In the book, it was referring to lottery based admission to the better schools. The result was that it didn't matter whether the students won the lottery or not. They performed equally well (on whatever generic criteria you use to judge academic performance in hs, most likely state standardized tests). The point being that students who cared enough to want to be in the better school would do well no matter where they were.
IIRC, Freakonomics had a chapter talking about the reduced crime in New York. It's been a few years since I read it, but I think Friedman's conclusion was that the reduction in crime had less to do with the broken windows policy and more to do with the fact that NY tripled their uniformed officers in that timeframe. Uniformed officers walking around an area is one of the largest deterrents of crime anywhere. Some good stuff in that book, anyone who liked this piece would do well to check it out.
Steven Levitt's blog:
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