NCPA - National Center for Policy Analysis

Free Market Competition in Education Is Good For Economic Growth

April 21, 2015

Economic growth typically results when businesses, workers, investors, and entrepreneurs are free to compete, innovate, and work to better serve consumers by supplying new or improved goods and services. These incentives govern the marketplace, and when built upon a sound foundation of property rights, the rule of law, open trade, minimal governmental burdens, and price stability, economic growth and prosperity emerge.

Unfortunately, when it comes to primary and secondary education in the United States, the entire structure runs counter to such a market system.

Expanding school choice and competition—ideally, transforming a government monopoly into a universal school choice system—would significantly boost both educational attainment and education quality. In turn, economic growth would be spurred through an assortment of channels.

Here are several ways school choice would aid economic growth:

  • Higher Productivity. Research shows improved education via vastly expanded—preferably universal—school choice enhances economic growth by boosting productivity. Greater productivity increases the contribution that employees make to individual businesses, and in turn, positively affects overall economic output.
  • Enhanced Educational Attainment. The evidence is clear that, on average, improved educational attainment means greater labor force participation, higher employment levels, reduced unemployment, and increased earnings.
  • Greater Entrepreneurial Success. Evidence points to a link existing between years of schooling and entrepreneurial success, including higher earnings, improved growth, and increased chances for business survival. Given the importance of entrepreneurship to economic growth, this is a critical link between education and economic growth. 

To achieve true excellence in education that will in turn help to accelerate economic growth, government control and regulation must be replaced by true choice and competition whereby entrepreneurs and educators work to better serve their customers, i.e. students and families.

Source: Raymond J. Keating, "School Choice and Economic Growth: A Research Synthesis on How Market Forces Can Fuel Education Attainment," Friedman Foundation, February 2015. 


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