Absent from school: Pigou

Let's just stipulate that the use of fossil fuels creates negative externalities. Whether these are supporting terrorists and despots, pollution, AGW, or simply underwriting a lifestyle that cannot be sustained forever, I am indifferent. In any case, this is the case made for public intervention in that market. There are two main responses: One is to subsidize or mandate alternative energy, the other is to raise taxes on fossil fuels with the desired result of shifting investment from fossil fuel exploration and extraction to alternative energy research and development. The former is thought to be the worst approach for a variety of reasons, including the argument that the government is a poor decision maker, that it leads to rent-seeking by interested parties (like ADM lobbying for ethanol from corn), and that it shifts money from taxpayers to political entrepreneurs with lots of deadweight losses in between (spending on lobbyists), whereas the latter merely raises the costs of fossil fuels, possibly buttresses state coffers (allowing us to pay for public goods like defense), and does not put the government in the place of solution-picker.

That sounds plausible, even if you might pick at some of the details and ultimately argue that the best solution would be to get government out of either punishing or rewarding any industry. Let's just say that that is a standard wonk description of the problem and solutions.

So let's look at an industry that has some parallel: public education. In this case, the schools should be providing public goods (literacy, numeracy, critical thinking skills, and other skills that Jefferson would argue are critical for the proper function of a democracy), but are widely regarded as having underproduced them. This is apparent whenever the left demands more spending or when the right demands more accountability. Very few will argue that it is perfect the way it is, and usually when they do, they always come back with, "but it could be improved" (usually with more money). My analogy turns on the idea that overproviding a public bad is similar to underproviding a public good. I also believe, but do not intend to prove here, that public school problems are institutional in character: that they will always underprovide no matter how much money you spend on them in the same way that pollution is always overproduced no matter how expensive oil is in a free market (those of you anti-free marketeers please note, however, that the efficient amount of pollution is not 0 and that the heavily regulated soviet industries tended to pollute even more).

The two responses analogous to those above for fossil fuels would be to subsidize the alternative or to change the price structure on the failing industry to make the alternative look more attractive. The former exists as a policy choice in the form of vouchers, charter schools, and mandatory testing; they are at least as controversial in education policy as alternative energy subsidies and mandates are in energy policy. The Pigovian tax response does not currently exist: it would consist of charging more at the pump schoolhouse. In other words, charging tuition for public schools.

Take a few breaths and allow the shock to wear off before continuing.

I propose that we start charging a moderate, nominal tuition for attendance at public schools. I think this can be made palatable to all political parties except the rabid left and religious right. To the former, who think that all education should be free, I simply point out that it is not and cannot be truly free; someone must pay for it because buildings and equipment must be built and maintained and teachers should be compensated fairly; to the extent that the wealthy are made to pay for it, they will be interested in controlling it; and they have many ways to exert influence in the large, complex state that y'all prefer. The "free" universities in Europe are not as successful as those in the US (see Figure 9 in this, our higher per capita spending results in a better healthcare education system according to this), and the European systems are under tremendous pressure to start charging tuition because the current system is underperforming. The problem for the religious right will come up below. To everyone else, I think you'll find that I can address your concerns.

First, I have no more problem with making the tuition means-tested than I do with providing relief for the poor on fuel taxes (ah, funny how you forgot to be indignant on *that* point, eh?). In fact, it's easier to bring in your 1040EZ and get a waiver at the schoolhouse than at the pump, where it must be done with something like the EITC. Many public school systems already have a mechanism for charging tuition for out-of-district students (not alway to the student: sometimes to the sending district).

Second, I'm talking about nominal tuition: $100 - $500 per year per child. Not the full value, just a little. And I'm not advocating reducing the public expenditure on public schools. A school with 1000 students (the average high school in the US has about 752) will suddenly find itself with an additional $100-500k per year for facilities and teachers. Neat, huh?

Third, schools could charge whatever they decide locally. Schools in wealthy districts would charge more than schools in other districts. This would decrease the pressure on legislatures to equalize spending (more tends to get spent in wealthier neighborhoods now), and poorer schools would therefore find it easier to get more public spending sent their way. And to the extent that the wealthier schools would charge and spend more, and therefore be better, poor enrollees would be better off at those schools (remember, I favor making the tuition means-tested, so they can free ride, same as now).

Fourth, I believe that we should be more circumspect about the subsidies we provide for breeding. If you are concerned about fossil fuels and the environment, you should be at least as concerned about the pressure of population on the environment. And for those of you on the right: how far are you willing to take this "personal responsibility" idea? Isn't it a little unfair that people with no children have to subsidize those of you who do? Why should married couples enjoy both income tax breaks and subsidies for raising their children? You don't want to pay for the pill, condoms, or abortions for other people? Fine, but why should we pay for your refusal to use the pill, condoms, or abortions? Let's face it: the two-income family depends on the public school-as-babysitter as much as an institution of learning, and that in turn subsidizes the culture of conspicuous consumption. Incidentally, contrary to popular myth, people on public assistance tend to have fewer than the average number of children, while people who vote Republican are known to have more children than those who don't. "Free" public schools are an example of a public institution that disproportionately supports those who complain most about the taxation that pays for it.

Fifth, to the extent that schools charge some tuition, they make it possible for alternatives to rise up in a similar way a carbon or fossil fuel tax directs makes research into alternatives possible. If a school charges $500 per student per year, and a competing private school or tutor charges $1000 per year, the difference is more palatable than between the "free" public school and the private school. You get similar results to voucher and charter school plans, but

• without the vouchers that "divert" resources away from public schools (they don't in per pupil terms, if you do the math),
  
• without setting up situations where the state may be sending money to religious schools and charlatans,
  
• without therefore putting the state in the position of certifying schools to receive vouchers,
  
• without having to repeal the Blaine Amendments,
• and without giving the state an opening to start killing the independence of private schools with onerous regulations.

Questions?

UPDATE: Apparently Tyler Cowen has reached the same conclusion:

I would be happier with vouchers if we were starting from scratch in designing educational institutions. And while I agree with Jane that children have a positive right to an education, I think the out-and-out laissez-faire option doesn't get enough attention. Keep the public schools we have, but make them charge tuition.