The ability to do things differently than was done previously must rank as one of the more desirable features of any entity. Individuals and institutions that have the flexibility to change as circumstance change are more successful than others. Those who are confident of themselves can dispassionately examine what about themselves needs change. It takes intelligence to figure out what is wrong and how to fix it. It takes courage to admit that the current system just does not work. It takes optimism and self-confidence to know that one has the ability to do better. Every problem that India faces is amenable to a solution. The first step is knowing that there is a problem, however. Then come the needed attributes of flexibility, courage, optimism, confidence, etc. I will touch upon one small but much needed change. And propose a solution.
He that will not apply new remedies must expect new evils, for time is the greatest innovator.
Sir Francis Bacon made that observation long ago, in 1595 CE. The importance of innovation in how we do things has only increased with time. India needs innovative thinking more than anything else.
I have discussed on this blog at some length the problems of higher education in India. To summarize briefly, the problem is one of scarcity of supply. This is what I call an “engineered scarcity” because it arises from the government control of the system. In free societies with free markets, scarcities are not a chronic feature. Why? Because any scarcity due to say sudden and persistent increase in the demand is met with increased prices which in turn increase supply and the scarcity disappears. For scarcity to persist for decades, the system has to be rigged such that the supply cannot be changed to respond to the demand.
The government of India depends on manufactured scarcity because socialism thrives thus: first create the scarcity through governmental control; then the government doles out the scarce thing to favored groups; the people are brainwashed into thinking that since the government is the source of the supply, it (the government) must be the benevolent entity in the economy; therefore all efforts must be made to keep on the good side of the government so that one is favored with some of the scarce good.
The Indian government controls the supply of education for two reasons. First, it can extract rents from it. Licensing is the mechanism. To get licensed, one has to pay a bribe — often in the hundreds of millions of rupees to officials who have the discretion to refuse the license. Rent seeking is one motivation for the government control. The other reason is related to India’s “democracy” — buying the allegiance of favored vote banks by discriminating for and against specific groups. If you belong to a specific religious group, you get special treatment, and therefore that religious group’s vote is guaranteed.
This is all old hat and I merely repeat it here for setting the context. The main thing is that education in India suffers from engineered (or manufactured, if you please) shortage. This leads to immense social welfare losses. I propose one mechanism to fix one small part of this welfare loss. I say “small” only because it is small relative to the aggregate set of problems, not because it is trivial. This small part actually amounts to billions of dollars worth of welfare losses.
Now on to the specifics. The problem I will address is one of selecting who gets to have the privilege of going to an elite publicly funded elite institution of higher learning such as the IITs.
FACT A: The demand far outstrips the supply. Why? First, because the education is subsidized. So you get more than you pay for. When something is under-priced, naturally more demand will be higher. Second, even if the education were priced at full cost, the life-time benefit of an IIT education far exceeds the full price.
FACT B: Because of fact A, people are willing to pay a high price to get into an IIT. How much would people be rationally willing to pay? Something approaching the difference between the private cost of an IIT education (tuition fees, food, rent) and the private benefit (the discounted net present value of an IIT education.) So if the discounted net present value of an IIT education is Rs 100 lakhs, and the private cost is Rs 16 lakhs (4 lakhs per year for 4 years), then people would be willing to pay upto Rs 84 lakhs.
But of course no one really pays that much to get into an IIT. For one thing, for Rs 84 lakhs, one can go abroad and get a decent undergraduate degree. The point here is that people are willing to spend a large amount of money to just get into an IIT. And they do indeed spend a lot in their attempt to do so. An entire industry exists just for that purpose. The coaching classes industry. The more successful firms in this industry charge more fees than the IITs charge. And people routinely spend more on trying to get into an IIT than they would spend if they ever got into one.
As I have mentioned previously in a post before, the more successful coaching classes, let’s call “1st order”, themselves have to select whom they will admit — which leads to the absurd situation that there are “2nd order” coaching classes — those that coach students to pass the entrance exams of the “1st order” classes. Venkatraman Ramakrishnan mentions this in his interview. But I’ll come to that in a bit.
Cost of Coaching
For now, let’s do the numbers. The figures say that around 300,000 students appear for the Joint Entrance Exam (JEE) for IITs. These days it is not unusual for students to go to coaching classes for a couple of years before attempting the JEE. Assume conservatively Rs 1 lakhs per year as the cost of getting coached. Assume that around 2 out of 3 of those who appear for the JEE have attended coaching classes. That gives us an estimate of Rs 6,000 crores (2 lakhs x 300,000) for the size of the IIT coaching industry. (That’s approximately US$ 1.3 billion.)
That $1.3 billion is incurred every year and what is worse, it is amounts to a huge welfare loss since it is essentially a rent-seeking activity and therefore a dead-weight loss to society. The coaching does improve an individual’s chance of getting into an IIT but its aggregate social effect is nothing at all. It just intensifies the competition. It is an educational arms-race.
An analogy I find illuminating is this: if I stand up on my seat at a stadium to get a better view of the game, some others will also do so. Then in a short while, the entire stadium will be standing up and everyone will be exactly where one was in terms of visibility of the game while sitting down but now everyone ends up paying the price of watching the game standing up.
From the pool of 300,000 aspiring students who appear for the JEE, around 10,000 are selected. That’s one student out of 30. But is it true that the students ranked 10,001 to 50,000 are incapable or unprepared for studying in an IIT? Most likely, they are almost as good as those ranked above them. I am confident that if the capacity exited, 50,000 students could enter the IITs and do as well. We all know of people who failed to get into an IIT and ended up being very successful. Recently I learned that Venkatraman Ramakrishnan did not make the IIT grade but was good enough to win a Nobel prize in Chemistry. (That name once again!)
Changing the Rules
The rules of the game have to be changed. The best option would be to get the Indian government out of the life-blood-sucking control of education it has. But that is going to happen the day hell freezes over. The second best option therefore is to fix this welfare loss of competitive exams and make the whole business of coaching classes irrelevant.
Mr V Ramakrishan, the aforementioned Nobel laureate, says in connection with entrance exams and coaching classes, “Maybe the exams could be re-designed. I don’t know how to do that. But maybe they can be re-designed so the coaching class actually has no use.”
“I have a very cunning plan, my lord,” as Baldrick said to Blackadder.
Instead of an entrance exam, select students for IIT by a random draw. First, allow anyone who wants to, fill out an application form. The bar for qualifying for applying should be set at an appropriate level so that say 50,000 students qualify. (More about that in a bit.) Scan the 50,000 applications using software tools, rank them, and reject the bottom 10,000. Next randomly pick 10,000 from the 40,000 remaining and admit them to the IITs following the usual process.
Now a bit about how to choose the 50,000 students. Figure out how many high schools qualify for being sufficiently good that their top student can benefit from an IIT education. Suppose there are 250 such schools. Divide 50K by 250 to get 20. So the rule says: from the total applications from each qualifying school, choose the top 20 applicants.
The advantage of this is easy to see. First, the students will strive to do well in their schools — not just ignore school and go spend all their time in coaching classes for JEE. (They may still go to coaching for their school subjects — which is not the best but it is still better than cramming for the JEE.) So all these schools benefit and this shifts the competition to the school level from the national level. Second, people may strategically choose to change schools to go to a lower ranked school so that their chances of getting to be in the top 20 increases. This will tend to improve the quality of students in currently low ranked schools.
There are too may reasons why this is a good idea for me to get into. Besides, I refuse to insult the intelligence of the fine readers of this blog by spelling out in detail why this is a brilliant ideal.
Overstressed Kids make Lousy Students
And now for the interview with the famous Mr Venkatraman Ramakrishnan. He’s famous now because he won a Nobel prize. I have seen him on some videos recently. I must say that I like the man. He’s down to earth and not full of himself (unlike a certain Indian Nobel winner who shall go unnamed here). As Venky notes (in an interview I link to below) “India has somehow gone slightly overboard about this Nobel Prize.” That is god’s honest truth. Indians go tend to go overboard with prizes from abroad. Be that as it may, I like the man because he also points to the same bits about the malaise in Indian education system.
Regular readers of this blog know that I keep saying that the problem is that Indian schools are lousier these days than before because now the kids don’t have any time to have fun. They are all the time doing school related stuff. We used to go to school for a few hours a day, do home work once in a while, never go to “tuitions” and run around the neighborhood having fun. We had lots of time to have fun and also a lot of time to understand what was being taught in school. What needs to be taught in schools is not a huge lot. It has to be good and limited in quantity. I am a minimalist when it comes to information being fed to kids. (I have written a lot about this previously on this blog.)
Now a days, kids go to school and then to tuitions and then do homework — from the time they wake up to the time they go to bed. They don’t have time to think and are forced into becoming stupid automatons. Mr VR makes that point in the excerpt I quote from the transcript of his interview with Yadugiri of IISc, published Jan 2010. (Hat tip: Yoganand Saripalli.)
Excerpt from the Interview
The first two pages are about ribosomes and RNA structures — stuff for which VR got that prize, stuff that is boring as all hell to me. So I would skip all that if I were you. Here are the good bits:
Any ideas on how science can be popularized in a country like India?
VR: I don’t know. . . I think, you know, first to have good teachers, obviously. Teaching cannot be the last resort profession, where we fail at everything and become a teacher. If that’s the case then you won’t have good teachers. My teacher was actually very good, and I was very lucky. But it’s not always the case, right? Actually there’s a terrible problem in India, which is, you have these elite institutions that everybody wants to get into and so the schools are teaching to that. But that’s not enough. Now people take entrance exams to get into a coaching school which prepares you for the next entrance exam. Next you’re going to have an entrance exam that prepares you for the entrance exam to get into the coaching school. It’s kind of ridiculous. That mentality is counterproductive. I think, if that were stopped, that alone would actually help focus people’s attention on where it finds interest. Instead, they are interested in exam problem solving. That’s a real waste of time. I mean, these poor kids – they work all day in school, they come home, maybe they have a quick snack, and then they’re off until 9 pm or something to this coaching school, you know. So when do they have time to think about science? I said in an interview that I thought that people should have much less homework, that excess homework kills the imagination. Amartya Sen went a step further. He said we must have no homework. All the work should be done in the school. So when they go home, they’re free to think, to read, to have hobbies, etc. And he said that coaching schools should be abolished. Because, he said, coaching schools also exaggerate the difference between rich children and poor children because they can’t go to coaching school. I never went to a coaching school, and I’m perfectly happy.
Do you think entrance exams need to be done away with?
VR: Well, it’s very hard. Look, if you have a very large country, you have a limited number of seats, and there’s a lot of variation between schools and states, then there’s no alternative to an entrance. I don’t think you can ever avoid it. But coaching classes… I think it’s very hard to legislate against coaching classes, but maybe, if people develop a culture where they sneer at people who go to coaching classes, where parents and educators realize. . . And maybe the questions could be changed so that going to a coaching class won’t really help you. I think the US tries hard in its entrance exams, so that the coaching classes don’t have a huge effect. They do have an effect even in the US, but not as dramatically. Maybe the exams could be re-designed. I don’t know how to do that. But maybe they can be re-designed so the coaching class actually has no use.
Indian Reservations. May 7, 2007. (Note the extremely clever title. As in reservations for natives.)
The most visible of the problems plaguing the education system is that it is “supply-constrained.” In other words, the potential quantity demanded outstrips the capacity of the system to supply. Putting aside for the moment the question of why the supply does not increase to meet the demand, let’s look at the various ways in which the limited supply can be “rationed.” In a free market, price is a rationing mechanism: the price rises sufficiently to equate the quantity demanded and the quantity supplied. There are no shortages. Thus, for instance, there is no “shortage” of diamonds or of Microsoft shares: the price rises to equate supply and demand. (Diamonds are a special case because the supply is monopolistic and limited by the cartel to maintain a certain price level. Microsoft shares, on the other hand, will be bid up if the demand goes up and the price will rise in the stock market till all those who want to hold them have as much as they want.)
There are no shortages in free markets. Shortages arise only when the price is not allowed to rise to what is called the “equilibrium” or “free market” levels for whatever reasons. It is a valid generalization to note that prices are not allowed to rise for a number of reasons, ranging from ignorance of basic economic principles to plain old-fashioned “rent seeking behavior.” Ignorance leads policy makers to believe that by imposing a price-ceiling, a more equitable distribution of resources will be obtained. In fact the opposite occurs as can be seen from the classic case of rent control: the poor are hurt differentially more than the rich. Rent seeking behavior, on the other hand, is not motivated by ignorance; it is motivated by greed and is informed by knowledge of how the system works. Here is the strategy. First, limit the supply. Then impose a price ceiling so that at that price, demand outstrips the supply. Having thus done away with rationing through the price mechanism, rationing is done through non-price mechanisms such as licenses, quota, and permits. These are handed out as favors to particular constituencies as a quid pro quo. This, in short, is the situation in higher education in India.
Imagine No Reservations. May 14, 2006. (Compare to John Lennon’s song. I am so clever.)
The fundamental problem with the Indian economy is that the education system is one of the most flawed systems in the country. If there is one sector which is in dire need of reform, it is that education system. The most urgently required reform is to get the government out of it—lock, stock, and barrel. The recent move by the government to further increase quotas in the so-called elite institutions with a view to social justice is akin to rearranging the deck chairs on the Titanic. No, I take that back: it is akin to scuttling the lifeboats even as the ship is sinking.
I have heard the claim that the Indian education system must be wonderful because the IITs produce so many wonderfully successful NRIs (non-resident Indians), especially in the US. They bolster their argument with the specious reasoning that it is harder to gain admission into IITs than into Ivy league schools, and that Narayana Murthy’s son had to use an Ivy league school as a safety school.
Sure it is harder to get into the IITs than into the top American schools. That does not mean that the IITs are in any way better than those American schools. It is a Herculean task to get into a Mumbai local during commute hours, compared to which using the Paris Metro is a piece of cake. Congestion is not an indicator of quality. When supply is severely limited relative to demand, there will be a mad scramble to get some.
Reservations about Reservations. May 20, 2006. (Heh heh. Another great title, even if I say so myself.)
The supply of higher education is severely limited. The reason for this supply limitation I will go into in a bit. The demand is high. The competition for admission leads to economic waste, for starters. Then there is the even more expensive skewing of the objective of the students: they are often not spending time and resources to understand the subject or because they like it, but because they want to do better in the admissions test than their competitors. Instead of producing thinking, cooperating humans, the system forces too many to focus on a narrow objective and to develop a maniacal zeal to study for a test that is more of a test of narrowly defined skills rather than an overall test of fitness to pursue higher studies. This exercise, I am sure, damages many students’ personalities so that they become anti-social and un-cooperative. They become incapable of group cooperation in solving problems. I have met too many IIT graduates who are perfectly dreadful people to hang out with. They are self-absorbed, narrow-minded, money-grubbing uni-dimensional idiots. I should hasten to add that there are notable exceptions to this characterization, of course.
The issue of reservation in higher education is not really complex. It is rather simple if one thinks about it for a while. Einstein observed that the universe is ultimately comprehensible. Compared to that, the economic system of a nation is child’s play. Although apparently confusing, India’s failures are totally comprehensible if one bothers to look at it with some degree of care. Just investigating thoroughly only one aspect of the economy would reveal the fact that ultimately it is the combined result of a small set of conditions. I will explore to its logical conclusion just one simple fact: why is education in India so supply constrained. It will become apparent that there are systemic problems which can be addressed. Like a good detective story, the plot line is simple. The system is the way it is because it leads to gains for those who are in charge. Once we have considered the facts, the solution will be obvious.