This paper summarizes the trend toward introducing markets into the education sector. We begin with a brief history of the market reforms and then review recent policy developments related to vouchers, charter schools, tuition tax credits, and educational management organizations. The internal anatomy of markets are then described, recognizing both the possibility of imperfect competition and of
... [Show full abstract] market failure. Next, we set out a framework for evaluating market reforms which has four criteria – freedom of choice; productive efficiency; equity; and social cohesion – and a set of three policy instruments – finance, regulation, and support services. We then show how voucher policies can differ considerably in how they satisfy each of the four criteria, although unavoidably trade-offs must be made. We then review the evidence on vouchers and choice in relation to each of the four criteria. Finally, we consider what are the prospects for market approaches to education and where are the needs for further research.