Without Education Savings Accounts, Disruptive Innovation In U.S. Schooling May Not Be Possible

At a recent conference on emerging school models, I was struck by one panelist’s observation that because education savings accounts (ESAs) are a public subsidy, they are having a distortionary impact on the market—raising costs, lowering innovation in the microschooling segment relative to other states without ESA policies. In her view, ESAs are also unnecessary to transform education in the United States. Families, she argued, are migrating to alternative schooling models on their own.

I admit that I was drawn to the remarks because I share the concern. I’ve written about the distortionary impact of government subsidies in higher education, for example, whether because of how they’ve impacted the pricing of online learning in higher education, the growth trajectory of for-profit universities that led many of them to prioritize access over value, college expenditures more generally, or the various input-based policies and regulations that get attached to those dollars. Free markets and capitalism, by contrast, more efficiently allocate capital and cause individuals to make tradeoffs that—over time—lead to market-creating and disruptive innovations that generate greater prosperity.

Still, I’m less optimistic that without ESAs we’ll have much of a chance for true disruptive innovation in schooling in the United States.

As I wrote back in May:

“Schooling is compulsory for the most part. And everyone had access to what, from a consumer perspective, appears to be a free public school. As a result, there was little nonconsumption of schooling.”

In other words, because there’s already a large, public subsidy and a public requirement, “distortions” are already in place. As I continued:

“Because of the ‘free’ element of public schools, there was no true “overserving” of individuals—a phenomenon that occurs when people won’t pay higher prices for product improvements and instead make tradeoffs. They’ll give up increased features for a lower cost, more stripped-down product. Without nonconsumption and overserved consumers, disruptive innovation is not possible.”