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Admissions Lotteries: Not Just About Fairness

Cato's Andrew Coulson takes issue with a recent Brookings report's recommendations that data on charter school lotteries be included in state and local student longitudinal data systems. Never mind that Coulson doesn't actually seem to understand what the report is recommending (which is interesting). I'm more interested in his general opposition to requiring any schools to admit students by lottery.

In one respect, I'm sympathetic to Coulson's arguments: To the extent that lottery requirements are an effort to ensure fair distribution of limited slots in desirable public schools, they're clearly inadequate. Much better would be to expand the supply of high-performing schools and eliminate the need for lotteries--although I clearly disagree with Coulson about how best to do that.

But there's another reason, beyond simply allocative fairness, to want to limit the ability of schools to select their students. Education is an industry in which a producer's cost of providing services, as well as the quality and results of those services, is a function not only of the producer's own quality and effectiveness, but also of the population of customers they attract. In such industries, there is a strong incentive for producers to seek to maximize their profits by attracting and/or selecting only the cheapest and easiest to serve customers, rather than delivering the most efficient services. We see examples of this in the higher education sector, where elite schools become elite primary by selecting the already most-distinguished students, as well as in cherry-picking by insurance companies in the health care sector.

Getting good at attracting or selecting for only the cheapest/easiest customers can be very beneficial to producers, but has negative social impacts. That's particularly the case in socially significant sectors like health care or education, where you run the risk that hard-to-serve customers can be left without access to necessary services. But there are social costs regardless of sector. Energies that producers spend improving their ability to attract/select the most desirable customers are energies they're not spending on becoming more efficient or effective at actually providing services or products. And the resulting lost innovation and efficiencies in actual product/service delivery reduce overall social welfare.

That's an important reason to want to ensure that the majority of schools are NOT allowed to selectively admit their students. Avoiding the temptation to focus on selection rather than actually serving kids better is a major argument for lotteries for admission to charter schools, district-operated public schools of choice, and publicly subsidized private schools, too.

Of course, the major shortcoming of libertarianism is the failure to recognize either a.) any such thing as social welfare, or b.) that there are circumstances in which individual producers and consumers acting reasonably to maximize their individual welfare can fail to maximize social welfare, so I'm not surprised that Coulson doesn't recognize this.

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