Week 7 Prep – Markets and funding

Lecture

Should schools operate like a market? Different degrees of privatisation

Theoretical positions on choice.

Consider values orientations around the question of choice

Explore market systems and formats

Understand the Australian system

Australia is at the upper end of countries with private schooling, behind Netherlands, Ireland, Indonesia,
Macao, Hong Kong, Dubai, and Chile.

Private can include government funding being over 50%

But that’s complicated with Ireland which is mostly government schools? And Netherlands.

Australia, Belgium, Chile, Spain. Greatest proportion of students in private school.

Privatisation can be endogenous or exogenous – using marketized practices or opening up to the private
sector.

In Oz, govt funding for independent schools is always there. They charge fees but are non-profit, and
must conform to regulation.

Also, endogenous privatisation occurs in public schools too.

Oz: “extreme” form of school marketisation. Unusually large.

Table of access to private schools. 40% non-govt., but 22.5% lowest SES, 62.5% of highest SES, 20% indig
and 23.6% with disabilities. INEQUITABLE

Reintroduction of state aid to independent schools (See Forsey, Proctor and Stacey 2017). Came in in
1962 or just after

Karmel Report saw a reallocation of funding according to need.

Howard revoked “New Schools” policy allowing schools to be set up even when there wasn’t sufficient
demand.

Education Revolution, Myschool website encouraging parents to vote with their feet.

In public schools in NSW – partial dezoning, and a growth of selective and specialist schools between
1988 and 2019.

Growth in independent public schools and devolution of governance. Endogenous privatisation.

What are some effects of a wide range of schools?

Evidence for benefits of competition between schools is scant.

Segregation and Equity?

Since the growth in school choice, middle class families are the most engaged in choice. “People like us”
“White flight” into high fee independents schools from selective public.

Segregation is likely in these conditions.

Selective public and high fee independent schools segregate by educational advantage.

Highest achieving NSW schools adjusted for SES are selective public schools.

There is a peer effect: regardless of your own SES background, your performance will be affected by the
SES level of your school as a whole.

Systems of school choice seem to exacerbate inequality. OECD:

“sorting students into schools by ability of social status may adversely affect both the efficiency and
equity of the school system” (2019)

Low achievers are more negatively affected than high achievers are positively affected

Friedman see the freedom of the individual as the ultimate objective. The govt should enforce minimum
standards only. 1955. Equity not necessarily the point.

What are my values regarding access to schools?

Do I think segregation is a problem in and of itself? Or do I think that everyone should have access to
choice equally.

New reform in Chile. A centralised sorting mechanism enabling some choice but also some degree of
social mix. Chile has been described as the most segregated education system in the OECD. The new law
will ban profit, tuition fees and selective admissions in all private schools that are funded by the
government.

Reading 1

A Most Poisonous Debate: Legitimising Support for Australian Private Schools. Forsey, Proctor, Stacey,
2017.

A vexed issue.

Simon Birmingham in 2016 on Q&A said some independent schools are overfunded.

Gov funding is how they ensure adherence to the national curriculum and teacher standards. Funding is
allocated based on the SES Score, but the majority of Catholic and Independent schools received more
than 50% of the govt funding allocated to comparable govt sector schools. Funding to non-gov schools
increased at a greater rate between 2009 and 2014 than to gov schools.
Table of funding allocation in 2015 shows Catholics receive 54% funding from the government and 18%
from state, Inds receive 34% from govt and 12% from state.

In the 1970s, 4% of kids were in independent schools and 18% in catholic schools. The Karmel report
was what led to funding for non gov schools. Gonski hasn’t worked through properly yet.

2 – History

AIS schools are not administered by the states.

Funding was withdrawn from denominational schools mid-19th century. Protestants mostly got on board
but Catholics resisted and established their own network of schools with cheap labour in the form of
monks and nuns.

High fee independent schools often focused on religious and military practice, a way to nurture leaders
of the future. They dominated higher ed. No govt funding, but various benefits.

Pre-1960s it would have been seen as political suicide to support Catholic school publicly. In 1963
Menzies promised to finance science labs in all schools. 1964 Act began all of this.

Under Whitlam it was established that even the wealthiest of schools would b subsidised. [WHY?!] And
why does the CMWLTH fund independent schools directly?

Chasing the Catholic vote? Powerful lobbies anyway.

Since federal funding saved Catholic sector in the 1970s many Catholic schools have gentrified, and
many high fee schools have built fancy facilities. Is this achieved through govt funding?

Funding can also be a lever of control over private schools.

Hawke tried to slow the establishment of new private schools, but Howard abolished this, saying it
limited free choice.

Ministers need to promise that any change in the formula of funding allocation will lead no private
school worse off.

Despite all of this, it seems to be social advantage that has the greatest effect on outcome, not sector
type. Advantage of both student and school has an effect.

Australia has stronger concentrations of disadvantaged students in disadvantaged schools than similar
OECD countries.

The Catholic sector now has more high income than low income family children.

The rise in inequity is an unintended consequence of the 1970s funding shifts.

Outcomes are not significantly improving as a result of this segregation

Reading 2
The Role of Government in Education by Milton Friedman, 1955

Assuming that the freedom of the family is the ultimate objective of the society via voluntary exchange,
the only valid grounds for government intervention are to maintain the rules of the game by enforcing
contracts, preventing coercion and keeping markets free. Beyond this 3 grounds on which intervention is
justified: “Natural monopoly” or similar market imperfections which make effective competitions
impossible. Substantial neighbourhood effects. And parental responsibility.

Two types of education: General Education for citizenship; and vocational education.

Gen Ed: Values and minimum degree of literacy and knowledge. There is a generalised benefit, which is
a neighbourhood effect that can’t be measured. So what does govt do? 1) make parents pay except in
extreme cases. But this isn’t happening. Govts pay right up to higher ed, which could also be justified by
neighbourhood effects.

A distinction between education for citizenship and leadership and education for private gain.

“Subsidising the training of vets, beauticians, dentists and other skills.. . cannot be justified on the same
grounds and subsidizing elementary education or liberal education”.

Different societies may decide to subsidize different types of education according to their values and the
perceived social benefit, but it’s the economist’s job to clarify the questions. Should the funding be
communal or individual?

Funding can be justified, but not administration of institutions, the “nationalization” of the education
industry. An alternative gives education vouchers to parents and assures minimum standards of
institutions. [like in Australia’s independent sector!]

Religious schools challenge the idea of instilling useful social values that lead to smooth running of
society.

If gov funding were removed from independent schools, achieving a common set of values would be
difficult. But how do we distinguish between common social values and indoctrination?

[Literally a description of the current Aus system!] He thinks we should give vouchers and schools will
spring up to meet demand. He argues that greater segregation wouldn’t result. Only highly limited class
does this.

The funding model in Australia is basically the Friedman model, where govs give money to independent
schools for those kids.

He points out in a footnote that this argument was used to achieve racial segregation in southern states,
something he didn’t want to happen.

[something here about a resistance to centralised control being a Friedman-esque reaction, rather than
a socialist one. If true socialism is equality then there will be more standardisation; discuss]

For higher ed, funding should be granted to the individual to spend at institutions of their own choosing
towards education in citizenship and leadership. His argument is that the government should subsidise
education that is useful to society socially, not institutions doing research.
[something here about how university funding relates to students learning, but prestige comes from
research, which isn’t what the government is paying for. So the putting of teaching on the back burner in
Australia is problematic for Friedman. The learning is what the institution is there for and the research is
a cherry on top.

F sees vocational and professional education as having no positive neighbourhood effects per se. It’s
investment in human capital and raises the economic productivity of the human being, which results in
better salaries, etc. [But what about artists and teachers and nurses?]

But private investment in vocational education has not taken off. Too complicated and ethically icky. So
the govt needs to intervene. Friedman recommends a graduate tax to repay, for life, the benefits of the
training investment.

[The friedman article seems to justify the jrg package on the grounds of offering greater access to able
individuals from any background via state subsidy and expected higher earnings]

It’s clear that Friedman believes his model is a gateway to greater equity of access and a way of tackling
inequity. But the system is riddled with people fighting to preserve privilege, including in the US, where
the free market story is told most loudly.

[But there are public goods to vocational education. Medicine, arts, trades…]

Workbook

Trailer about Charter Schools in the US

Public schools in certain districts and in the US as a whole are seen to be failing. The hope comes
through selection – by lottery – for a charter school, which is run on a different model for free. The
children – the individuals, and their families - and great teachers are seen s the source of hope, and a
system that allows them to flourish. Bill Gates puts a word in. Entrepreneurs support this?

Second video

Charter schools are about choice and business mentality. The video presents the move towards charter
schools as a move towards market failure and greater inequity. Hope is coming from a wider range of
teachers and legislators speaking up in favour of public education, to try to save it.

John Oliver

Do they work? Uneven in performance, arguments about whether they select for ability, etc.

How are charter schools assessed for quality before they open?

They receive funding per student.

Authorisers oversee Charter Schools. But depending on state rules those authorisers could be owned by
the school leaders.
Synchronous Session, 26 October 2022

Idea of interest groups for the course is a good one! Meghan taking on an idea I presented among
others.

UNSW APA resources, search through the browser and it’ll come up.

Wants us to grapple with the challenges and trade-offs of policy work.

Review sample responses from part 2.