Whether or not the supply of schools can meet the parental demand for choice has been central to the school choice debate for more than a decade. Unfortunately, the two sides to the debate often carry their argument to the extreme. On the one side, one finds, to coin a term, the strict inelasticians: Those who assume that supply will not change in response to an increase in demand. When model builders make such an assumption, they easily reach the conclusion that choice systems will necessarily be highly stratified. In fact, studies of school choice find increasing stratification in contexts where school supply was forced to remain fixed. But one cannot generalize from such situations to those where supply is allowed to fluctuate.
On the other side, one finds those who might be called strict elasticians, those who assume that supply will increase smoothly as demand increases. Milton Friedman's essay that helped give rise to the school choice movement is an example of an elastician's argument. But it is another matter to assume that supply will expand rapidly no matter what kind of school choice program is introduced, especially when that program is the outcome of political bargains and it falls short of fulfilling the assumptions that Friedman set forth.
In practice, supply response will be affected by two major factors- (1) legal and political barriers and (2) financial incentives given to potential suppliers. To study how these two factors affect school supply, we examined the school choice innovations the city of Milwaukee, where the first small voucher experiment began in 1990 and where much larger voucher and charter interventions have been in place since 1998. We also gathered information on the impact of the choice interventions on existing public schools.
If one can generalize from the Milwaukee experience, school supply is quite elastic, responding quickly to change in parental demand whenever legal and political conditions are relaxed. Even if financial arrangements are considerably less than ideal the supply grows with demand. But, whether those newly created schools provide a higher-quality education is another matter. Choice can sustain and enhance existing quality schools and it can have positive impacts on traditional public schools that must now take active steps to maintain their enrollments. But when financial arrangements are inadequate and oversight is lax, some of the new schools may be of lesser quality.