Education and the market: Which parts of the neoliberal solution are correct?

For many years the orthodox view among economists has been that the state should take the major responsibility for both financing and supplying educational services. Over the past decade, however, a new group of “neoliberal” critics have argued that education systems in developing countries should be financed more directly by private households, particularly under the sharply constrained financial circumstances facing many governments in the South. This paper critically reviews the literature pertinent to this debate. On the basis of the available evidence, it finds that cost recovery policies would be harmful to both efficiency and equity if significant resources were to be generated by these means. Alternative revenue-raising measures are likely to provide a better solution. Private schooling can be helpful to governments facing strong financial constraints, but only under circumstances which are more tightly defined than those generally allowed by most neoliberal authors. Other policies are available to improve equity and efficiency in education which are not substantially included in the neoliberal case.