, for whatever reason, were unable or unwilling to go elsewhere and the schools themselves would become centres of despair and a breeding ground for misfits.

Many parents, particularly the disadvantaged, lack the capacity or the interest to make sound or beneficial decisions regarding their children’s education.  Their increased freedom to choose would be likely merely to frustrate or confuse them and lead ultimately to less beneficial outcomes for their children.

Vouchers are likely to lead to an increase in fraud such as kickbacks to parents.

Vouchers are likely to erode the independence of the existing private school system.  Financially it would be extremely difficult for a private school to decline to accept a government voucher.  Yet with state funding is likely to come increased state control since only approved schools will be eligible to receive vouchers.  The ultimate result is likely to be a takeover of the private schools by the state bureaucracy and the public service unions and less freedom of choice rather than more.


                                               David Sharp

                                                 22 August 2006        





Return to the Home Page