Hard Lessons: Public Schools and Privatization.

• Author: Johnson, William R.

By Carol Ascher, Norm Frucher, and Robert Berne. New York, NY: Twentieth Century Fund Press, 1996. Pp. xi, 144. $9.95.

Can increased reliance on the market mechanism improve the quality of America's system of public education? These two books offer contrasting answers to this question, which is increasingly asked as education policy currently captures more public attention than all other policy issues. As economists we respect the power and efficiency of decentralized market forces in promoting efficiency. These two books, though neither is written by an economist, offer insights and perspectives on the application of market principles to public education that will profit economists interested in education policy.

Paul Hill, long associated with the Rand Corporation's educational studies, and his coauthors Lawrence Pierce and James Guthrie, offer a market-based school reform proposal, which they term "contract schools," as an alternative to such other market-oriented school reforms like vouchers, charter schools, and the contractual management of entire school districts. "Contract schools" would be run by private or nonprofit groups literally under legal contract to the local school board, which would retain responsibility for specifying the type of schooling to be supplied (the "output") but leave most of the internal workings of the school (the "inputs") to the contractor. The school board, as the representative of the public, will focus its efforts on specifying educational goals, choosing contractors, and monitoring their performance. Contractors will focus on supplying the educational services they have agreed to supply.

To an economist's eyes, the benefits of this arrangement are obvious; decentralized decision-makers will be able to run schools freed of the political and administrative constraints that bind the typical school principal. To this "supply-side" reform, Hill, Pierce, and Guthrie add a "demand-side" reform in the form of parental choice of schools. Contractors must not only satisfy the contract they have made with the school board, they must also attract enough students to break even, as their payment depends on the number of students who choose their school.

Although the elements of market-based school reform are present in the contract school proposal, Hill, Pierce, and Guthrie go to great lengths to distinguish their proposal from voucher systems or even the form of public school choice proposed by John Chubb and Terry...