The papers in this volume were presented at a conference held at the Federal Reserve Bank of Dallas in October 2003. We wish to thank the authors as well as Milton and Rose Friedman for writing the foreword and Alan Greenspan for allowing publication of his remarks. (Two of the conference speakers, Gary Becker and Francisco Gil Diaz, are not represented in these proceedings.) We also extend special thanks to Kay Gribbin and Betty Chapman of the Research Department and Gloria Brown, Laurel Brewster, and Heather McDonald of the Public Affairs Department for assistance in organizing the conference. We would also like to thank Kay Champagne, Jennifer Afflerbach and Laura Bell of the publications staff for seeing this volume through to publication.
The Theory and Practiceof School Choic,
Paul E. Peterson
Economists prove in theory what works in practice. So it is said. This paper demonstrates quite the opposite: It shows that school vouchers work in practice, just as Rose and Milton Friedman proved in theory. Simply defined, a voucher is a coupon for the purchase of a particular good or service. Unlike a $10 bill, it cannot be used for any purpose whatsoever.
Its use is limited to the terms designated by the voucher. But like a $10 bill, vouchers typically offer recipients a choice. For this reason, distant relatives find coupons popular birthday presents for those whose tastes are unknown. It is not only in the retail market that vouchers or coupons are used. Food stamps, housing allowances for the poor, and federal grants for needy students are all voucherlike programs that fund services while giving recipients a range of choice. It is the special contribution of the Friedmans that they have shown, theoretically, how vouchers can also enhance school choice and school productivity.
By giving parents a school voucher, the government ensures that the money will be used for an investment in human capital. But instead of requiring attendance at a government-operated neighborhood school, no matter how deficient, the family is given a choice among public and private schools in its community. Schools can then compete for customer support. If educational services do not differ significantly from other goods and services, then this market-based approach to educational provision should yield efficiency gains.