School vouchers is an idea which I first heard proposed by Milton Friedman in 1962 in 'Capitalism and Freedom.' The idea is a public good with positive externalities and therefore needs subsidy. However, rather than a limited and uncompetitive system of public schooling, education should be subsidised as vouchers which can be applied to private or public education. Especially in the United States, the educational system is completely broken. Public schools are funded by neighbourhoods, which result in well funded and decent public school in rich school districts, and absolutely abysmal prison-like schools in poorer areas. The problems are compounded by teachers unions which block the firing of incompetent teachers and support the interests of established teachers instead of students' education. Even George Bush campaigned for president by supporting school vouchers, but as with most of his campaign promises, they had very little to do with his actual policies. Having attended private school and realising their enormous superiority over their public counterparts, I have always supported the idea of school vouchers. If education should be subsidised at all, then private schooling should be accessible by anyone who is accepted, not just the wealthy. Financial limitations on access to education serve only to reinforce class differences, reduce competitiveness of the public schools, distort real estate markets, and dampen long run productivity of the economy.
Tyler Cowen on vouchers.