School Vouchers and Behavioral Economics

 

Presently in Texas there is a movement towards school vouchers.  As it stands a bill (SB 1) has passed the Texas Senate but is having trouble moving past the Texas House.  According to this recent article house Democrats and rural Republicans are holding up the bill.  Governor Abbott has vowed to continually call special legislative sessions until a voucher program has passed.  Many Texas house representatives however are a hard line "no" when it comes to school vouchers.  The basic push back from the hard line no's is that vouchers will destroy the public school system.  as Texas Democratic party Chairman Gilberto Hinojosa states; "Public dollars belong in public schools. Period".

Before I get to the main element of this post I do have to impose some of my general thoughts on education.  These are thoughts and musings and are only based on my experiences and observations.  None of this is based on any factual analysis.  Just front porch conversations from a guy that has been around the block a few times.

First an foremost a sound public education system is a common good.  I firmly believe that the nation as a whole is better off when it's population is properly educated.  I also believe that each of us as individuals benefit from a properly educated nation.  I also believe that a sound public school system is the best way of achieving this goal.  Properly educated does not mean that we all attend university and obtain masters degrees.  In fact I cannot imagine the chaos that would ensue if we were all MBA's (quite a scary thought).  To me properly educated means that a person can read a document critically and determine if they should accept the information at face value or investigate the topic more thoroughly.  One may not be able to fully understand a document with lots of legal verbiage.  That is when you would hire an expert.  A high school graduate should be able to do basic math and geometry.  As with legal verbiage I would not expect every one to be an engineer or architect but you should know when you need one.  A high school graduate should also be exposed to different vocations so that they get a sense of where their strengths and weakness lie.  Shop class is an excellent way for many to be exposed to a possible trade.  Personally I disliked music class and I was also not very good at it, but I did get exposed to it enough to determine that it was not a career path for me.  Coming out of high school a person should be able to assess their situation (financially, academically and emotionally) and be able to investigate their options going forward.  As an example a high school graduate may feel that academically they are destined for a 4 year degree.  Emotionally they feel engineering is the field for them.  However financially university is out of reach.  They should be able to investigate what scholarship options are available.  Or maybe attend a community college for 2 years while saving money and attend university for the remaining 2 years.  There are also military options that may be available.

So now that I have risen from my front porch rocking chair time to get to the meat of the school voucher issue.  This initiative is some times referred to as the "School Choice" program.  The basic idea is to give families public money to put toward private schools.  Basically making it easier for families to "opt out" of the public school program.  There are a lot of macro issues to unpack with this but I am mostly interested in the micro issue of choice.  The basic focus of this blog has been decisions and how we make them.  So this voucher program is meant to allow families make decisions about their child's education.  According to the proponents of school vouchers parents are the best arbitrators of their child's education and future.  At first glance this is a very convincing argument.  Who would disagree that a parent would not want only the best for their child?  However as humans do we always make the right decisions?   The field of behavioral economics offers a contrary opinion to this basic premise.

I have posted about Behavioral economics previously.  Behavioral economics examines the differences between what people “should” do and what they actually do and the consequences of those actions.  In traditional economic theories people are viewed as factual, rational decision makers.  Richard Thaler has coined the term "Econs" for these mythical rational beings.  In Thaler's view Econs do not exist.  Behavioral Economics takes the view that people are subject to a number of constraints that do not allow them to make the best possible decisions.  In the article referenced above (Behavioral Economics) under the heading "Guide to behavioral economics terms" are some of these constraints that would negatively affect a parent making a decision.

Availability heuristic, refers to the idea that people often rely on easily recalled information, rather than actual data.  In Texas high school football does get the lions share of press however most people would generally evaluate a private school as superior to a public one.  This is usually due to famous alumni, publicized large grants or endowments and generally good press.  Even if we acknowledge the superiority of a private school would this be the correct choice for your child.  There would be lots of other factors to consider.   Pressure to succeed, travel time would be data points that should be seriously considered.

Bounded rationality, refers to the fact that people have limited cognitive ability, information and time, and do not always make the “correct” choice.  A sub factor of availability heuristic.  Could a parent rationally expect to assess all of the factors that could possibly affect this decision or simply chose a private school because their "gut" says it is better.

Loss aversion, is the idea that people are more averse to losses than they are eager to make gains.  Would a parent fear the loss of a private education over the benefit of a sound public education?

Bounded willpower captures the idea that even given an understanding of the optimal choice, people will often still preferentially choose whatever brings the most short-term benefit over incremental progress toward a long-term goal.  This one can have the greatest economic impact on a family and on the students we hope to empower.  As it stands the current bill offers $8,000 dollars per student to apply to private schools.  According to google the average private school tuition in the DFW is $13,299 (Texas average is 10,069).  So families will have to make the difference out of their own pockets.  I am sure that there are other costs as well, student fees, uniforms, etc..  Will families suffer from loss aversion and go into debt to make up the difference?  Would a family forgo 401K contributions?  What good would a somewhat better education be if the parents have no retirement savings and the child now has to financially support the parents.  We already have a serious retirement crisis evolving with people have very inadequate savings.

I have posted previously regarding high earners living paycheck to paycheck and how people earning six figures and are not able to save any money.  This is not a trivial number upwards of 49% of high earners live paycheck to paycheck.  Should these be the people making decisions regarding the future of their children and our society?