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MICHAEL Q. MCSHANE
EDUCATION AND
OPPORTUNITY
education and opportunity
Michael Q. McShane
Education has the potential to open incredible doors to opportunity. Yet despite
unprecedented levels of public school funding, far too many students in America never
enjoy the benets that can result from a high-quality education.

In Education and Opportunity, Michael Q. McShane proposes a market-based approach
to revitalizing US educationone that fosters innovation and encourages competition
via school choice, education savings accounts, and charter schools. But as with any
sector of the economy that moves from a public monopoly to market-led solutions,
smart stabilization and support from other institutions are essential for making a
decentralized school system effective.
McShane lays out a compelling case for education reform that encourages wiser use of
technology and a marketplace of education options that can help todays students
succeed in tomorrows economy.
michael q. mcshane is a research fellow in education policy studies at the American Enterprise
Institute.
$3.95
Cover image:
Liz Baneld/Getty Images
EDUCATION AND OPPORTUNITY
EDUCATION AND OPPORTUNITY
Michael Q. McShane
AEI Press
Washington, D.C.
Distributed by arrangement with the National Book Network, 15200
NBN Way, Blue Ridge Summit, PA 17214. To order, call toll-free
1-800-462-6420 or 1-717-794-3800.
For all other inquiries, please contact AEI Press, 1150 17th Street,
NW, Washington, DC 20036, or call 202-862-5916.
Copyright 2014 by the American Enterprise Institute for Public
Policy Research, Washington, DC.
ALL RIGHTS RESERVED.
No part of this publication may be used or reproduced in any manner
whatsoever without permission in writing from the American Enter-
prise Institute except in the case of brief quotations embodied in news
articles, critical articles, or reviews. The views expressed in the publi-
cations of the American Enterprise Institute are those of the authors
and do not necessarily reect the views of the staff, advisory panels,
ofcers, or trustees of AEI.
Library of Congress Cataloging-in-Publication Data
McShane, Michael Q.
Education and opportunity / Michael Q. McShane.
pages cm.
Includes bibliographical references and index.
ISBN 978-0-8447-7269-1 (pbk.)
ISBN 978-0-8447-7270-7 (ebook)
1. Educational sociologyUnited States. 2. EducationAims and
objectivesUnited States. 3. Social mobilityUnited States. 4.
Educational changeUnited States. 5. Educational equalization
United States. I. Title.
LC191.4.M395 2014
306.430973--dc23
2014012777
v
CONTENTS
1. INTRODUCTION 1
2. THE IMPORTANCE OF EDUCATION 11
3. HOW AMERICAS EDUCATION SYSTEM FAILS TO
LIVE UP TO ITS PROMISE 21
4. LESSONS FROM TODAY AND GLIMPSES INTO
THE FUTURE 39
5. CREATING A VIBRANT EDUCATION MARKETPLACE 51
6. CONCLUSION 67
ENDNOTES 73
ACKNOWLEDGMENTS 81
ABOUT THE AUTHOR 83
INTRODUCTION
1
education and opportunity
2
I am a living testament to the opportunities afforded
by education.
When I was growing up in Kansas City, Missouri,
in the 1990s, the schools were in terrible disarray.
A landmark desegregation ruling in 1984 essen-
tially wrote a blank check to the district, allowing it
to construct an Olympic-quality swimming facil-
ity, planetarium, mock courtroom, Model United
Nations hall with simultaneous translation capabili-
ties, and working farm. The school districts budget
nearly doubled from $125 million per year in 1985
to $233 million in 1988, then again to $432 million
in 1992. The district had the lowest ratio of students
to instructional staff (12 to 1) of any major school
district in America. Yet these expensive perks hadnt
changed any of the measurable outcomes of student
achievement in my hometown.
1
By the time I started
kindergarten in 1989, my family did everything it
could to keep me out of those schools.
Because Im Catholic and the parish I attended
growing up subsidized the tuition of parishioners at
its school, I was able to attend St. Elizabeths School
for free (or, to be fair, for the tithe my parents paid
to the parish, which was well below the cost to edu-
cate my brother, sister, and me). When I entered
high school, I was fortunate enough to qualify for a
work-study program at the citys all-male Jesuit prep
school, Rockhurst High School, and paid off a large
Michael Q. McShane
3
chunk of my tuition working as a janitor, calling
alumni and hitting them up for money, and work-
ing odd jobs in the music department.
The outstanding education I was afforded there
parlayed into a full scholarship to attend St. Louis
University. This led to a masters program in educa-
tion at the University of Notre Damewhose cost was
defrayed by my teaching for two years in an inner-city
Catholic school in Montgomery, Alabamaand then
to a doctoral fellowship and research assistantship that
paid for my education at the University of Arkansas.
I share this not to boast, but to say with certainty
that I would not be where I am today, sitting in my
ofce with my name on a brass plate on the door and
a view of downtown Washington, DC, if it were not
for the outstanding education I received as a result
of the great sacrice of my parents and the generos-
ity of people whom I have never met.
It shouldnt have to be that way.
In America today, taxpayers spend on average just
more than $10,560 to educate one student for one
year.
2
And yet, 17-year-olds' scores on the National
Assessment for Educational Progress (NAEP) have been
at for almost 40 years, only 26 percent of students who
take the ACT meet college readiness standards in all
four tested subjects by the end of high school, and too
many students who dont look like me are never given
the opportunities I enjoyed to pursue their dreams.
3
education and opportunity
4
If more money were the answer, students in
Kansas City should be doing signicantly better
now, right? In 2013, the Missouri Department of
Elementary and Secondary Education found that
only 28.4 percent of eighth graders scored pro-
cient or better on the state accountability exam in
English language arts, and only 10.1 percent scored
procient or better in math.
4
Its difcult to imag-
ine doing much worse than this. Clearly, the issue
involves much more than nancial investment in
the system.
Over the course of this short volume I want to
address two things: education and opportunity. I
wholeheartedly believe that the American educa-
tion system can improve to the degree that chil-
dren nationwide have the opportunity to receive a
high-quality education. That is not to say that all of
them will take the opportunity. But it is possible to
put them in a position to succeed. New education
options may not look like the schools we attended in
our youth, but by expanding our horizons and wel-
coming innovation we can discover new solutions to
decades-old problems.
So how do we equip a better-educated popu-
lace? A vibrant marketplace of education options is
the most effective means of developing the schools
necessary to meet the needs of students today and in
the years to come.
Michael Q. McShane
5
To date, there are several mechanisms that could
help drive this ecosystem. The two most commonly
known tools are chartered public schools and school
vouchers.
Charter schools are funded by public dollars and
make a trade with the state: to gain autonomy they
agree to a more rigorous system of accountability.
They are granted a charter (contract) that agrees to
particular performance targets from a state board,
local university, or other organization authorized
by the state. As long as they achieve these standards
and enroll a sufcient number of students, they con-
tinue to exist. If they fail to meet targets, they can lose
their charter and be forced to close. Chartering has
spawned many of the most successful urban school
networks, including the Knowledge Is Power Pro-
gram (KIPP) schools and Democracy Prep schools.
School vouchers give a portion of the tax reve-
nue levied to fund a childs education to that childs
parents to pay for tuition at a private school of their
choosing. School vouchers date back to small towns
in Maine and Vermont in the 1860s. When these
towns didnt have a sufcient number of students
to justify building a school, they instead used their
funds to pay the tuition for students to attend private
schools in neighboring towns. The modern voucher
movement began in Milwaukee, Wisconsin, with the
launch of the Milwaukee Parental Choice Program,
education and opportunity
6
a voucher program that has grown from 340 stu-
dents in 1990 to more than 25,000 in 2013.
But other emerging mechanisms can help drive
this marketplace as well. Tuition tax credit pro-
grams are cropping up in states across the country
and often take two forms. In the rst, individuals or
corporations making donations to nonprot orga-
nizations granting scholarships to students to attend
private schools can get that amount (or some per-
centage of it) credited against their tax bill.
In the second, families that pay private school
tuition can get the amount they pay (or some per-
centage of it) credited against their tax bill. Educa-
tion savings accounts allow states or districts to place
money in a exible spending account (that functions
much like a health savings account) that parents can
then use for tuition, fees, tutoring, supplemental
services, or any number of other qualied expenses.
There are also course-choice programs that allow
students to take a portion of the money allocated for
their education to qualied providers for one or
more of the classes they take in a given day.
These programs leverage two functions of mar-
kets in order to drive better performance.
First, they allow parents to match their prefer-
ences and their childs unique needs to the school
environment best suited for them. Decades of
cognitive science have demonstrated that children
Michael Q. McShane
7
learn differently and, perhaps most importantly,
at different rates. While some children can pick up
a new math problem with very little practice, oth-
ers need more. Similarly, schools have different
pedagogical and cultural approaches. Some stress
strict discipline while others allow more freedom.
Some schools emphasize math and science, others
literature and the arts. There has been no proven
right way to educate students. Therefore, parents
should be allowed to nd a model that works for
their children.
Second, these programs more efciently allocate
resources to productive ventures. By allowing money
to follow children rather than be centrally allocated to
schools by set formulae, as it is today, the resources go
to programs people actually want to use. Kansas City
built a farm, courtroom, Model United Nations, and
Olympic-quality training facility before having any
idea how many children, if any, would actually want
to use those resources. School districts do this all the
time, starting new themed schools or investing in
technologies that end up sitting dormant. If instead,
children and families drive such decisions, money is
spent more efciently. If less money is wasted, more
money makes it into the classrooms that actually edu-
cate kids.
But while these tools may be necessary for
creating a vibrant marketplace, they are far from
education and opportunity
8
sufcient. Too often, my free-market brethren like
to say that giving every student in America a voucher
would create the type of education system necessary
to create opportunity for all children in America. I
do not believe this is true.
Why do I think that? Well, if the United
States decides to move its education system from
government- monopoly control to private man-
agement, it would by no means be the rst time
something like that has happened. In fact, since
the collapse of the Soviet Union in the late 1980s,
countries all over the world have decided to move
sectors of their economy out from under govern-
ment control. In some places such as Vietnam,
China, the Baltics, and Central Europe, this has
been a positive development. Yet in others such as
Russia, many parts of Africa, and regions of South
America, it hasnt proved successful. Why? Because
markets are not magical. They rely on government
institutions to set and enforce laws and regulations
fairly and openly. They need access to capital to
nance new projects, and talented workers to help
their enterprises grow. Simply transitioning who
owns an organization does nothing to help ensure
that it performs well.
To borrow language from economists who have
studied the issue, its not just about liberalization
that is, injecting market forces where there previously
Michael Q. McShane
9
were none. It is also about stabilizationpromoting
the rule of law, setting prices, and curbing the dis-
tortions that noncompetitive systems create. Further-
more, it is about institution-buildingwriting laws
and regulations and developing the human capital to
make the education marketplace function.
What lessons have we learned that can be applied
to education? While Ill address these points in
chapter 5, Ill introduce them here. I think our sys-
tem needs to be reformed to possess three central
characteristics:
1. A funding mechanism that allows prices to be set;
2. A regulatory framework that guards against
the excesses of markets without stiing their
powerful tools; and
3. Complementary institutions that can encour-
age market improvement.
A vibrant marketplace of education options is the most
effective means of developing the schools necessary to meet
the needs of students today and in the years to come.
education and opportunity
10
First, Ill attempt to make the case that educa-
tion is important for its economic, democratic, and
social impacts. Second, Ill argue that our current
system has failed to meet students needs because of
the inherent institutional constraints under which it
must operate. Third, Ill describe promising small-
scale efforts that strive to improve the education
system by attempting to create space for markets to
work. Finally, Ill offer a more expansive framework
through which we can think about organizing a new
education system.