Educational Vouchers for the Onteora School District

I just sent this letter to Paul Smart, editor of the Olive Press.

Dear Editor:

A local government official has revealed a shocking statistic to the Town of Olive Republican Committee.  The average cost of education in the Onteora school district is currently $31,000 per enrolled student.  The official who revealed this number compares Onteora's $31,000 per student tuition to a national average of $10,259 per enrolled student and a New York State average of $17,200.  New York's public tuition is the highest in the nation, according to the official, but Onteora's is 44% higher than the state's average.

Assuming the $31,000 per student cost number is accurate, let us see how Onteora's costs compare to private schools'.  Nationally, in 2008 the average private school tuition was $8,549, 27% of Onteora's.  Nonsectarian secondary schools averaged $27,302 while Catholic elementary schools averaged $4,944.  Many of the nonsectarian secondary schools are elite schools that cater to the wealthy.  According to one survey Northfield Mount Herman in Massachusetts is the top ranked private elementary school.  The tuition for day students, according to its website is $31,700, roughly the same as Onteora's cost per student.  The UN International School, one of the best private schools in Manhattan, charges $24,350 per year, 21% less than Onteora.  The Beekman School in Manhattan has tuition of $28,500. The Rudolf Steiner School, with a 1:8 faculty-student ratio charges $29,468. Beekman calls itself "the tutoring school" and offers customized schedules, university-level classes in math, science, humanities and English, an average class size of eight (8), and one-on-one tutoring in concentrated subject areas.  Beekman has a one-on-one college placement program (one guidance counselor to one student) with continuous follow up conferences to refine college choices.  Guidance counselors guide students through the college application process. Specialized classes with three (3) students may be formed if requested, such as for advanced placement.  Tutoring is available once or twice per week. The school provides eight written evaluation reports in addition to four quarterly report cards.   98% of Beekman students go on to college. 

What is the college attendance rate for Onteora High? Given that the three Onteora schools are more expensive than Beekman, do they provide similar services? Are class sizes limited to 8 students? Is there intensive career guidance?  If a student wishes to study acting, is a course set up to cater to them?  If not, where is the $31,000 in teacher jackpot money going? 

It is going to keeping an extra school open. Moreover, the Onteora School district puts students far down on its list of its priorities. The $31,000 per student cost is a pretext to fund teachers' salaries, pensions and administrative bloat.  Teachers are more interested in indoctrinating students ideologically than in teaching the three r's. The Democrats are loyal to the teachers' unions, and could care less about your children. This is because of the dominance of academic certification organizations like the National Council for the Accreditation of Teacher Education (NCATE), which could care less about the three 'rs and exclusively emphasize political correctness.

In his book Capitalism and Freedom,  Professor Milton Friedman came up with an ingenious idea.  Give school budgets to parents in the form of vouchers, and let them decide the school to which they send their children. Schools would compete for students just as automobile manufacturers used to compete for customers. Onteora would have to compete with Beekman and the UN School, and provide an education of a comparable standard to Beekman's for the same price.  Since the taxpayers of Olive have magnanimously chosen to spend like a rich person on behalf of the Town's children, it is foolish to squander the money on subsidies to Onteora's unproductive school administrators as the Democrats have chosen to do.  We Republicans believe that if we are spending as much on education Olive's children ought to be given the same educations that rich people's children receive.  It is true that this arrangement would likely mean lower salaries and pension benefits for teachers, less administrative bloat, and fewer make-work jobs, which is why the teachers hate libertarians and the GOP but love the tax-and-spend Democrats.  But there is little doubt that your children would be better educated under a voucher system.  Perhaps it is time to ask the Onteora School district to compete with Northfield Mount Herman, the UN School and Beekman, and to end the festival of waste in the Onteora School District.

Sincerely,

Mitchell Langbert
Town of Olive Republican Committee

Firms' Goals and Pricing

Walter Nicholson. Intermediate Microeconomics and Its Application Third Edition. Dryden Press, 1983.

I have decided to treat myself to review some basic economics this evening. It's been 20 years since I looked at my last economics textbook. What better way to brush up than my 1983 copy of Walter Nicholson's Intermediate Microeconomics and Its Application textbook? In this blog I will briefly review his thoughts on costs.

Costs (chapter 9)

Economists view historical costs as sunk costs. The implicit cost of a machine is what someone else would pay for it, i.e., its "rental rate". To minimize production costs firms choose inputs such that the rate of technical substitution is equal to the ratio of input costs. Thus if wages are w and machinery rental rates are v then:

Rate of Technical Substitution = wage rate/rental rate = w / v

That is, the rate of technical substitution is the rate at which one input may be traded off against another in the production process while holding output constant and that rate is the same rate at which they are traded in the open market.

In other words, the rate of technical substitution of labor for capital is the ratio of the

marginal product (labor)/ marginal product (capital)

so that each input should provide the same additional output per dollar spent and if they don't, firms will trade some of the less productive input for the more productive.

Short versus Long Run

In the short run production capacity is fixed. In the long run production can be curtailed. Fixed costs are fixed in the short run.

Short run average total costs = (total costs) / (total output)

while

Short run marginal costs = (change in total costs) / (change in output)

In the very short run price purely rations demand. This is because supply cannot be increased. But generally in the longer run there is a supply response to changing demand. In the short run (longer than very short run) the number of firms is fixed but firms can adjust the amount they are producing.

Theoretically, marginal and average costs ought to increase in response to increases in output but most studies fail to show increasing average or marginal costs but rather find that marginal and average costs are constant over large ranges of output.

Long Run

In the long run all productive inputs are variable. Nicholson makes the point that some factors may be difficult to alter even in the long run. The rate of technical substitution must equal the ratio of the input prices.

The long run total cost curve is found by considering all short run total cost curves and choosing the lowest one for each possible output level. "The locus of all these cost minimizing choices is called the long-run total cost curve..."

Under the assumption of constant returns to scale, the long term total cost curve is a straight line and average and marginal costs are constant and equal (equal because of the assumption of constant returns to scale which means that the marginal cost equals the average cost).

If there is a fixed input, average costs fall as variable inputs are added, but then rise again as the fixed input causes diminishing marginal productivity.

At the minimum piont of the Long Run Average Total Cost Curve the Long Run Marginal Cost Curve = Long Run Average Total Cost Curve = Short Run Average Total Cost Curve = Short Run Marginal Cost Curve

In reality, many empirical studies find declining long run average costs for smaller size with a flattening minimum average cost beyond a threshhold.

Changes in input prices will tilt the total cost lines. Changing input prices will change the isoquants on which the total cost curves are based and change the ratios of inputs.