The Market for School Choice in Indiana

Download PDF Introduction and Background

The Indiana Choice Scholarship Program has the potential to be the largest school voucher program in the country. Though the authorizing legislation capped enrollment in the program at 7,500 for its first year (the 2011-12 school year), that cap was increased to 15,000 for this year, and will be removed for all subsequent years. With careful management, the program has the opportunity to infuse the Hoosier state with a level of choice previously unrealized across the nation. However, without some careful planning and thoughtful consideration of salient program design details and the informal market infrastructure necessary for the program to thrive, the Indiana Choice Program will not be able to reach its full potential.

Private school choice in the United States, writ large, has not sparked the types of systemic changes that advocates envisioned when the first choice plans were enacted. Though the gold-standard analyses of choice programs have found positive results, they have been modest and mostly confined to the students participating in the program. When Milton Friedman first made the economic argument for school choice in the 1950s he envisioned choice and competition increasing quality and decreasing cost for education in both the public and private sector, as it has in the private markets of innumerable goods throughout history. However, it appears that for a variety of reasons, choice has not sparked the supply side responses that the economic models predicted.

Why has this happened? Why has choice failed to live up to its hype? In short, functioning choice markets do not simply emerge from the ether. They must be cultivated, both on the demand and supply sides. Too often, advocates have pushed an “if you build it, they will come” program design that has neglected many of the necessary conditions for markets to function. Strong program design can establish the playing field on which choice and competition can drive change, but without the support of institutions and organizations within states, the innovative capacity of any program will be greatly curtailed.

In this way, the Indiana Choice Scholarship Program can serve as an interesting case study in the cultivation of choice markets. The newness and enormous potential of the program offers a unique opportunity for a meaningful conversation on school choice markets, both how to design them and how to ensure that they function. By examining both program design and the emergence of the institutions and organizations that are necessary to make markets work, we can use the Hoosier State as a model for the potential for choice programs around the country.