School choice policies may, by aligning administrators’ incentives with parental demand, yield improved efficiency in educational production (Milton Friedman, 1962; John E. Chubb and Terry M. Moe, 1990). But Eric A. Hanushek (1981) cautions: “If the efficiency of our school systems is due to poor incentives for teachers and administrators coupled with poor decision-making by consumers, it would be unwise to expect much from programs that seek to strengthen ‘market forces’ in the selection of schools” (p. 35, emphasis added). Poor decision-making is not required; parents may rationally choose schools with “pleasant surroundings, athletic facilities, cultural advantages” (ibid., p. 34) over those that most efficiently pursue academic performance; they may prefer poorly run schools with good peer groups over those that are more effective but enroll worse students (J. Douglas Willms and Frank H. Echols, 1992, 1993); or they may simply be unable to identify effective schools (Thomas J. Kane and Douglas O. Staiger, 2002). Any factor that leads parents to choose any but the most effective available schools will tend to dilute the incentives for efficient management that choice might otherwise create.

This study examines the distribution of student outcomes across schools within metropolitan housing markets for evidence on parental demand. Economists have long noted that parents’ choices among residential locations are potentially informative about how more complete choice systems may operate (Charles M. Tiebout, 1956; Melvin V. Borland and Roy M. Howsen, 1992; Caroline M. Hoxby, 2000; Rothstein, 2005). I ask whether school effectiveness plays a sufficiently important role in these decisions to create meaningful incentives for more productive school management.

Despite robust growth in real per capita GDP over the last three decades, the U.S. poverty rate has changed very little. In an effort to better understand this disconnect, we document and quantify the relationship between poverty and four different factors that may affect poverty and its evolution over time: labor market opportunities, family structure, anti-poverty programs, and immigration. We find that the relationship between the macro-economy and poverty has weakened over time. Nevertheless, changes in labor market opportunities predict changes in the poverty rate rather well. We also find that changes in female labor supply should have reduced poverty, but was counteracted by an increase in the rate of female headship. Changes in the number and composition of immigrants and changes in the generosity of anti-poverty programs seem to have had little effect.

The continued rise in U.S. healthcare spending, along with growth in the number of uninsured, has spurred the move toward consumer-driven health plans. We review new legislation covering such plans, analyze their penetration in the marketplace, and predict their growth. We also use current information about plans that are compatible with Health Savings Accounts to compare them to traditional Preferred Provider Organization plans. Next, we discuss some concerns about the impact of these plans on vulnerable populations, such as the poor and sick. Finally, we suggest how consumer-driven health plans may help to improve the functioning of the healthcare market, especially by producing more transparent information on cost and quality.

The United States has long enjoyed being on the cutting edge in its devotion to building a vibrant higher education sector. After a century of leading the world in participation rates in higher education, however, there are strong indications that America's advantage is waning. The academic research enterprise remains relatively vibrant. However, participation and degree attainment rates have leveled off and are showing signs of actual decline in a number of major states with large populations — and this seems to be more than just a bump or short-term market correction. Other competitive nations, and in particular key members of the European Union, along with China, India and other developing economies, are aggressively nurturing their higher education systems, expanding access, and better positioning themselves in the global economy. They have been trying harder, while in the US public funding for higher education has declined. The nation's international and domestic concerns lie elsewhere. In addition to outlining these reasons that America's higher education advantage is waning, this article also discusses the possible consequences.