In Defence of Choice and Competition: Vouchers and Charter Schools

Education reform is typically a controversial and polarizing issue. Student performance is falling below the national average in some provinces such as Newfoundland and Labrador, however, and the rationale for reforming the public education system seems clearer than ever. Yet, revisiting how provincial governments deliver education does not necessarily mean creating more government programs and more bureaucratic red tape. Instead, there are two alternative reform paths that will be the topic of discussion in this article: vouchers and charter schools.

By definition, a school voucher is a funding certificate issued by the government to parents who wish to enroll their child in a private school or, in some jurisdictions, who choose to homeschool their children. The values of these vouchers typically reflect the cost of educating a student at a public school. They reduce barriers that prevent parents from sending their children to privately-owned institutions, which may provide higher-quality education or education programs that are more suitable for their children’s needs. Critics of school vouchers argue that they force public schools to compete with private schools and that the diversion of funds away from the former results in lower-quality education for those who cannot afford a private alternative. Yet, while it is true that implementing a school voucher system would force public schools to compete with private schools, several studies indicate that student performance improved in jurisdictions wherein competition is rife.

Another alternative is that of the charter school system. Charter schools are publicly-funded, privately-operated autonomous schools operated by groups of educators and parents. These schools feature flexible curricula and offer unique educational programs, but they must demonstrate that their programs are different from what other schools offer and they must be held accountable to the provincial government.

Since elected officials in Alberta enacted the School Amendment Act in 1994, charter schools have played an important role in the province’s education system. And, like the implementation of a voucher system, the charter school system has demonstrated the value of competition and choice. One study indicates that charter schools have been better equipped to advance student learning and another study argues that the success of Alberta’s charter school experiment should be the rationale for expanding it.

In reviewing the successes of both the school voucher system and Alberta’s charter school experiment, it becomes increasingly evident that competition-driven reforms that emphasize individual choice deserve the attention of elected officials in Atlantic Canada, particularly in Newfoundland and Labrador. Parents could then decide what school will best meet the needs of their children and public schools would have an incentive to improve student performance outcomes by developing more effective curricula. Indeed, a rising tide lifts all boats.

Devin Drover is an AIMS on Campus Student Fellow who is pursuing an undergraduate degree in economics at Memorial University. The views expressed are the opinion of the author and not necessarily that of the Atlantic Institute for Market Studies

Alcohol, Social Harms, and the State: The Case for Privatizing the NLC

“Let us henceforth make war on all monopolies— whether corporate or union. The enemy of freedom is unrestrained power, and the champions of freedom will fight against the concentration of power wherever they find it.” – Barry Goldwater, The Conscience of a Conservative

The Newfoundland and Labrador Liquor Corporation (NLC) has, once again, increased the price of beer, wine, and spirits in the province. In an open market, raising the price of any given product is a decision that, among other things, reflects competitor pricing, however, the NLC and its provincial counterparts retain a monopoly on the sale and distribution of liquor products and consumers cannot purchase them from other retailers. Yet, it is not sufficiently clear why the provincial government is involved in the liquor industry and one must question whether the NLC should exist at all.

One justification for the existence of publicly-owned and operated liquor monopolies is reducing “social harms.” In other words, the state’s role is to protect individuals from the harmful effects of alcohol, which it can achieve through setting the price and regulating the sale of liquor products. By appealing to microeconomic theory and empirical evidence, however, the logic behind government-run liquor monopolies begins to crumble.

Regardless of whether individuals consume alcohol purchased from the government or from a private retailer, there exists some “dangers” associated with excessive alcohol consumption. Of course, alcoholism is a very serious illness with roughly 600,000 Canadians reporting a dependency on alcohol in 2002, but there is no evidence that government involvement in the sale and distribution of alcohol curbs this ailment. Furthermore, the link between alcohol consumption and prices is weak and there is little evidence that raising prices will discourage alcohol consumption. In fact, because alcohol is an inelastic product, dedicated consumers will not purchase less of it when the price rises (or when their income falls). Essentially, the NLC’s decision to raise the price of beer, wine, and spirits is unlikely to discourage consumption and will simply generate additional revenue, albeit at the expense of consumers (and their health).

An extension of the “social harm” justification for government involvement in the liquor business (and, correspondingly, the justification for limiting private sector involvement) is protecting children from early exposure to alcohol. In practice, there is at least some empirical evidence to support this arrangement. A study conducted in British Columbia revealed that private stores are more likely to sell alcoholic beverages to individuals who do not meet the province’s legal drinking age. (Conversely, a study conducted in Prince Edward Island, which recently made headway for private retailers to sell liquor at licensed establishments, found that government-owned stores were less likely to check for IDs.) Yet, it is not clear whether this finding justifies a government-owned and operated monopoly. It does illustrate a need for stringent regulations in the liquor industry and harsher punishments for retailers who break the law.

Of course, the primarily justification for government involvement in the liquor industry is revenue. Alcohol sales provide a significant stream of revenue for the provincial government–the NLC projects a $154 million profit in 2015. Thus, once again, the fact that the NLC generates revenue for the province does not justify its existence, particularly when actual operating expenses in that year reached $53 million, which reflects larger-than-average management and administrative costs, including generous employee benefits. Further, Prince Edward Island’s experience with privately operated liquor stores actually recorded higher revenues for their provincial government than under a solely publicly-operated model. If the provincial government privatized the NLC, taxpayers would no longer fund these excessive operating costs while the provincial government could actually increase their total revenues from liquor sales.

Government-owned and operated businesses are generally less efficient and less innovative than private sector counterparts and that remains the case with the NLC. Moreover, an appeal to evidence suggests that the state does not need to involve itself directly in the sale of alcohol to “protect” individuals and their children. As a result, it remains unclear why the NLC should remain an extension of the provincial government and the province should consider privatizing it.

Devin Drover is an AIMS on Campus Student Fellow who is pursuing an undergraduate degree in economics at Memorial University. The views expressed are the opinion of the author and not necessarily that of the Atlantic Institute for Market Studies

On Rural Newfoundland: Community Resettlement and Taxpayer Equity

Newfoundland and Labrador (NL) faces unique policy challenges due to the Island’s vast physical geography. Unlike the other provinces in Atlantic Canada, NL has a low population density, with 370,510 square kilometers of land for little more than a half million people. Further, a majority (51 per cent) of the population live outside of census metropolitan areas, with many living in rural or remote communities, some with a recorded population as low as five and reachable only by daily ferry service. While NL’s geographic makeup has created an interesting cultural element for Canada’s most eastern province, it has also created difficulties for the provincial government to ensure services are delivered efficiently to these rural communities. As a result, it is important to consider existing policies put in place by the provincial government that address these difficulties and whether they have been successful. Specifically, it is important to consider perhaps the most controversial policy in the history of provincial-municipal affairs: community relocation.

The provincial government adopted community resettlement policies between 1954 and 1975 in an effort to centralize the province’s population into government directed “growth areas.” In doing so, the government wished to ensure that all residents of the province had access to a reasonable level of government services, which could be achieved through less expensive means, while also encouraging innovation in the province’s economy through reforms to the provincial fishery. The government would provide financial assistance to families prepared to resettle. Initially, this project was a success, as 300 remote communities were abandoned and over 30,000 people resettled. However, the policy became politically unpopular, due in part to the absence of many promised economic reforms and, therefore, led to the end government-initiated resettlement.

Presently, the resettlement policy has been reformed into the current Community Relocation Policy, which is “community-initiated and community-driven.” Communities can apply for community relocation if 90 per cent of the community’s residents agree, in writing, to relocate. Following this process, the government completes a cost-benefit analysis and determines whether the cost of delivering services to the community over a twenty year period exceeds the financial assistance that would be given to residents to relocate. In the event that there is a benefit to government, government will purchase the physical property of these communities for values of $250,000 to $270,000 per household.

While this policy has led to the resettlement of a few communities over the last decade, however, it is far from perfect and the government should, instead, consider reviewing one key element of the policy: the high threshold required for resettlement. As stated, this policy requires that interested communities come together on their own terms, organize their own resettlement committee, and organize their own independent resettlement vote. However, since this vote requires that 90 per cent of residents agree, it often means that less than a dozen individuals can hold up individuals from receiving government assistance to relocate (and, as many individuals are unable to relocate without this assistance, it means they are often left with no other choice but to remain). Furthermore, with such a high vote threshold, taxpayers continue to be on the line because of the actions of just a few individuals, including in cases wherein the financial assistance provided by government would outweigh the costs of government assistance relocation. Since taxpayers foot the expenses of these communities, many of which do not have any need for the service provided, it is clearly unfair for these few individuals to put a majority of taxpayers on the line for the continued delivery of services to these communities. Essentially, because of this clear inequity, government should consider reducing the threshold required for relocation or otherwise take a more government-initiated approach.

Overall, even if one believes the premise that government should provide core services to all residents, it is still important to consider at what level are taxpayers receiving the services for which they are paying. For some rural and remote communities, it appears that the actions of a few individuals are often forcing a majority of taxpayers to foot the bill for services that benefit a few lone actors. While these developments may not justify a complete removal of services to these communities, at the very least they suggest the provincial government should take a look at reforming these policies and some other potential solutions to ensure that taxpayers are treated fairly.

Devin Drover is an AIMS on Campus Student Fellow who is pursuing an undergraduate degree in economics at Memorial University. The views expressed are the opinion of the author and not necessarily that of the Atlantic Institute for Market Studies