This paper applies economic concepts to several school choice issues, identifying various market and public school choice proposals as alternative mechanisms for generating and distributing the economic benefits of education. Private benefits redound directly to those educated or their parents; external, or public, benefits redound to other members of society. The criterion for evaluating choice proposals is their potential to maximize combined private and external benefits. Successful school choice schemes must consider numerous factors that may increase the overall cost of publicly supported education, including costs necessary to: (1) increase parents' ability to take advantage of choice programs; (2) increase schools' diversification or improvement; (3) support the education of privately educated students and expand these students' education program to include public educational benefits; and (4) decrease school size. Finally, a successful school choice program may require significant modifications of the school finance system. General school funds should be distributed according to real school choice cost effects, including those on personnel and overhead. Taxation systems should be modified to ensure that sufficient public benefits of education are provided and that parents and taxpayers have appropriate control over the amount and kind of private benefits delivered. Categorical funding programs' purposes should be clarified to distinguish between programs primarily benefiting the child and those primarily benefiting the school. An executive summary is included. (Contains 27 references.) (MLH)