Is Public Schooling a Public Good? An Analysis of Schooling Externalities

By Corey A. DeAngelis,

s public schooling a public good, a merit good, or a demerit good? Public schooling fails both conditions specified in the standard economic definition of a public good. In order to place public schooling into one of the remaining two categories, I first assess all of the theoretical positive and negative externalities resulting from public schooling as opposed to publicly financed universal school vouchers. Then, in an original contribution to the literature, I quantify the magnitude and sign of the net externality of government schooling in the United States using the preponderance of the most rigorous scientific evidence.

While the counts of theoretical positive and negative externalities are about equal, the empirical evidence leads me to estimate that public schooling in the United States has a net negative externality of at least $1.3 trillion—over the lifetime of the current cohort of children in government schools—relative to publicly funded universal school vouchers. I conclude with three policy recommendations: (1) the U.S. government should not operate schools at the local, state, or federal level on the basis of schooling’s being a public good; (2) U.S. citizens should not fund government schooling indirectly through the tax system on the basis of schooling being a merit good; and (3) the United States should instead fund education directly—rather than schooling—through a universal Education Savings Account (ESA) program.

… for a good or service deemed to be a “public good.” The formal definition of a public good is attributed to Nobel laureate economist Paul Samuelson. In a classic 1954 article he explained that such a good satisfies two necessary conditions: (1) it is nonexcludable, and (2) it is nonrivalrous in consumption. The nonexcludability provision means that the producer cannot prevent nonpayers from using the good without bearing costs that exceed the benefit of payment.

The nonrivalry provision simply means that one individual’s consumption of the good does not diminish the abilities of others to consume it.

When people, including prominent education scholars, say that schooling is a public good, I believe they mean that schooling is “good for the public.”10 Or, as an economist would say, schooling is a “merit good” because it has net positive externalities.11 An economic externality occurs whenever a voluntary transaction between two parties affects an involuntary third party in a positive or negative way.

Thus, the reduction in lifetime earnings for each student experiencing 13 years
of government schooling is $106,268 ($1,341,225 – $1,234,957). Multiplying this result by the number of students in government schools reveals an overall negative effect on lifetime earnings of $5.364 trillion …

the average state-funding amount allocated to voucher students is around 59 percent of the per pupil funding in traditional public schools.

That is equivalent to around $656.019 billion in 2017 dollars.

average private school tuition was around $10,740 per student in 2011-2012, or around $11,633 in 2017 dollars. According to the Digest of Education Statistics Table 236.60, average public school per pupil expenditure was $11,991 in 2011-2012, or around $12,988 in 2017 dollars.

An ESA would allow society to educate children — rather than simply school them — by allowing parents to allocate education dollars toward various educational services such as schooling, tutoring, online instruction, textbooks, and even college costs.

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