The delivery of education is at the forefront of public debate during the COVID-19 pandemic, and researchers say market design principles will position schools to better prepare for challenges when assisting students with disability.

Economists at the University of Melbourne's Centre for Market Design (CMD) partnered with the California Institute of Technology (Caltech) to road test new operating models – applying market design theory to reform travel services for students with disability at a northern Melbourne school.

As a result of the 2018 project, a bus service was created for secondary-school students attending the Northern School for Autism (NSA) in Melbourne, halving school travel times and delivering hours of extra education by eliminating complex travel arrangements.

Before the CMD-Caltech project, some students were travelling for up to four hours every day – including an interchange at the junior campus – and losing vital learning time on campus as classes were delayed until all students arrived at school.

The CMD, funded by the Department of Education and Training in Victoria, designed specialist software to create an online market for NSA bus services.

Previously, more than half of the students spent longer than an hour travelling to school, with a quarter of students spending an hour-and-a-half in transit each morning. Now, all students spend less than an hour travelling to school.

Gary Stoneham, Director of Policy Projects at the Centre for Market Design and project leader, says one student who lives close to school, now spends 15 minutes' travelling to school, down from an initial journey of 47 minutes.

For the student living furthest from school, their travel time has been reduced to 54 minutes from 115 minutes.

"Over the full year, the new routes have replaced around 200 hours of bus time for each student with education time," Mr Stoneham says.

"One mother told us she was a 'big fan' of the CMD's tailored bus routes because her son's travel times were cut from 90 minutes each way to 30 minutes and he is 'much, much happier and his behaviours are much more manageable both at school and at home'."

Caltech Professor Charles Plott says the team used a three-step process to design a market that harnesses competition between commercial transport operators while providing transport services that benefit students.

"The first step is to understand the client's needs," Professor Plott says.

"The second step is to design software which uses rules and processes to harness competition, while ensuring the market supplies the required outcomes.

"The final step involves rigorous testing of the market under laboratory conditions to ensure it is implementable and efficient."

Professor Plott is a pioneer of laboratory-based market-design processes, often referred to as "experimental economics", that improve mechanisms to implement policy objectives and deliver better outcomes for people who need specialist products and services.

For the NSA application, the researchers designed a market to establish prices and allocate contracts for travel services. Complex mathematical processes identified routes that met the needs of students, including travel times, supervision requirements, seating arrangements and the number of stops.

Millions of possible routes were computed to identify the seven routes required to reduce travel times for students.

The team then used Google Maps in tandem with theoretical computations and identified safety issues to ensure pick-up locations were convenient and accessible.

Mr Stoneham says a specialised auction enabled private transport suppliers to compete to determine the most efficient allocation of transport contracts and the price.

"The auction component of the market was particularly challenging given that only three private transport providers participated," Mr Stoneham says.

Despite this 'thin market' problem, Professor Plott says that in 15 minutes "more than 400 bids were submitted through an electronic auction."

"These are signs of an efficient market in which the seller makes a reasonable return and the buyer get value for money," he says.

The outcomes illustrate the role that market design could play in supporting students, and others with disability, as they navigate the National Disability Insurance Scheme (NDIS).

"The inspirational vision for the NDIS to guarantee funds, tailor services to individuals' needs, and engage non-government suppliers of services has been hindered by the absence of efficient markets for many of the services needed," Mr Stoneham says.

"While markets for most of our goods and services are taken for granted, they are missing or inefficient for many of the services needed to support individuals with disability.

"Problems including thin markets, information, incentive and coordination problems, and in some cases computation complexities have prevented these markets from emerging. We can design markets and other allocation mechanisms to overcome many of these and other impediments."

Daniel Mulino, the federal Member for Fraser, actively supported the NSA pilot during his time as a Member of the Victorian Parliament.

"Markets like this, which harness the confluence of emerging technology and regulation, could drive positive change that reaches every part of society," he said in his maiden speech to parliament in 2019.

These markets represent the next wave of productivity enhancing reform that could benefit the public, private and not-for-profit sectors alike.

Banner: Getty Images