This book is the culmination of extensive discussion among a panel of economists led by Eric A. Hanushek. The panel argues that improvement of schools depends more on better uses of resources than on the provision of added funds. The book outlines a plan to improve school performance without increasing expenditures. Specifically, it calls for more efficient use of resources, greater performance incentives, and continuous learning and adaptation. Rather than spending more, schools must learn to consider tradeoffs among programs and operations and must evaluate performance and eliminate programs that are not working. Chapter 1 explains the need for budget-neutral school reform and the rationale for the book's recommendations. Chapter 2 examines the economic returns gained from educational investment over time. The third chapter traces the history of public educational expenditure and its relationship to student performance. Economic principles for making decisions about the allocation of economic resources are explained in the fourth chapter. Chapter 5 examines the way that decisions about programs have been made in schools, and it finds that school administrators hinder change in a variety of ways. Two tests to evaluate school programs are described. The sixth chapter focuses on administrative structures designed to create incentives for each school to find and adopt those reforms best suited to its individual situation. Suggestions for assessing and measuring school performance are offered in chapter 7. The concluding chapter offers recommendations for educational improvement, describing what is missing in the current system, the costs of reform, and new roles and responsibilities. A total of 5 tables, 10 figures, and 13 text boxes are included. (Contains 228 references.) (LMI)