Competition helps all

January 10th, 2014 at 4:00 pm by David Farrar

writes:

A few years ago, Jerry Hausman showed that Wal-Mart does a lot to benefit even consumers who don’t shop there. When a Wal-Mart opens, competitor local supermarkets cut their prices to keep customers. And poor customers reap most of the benefits

Figlio and Hart, in the latest AEJ: Applied Economics, show a similar effect with school vouchersAn ungated version is here.

Suppose your worry about school is that low social capital parents’ stick with a local underperforming school while kids whose parents have better social capital all flee with their to the better private schools. And suppose further that you care way more about the potential losses to the former than about the gains for the latter. You might then oppose voucher systems.

Figlio and Hart show that public schools facing competitive pressure from private schools under a new voucher system provided stronger student score improvements. All that concern about kids left behind as the private schools cream off the best voucher kids? Not much of an issue if the public schools facing the competitive pressures perform better as consequence. They find the biggest positive effects in public schools facing strong financial incentives to retain low-income students.

There has also been studies showing that not only improve the performance of students at those schools, but neighbouring public schools improve their performance also.

For some strange reason, this is seen as a bad thing because it clashes with an ideology that competition is bad.

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34 Responses to “Competition helps all”

  1. freedom101 (504 comments) says:

    As pointed out in another thread. It’s very helpful to have ACT sitting next to National. They are not one and the same. Without ACT we would not have Charter Schools. This is probably one of the best social initiatives introduced by any government for many years.

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  2. RightNow (6,994 comments) says:

    You can tell it’s school holidays by the absence of invective after 45 minutes of this post being up.

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  3. Psycho Milt (2,412 comments) says:

    Given (yet again, maybe it will sink in one day) that the NZ public school system is different from the US one and public schools in NZ already face competitive pressure from other public schools in most cases, the usefulness of such studies to us is minimal.

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  4. Psycho Milt (2,412 comments) says:

    Also, this stinks to high heaven:

    A few years ago, Jerry Hausman showed that Wal-Mart does a lot to benefit even consumers who don’t shop there. When a Wal-Mart opens, competitor local supermarkets cut their prices to keep customers. And poor customers reap most of the benefits.

    How is Wal-Mart so cheap? Because it offers such poor pay and conditions. How do other supermarkets cut their prices and survive? By putting the squeeze on their own employees’ pay and conditions. Who are the “poor customers” who “benefit” from all this? The kind of people getting their pay and conditions squeezed by the likes of Wal-Mart and its competitors. Sucks a big one.

    [DPF: Nice rant, but do you have any stats on that? I know in NZ Warehouse has relatively generous employment conditions for a retail store]

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  5. Viking2 (11,471 comments) says:

    Psycho Milt (1,641 comments) says:
    January 10th, 2014 at 4:54 pm
    How do other supermarkets cut their prices and survive? By putting the squeeze on their <suppliers to be more efficient or replace those suppliers with others who are more efficient, own employees’ pay and conditions.
    =========
    There put that right for ya Milt.

    Mind you, lowest price ain’t always best price. Same with labour.

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  6. Manolo (13,780 comments) says:

    What a surprise: red Psycho, as ignorant in economics as any other left-winger.

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  7. Psycho Milt (2,412 comments) says:

    By putting the squeeze on their <suppliers…

    Who of course would not dream of meeting the challenge by putting the squeeze on their employees’ pay and conditions…

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  8. J Bloggs (241 comments) says:

    It’s all very well offering vouchers in order to induce competition. And it may even work in Auckland, Christchurch, Wellington and other main centres, where there is a choice of schools (although I doubt it). But how is it going to work in Warkworth? or Westport? Or Taihape? or Oamaru?

    And what happens when all the parents want to spend their voucher at one school (Auckland Grammar, for example) – Who gets to decide who attends the school? Will the school be able to cherry pick the top applicants, thereby ensuring they increase the odds of getting better results, which feeds back into thier reputation, thereby increasing the demand for thier services?

    Will the vouchers be the same value per child regardless? if so, Will this mean that schools in higher income deciles will milk the parents for more money, to pay for better staff, to further increase outcomes, to further be able to attract funding vouchers?

    What about schools like Rangitoto college, which already has a roll of over 2500 students? Are the facilities going to cope with the influx of voucher bearing parents looking for the best schools? Who will pay for the upgrades to cope?

    All questions that need answering.

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  9. thor42 (971 comments) says:

    Isn’t it GOOD if a charter school set up close to a state school and this led to lots of students leaving the state school to go to the charter one?

    Teachers are *always* moaning about class sizes. Fine – get a charter school set up next to your one and you can *have* smaller classes – just as you wished for!

    Oh, and while I’m here, I might as well post a few links showing that charter schools *work* –

    http://www.education.gov.uk/schools/leadership/typesofschools/academies/a00210582/annual-report-2010-11

    http://www.guardian.co.uk/world/2012/oct/26/new-orleans-charter-schools-model?newsfeed=true

    http://www.economist.com/node/21558255

    http://www.economist.com/node/21558265

    http://online.wsj.com/article/SB10000872396390444358804578018410937727422.html

    http://www.nyccharterschools.org/content/nyc-charter-schools-show-math-and-english-gains-2011-12-tests

    http://www.kipp.org/results/independent-reports

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  10. scrubone (3,099 comments) says:

    thor42: but if *all* the students left the state school would have to close.

    And that would be bad… for some reason.

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  11. scrubone (3,099 comments) says:

    It does disturb me just how much of the anti Charter Schools boils down to “we can’t let the poor have the same alternatives as the rich”.

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  12. scrubone (3,099 comments) says:

    See also…
    http://washingtonexaminer.com/surprise-walmart-health-plan-is-cheaper-offers-more-coverage-than-obamacare/article/2541670

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  13. doggone7 (805 comments) says:

    Psycho Milt
    Given (yet again, maybe it will sink in one day) that the NZ is different from the US the usefulness of many comparison is minimal. Ghettos in US Metropolitan districts have charter schools so we apparently need the same thing. The circumstances of the charter schools in Northland could hardly be more different than those of metropolitan USA yet we still get the vacuous blathering.

    J Bloggs
    No doubt with all of the available expertise the questions will soon be answered! Keep watching…

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  14. dime (9,972 comments) says:

    Wall mart makes $6000 profit per worker… So they aren’t exactly creaming it. Volume, low margins.

    Supplying the evil demand and keeping the working man down lol

    Lots of competition in nz schools. You can either go to a public school or the parents can shell out 20 stacks a year for a private one.. No tax break either. Awesome.

    Or do the left mean parents can choose between which Union infested school the kid goes to? O for orsum

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  15. dime (9,972 comments) says:

    J bloggs – so many light weight questions. When I’m on a PC later I’ll answer em for ya.

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  16. wat dabney (3,769 comments) says:

    How is Wal-Mart so cheap? Because it offers such poor pay and conditions.

    People far prefer working for Walmwart than they do for small mom’n’pop stores. That’s one reason why Walmart gets so many applicants for each of its jobs. In fact, as was pointed out not so long ago, “it’s harder to get a job at Walmart than it is to be admitted to an Ivy League school.”
    http://www.americanthinker.com/blog/2011/05/its_harder_to_get_a_job_at_wal.html

    Anyone capable of rational thought would therefore, if they feel the need to put on a public display of piety, be criticising Walmart’s competitors rather than Walmart itself, since they are clearly worse employers by a long margin.

    At Walmart, we offer hourly store associates quarterly cash bonus opportunities, a health care plan that starts at $17 per pay period, a 401k plan with a company match, a discount on merchandise, and, most of all, a chance to move up through the ranks and build a career.

    Here’s what many people don’t get: entry-level jobs often lead to bigger jobs. In retail, you can climb the ladder from a stocker or a cashier to a department manager to a store manager and beyond. Depending on the time of year, there are between 15,000 – 50,000 job postings at Walmart. In fact, every year at Walmart we promote about 170,000 people to jobs with more responsibility and higher pay. About 75% of our store management started as hourly associates, and their average pay is between $50,000 and $170,000 a year – similar to what fire fighters, accountants, even doctors make. The highest earning store manager last year made more than $250,000. And I know many of you can tell similar stories.

    http://news.walmart.com/executive-viewpoints/a-job-to-do-retails-role-in-an-american-renewal

    Still, I’m sure someone as achingly right-on as our Milt won’t let facts get in the way of his trendy Walmart-bashing. Anything’s got to be better than thinking for yourself, eh Milt?

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  17. Kimble (4,440 comments) says:

    Who of course would not dream of meeting the challenge by putting the squeeze on their employees’ pay and conditions…

    Far better nobody ever lowers prices in a region and nobody ever puts pressure on suppliers to reduce theirs. That way everyone will get rich!

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  18. Harriet (4,972 comments) says:

    “….Will the vouchers be the same value per child regardless? if so, Will this mean that schools in higher income deciles will milk the parents for more money, to pay for better staff, to further increase outcomes, to further be able to attract funding vouchers?…”

    The last thing I heard the teachers union telling everyone was that a child should ‘fulfill’ their expectations[outcomes] – and be FULLY encouraged to do so.

    I don’t think your arguements support that union view. Mind you, neither do the unions arguements. :cool:

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  19. wat dabney (3,769 comments) says:

    Will the vouchers be the same value per child regardless? if so, Will this mean that schools in higher income deciles will milk the parents for more money, to pay for better staff, to further increase outcomes”

    There is no correlation between spending and educational outcome.

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  20. OneTrack (3,107 comments) says:

    “Or do the left mean parents can choose between which Union infested school the kid goes to?”

    Yep.

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  21. doggone7 (805 comments) says:

    dime

    Which was the last union infested school you visited and how did the fact some of the teachers were union members show itself.

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  22. Psycho Milt (2,412 comments) says:

    People far prefer working for Walmwart than they do for small mom’n’pop stores.

    People in the USA prefer working for a large company that provides medical cover and a retirement fund, even if the pay is so bad they need food stamps? No fucking shit, Sherlock.

    Wall mart makes $6000 profit per worker…

    …while its employees are the largest single group of food stamp recipients and receive an average $1000 a year in public assistance. (http://mobile.bloomberg.com/news/2013-11-13/how-mcdonald-s-and-wal-mart-became-welfare-queens.html). So the US taxpayer is subsidising Wal-Mart’s $6000 per employee profit to the tune of $1000 per employee – who said US companies don’t love socialism?

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  23. dime (9,972 comments) says:

    Doggone – I’ve fucked about a dozen teachers. All had horror stories about unions.

    Apart from that, their disgraceful behaviour over the last few years shows me enough to know I don’t like em

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  24. Jim (398 comments) says:

    Psycho has a point. Nobody really desires a Wal-Mart job (nobody smart anyway). That is not what we want for NZ schoolteachers.

    Bad comparison.

    I can see how it *could* work for schools – if students had multiple local options. The school that was most picky with teachers/student outcomes would attract the students of discerning (because discriminating is a now bad word) parents. This would then put pressure on the whole teaching dynamic in a (hopefully) positive way.

    Fine.

    Sucks if you are in a 1 school town though.

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  25. Jim (398 comments) says:

    @dime – yeah. the teachers I ‘knew’ in my younger days had nothing but bad things to say about the whole training college/union scene. Maths teachers tested on marae protocol, etc. [don't read into that anything about my views on customs/protocol. maths is all about Fourier/Galois/Lagrange though.]

    Now I have kids at school that has taken on new significance.

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  26. Psycho Milt (2,412 comments) says:

    [DPF: Nice rant, but do you have any stats on that? I know in NZ Warehouse has relatively generous employment conditions for a retail store]

    Just Google walmart employees foodstamps – you’ll find a range of items. It seems that competition does help lower prices, but nothing beats having the taxpayer subsidise low wages.

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  27. Psycho Milt (2,412 comments) says:

    Doggone – I’ve fucked about a dozen teachers. All had horror stories about unions.

    I think we can take it from the context in which you met them that they all also had severe personality disorders. However, thanks for the reminder of what charter schools are all about from the government’s perspective.

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  28. wat dabney (3,769 comments) says:

    Milt,

    People in the USA prefer working for a large company that provides medical cover and a retirement fund, even if the pay is so bad they need food stamps? No fucking shit, Sherlock.

    That’s kind of my point: Walmart’s pay, conditions and employee prospects are better than its competitors. Yet we have to endure your tedious, bovine and predictable anti-Walmart rants which you dutifully copied for us from some teenagers’ internet site you found.

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  29. bc (1,367 comments) says:

    Teachers with “horror stories” are attracted to dime!
    Now that they have moved on, they no doubt have a few more horror stories to tell!

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  30. bc (1,367 comments) says:

    DPF: The article you posted mentions Walmart.

    This article explains why Walmarts low wages COSTS Americans through federal subsidies.

    http://www.huffingtonpost.com/2013/12/18/walmart_n_4466850.html

    Comaring Walmart to the Warehouse is definitely fomenting mischief.

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  31. Psycho Milt (2,412 comments) says:

    …we have to endure your tedious, bovine and predictable anti-Walmart rants…

    You don’t have to endure them at all. If you find it excellent that a large corporation uses taxpayer subsidies to undercut local businesses, you’re under no obligations to read my disparaging of it.

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  32. doggone7 (805 comments) says:

    dime

    I guess it’s easy to see why you’re such an expert on education and schooling then.

    “All had horror stories about unions”? If that were the case you certainly could pick ‘em. And you and they undoubtedly deserved each other.

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  33. wikiriwhis business (4,016 comments) says:

    Of course the corprates don’t like Competition. That’s why they taking over and so many businesses are failing

    Anyone see teh NAFTA/TPP story in the herald on Staurday.
    exposes the fraudulent TPP to bits.

    and exposes what a financial terrorist PM we have.

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  34. unaha-closp (1,165 comments) says:

    For some strange reason, this is seen as a bad thing because it clashes with an ideology that competition is bad.

    From the party that has banned any competition in casino sector for the next 35 years, a lecture in irony.

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