Publicly-financed educationImportant announcementsTimelinePublicly-provided educationCitizen preferencesPositive externalitiesWhat about higher education?Diminishing marginal returns argumentResearch externalitiesPotential negative consequencesGovernment provision of educationPublic provision of educationReality check on educationQuality of public educationUnionization of teachersParents’ choices of their kids’ curriculumSlide 17Size of schoolSchool-sponsored sports and activitiesTotal spendingClass size and total spendingSlide 22Slide 23Empirical work on educationExample of empirical workCost-benefit analysis of spendingResults from Peltzman (1997)How are schools changing?Charter schoolsSchool vouchersSlide 31Slide 32School accountabilitySlide 34Slide 35Education and employmentSlide 37Slide 38Summary: Publicly-provided educationSlide 40Publicly-financed educationToday:Why is K-12 education provided by the government for free?Important announcementsTest 1 on MondayReminder on calculatorsBasic or scientific calculator onlyNo memoryException: One- or two-number memory is okayNo graphing abilityNo calculators with communicative abilityNo blue book neededTimelineOn Monday, we went through topics related to direct and indirect governmentsTodayWe finish Unit 2 by looking at Chapter 7Topics in educationTime for reviewYour questionsPublicly-provided educationReal annual spending per pupil on elementary and secondary schooling has increased by 68% from 1980 to 2004Why is this so?Citizen preferences?Positive externalities of education?Generates more taxes as adultsSocialization reasonsSchool Year Real expenditure per pupil (2004 dollars)1980 $4,9171985 $5,6871990 $6,7461995 $6,8492000 $7,5742003 $8,2422004 $8,248Source: Computed from US Census Bureau, Statistical Abstract of the United States 2006. Washington, DC 2006, p. 155Citizen preferencesSome people believe that each person has a right to a minimum level of educationRecall social utility functionAt low levels of education, social welfare could be min{educi}Basic education needed to be functional in societyEquitability issuesPrevention of de facto caste system if only the rich can afford educationPositive externalitiesAn economist would go further, claiming that there are positive externalities in educationLess likely to have civil unrestMore income to tax later in lifeAbility to understand public policyDebate exists as to the level of positive externalitiesEmpirical findings are not conclusiveWhat about higher education?In-state students at California’s public colleges and universities have their educations substantially subsidizedAre there positive externalities from higher education?Argument againstDiminishing externalities from educationArguments in favorResearch externalitiesInefficient loan market for studentsDiminishing marginal returns argumentThe diminishing marginal returns argument claims that the positive externalities are greatest for the early years of educationWith this argument, the amount of subsidized higher education may be above the optimal quantityResearch externalitiesHigher education in some fields provides substantial amounts of externalitiesResearch that benefits many people in societyThis leads to the question: Should different fields of study in college have different subsidization levels?Hard sciences may deserve a higher subsidyFields with no research externalities would get small subsidy by this argumentPotential negative consequencesAlthough there may be positive externalities with college education, there is another consequenceIncreased income inequalitySubsidized education results in the rich getting richer, leading to increased income inequalityWith increase in income inequality, social instability can occurGovernment provision of educationIt appears that the government is justified in subsidizing educationHow should education be provided?PublicPrivateSome public and some privatePublic provision of educationAssume a simple model of educationEach student goes to public or private school (but not both)Parents try to maximize utilityPublic school quantity is fixedPublic school price is freePer-hour quality of public and private school is equalThis assumption will be relaxed later onTotal taxes collected on each family does not change with publicly-provided educationSee Figure 7.1, Panel A, p. 139Total education could decrease when public education is introducedReality check on educationIn reality, most people maximize utility by sending their kids to public schoolIf desired education level is above ep, parents can supplement education with after-school and weekend activitiesMusic lessonsLearning a second languagePrivate tutoringSee also Figure 7.1, Panels B and C, p. 139Quality of public educationQuality of education is hard to quantifyBesides the obvious aspects of class size and total spending, there are different criteria that affect educationUnionization of teachersParents’ choices of their kids’ curriculumSize of schoolSchool-sponsored sports and activitiesUnionization of teachersMany public school districts have unionized teachersProKeep standards of educators highConsHigher wages than in competitive marketLess money for other spendingLayoff orderUsually based on seniority, not quality, of educatorParents’ choices of their kids’ curriculumParents are heterogeneous in the wants for their kids’ educationPrivate schools often provide more specialized choicesReligionMontessoriMore challenging curriculum than public school (in some cases)Parents’ choices of their kids’ curriculumPros of private schoolMore choicesNo big bureaucracy to deal withCons of private schoolLess public oversightAdditional costSize of schoolPros of big schoolsLower administrative cost per studentAbility to offer more classesExample: Tagalog class in a school with a significant Filipino populationFewer school sites neededCons of big schoolsSome students have longer distances to travel“Getting lost in the crowd”School-sponsored sports and activitiesPros of big schoolsMore sports and activities offeredHigher quality for spectatorsCons of big schoolsFewer students “make the