Education: An Economy of Exclusivity

Readers over the age of fifty probably remember the 1970s as a depressing decade of stagflation, an oil crisis—and disco music. They may recall Studio 54, a New York nightclub where celebrities and their glitzy hangers-on would gather to snort cocaine and cavort amid the decline of western civilization. The nightclub had a notable business model. Instead of trying to attract as many customers as possible, Studio 54 operated through extreme selectivity. Doormen would only grant entry to people who were famous, beautiful or had some special attraction that would add to the ambience. People like me were strictly excluded.

Studio 54’s real product was not the drinks, or the music, or even the cocaine, all of which could probably be found in any number of more accessible places. Instead, the nightclub was selling its customers to their fellow customers. The clientele created the value.

As economic entities, schools are in some ways similar to Studio 54. Not because schools are sometimes places where people party and ingest substances that are bad for them, but because the value of educational institutions is created primarily by their clientele, their students. Schools are economies of exclusivity.

What Makes a Good School?

In the mid-1960s, as the United States faced increasing concern over racial inequality in its schools, sociologist James S. Coleman and his team of researchers examined what makes some schools better than others. The influential 1966 document Equality of Educational Opportunity, often known as The Coleman Report, describes variations in school finances and resources, but concludes that material resources are not the most important influence on school quality. Curricula and the preparation of teachers bore some relation to the average performance of students, but these did not make the greatest difference. Instead, the quality of schools, as measured by the average level of student achievement, owed most to the socioeconomic background of the students themselves. This was not, moreover, just a matter of pupils from advantaged family backgrounds carrying that advantage into education. Socioeconomic status mattered not just at the individual level, but at the level of the school. School quality was, more than anything else, a consequence of the student composition of the school. The most interesting implication of this was that pupils benefit not just from their own backgrounds, but from the backgrounds of their classmates.

Coleman’s later work on social capital provided theoretical elaboration of how the demographic composition of a school environment affects student learning. Social ties of homes and communities encourage the development of assets that students bring with them to the classroom. For example, one of the strongest predictors of successful learning from early childhood onward is the practice of parental reading to children, and this practice is closely associated with parental educational background. Parents who have more familiarity with schooling are better able to communicate to children the behavior and attitudes that will pay off in the classroom.

Coleman also allocated an important role to family structure. Two-parent families, he argues, generally provide children with more support and direction than single-parent families, and family structure is also related to socioeconomic position. Of course, one good parent is always better than two bad ones and family structure is just one of many influences.

The same dynamics that turn social relations into assets also occur at the level of communities. When people in neighborhoods and surrounding organizations give the same kinds of support and direction as families, they reinforce the useful information and constructive behavior and attitudes conveyed by families. But, if social ties can be assets, they can be liabilities, too. If growing up in an environment of high literacy and relevant experience with institutions encourages educational achievement, then growing up in an environment of low literacy and limited institutional experience can depress achievement.

The implication of Coleman’s findings about the demographic composition of schools is that schools are places to which students bring the assets they have acquired and invest these in each other. Schools are of varying quality in large part because students with varying social assets make up these schools. The title—and central concern—of Coleman’s study was “Equality of Educational Opportunity.” Coleman’s goal was not simply to explain why some have better outcomes than others, but to find ways to equalize outcomes. If the composition of schools is critical in determining school quality, then schools might be equalized by redistributing students.

Coleman’s study was, of course, inspired by the American civil rights movement in general and by school desegregation efforts in particular. Because race was (and is) closely linked to socioeconomic position, due to a long history of racial inequality, the historically ingrained socioeconomic disadvantages attached to race could be diminished, or eventually eliminated, by redistributing students in schools according to race. The Coleman Report provided a strong justification for aggressive efforts at shuffling students around, to promote educational equality.

This raised the uncomfortable possibility that students who enjoy social capital advantages might suffer from redistribution. Coleman attempted to counter this objection through a harm and benefit thesis: less advantaged students could be included in more advantaged environments without harming the more advantaged. Although this is not true when taken to extremes (as it sometimes has been), there is evidence to suggest that a minority of students from a disadvantaged group can be included among a majority from a more advantaged group without detriment to the latter, provided the former remain very much in the minority.

By the early 1970s, Coleman had begun to express reservations about the aggressive programs of school desegregation that he had earlier supported. As a good social scientist and not a dogmatist, he was willing to look at how policies affect the real world. He expressed worries that approaches such as busing students to achieve demographic redistribution were making matters worse by creating white flight, as whites moved away from desegregating districts. The desegregation of schools was contributing to the greater segregation of society at large.

Coleman’s reservations were not universally well received. This supporter of the civil rights movements was widely accused of being a racist. In 1976, the president of the American Sociological Association led a movement to have the organization condemn Coleman and expel him from its ranks.

Coleman survived the attacks and even became a president of the ASA. Still, his white flight thesis remains controversial. In a series of articles and books published over more than twenty years, from the mid-1990s through to the present day, my colleague Stephen J. Caldas and I have provided observational, statistical and archival evidence at the levels of schools, districts, cities and states, strongly supporting Coleman’s idea that demographic composition is of critical importance in determining school quality and that people of all races and backgrounds, who have social capital assets with pay-offs for their families, flee attempts to redistribute those assets.

Our statistical analyses have shown that the average socioeconomic level of families in schools is strongly associated with results on standardized tests, even when we control for the students’ own socioeconomic backgrounds. This means that doing well or badly is a matter of the advantages or disadvantages of one’s fellow students, and not just a matter of how well-off a particular student happens to be. Further, we found that much of the effect of peer socioeconomic status on individual performance could be statistically attributed to the degree of concentration of two parent or single parent families. For black students, much of the negative association between racial segregation and educational performance could be explained by the fact that schools with high percentages of black students tended to also have high percentages of students from single parent families.

Even at the individual level, the common claim that differences among students can be explained away by the fact that some have money and some do not has never held up. Clearly, rich parents can pay for tutors and sometimes even bribe college admissions officers. Money buys things. But the part of socioeconomic status most closely related to school achievement is not family income, but parental education. We found that the greatest benefit of socioeconomic position was an intellectually rich environment. Sometimes, in fact, as in the case of a number of immigrant groups, the intellectually rich environment was not connected to money at all.

The nature of the assets and liabilities that individuals bring to schools to create school quality has become clear to us from years of research. Schools that bring in students largely from two-parent families, from homes with books and abundant opportunities for development, and from communities that foster characteristics such as self-control and delayed gratification turn out to be good schools that amplify those assets. Schools that bring in students from less advantaged backgrounds are places you want to avoid, if you can. Schools, in other words, are competitive markets of exclusivity.

Schools as Competitive Markets of Exclusivity

If Studio 54 had started opening its doors to people who look like me and dance like I do, it would not have been an elite place for very long and it would have had to base its business model on a much more plebeian class of customers, further diluting its quality. In our 2015 book, Controls and Choices: The Educational Marketplace and the Failure of School Desegregation, Caldas and I examine how who gets into particular schools drives the competitive economy of education by creating differences in the desirability of those schools.

The most essential elements of markets are competing producers and consumers who make choices among producers. In nearly all modern nations, there are multiple competing educational institutions and people have some degree of choice among them. Taking primary and secondary education in the United States as an example, at the broadest level this country has both public and private providers. Confusingly for some, in the UK the term public school means a long-established elite private institution, but, in the US, public schools are schools established and funded by government, while private schools are non-governmental institutions, usually funded by tuition. Some authorities distinguish parochial schools, run by the Catholic Church, as a distinct category, but here I will include parochial schools as the largest set of private institutions.

Neither of these types of school is free. Public education is funded through local property and sales taxes, state money and federal money. The greatest single source of revenue for most districts comes from the local taxes that voters impose on themselves.

If public education is not free, its costs are at least relatively widespread and all property owners pay these costs, whether or not they have children in public schools. So why would anyone choose to pay tuition for a private school? Clearly, they must be getting something they believe they will not get in a public school, and that something must be worth the additional cost to them.

There is a substantial literature to indicate that private schools do a better job of educating students than public schools on average, and they clearly have to do something to make the extra cost worthwhile. So, the question is: why don’t all parents send their children to private schools? If they are better than public schools, and if all parents want to give their children the best possible education, why don’t families abandon public schools altogether?

One response is that sometimes public schools are the best choices. Private schools may, on average, show better results than public schools, but this does not mean that all private schools are better than all public schools. In many places, the local public school may be the best educational institution around. For example, Boston Latin in Boston and Stuyvesant High School in New York are public schools that are widely considered among the best schools in the nation.

In some cases, choices among educational providers may result from desires other than the wish to attend the place with the best academic outcomes. Attendance at religious schools, for instance, may be partly the consequence of the academic quality of those schools, but it also derives from wishes for doctrinal teachings or moral guidance not available in secular classrooms. Still, even when culture or religion inspires a decision, a calculation of academic benefit is rarely absent.

Government and non-government schools are not the only competing providers in the educational marketplace. People also make choices among publicly funded institutions. The abovementioned elite schools in Boston and New York are publicly funded and compete for students with other public schools. Furthermore, even when attendance is determined solely on the basis of residence, families with children choose their homes based on the quality of the local schools in the catchment area, using widely available information about school performance scores, aggregate test scores and other objective indicators.

So the educational marketplace largely consists of people making choices among school systems and individual schools based on academic quality. This derives heavily from student composition. Whether they realize it or not, consumers base their decisions on who their fellow consumers will be. However, as in any other marketplace, the ability to make choices depends on resources. Generally, these are financial resources. If you have the money, you can opt for taxpayer-funded schooling or private schooling or move to the neighborhood with the best publicly funded institutions, in which case you will probably pay tuition in the form of a large mortgage. Precisely because school quality depends on student make-up, though, the intellectual skills of the students themselves is frequently a resource. The top public schools compete for the best students, regardless of family income, because the best students make the best schools. This is why both Boston Latin and Stuyvesant have such high percentages of high achieving pupils from immigrant backgrounds, in many cases from families of modest status. Private institutions often give scholarships to excellent students for the same reason.

The economy of higher education generally responds to the same marketplace of exclusivity as primary and secondary schooling, although in the United States and many other countries the former is much less localized. Top universities are top universities because they are able to attract the best students. When the United States government unveiled plans to provide higher education funding to military veterans in the years after World War II, the president of Harvard University, James Bryant Conant, and the president of the University of Chicago, vociferously objected on the grounds that this would lower the quality of university education by bringing in masses of new students. This may have eventually proved true for institutions lower on the prestige scale, but it had the opposite effect for Harvard and Chicago. Although family influence continued to make a difference in likelihood of admission for children of alumni, especially at Harvard, making entry into the most elite universities more a matter of nationwide competition actually intensified their selectivity and elite status, enabling the top universities to concentrate many of the highest achieving students in the nation and the world.

Implications for Policy

Reality is often not what we would wish it to be. I doubt that we can just assume that the unimpeded invisible hand of the market will always create the best of all possible worlds. But we also cannot wish away market forces inconsistent with egalitarian ideals, and sensible policies must recognize the nature of those forces and take them into consideration.

Efforts to improve schooling or to make it more equitable are generally based on a fundamental misunderstanding of or willful ignorance about what makes good schools. Curriculum and quality of teaching do matter. But the fact that the pupils create the learning environment out of the characteristics they bring from the world outside of schools means that the improvements educators can make are necessarily limited by the nature of the surrounding society.

Even ostensibly market-based approaches to educational reform often misunderstand the market itself. Charter schools focus on creating competing providers, with schools trying to attract students in the expectation that competition will improve offerings. But if the schools employ selective admissions, then whatever special curricular or organizational programs they establish will improve quality mainly because these programs attract highly qualified individuals, while the less qualified are channeled to places predetermined to be of lower quality. Without selective admissions, competition will tend to take place among equally mediocre providers, and the families of the best students will often find ways to opt out of the system.

Vouchers, another market-based reform, aim to equalize the buying power of consumers, so that lower income families have the financial assets to make choices otherwise available only to those with higher incomes. But, again, either this makes it possible for private schools to select only the very best students, regardless of family income, or it opens them up to less qualified students. This may be beneficial for a small number of the latter, but it cannot apply to any significant number of the less advantaged without compromising the intellectual environment of the schools.

Finally, recognizing the exclusivity of the educational marketplace has unsettling implications for the goals known as excellence and inclusion—implications that most academics and administrators prefer not to acknowledge. The excellence of any institution depends on who is included. Academic excellence, in primary or secondary school or in college, does not require that members of any demographic category be excluded, because topnotch students can be found in all gender, geographic, ethnic and socioeconomic categories. But it also means that including students on the basis of demographic necessity runs counter to a goal of academic excellence.

We may want to include some people from under-represented groups for social reasons or in the belief that this may have non-academic benefits, such as exposing students to people unlike themselves. But one must avoid romanticizing disadvantage by assuming that somehow bringing in the disadvantaged will lead to a better environment for everyone. These social goals may not seriously threaten academic goals, as long as those included for social reasons remain in a decided minority, but we have to recognize that social goals of inclusion are at best compromises with academic excellence, not contributions to it.

Education is, by its nature as a marketplace, unavoidably unequal and exclusive.