would be implemented through incentives rather than regulations. Both authors would have states deregulate choices among education inputs and teacher certification, providing much enhanced discretion for local school administrators in selecting the best mix of education resources for achieving higher performance.

The economic perspective provided by the PEER report provides an important new dimension for deliberations about future education reform. This dimension was omitted from the lengthy debate that led to Goals 2000 and the ESEA legislation. Costs and benefits have not been compared in determining levels of support for education at the federal level. Evidence of substantial inefficiencies in the allocation of education resources has been ignored. Incentive schemes are notable by their absence from the resulting program for school reform.

The conclusions of economic research on education summarized by Hanushek and the conclusions of education research summarized by Smith and his colleagues represent different ways of abstracting from the same reality about American education. Education research focuses on the goals of education; economic research concentrates on the means of achieving those goals. Viewed from this perspective, the two points of view produce a more complete framework for future education reform.

Nevertheless, the policy recommendations of the PEER report go well beyond the education policies described by Smith and his colleagues. A budget crisis arising from rapidly growing enrollments is already enveloping school systems around the country. The new challenges facing America's schools will require balancing the costs and benefits of education and enhancing performance while realizing efficiencies in operation. In meeting these challenges it will be critical to make effective use of economic research in improving America's schools.


Board on Science, Technology and Economic Policy. 1994. Investing for Productivity and Prosperity. National Academy Press, Washington, D.C.

Bureau of Labor Statistics, July 11, 1994, "Multifactor Productivity Measures, 1991 and 1992," News Release USDL 94-327, and Dale W. Jorgenson, 1995, Postwar U.S. Economic Growth, The MIT Press, Cambridge, Mass.

Jorgenson, Dale W., and Barbara M. Fraumeni. 1995. "The Accumulation of Human and Nonhuman Capital 1948–84," reprinted in Dale W. Jorgenson, Postwar U.S. Economic Growth, The MIT Press, Cambridge, Mass., pp. 273–332.

National Commission on Excellence in Education. 1983. A Nation at Risk. U.S. Department of Education, Washington, D.C. The Boston Globe, October 6, 1994, p. 10.

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