Central Planning Escape: An Essential Economic Argument For K-12 ESAs

By Dr. John Merrifield

Q: Why is our traditional K-12 education system so inefficient; costs too much; leaves a lot of children massively under-educated?

A: It operates in ways that are always, predictably, very inefficient.

There are only two ways to decide what is taught, where, how, and to whom. Similarly, there are only two ways to decide what is produced, where, how, and for whom for any industry.

1. Decentralized planning through free enterprise orchestrated by market-based price formation and adjustment. This is how most industries and modern economies function.

2. Central planning where a single authority, such as a government, makes economic decisions regarding the manufacturing and the distribution of products via political and administrative processes.

I like to refer to central planning approaches as “price-less” because prices are absent, or set by a bureaucracy rather than by supply and demand. Because price formation and change through markets,such systems always yield severe inefficiency, if not tyrannical disaster (see : Venezuela, Cuba, North Korea). There are no current or past examples of high-performing, centrally planned industries.

Despite that, central planning approaches dominate K-12 schooling — taxpayers pay into a system over which they ultimately have very little control. State lawmakers set aside billions for public education. That funding is then allocated at the local level by elected or appointed school board members who often know little about financing or operating a large, multifaceted enterprise. The system has historically been ripe with self-dealing and waste because there has been no incentive to save money or be accountable for failure.

There’s a great deal of room for improvement even in the world’s best K-12 systems (all schools, public and private).[i] Every one of the 51 U.S. systems is low-performing; together the basis for six official and semi-official, non-partisan and bipartisan ‘Nation at Risk’ declarations. The price-lessness of central planning handicaps every school system: The world’s top-ranked K-12 systems are only about 10 percent better than the ‘Nation-at-Risk’-bad U.S. system.

It might be tempting to continue to focus on improving school systems (all schools, public and private) within the just a central planning framework, but as decades of effort have shown the system would remain highly inefficient. Instead, we must achieve the basis for high performance by establishing the price formation and adjustment basis of decentralized planning (free enterprise provision) for at least the alternatives to the public schools.

Since there is a very low, maximum upside to centrally planned reform of a central planning disaster — in the U.S., it is a gold-plated disaster — we have to adopt the decentralized planning approaches that dominates most modern economies. Decentralized planning occurs through a combination of free enterprise and consumer choice, orchestrated by price formation and change. Within a school system, consumer choice means universal school choice.

I specifically call for universal school choice because we must make systemic change to the K-12 marketplace if we want to see a true shift from central planning to decentralized planning.

Nibbling at the edges won’t cut it. There is no third way.

We cannot continue to jeopardize the future of our children and country — go back and re-read “Nation at Risk” — by embracing a system that never produces quality results. We cannot accept lowest-common-denominator outcomes after decades of poor performance and failure. Doing so foretells the continued devastating consequences of K-12 system that leaves a lot of children behind, and will continue to do so as long as the centrally-planned schooling options have a monopoly on public funding

The best way to implement universal school choice — and energize decentralized planning — is via education savings accounts or ESAs. ESAs result from state government policies that allow eligible families that opt out of the assigned public school to receive an annual deposit into an account they can spend on approved education-related goods and services, including private school tuition.