What Do Cost Functions Tell Us about the Cost of an Adequate Education?

Econometric cost functions have begun to appear in education adequacy cases with greater frequency. Cost functions are superficially attractive because they give the impression of objectivity, holding out the promise of scientifically estimating the cost of achieving specified levels of performance from actual data on spending. By contrast, the opinions of education stakeholders form the basis of the most common approach to estimating the cost of adequacy, the professional-judgment method. The problem is that education cost functions do not in fact tell us the cost of achieving any specified level of performance. Instead, they provide estimates of average spending for districts of given characteristics and current performance. It is a huge and unwarranted stretch to go from this interpretation of regression results to the claim that they provide estimates of the minimum cost of achieving current performance levels, and it is even more problematic to extrapolate the cost of achieving at higher levels. In this paper we review the cost function technique and provide evidence that draws into question the usefulness of the cost function approach for estimating the cost of an adequate education. (Contains 28 footnotes and 7 figures.) [Funding for this paper was provided by the Missouri Show-Me Institute.]