Balancing the equation: Supply and demand in tomorrow’s school choice marketplaces

Key Points

• School choice programs will succeed in improving options for children only insofar as they are able to create a functioning marketplace.
• Policymakers and educators must overcome supply-side hurdles to allow schools to access the financial and human capital necessary to grow and thrive.
• Families need better information on the schools they are trying to choose among so that they can advocate for the best education for their children.

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Executive Summary

School choice is an education reform premised on a simple proposition: give families more choices, and they will find schools that best fit their children’s needs. In short, school choice aims to create a marketplace of schooling options. School choice programs will succeed or fail based on how well they are able to create this marketplace and how deftly they can overcome issues on both the supply (schools) and demand (parents) sides of the school choice equation.

Over the past several years, we at the American Enterprise Institute (AEI) have been working to come to a more sophisticated understanding of both the demand and supply sides of school choice marketplaces. This report is a summary of what we have learned and a road map for those hoping to improve the design and efficacy of school choice programs in America.

Improving the demand side means collecting and disseminating better information for parents. This paper offers several lessons to keep in mind:

• Parents tend to follow Maslow’s hierarchy of needs when selecting a school. They first want to know if it is safe, then about academic performance, then about all of the other things that the school offers to help make their child a more well-rounded individual. Test scores can tell us one important part of what parents are looking for, but parents need more and wider information to make an informed decision about their child’s school.
• School report cards are useful, but parents greatly value the opinions of other parents. Finding ways to include the thoughts of parents, by allowing for star ratings, comment sections, or easy sharing via social media can help ensure information is put to use.
• Parents need help advocating for programs that help their children. Many school choice programs are designed specifically to help low-income families, a demographic group that is often disenfranchised from the political process. Organizations that want to help parents select schools should also think about how they can help connect parents with the political process to ensure that school choice programs are able to continue.

Improving the supply side means creating the conditions that help new schools open and good schools scale. Three key forces shape the supply-side response of schools to school choice programs:

• Financial capital. Schools need access to financial and human capital. At current funding levels, voucher and tax credit scholarship programs do not provide enough money to finance new buildings, substantial technology purchases, or any of the other upfront costs that come with starting or expanding a school. Designated line items in state budgets, traditional bond-granting authority, and social impact bonds can help cover the high upfront capital costs associated with starting or expanding a school.
• Human capital. New schools need new teachers and leaders. The skill set that will lead to success in a school participating in a school choice program is not necessarily the same skill set that would lead to success of a traditional public or private school. New programs must emerge to help cultivate the unique skill set needed to lead and work in schools of choice.
• Regulation. Regulations for school choice programs must be designed with the understanding that they are regulating a marketplace, not a monopoly. A modified British inspectorate model, “chartering” private schools, or integrated accreditors are all market-friendly regulatory models that could help ensure that children are protected without stifling innovation.

Understanding how to balance the school choice equation dramatically increases the likelihood that school choice markets will grow, thrive, and help more children access a high-quality education.

Read the full report.

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