Education markets: Forward-looking policy options

Editor's note:

This paper was prepared for a Hutchins Center event, From bridges to education: Best bets for public investment, held at Brookings on Monday, January 9, 2017.

Education is imperative for generating upward mobility and sustained economic growth. The consequences of the persistent inequality in educational attainment associated with where young people reside and their family circumstances are greater today than ever before; inequalities that start at young ages are often magnified through formal schooling, ultimately limiting mobility and cementing differences in opportunities. This is not a new phenomenon yet the consequences are greater than ever as labor market opportunities for those lacking broad-based skills have eroded. Failure to close achievement gaps will limit economic prosperity of those at the bottom and likely increase future burdens on taxpayers. 

The case for public investment in education is strong. Benefits accrue not only to individuals, but to society. Money is necessary, but not sufficient. The decentralized and market-oriented nature of education production in the U.S. can be seen as a significant virtue. Yet, these markets are not without imperfections. The role for federal policy is to address inequality of opportunity generated by differences in resources, to foster innovation and to ensure a high return to public investment.

Although there are no easy solutions, there are modest—yet significant—changes in the allocation of federal resources and regulations that can yield efficiencies and improve outcomes in such areas such school accountability, teacher preparation, and undergraduate financial aid.

Increased federal emphasis on data-driven innovation and (at least some) decentralization in policy formation are needed. It is only natural to tie spending to outcomes-based assessment; how this is done matters enormously. An overarching conclusion of this paper is that the federal government must dramatically increase its investment in educational R&D. 

We know a great deal more about what works and what doesn’t in education than we did two decades ago. Existing evidence, while not definitive, identifies areas where further investment is likely to yield high returns, policies that are not working, and big unanswered questions. How federal policymakers address entrenched disparities in educational attainment will either pave a path to vibrant economic growth and innovation or produce stagnant growth and further erode the U.S. standing as a global leader in educational attainment.

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The author did not receive financial support from any firm or person for this article or from any firm or person with a financial or political interest in this article. She is currently not an officer, director, or board member of any organization with an interest in this article.