Education Vouchers: The Lessons from Housing

by  Alex Tabarrok in

Tyler is concerned that a voucher system for education might end up looking like our health care market – “a crazy-quilt mix of bad incentives, high costs, and increasing levels of intervention.” But our health care system is not a voucher system – much more relevant is the existing voucher system for housing. Public housing has been a disaster in this country, low quality, dangerous and expensive (to the taxpayer). The Section 8 voucher and similar certificate programs have been far superior on all measures. What would you rather have – an apartment in a public housing project, costing the taxpayer $1000 a month, or a voucher worth $500 a month that you could spend on private housing?

The economic studies on the superiority of vouchers are unanimous. Here is Ed Olsen, one of the country’s leading researchers:

Five major studies have estimated both the cost per unit and the mean market rent of units provided by housing certificates and vouchers and important production programs, namely Public Housing, Section 236, and Section 8 New Construction.1 These studies are based on data from a wide variety of housing markets and for projects built in many different years. Three were multi-million dollar studies conducted for HUD by respected research firms during the Nixon, Ford, Carter, and Reagan administrations. They are unanimous in finding that housing certificates and vouchers provide equally desirable housing at a much lower total cost than any project-based assistance that has been studied, even though all of these studies are biased in favor of project-based assistance to some extent by the omission of certain indirect costs.

As with housing, the market for education would be very competitive so we would not see price rises due to monopoly problems (as Tyler fears might be the case). There has been a big debate about whether private schools result in better outcomes that public schools. Put aside this debate and focus on what is undeniable – private schools have achieved at least as good outcomes as have public schools but at about half the cost (similar to the cost savings of vouchers over public housing). Thus we are starving the most productive sector of the educational market and throwing money at the least productive sector. Prices might rise in a voucher market but only as a rational response to the lower price of quality in private schools.

Galbraith II

by  Alex Tabarrok in

James K. Galbraith (son of John K.) has a strange review of William Greider’s The Soul of Capitalism in today’s Washington Post. He doesn’t say much about Greider’s book but does offer the following:

More deeply, we may question the book’s premise. Has the United States really solved the scarcity problem? That may have been more true five decades ago when a tract called The Affluent Society first made the case. Then, the United States was the world’s dominant industrial power. Today, our material abundance rests on fragile strands: our military reach, the willingness of the world to export cheap goods to us and to lend us the means to pay for them.

In the past 50 years real GDP per-capita has almost tripled (and this doesn’t account for improvements in the quality of many goods and services) and yet it may have been more true 50 years ago that the scarcity problem was solved?!! This is taking family fealty too far. The explanations for our fragile abundance are not too convincing either. Put aside the fact that the US is less dependent on trade than most other industrial nations. More interesting is that Galbraith thinks that the hundreds of billions of dollars we are spending on military adventures in Iraq, Afghanistan and elsewhere are a net positive for the economy. Why? Later he suggests that the Iraq war is about a “tenacious drive for oil.” Where then is the oil dividend? Has Galbraith filled up at the pump recently? In truth, Empire rarely pays and whatever the political case for war it will never turn a profit.

Even the Christians Can’t Agree

by  Alex Tabarrok in

Lew Rockwell complains that the version of the Ten Commandments that Alabama Judge Moore chose for his 5,300 pound monument is “a sectarian one promoted by Calvinist and fundamentalist Protestants, but rejected by Catholics, Lutherans, and Episcopalians. (The difference has to do with whether the first commandment should be split into two parts to seem to justify iconoclasm.)”

The Right argues that the first amendment is all about defending atheism when, as Rockwell’s comment illustrates, it’s really about defending the religionists from themselves.

The Lunar Men

by  Alex Tabarrok in

I highly recommend Jenny Uglow’s The Lunar Men. In the 1770s, Erasmus Darwin, Matthew Boulton, James Watt, Josiah Wedgwood, Joseph Priestly and others met regularly under the light of the full moon to talk science. The Lunar Men is their biography. It’s the sort of biography where you learn much about other things. I found interesting discussions of private road and canal building (Wedgwood was a big supporter because some 30% of his pottery would break on the public roads), private coinage (Boulton ran a mint using the steam engines he and Watt had developed to press the coins), and the first industrial health and sickness insurance plans. Rousseau had an important influence on the group and makes an appearance as does Benjamin Franklin and many other figures of the day.

Erasmus Darwin was an especially colorful genius who wrote what were in essence biology textbooks set to verse! In this stanza (from The Temple of Nature) he discusses evolution long before his grandson was born:

Organic Life beneath the shoreless waves

Was born and nurs’d in Ocean’s pearly caves;

First forms minute, unseen by spheric glass,

Move on the mud, or pierce the watery mass;

These, as successive generations bloom,

New powers acquire, and larger limbs assume;

Whence countless groups of vegetation spring

And breathing realms of fin, and feet, and wing.