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The role of prices in education

April 2nd, 2012 Posted in education by

The government’s Free Schools policy is widely regarded as a significant innovation; a radical shake-up of state education. The next logical step – permitting for-profit providers to deliver state-funded education – is still hotly contested and is unlikely to emerge in this parliament.

Yet even if profit-making providers were able to deliver state-funded schooling, this would hardly represent a free market in education. For one thing, almost all discussion of voucher schemes and for-profit provision assumes that prices will be capped.

This misses one of the most crucial benefits of allowing markets to operate.

Read the rest of the article, and leave any comments, at the IEA blog.

3 Responses to “The role of prices in education”

  1. Tabman Says:

    There is a market already in operation for state schooling; it operates via the cost of housing around “desirable” schools.

  2. Tom Papworth Says:


    Well, yes and no. I agree that house prices act as a proxy for school access, but it’s not an efficient market because increases in demand for the good school do not lead to an increase in supply of good schooling; i.e. the extra spent to buy one’s way into the catchment area does not feed into the school.

    As such, it’s a zero-sum game: even the increased demand for housing near the school cannot be met by increased supply, as new supply merely reduces the range of the catchment area.

    It is a shockingly inefficient system: Paul Collier reckons that one could not design a worse system if one asked economists to sit down and try to come up with one.

  3. treetop Says:

    Taking education out of state control would be a massive boost to our education system. Interfering politicians have no place trying their social engineering ideas out on children. Millions of kids have had to endure sub standard education for the last 40 years as a well meaning but underperforming system of one size fits all education has destroyed the concept of effort and achievement. This country has slowly slipped down international rankings and political manipulation of the scores has only masked this.Giving tax credits to anyone paying for education,health or any other state provided form of supply is an excellent idea.