Disadvantaged Students Transportation

Grant Details

Organization: Caltech
Country: USA
Project Name: Markets and Government Services: Disadvantaged Students Transportation
Grantee Name: Charles Plott

Funding Areas
Private Sector Solutions ✓

Markets and Government Services: Disadvantaged Students Transportation

The project goal is to implement markets and demonstrate the benefits where markets are seldom employed. The initial focus has been the procurement of government services, one of the fastest-growing areas of government. Heavily bureaucratic, administrative allocation processes are universally regarded as the only option. 

Markets are not used because no one knows how to organize them to solve the underlying social problems. The research strategy is to choose a simple, special case to serve as an exemplar of many cases, and to craft and implement market modifications of the administrative processes used. The strategy addresses why markets have not automatically emerged and what dimensions of the regulations might be replaced by special forms of markets and new technologies.

The initial effort is focused on administrative procedures used for procuring school transportation for disadvantaged children. The allocation issues involve economic environments theoretically identified as common causes of poor (or impossible) market performance: public goods, service quality issues, coordination complexity, non-convexities, the nonexistence of equilibrium, poor information, and thin markets. The laboratory experimental and theory-guided design involves user preference integration, route designs that clearly define services to be procured, auction design that supports competition for coordinated service provisions, experimental testing, and implementation.

The research demonstrates that markets can be used. A new market-based process produced improved transportation services for the children (e.g, 53% travel time reduction) for the same cost, support from teachers and families as well as upper levels of administration and government. Robustness analysis (a form of external and internal validity test) demonstrates close relationships among theory, experiments, and actual field performance.

This program is ideal for economists with an interest in harnessing the energy and motivation of private enterprises to solve social problems. By nature, social problems emerge in areas where social, political, and legal arrangements have not evolved as support for private enterprise. Solutions can involve conflicts among deeply held scientific beliefs and philosophies. Resolutions can require new technologies, new forms of markets, demonstrations that can require basic science, technical advances, and political skills. The Rising Tide Foundation program is designed to support such work.

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