For-Profit Schools and the Scale Challenge

by Reihan Salam

Michael McShane of the American Enterprise Institute has an admirably frank piece in NRO acknowledging that school choice in Milwaukee, poster-child for the voucher movement, has been a disappointment. For McShane, the fundamental goal of education reform is to create high-quality seats for students in schools, and so far, at least, the choice movement has failed to do enough to spur the scaling-up of existing high-quality schools and the creation of new high-quality schools:

For example, 86 percent of schools participating in Louisiana’s state scholarship program are more than ten years old and so were in existence before the voucher program. While almost 40 percent of participating Milwaukee schools have been created after Wisconsin’s program began, annual publication of school testing averages shows that the high performers are almost exclusively the long-existing schools. In both places, the high-quality seats that school choice creates or fills are not coming from market forces driving the creation of better options; rather, they are coming from vouchers that provide funding for students to leave existing low-performing schools for existing higher-performing ones.

McShane concludes on the following note:

Private-school choice will drive positive change only when it creates high-quality private schools within urban communities. New schools and school models need to be incubated, funding needs to follow students in a way that allows for non-traditional providers to play a role, new pathways into classrooms for private-school teachers and leaders need to be created, and high-quality school models need to be encouraged and supported while they scale up. In short, policymakers, private philanthropy, and school leaders need to get serious about what’s necessary to make the market work.

What I found surprising about McShane’s article is that he never mentions the profit motive, the force that drives the expansion of successful firms in other domains. In Sweden, for example, high-quality tax-financed for-profit school networks have been expanding rapidly. But the idea of tax-financed for-profit schools is a non-starter in the U.S., and also in Britain, where the Coalition government’s free schools initiative, inspired by the Swedish example, has explicitly excluded for-profits from taking part. I’m not entirely unsympathetic to this squeamishness, as the danger of rent-seeking is high and the optics involved in failing for-profit schools are, fairly or not, totally toxic. And there are other ways to encourage high-quality schools to scale up. Neerav Kingsland of New Schools for New Orleans has described how charter school districts can serve as market makers — which aim to increase the talent level and entrepreneurship with a school system by utilizing charters, vouchers, and alternative human capital pipelines — and as bankruptcy stewards, which intervene when schools fail by either bringing in new management to lead a turnaround or shutting them down in an orderly fashion. If for-profits are going to play a bigger role in K-12 education, and I think both that they will and that they should, I suspect that this will happen outside of the world of charters and vouchers and more in the world of course-level instructional providers and private tutoring. 

The Agenda

NRO’s domestic-policy blog, by Reihan Salam.