Measuring the Value of Better Schools

n 1993, spending on education represented 28 percent of state and local government expenditures and almost 14 percent of total government expenditures in the United States.1 The tremendous resources devoted to education in this country underscore the need to identify the tools and programs that yield the greatest return on our investment. Policymakers have sought to improve schools in a variety of ways, ranging from increasing per pupil expenditures or teacher salaries to creating programs that send inner-city students to suburban schools. How, then, do we assess the cost-effectiveness of specific initiatives and programs? The first step is to measure the value of better schools. The goal is to develop a sound method of quantifying how investments in educational quality relate to outcomes. Once we are able to put a dollar value on improvements in school quality, we can compare policy alternatives. In this paper, I examine two methods of measuring the value of better schools. One involves following individuals over time to determine how the quality of their schooling affects outcomes later in their lives; the other involves calculating parental valuation of better schools today. I review the benefits and limitations of the two methods, then briefly consider how these methods might be used in evaluating policies. At the end of the paper, I note some uncertainties affecting research in the field and outline directions for future research.