Frances Woolley asks about why we don;t have vouchers for PhD programs. As a part of this discussion she points out the issues of misalignment of incentives for K-12 school vouchers:
It's odd: school vouchers are frequently advocated for primary and secondary school students. Yet there are good reasons why they would not be expected to work well, especially for primary school, as the ones exercising the vouchers (the parents) are not the ones experiencing the education (the children). Also there are very large costs associated with switching schools, and especially going to a school outside your immediate neighbourhood, if you are six years old and not able to drive, or 12 years old and in a tight friend network. Hence the possibility for effective competition between schools is limited at the K to 12 level.I think a lot of the same issues would apply to PhD vouchers as would apply to school vouchers, especially in terms of the issues of coordination. So I am not a fan of the PhD vouchers idea, doubly so when there are provincial funding differences for the schools themselves. I can see too many ways that we could end up with all viable students being at the University of Toronto, for example, with a clever use of network effects.
But the real issues are the barriers to change. These are high -- just differences in the material that is being taught can be brutal to overcome when changing mid-semester. Market forces will always be inhibited by the challenges in overcoming these barriers, especially since the service is being marketed to a proxy for the consumer.
But my biggest question is why the economist can rattle off real issues that don't even appear in the current conversation. Everything is about quality, but this all presumes that the new system (at scale) will be better than the old system. Which might be true, but pure market forces will suffer an uphill battle given transaction costs. After all, how do you prevent "we will just under-serve a little bit, but not enough to make the costs of changing schools worthwhile" becoming a "race to the bottom" for most schools (with a few high priced and elite exceptions).

