This article was published in the spring of 2009, and it focuses on various New Yorkers’ approach to their children’s education in the wake of the Great Recession that started in the fall of 2008. The article discusses how there has been an increase in interest and in applications for public schools in certain New York City areas because some families can no longer afford to pay private school tuition for their children. The areas mentioned in the article are ones that are typically thought of to be inhabited by wealthier families (like the Upper East Side and Upper West Side of Manhattan). The article also shows how some couples without children (but who plan on having them in the future) are now looking to buy/rent apartments in areas with established public school systems because the education of their future children is very important to them, and they do not know if the economy will have turned around by the time their future children reach school-age.
I felt as though this article tied in well with our discussion of Charles Tiebout’s “A Pure Theory of Local Expenditures” and the concept of “voting with one’s feet.” The article provides several examples of people who had purchased apartments in an area of New York before the recession hit, and their education preferences were not factored in to their apartment location because they assumed that they would send their children to private school. However, the recession is causing these families to alter their preferences to include their children’s public school education, as private school is no longer economically feasible. Many of the families mentioned in the article are either trying to sell/sublet their current apartment and move in/rent a new apartment located in a better public school zone. Although not all of the assumptions of Tiebout’s model hold in this article (some of the people interviewed mention the high costs associated with moving), Tiebout’s overall conclusion that people reveal their true preferences by their location is realized.
After reading this article, I was curious to see if the local government of New York responded to the changing preferences of these New York families. Not surprisingly, I found another article (which was published after the first one) about the opening of a new public middle school (the first new public school building built on the Upper East Side in almost 50 years!) in one of the areas mentioned in the first article that had seen an increase in public school applications. As Tiebout suggested, local provision and adjusting was done within the public school district by the voter based on where they live; the government saw both the movement of families to a certain area and the increase in public school applications in that area and responded by allowing a new public school to be built in said area. A pretty good real-life example of Tiebout’s argument in my opinion!
3 comments:
Sally, this is a great blog entry. I read both of the articles and reread Tiebout’s “A Pure Theory of Local Expenditures” and feel like I gained an even better understanding of this topic. Thanks!
When I was reading the first article it had me thinking what would happen when all of the communities in the zones of the “most-wanted” public schools became saturated. The recession caused the demand curve for real-estate in “most-wanted public schools” zones to shift to the left, hence increasing the equilibrium price of buying or renting a home in those areas (ceteris paribus). I thought this was an excellent example of Tiebout’s seventh assumption which states that communities at or above the optimum size will find ways to discourage more individuals from joining the community. Continuously rising housing costs would discourage more and more people from moving into these high demand school zones. The solution of opening a new school directly addresses Tiebout’s sixth assumption which states that an optimum number of individuals in a community is partially based on limited resources (enrollment in public schools). Thus, by building the new school the government loosened the limitations by increasing the supply of public education. Sounds like a pretty sweet solution, or does it?
The article quotes the new school’s chancellor saying “This would be a great building if we had to pay for it, but for free, it’s off the charts.” As economics students the word “free” should make us cringe and it left me questioning the finances of this project. Was it handled economically?
What the chancellor was referring to was that the city was able to make a deal with private developers who would build and pay for the school. There is no way the developers would have agreed to this if they didn’t see it as profitable. One agreement under this contract was that the developers would be allowed to build on part of the land. The developers build a residential community with 120 apartments. In order to surmount the costs for the new school, the developers are likely to charge the future residents of those apartments a premium on the price of the apartments.
This means that while the new residents will incur the benefits of the new school as well as its costs, what about the families that have lived in the school zone even before the new school was built? Wouldn't that lead to positive externalities for those 'old' residents? Their community has become much more attractive which could raise the value of their homes. If these families have children they can also benefit by sending their kids to the new school without incurring any of the $45 million in construction costs. That’s a tricky free rider problem.
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