Policy-makers at all levels of government, in an effort to define both "failing schools" and "quality education," are busily enacting policies that require districts to measure student and school performance. One of the most popular measurements being touted is graduation rates. But there is reason to doubt graduation rates accurately reflect either student proficiency or school excellence.

Using graduation rates as a method of holding schools accountable seems to make sense on the surface. As a recent Wall Street Journal article asked, "How good could a school be if half of its students never graduate?" The federal government is now trying to answer that question: Congress recently passed an education bill that uses graduation rates to help determine whether high schools meet performance goals. Policy-makers are enthusiastic because, unlike test scores nationally, graduation rates are well tracked and on the rise. According to a U.S. Department of Education study, high school graduation rates rose to a record high of 86.5 percent last year.

But before anyone gets too excited, we need to recognize that high school graduation rates have little or nothing to do with educational quality. The reality is that schools could have graduation rates of 100 percent and still have students who can't add, subtract, read, or write. A December 2001 Standard & Poor's study compared student achievement on standardized tests against graduation rates in Michigan schools. Eight out of ten students graduated, yet only six out of ten students scored in the "proficient" category on achievement tests.

The shortcomings of using graduation rates as an indicator of adequate student performance show up in the collegiate and work worlds, as well. A September 2000 study by the Mackinac Center for Public Policy revealed that Michigan businesses and institutions of higher learning spend more than $600 million per year to compensate for the lack of basic reading, writing, and arithmetic skills among high school graduates. These are the minimal skills that young people need to be functional participants in society. Yet the fact is that many high school graduates are getting diplomas without mastering these basic skills.

There are ways, however, to make high school graduation a more meaningful measurement of student performance. Rockford Public Schools in Michigan offers a diploma guarantee. The district backs its diplomas with a "money back" warranty. If a student does not demonstrate a certain level of competency, the district provides for remedial education. In this way, Rockford seeks to ensure its graduation rates are representative of true academic achievement.

Unfortunately, few public school districts are willing to guarantee their diplomas, and Rockford will remain an anomaly as long as public schools remain exempt from the incentives and rewards we use and expect in every other area of our market economy.

Basic economics tells us that high-quality products and services are commonplace where choice and competition exist. If schools understand that they must produce quality results to survive, they will be motivated to improve. This motivation is absent in the current monopolistic setup-a setup whose lack of choices and incentives to improve also prevent us from accurately measuring educational quality.

It's true that a measure of choice and competition does exist in some communities in Michigan. But such benefits are strictly limited to families who possess the financial wherewithal to move into the "right" neighborhood or pay tuition at an alternative school. The greater tragedy, however, is that children in poor, urban communities are trapped in a one-size-fits-all system with few opportunities of escape and even less hope for the future.

The key to keeping our promises to the children of Michigan is returning to parents the ability to choose their children's schools among many competing educational options. Until then, graduation rates-and other statistics that flow from state agencies-will continue to conceal underlying failure and deceive too many parents into believing their children are doing well.

Matthew J. Brouillette is president of the Commonwealth Foundation in Harrisburg, Penn., and former director of education policy with the Midland, Mich.-based Mackinac Center for Public Policy, a nonprofit, nonpartisan research and educational institute. Mary F. Gifford is director of leadership development with the Mackinac Center.