Economies of Scale in High School Operation

Abstract

IN THE school year 1963-1964, according to the National Education Association, the total expenditures to educate 41.7 million pupils of the Nation's public schools exceeded 21 billion dollars. This expenditure figure shows a significant increase from 15.6 billion dollars in 19591960 and 5.8 billion dollars in 1949-1950 which were spent, respectively, for 34.2 million and 24.1 million pupils. In view of the magnitude of the resources involved and the rapid growth of their amounts, inquiry into scale economies in public education has not received adequate treatment by researchers. The main reasons for this seem to be (1) the difficulty of determining the quality of various schools, and (2) varying opinions regarding the importance of the implications of such a study. The cost per pupil may reflect differences in the quality of education among schools, unless this quality differential is somehow taken into account. Then, if a study indicates an economic advantage for large size schools, there is a question of how this fact should affect policy decisions when there are other factors to be considered. The United States Office of Education, for many years, has been making surveys of public school costs in cities of varying sizes. Their results in general show higher per-pupil costs for schools in larger cities. In the year 1958-1959, the cost per pupil in cities with a population of less than 10,000 was 312 dollars. The cost in cities with populations ranging from 10,000 to 24,999 was 305 dollars. In cities with populations from 25,000 to 99,999, it was 321 dollars, and in cities of over 100,000 people, 361 dollars.1 In 1939-1940, the equivalent figures were 80 dollars, 87 dollars, 102 dollars and 127 dollars, respectively.2 The surveys obviously were not intended for analysis of economies of scale in school operation. Although large schools are typically in large cities and small ones in smaller cities, city population is hardly a suitable index of school size. Also these surveys do not account for differences in the quality of schools among size classes. The first serious inquiry on the subject was made recently by Werner Z. Hirsch.3 In his analysis, which employs multiple correlation and regression techniques and uses an elaborate device to distinguish quality differences among schools, he finds no significant economies of scale. He thus concludes that consolidation is unlikely to solve the fiscal problems of public schools. Hirsch uses a school district as the unit of observation. A study based on school districts undoubtedly has its merits, but schools, by and large, operate independently within a district. Thus, a more meaningful analysis of the size-cost relation, as Hirsch also implies, should be based on individual schools. Of the 27 St. Louis public school systems included in his study, all but six had enrollments of more than 1,500. To test the validity of a conjecture that significant scale economies exist over a relatively low size-range into which the nation's great majority of schools fall,4 we need a sample with a larger number of smaller units. Schmandt and Stephens, in a rank order correlation analysis, offer the conclusion that

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