Private schools in a global world.

• Author: Toma, Eugenia Froedge
• Position: 2004 Presidential Address

Globalization is a popular term that, to economists, describes the effects of diminished costs to trade around the world. The technological revolution of the past two decades lowered barriers to trade in the financial sector as well as in the goods and services sectors. As a result, we routinely consume products from China, India, or Latin America, and these and other countries likewise consume goods and services from us. Many argue that a by-product of the technological revolution is the loss of country and regional cultural identity. We find McDonald's and Starbucks in Seattle, Washington, Beijing, China, and small towns around the globe. Others argue that this simply implies wider choice of goods and of cultural identities.

As economists think about globalization, we attribute these changes to efficiency in the marketplace. The technological advances have enabled countries to export those goods and services for which they have a comparative advantage, and the gains from trade have resulted in increased economic growth worldwide. While we see the benefits from the enhanced flow of goods and services across markets, economists have paid less attention to the nonmarket aspects of globalization. The increased flow of information and people across national boundaries implies increased competition across all sectors of the economy. Similar to the market for goods and services, the political institutions that survive the competitive race in the long run presumably will be those that enhance efficiency. This is not to intimate that political systems will replicate the efficiency of the marketplace but to suggest that competitive forces tend to lead to more efficient structures and, ultimately, toward more efficient outcomes. As these public administrative institutions become more competitive, politics should play a diminished role and economic efficiency should play an even greater role in future structures.

If globalization ultimately leads to more efficient institutions, the value of examining current international differences in institutional structures is immense. Through understanding past and current differences, we gain insight into our future. Today I want to examine one specific institution within this context--private provision of elementary and secondary schooling. I want to examine private schooling by exploring the institutions that govern the provision of private schooling, the role of politics and economics in the evolution of these institutions, and, finally, the efficiency implications of the various institutional arrangements. At each step in this examination, I shall be assessing the role that globalization has played, and is expected to play, in the delivery of schooling around the world.

1. Private Provision around the World

   Economists have studied education since the days of Adam Smith. We have estimated the demand for schooling, provided normative assessments of the role of the state in education, examined the effects of public expenditures for education on housing markets, estimated the returns to schooling, and estimated the relationship between public schooling and economic development. But most of all, economists have estimated education production functions that relate public sector inputs such as per pupil expenditures, pupil--teacher ratios, or teacher salaries to educational achievement. And, as last year's Southern Economic Association Distinguished Guest Lecturer so eloquently demonstrated, economists, policymakers, and the public have been sorely perplexed by the lack of positive association between these inputs and the achievement of public school students (Hoxby 2004).

   The private side of schooling has received increasing attention from economists as data have become more available (James 1993). Private schooling occupies a significantly smaller sector of the economy in the United States than does public schooling. According to UNESCO (2000) data, approximately 12% of students enrolled in primary schools in this country attend private schools. At the secondary level, the numbers are slightly less at approximately 10%.

   The 12% of students in private primary schools in the U.S. schools places the United States at 55th in the world with respect to reliance on the private sector for provision of schooling. For perspective, let us examine Table 1. which lists the top 20 countries in terms of proportion of enrolled students in private primary schools. The small Asian country of Macau (China) ranks number 1 in the world with 94% of its students enrolled in private schools. Zimbabwe (Africa) ranks second at 88% of students in private schools at the primary level. As we move down the list, we see Caribbean countries, European countries, and Middle Eastern countries. The 20th-ranked country, Spain, enrolls more than 33% of its students in private primary schools.

   A comparison of enrollment at the secondary level (see Table 2) provides only a slightly different image. First, the United States falls to number 72 in the world at the secondary level. The Caribbean and European countries remain on the list, but there is significant shuffling of the rankings between the two levels. Some countries fall out of this ranking because of lack of provision of secondary schooling. Others such as Zimbabwe fall from number 2 to number 21.

   Before considering these numbers further, I want to clarify some definitional issues. In the United States, we think of private schools as those that are governed and managed by an institution or organization outside the public sector and for which attendance fees are required to cover the costs of operating the school. But I shall illustrate this afternoon that this definition does not extend to much of the rest of the world. Private schools are virtually always defined as those for which a private sector authority holds some degree of governance responsibility and rights and has managerial authority over the schools. The public sector, however, may exert significant degrees of regulatory authority over the "private" schools. Furthermore, financing of privately governed schools may be entirely from public funds. As we progress, I shall return often to these definitional issues.

   The relatively small numbers for private schooling in the United States have not always described our situation. From the pre-Revolutionary War period into the mid-1800s, education in this country was largely privately provided and privately financed. For the most part, families paid fees to tutors to visit their homes or, in more urban areas, paid fees to teachers for instruction in a school setting. Churches and other charitable organizations sponsored the education of children whose families were too poor to contribute to teachers' fees. As education became more widespread, the public contributed to the schooling for the poor, but full taxpayer financing of schooling was not common until well into the 1800s. Education was not universal, but E. G. West (1994) demonstrated that literacy rates were surprisingly high and private education was a growth industry. This same success in literacy occurred with private schools in England and France as well through this same period in time.

   Private schooling dominated initially in our country's history in large part because the public sector was simply not developed. Scarce resources limited taxing capacity and service provision largely to defense. In part because of the success of schools in producing human capital, and in part because of general economic growth, the capacity of both the private and the public sectors grew rapidly in the mid-1800s.

   With general economic growth came an increased demand for goods and services, including those provided by the public sector. The collective provision of goods and services in general began to grow relative to its historical rates. The population of towns was small by modern standards, and the composition of the population in each town was relatively homogeneous. Efficiency gains from collective provision of goods were shared among the townspeople without severe allocation costs that accompany provision to persons with heterogeneous tastes.

   The local public sector was growing in numerous functional areas both for economic and for political reasons. Several factors directly affected the growth of public schools. To spur settlement in the West, the federal government began to grant land to new townships that was to be used specifically for the purpose of building schools (Tyack, James, and Benavot 1987). Around the same period in time, philosophical debates about the role of the state in education ensued. Some professional educators believed schools were the single place where immigrants could be taught the common values and common language of a new country. Some educators thought schools for the public were the only way to ensure socialization of humanity. The public choice answer to these debates resulted in a collectively funded, publicly operated system of schools available to all children.

   In these early days of public schooling, towns were dominated by Anglo-Saxon Protestants. The curriculum of the public schools reflected this in that they provided instruction steeped in Protestant...