(FORTUNE Magazine) – Educational reform has been and remains a controversial issue. But despite several years of consciousness raising, significant reform has not occurred and will not occur in the near future. Effective reform will not come until we find a way to encourage a market economy approach to education. That means having profit-making schools competing with both public schools and the nonprofit ones that now predominate among private schools. One reason reform has not happened is that nearly all proposals to improve education ignore the interest groups that oppose reform. It would be unrealistic to propose reforms of the automobile industry that did not take into account the interests of the United Auto Workers. It is even more unrealistic to propose educational reforms that ignore the National Education Association and the American Federation of Teachers, the national teachers' unions. Teachers' unions typically have more power to block change than unions in the private sector. Yet I have not read a single educational task force study that has suggested a way to overcome union opposition to change. Over 40 states have teacher tenure laws, many of which provide excessive protection not just for incompetent teachers but also for those no longer needed because enrollment has declined or programs have changed. Yet not a single major reform proposal deals realistically with tenure. Let me cite one more problem. What is required to change a textbook in public schools? In some states, texts must be approved by a state agency. The books a local school board wants to use may never be approved. Or the school district may be required to use its textbooks for a minimum number of years. In short, the need to replace one textbook can be an enormous obstacle to change. These examples point to a critical conclusion: reform cannot happen without basic changes in the governing structure of education. Much of the public mistakenly believes that reforms are being made. The crumbs of evidence that support this notion are magnified and publicized; the mountains of hard evidence to the contrary are ignored. Some states, for example, have begun requiring more credits in science, math, and English for high school graduation. What often happens, however, is that schools simply apply these labels to distinctly nonrigorous courses. The fiction that this is improvement cannot be sustained forever. We are at the threshold of widespread disenchantment with the reform movement. Disenchantment will increase the prospects for changes in the structure governing education. At present the major changes being proposed are educational vouchers and tuition tax credits. Both are intended to strengthen family choice -- to increase the power of parents to send their children to schools they choose. Family choice measures could enable more parents to enroll their children in private schools. The rationale for such a change is that it will lead to more competition, and that competition will lead to better education. In my view, a market approach is indeed our best bet for achieving educational reform, and public policy should encourage it. Nonetheless, I question the assumption that nonprofit schools, public or private, can generate the benefits of competition.

The research comparing the achievements of pupils in public and private schools provides only weak evidence of private school superiority. When the abilities and backgrounds of students are taken into account, most studies find either no difference or only a modest superiority of private schools. Even if we accept the conclusion of modest superiority, as I do, the reasons for it are crucial. If private schools educate better, it is not because they possess technology or expertise not found in public schools. Instead, private schools are superior largely because they are not hampered by legal and administrative obstacles that permeate public education. Public schools, for example, are limited in their right to search students and lockers, or to discipline unruly students. A private school can impose search and disciplinary procedures as a condition of admission. Discipline, neat attire, punctuality, and respect for authority are important. But what we especially need is technology that will reduce the extreme labor-intensiveness of education. In other words, we need the educational equivalent of refrigerators in place of iceboxes. Only then can we buy better education for the same amounts now spent on schooling. NONPROFIT SCHOOLS are not as likely as profit-making ones to develop such a technology. To put it bluntly, school executives who can personally profit from greater productivity are more likely to be competitive than executives motivated by religious or ideological considerations. To foster productivity we need to restructure education as a vast market in which entrepreneurs can reap the benefits of improved technology. Private enterprise must do more than sell products to public and private schools. It must establish and operate schools so that improved technology is not hostage to local politics, union opposition, state aid, and the other hazards of local school administration. Can good education be made both affordable and profitable? The private sector delivers other so-called public services more cheaply, and often better, than public agencies. I see no reason that it cannot do the same with education. Today the voucher and tax credit issues are cast in terms of public vs. private schools. Down the road the distinction between profit and nonprofit schools will be more important. As this happens, public and nonprofit private schools will unite to freeze out their fledgling competitors. But the public will come to recognize the advantages of resolving educational issues through economic instead of political decision-making. Eventually businessmen trying to generate profits will bring about improvements beyond the reach of our moribund educational establishment.