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.

Manufactured Shortage

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.

Related Posts:

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.

In our everyday lives we constantly make trade-offs between fidelity and convenience. Fidelity is the total experience of something. At a rock concert, for instance, it’s not just the quality of the sound—which often isn’t as good as listening to music on a good stereo—but everything else, too, such as the show’s ambience and the bragging rights that come with having seen the band live. Convenience is how easy or hard it is to get what you want. That includes whether it’s readily available, whether it’s easy to do or use, and how much it costs. If something is less expensive, it’s naturally more convenient because it’s easier for more people to get it.

Further on he writes:

Once in a while, a market gets completely out of balance. Forces conspire to prevent either a high-fidelity or high-convenience player from emerging. All the offerings crowd around one end or the other. Eventually, someone nails a disruptive approach. Customers and competitors rush in and the marketplace wonders why that great idea didn’t come sooner.

The higher education market is a lot like that. For centuries the university model dominated because nothing else worked. No technology existed that might deliver an interactive, engaging educational experience without gathering students and teachers in the same physical space. In the past century, a powerful social bias set in: Only accredited universities were allowed to grant degrees, and most professional jobs required an accredited degree. Even though technologies emerged that might foster new models of higher education, the neat accreditation ecosystem locked out innovative competitors.

These days broadband Internet, video games, social networks, and other developments could combine to create an online, inexpensive, super-convenient model for higher education. You wouldn’t get the sights and sounds of a campus, personal contact with professors, or beer-soaked frat parties, but you’d end up with the knowledge you need and the degree to prove it.

I agree with the above viewpoint. The broad picture of economic development reveals that all complex activities, that involve numerous tasks which fall in different domains, tend to get horizontally segmented and the subtasks are performed by specialized firms, thus allowing economies of scale. I have written about the process previously. (See “The Future of Education and Technology — Part 2“. April 2009.)

To recap, consider the task of automobile manufacturing. At the nascent stage of the auto industry, an automobile firm would do everything in-house — basically make a car out of scratch, where scratch stands for “steel, glass, rubber, etc.” As the industry matured, and more cars began having sophisticated subsystems, the tasks were hived off to specialist firms: a few firms made wind shields and supplied to all auto firms; a few firms made the instruments, some made shock absorbers, some mufflers, some even specialized in engines.

The same process can be expected to happen in the education domain. Teaching will be horizontally segmented from testing, certification and evaluation. Some firms will specialize in teaching and some other firms will evaluate how effective the learning has been and to what extent. Companies are really interested in knowing whether an employee can do the job, not whether the employee has attended a specific course or a school. Regardless of how a person came to have a certain skill, the testing agency will certify the competency of the person in that skill.

Horizontal segmentation, as opposed to “vertical integration,” opens up the possibility of innovation and competition ensures that innovation happens. Wherever horizontal segmentation is not prohibited, it naturally happens because it lowers costs through scale economies. Education is in dire need of innovation. Some countries will allow these much needed innovations and they will prosper. Others will continue to languish because their policy makers will not allow change. India needs to think and behave differently — especially in the education sector.

India needs to move from just having a very small number of “high fidelity” schools (such as the IITs, IIMs etc) to having a very large number of “high convenience” schools — where there are no capacity constraints, and where anyone wanting to learn can do so without facing any credit constraints. From all indications, the entrepreneurs are waiting in the wings to bring that change about. They have to be allowed on to the stage.

[Thanks to Raja Sekhar Malapati for the BW link.]

The government on Monday announced that it will introduce grading system in all Central Board of Secondary Education (CBSE) schools and make Class X board exams optional from coming academic year (2010-11).

Union Human Resource Development minister Kapil Sibal, during a press conference in New Delhi, said: “Central Advisory Board of Education (CABE) supports making Class X examination optional in CBSE system.”

I don’t know what it means to make an exam optional and replace it with a “grading system”. The grading system is “an aptitude exam, which schools can use to test Class X students on their level of understanding in each subject.” What’s the distinction and what difference will that distinction make? I suppose a spade is different from a handy gardening tool with a triangular metal blade and a short wooden handle.

I seem to vaguely recall that the class 10th board exam came under scrutiny because it was a major cause of stress to students and their families. Why the stress? Because the results of that exam critically decided where one ended up. Why was it such a make or break deal? Because the demand for further schooling far exceeded the supply and the 10th exam results essentially did the rationing required.

The problem is that those in control of the entire mess (the education system) are apparently totally incapable of coherent thought or analysis. They cannot distinguish between causes and symptoms, and furiously attempt to suppress the symptoms instead of inquiring into the causes and addressing them.

I find it curious that the permanent link to the rediff item ends in “govt-makes-strong-pitch-for-educ-reforms.htm”. See what I mean? It is as if the government is wise and beneficial and is only interested in fixing a bad system which it has had no role in creating. This attitude is not limited to the educational system: the entire structure of the economy suffers from it. The government creates the dysfunctional economy through its mindless control, and then talks loudly of “reforms” and “liberalization”. Then it mostly comes up with more muddled rules and congratulates itself for all the great changes it has made.

Liberalization is a curious concept when it is promoted by those who do the imprisoning of the system. Only extreme schizophrenia mixed with hyper hypocrisy and cognitive dissonance can explain this attitude.

Liberalization if it means anything at all means freeing the system from some harmful control. One cannot proclaim that one stands for freedom while simultaneously making no moves to relinquishing control and only ordering new controls. Take the latest move: the Right to Education. By instituting that right, the government has awarded itself the right to further tax the people and thus have more control over the education system by controlling a massive purse. As Mr Sibal points out, “that Rs 1,50,000 crore would be required for implementing the RTE in the country and it is perceived that there will be a shortfall of Rs.60,000 crore, as it would be a massive exercise.” We already bear an “education cess” on every transaction — now let’s get ready for more.

The Congress has ruled India for about 90 percent of the time since 1947. The Indian educational system we have today was designed by the British to serve their purposes as colonialists. Seen in that context, the system had to be controlled by the British government and the control yielded the results they wanted. The Congress inherited the educational system (just as it did all the other colonial systems) and found no reason to change the colonial control of it. That control serves (note the present continuous form of the verb) the Congress as well as it did the British. Instead of gora sahibs lording over the natives, it was the brown sahibs. But color is only skin deep. Whitewashing the building does not change its structural elements.

Any improvement of the system must start with meaningful reforms. The most meaningful reform has to be that the government relinquish its control of the system. Otherwise it is a lot of busy work that gives the illusion of reform but ends up making a bad system worse.

{Thanks to Sudipta for the link.}

A brief formulation of one set of policies for India’s higher education could include the following components:

• Provide public funding only for those higher education activities such as R&D that have public goods characteristics and which would not be privately funded to the socially optimal degree.

• Remove all public support for those higher education activities the result of which have sufficient private returns to cover the costs. Thus undergraduate education must not be subsidized. Policy must, however, make loans available to qualified students who face credit constraints.

• Ensure equality of opportunity and access to higher education. This means that policy must allow the expansion of the supply of higher education in response to expressed needs and demands of the population. This directly implies, first, that the higher education sector must be liberalized to allow for-profit entities to supply to market demand. And second, that equal opportunity and increased access to secondary education is a precondition for equality of opportunity in higher education.

• The range of disciplines must match the range of skills needed and changing opportunities available in a dynamic economy. This implies that bureaucratic centrally planning of higher education which may have worked in the past cannot respond appropriately and effectively now. A competitive market-liberal system must be allowed to operate instead of central planning.

• Foreign direct investment must be allowed for the sector. Apart from capacity expansion, India would gain from the flow of expertise that accompanies FDI. This capacity expansion would not only stem the flow of Indian students going abroad for higher education at great expense (estimated annually to be of the order of $20 billion), it would be able to transform India into a destination of choice for foreign students.

In summary, capacity expansion in higher education and increasing the production of diverse human capital requires the sector to be liberalized so that private sector can participate in growing the human resources that are needed for economic growth. The increased capacity is needed for providing equality of access and opportunity for the tens of millions of Indians who are capable of being highly educated. Public funding must be directed only to those parts of the higher education sector that would not be funded privately.

Let’s start with today’s Economic Times editorial, A Broken School System, by Neeraj Kaushal. He starts off generously, “For a moment, let us not dismiss Dr Manmohan Singh’s goal to eradicate illiteracy among women in the next five years as just another hollow promise. Let the inactivity of his government in the past five years not influence our judgment.”

Did you know that illiteracy is actually increasing?

In 1991, only 40% of women in India aged seven or above were literate. Ten years later, in 2001, the latest year for which census data are available, the proportion increased to 54% — about a 1.4 percentage point increase per year.

Projecting this growth to the present, perhaps 66% women are literate in 2009.

Makes you feel all warm and fuzzy knowing that the government is in charge of education, doesn’t it? I know that it is possible to make India 100 percent literate and numerate within 3 years. But that would not serve the interests of a government which depends on illiteracy and innumeracy for maintaining its power at the ballot box. Sheer incompetence can explain the failure to achieve expressly stated once in a while but consistently bad performance forces the conclusion that the failure involves malice.

The Sarva Sikhsha Abhiyan, the flagship elementary education programme of the central government, introduced in 2001 to provide education to all children, has been a colossal failure. The 2007 the Comptroller and Auditor General of India report found that 40% of the children aged 6-14 were out of school. The goal of the SSA was to increase enrolment to 100% by 2010.

The article is worth a read because it lists studies that document the government failure in education. However, the author makes an elementary mistake near the end of the piece:

The government school system in India is non-functioning. However, government schools have a big responsibility in providing primary and secondary education to all. In most developing and developed countries, providing free primary and secondary education to all is a government responsibility.

Confusing funding and provisioning of a public service is pretty common. It is well-understood and widely appreciated that the government has a role in funding primary education because of its public good characteristics. However it is also widely appreciated that governments usually are not very good at providing the service. The solution is therefore public funding but private provisioning of the education. What’s needed is the design of the instruments to get this done and an independent regulatory authority that will oversee the entire operation.

The Human Resource Development minister, Mr Kapil Sibal, appears to think that an independent education regulator is a good idea. Today’s livemint.com reports that “India needs a regulatory body for education sector — HRD minister Kapil Sibal said he would try his best to push for FDI in education & the government may soon set up a regulator to oversee this crucial sector.”

A bit from a CNBC-TV18 interview published in livemint.com

CNBC-TV 18: In the context of attacks on Indian students in Australia, does it not throw up the challenge of a supply-demand mismatch? Do you think the time has come to open up the education sector to do away with the political rhetoric and the hypocrisy?

KS: I entirely agree. I think if you are spending $20 billion (Rs94,800 crore) by sending your children out, it’s better to invest that $20 billion in the country. You know, you can transform the entire education sector.

Mr Sibal appears to be somewhat sensible. He says about the coming changes that “at the heart of it would be to open up the entire education sector to greater investment and to allow children to go to the school that they want to, without any concern about where the money is going to come from, because we’ll have to put in place a loan scheme, both in higher education as well as public education. If somebody wants to go to a private school, he should be entitled to go to a private school as long as he gets a loan.”

I have been saying this for a while that that’s what’s needed. Good to hear the talk but let’s see if they walk the talk.

Here’s that bit about the independent regulatory authority from Sibal:

We need to have an independent accrediting agency that accredits at the entry point by giving a provisional certificate, and when the institution is built, by giving a final certificate so that the intake can take place. We need to get the government out of this and give it to an independent regulator. But all of this needs a lot of work and a lot of consensus across the board, and I think once we do that, then anybody should be able to enter.

I’ll give you an example. Except for the Central government or the state governments, nobody can set up a university. And then, you have the whole deemed-to-be-university concept. Why should this happen? Anybody should be able to set up a university and he should be able to compete in a market for the quality of that degree. As long as you put a system in place, it’s very easy to work it out so you’ll get the investment that (will bridge) that Rs2.5 trillion gap if you have the appropriate policies in place.

Great start, Mr Sibal. If you need some ideas, you know where you can reach me. And good luck.

Moving on, again from livemint.com, see a piece titled “A new era in education” which notes that “the government is seriously considering a regulatory overhaul.”

A senior official at HRD told this newspaper that the government will soon abolish both the University Grants Commission (UGC) and the All India Council for Technical Education (AICTE), replacing them with a new independent regulator. To put that in perspective, that’s like doing away with the Reserve Bank of India and installing a new banking regulator. The move may sound too bold to some, but multiple committees have found that this is the best avenue for reform.

The National Knowledge Commission (NKC) has recommended this repeatedly, as has a committee under Yash Pal. With not one but two regulators, supervision is already complicated. And heavy-handed regulation gives universities little autonomy—even introducing a new academic course requires approval.

Add to that the usual bureaucratic corruption and inefficiency, and India is left with incompetent management of perhaps its greatest resource today: its large and young population.

I totally agree what the UGC and the AICTE must be killed without much ado. But I have another suggestion that I suspect won’t sit very comfortably with Mr Sibal, the minister for HRD: Abolish the ministry of human resource development.

Why? Because that ministry has been responsible for education in India and we know how well that turned out.

Moving on, Raman Roy writes in an op-ed in the Wall Street Journal that “We Need An Overhaul in Employee Education“. (Hat tip R S Malapati.) Mr Roy, a pioneer of the Indian outsourcing industry, is chairman and managing director Quatrro.

He says that there are three category of graduates in India. The first come from the elite institutions such as IITs and are employable right out of school and get premium salaries. The second category people are rough cut and have to be given some additional polishing by companies such as Wipro, Infosys and Quattro. They do alright. But the third category:

The third category is what I call “paper graduates. Students are duly awarded a degree and have the paper qualification but in terms of competency and capability, they don’t match up to the qualifications they possess. Bringing them to the point where they could be a revenue-generating resource would not be cost efficient or effective.

It is disappointing to see that only 150 to 200 applicants meet the actual criteria and get recruited when Quatrro advertises and we get 7,500 to 10,000 applications. Technically, a large proportion of the applicants meet the requirements but in terms of competency and capability, they don’t match up.

He outlines some of the things that need to be done.

Another piece from the Wall Street Journal warns “Don’t bet on Education in India.” Harsh Joshi write:

India’s education sector is heating up — to scalding point.

Stocks such as NIIT and Everonn Systems India are soaring on expectations that the newly elected, reform-friendly government will spend on schools and colleges as it promised in the manifesto and maybe relax rules to allow private investment in them.

Oh, the title is misleading. I believe that one can bet on education in India — in fact, make the biggest bet you can. But don’t bet on the stocks of Indian education providers right now because they are overvalued.

Remember that overvalued stocks indicate that the sector has space for new entrants — which is precisely why the existing players’ stocks are rocketing. That also means that the sector is ripe for entrants. (That’s econ 101 — entry in the industry when the firms are making supernormal profits.)

So the lesson is that you the Indian education sector is ripe for innovation and reform. But the government has to let go its hold on it. The license-permit-control-quota Nehruvian raj has to go.

Let’s keep our fingers crossed.

Remember that these politicians are elected by the same population which eventually suffers the consequences of the government control of education.

Here’s a news item which reports that medical post graduate studies involve bribes of up to Rs 2 crores (around $ 400,000.)

The TOI report on MBBS seats sold for between Rs 12 lakh and Rs 40 lakh by two private colleges in Chennai barely exposes the tip of the iceberg. The scam gets bigger, more brazen as medical graduates embark on specializations that are necessary for a successful career. The price this year for a post-graduate seat in radiology in most leading private colleges across the country is Rs 2 crore while in cardiology, gynaecology and orthopaedics are priced around Rs 1.5 crore.

It should be obvious why this sort of thing can happen. It is not quantum mechanics. It is a predictable consequence of what I call “engineered scarcity.” Briefly the problem can be stated as

To address not just this question but a whole family of related questions, I propose a general theory of “Power, Scarcity, and Corruption.” Basically, the three form a nexus, with mutually reinforcing influences. Scarcity in general is not a chronic condition in any functioning economy; it has to be engineered. Given economic freedom, people work their way out of any transient scarcity. For persistent scarcity to exist, it has to be carefully nurtured. The motivation for engineering scarcity is that it allows the consolidation of power. This is Econ101 and even a superficial reading of the chapter on monopolies is sufficient to persuade one that monopolies do restrict quantities to maximize “profits.”

The relationship between power and scarcity is bi-directional. You have to have power to engineer scarcity, and through that engineered scarcity you gain power. Political power allows you to dictate policies that give you monopoly control and then you use that for gaining even more political power. Then of course, where there is scarcity, corruption cannot be far behind. Corruption is therefore a mechanism which allows the collection of rents that arise from the scarcity.

If scarcity were to vanish for some reason, both the corruption and the power to extract rents would disappear. For those in power, therefore, the primary objective is to somehow maintain an artificial scarcity both for maintaining power and for gaining from the corruption.

Now back to our educational system. The government has a monopoly control of the sector through many institutions such as the Ministry of Human Resources and Development, the University Grants Commission, etc. Licenses and other requirements force the private sector from fully and freely participating in providing education. The resulting scarcity gives the government a handy lever for manipulating voting blocks. Quotas and reservations are handed out to favored groups. And more directly, the bureaucrats and politicians extract rents from handing out the licenses and permits to those who have the deepest pockets. ["Power, Scarcity, and Corruption." Sept 2007.]

How does the arithmetic of corruption in education work? I gave an illustrative hypothetical example in May 2007:

Some institution wants to start a medical college somewhere in India. It applies for a license and is told off the record that the price is Rs 20 lakhs (approximately US$ 50,000) per seat. For the 200-seat license applied for the price is Rs 4,000 lakhs, to be delivered in unmarked bills in a large plain brown envelope. That “fee” is routed through the licensing bureaucracy with appropriate payoffs to different people—the lion’s share ending up in the appropriate political hands. After all, securing top positions at the bureaucracy is not cheap; and running elections is a costly business.

The firm having paid the whopping fee to operate a medical college, now has to recover its costs. Perhaps its actual cost of training a medical student is Rs 5 lakhs per year. It adds on a “special college entry fee” of say Rs 10 lakhs (remember to bring in unmarked bills in a plain brown envelope) to the normal tuition fees. The hapless students are forced to pay because seats are limited. The four year medical training which should have cost only Rs 20 lakhs if free entry were allowed into the field now has to pay Rs 30 lakhs, and perhaps gets substandard training. Further down the line, doctors are in short supply and therefore they command some market power and thus are able to recover their costs. The patients suffer but that is why they are patients—they suffer.

Engineering shortages is what the government does very effectively. Engineer scarcity in sufficient number of sectors, and you have engineered a very poor economy. India’s poverty is engineered by the government. There’s really no earthly (or even heavenly reason) for India to be a “third world” country. The decades of governance by the Congress has effectively destroyed India’s potential.

The government has done the most damage to India through its stranglehold on education. By destroying the education system, it has destroyed the capacity among the people to perceive the problem in the first place. It is like the human immunodeficiency virus which causes AIDS: HIV acts by attacking the immune system itself. Similarly, hitting the education system destroys the capacity among the people to ever understand what ails the education system and why.

Here’s an example of the lack of understanding of what’s wrong. The news item linked above ends with this:

Another senior expert, who has held prestigious posts at the national level, says he has urged the UGC to hold centralized examinations like JEE for admissions to both MBBS and PG courses. “It’s a national shame to commercialize education. Besides, death of merit affects the quality of medical education. When money is paid, these colleges ensure that the exit is definite. The students pass, qualified or not,” he said.

I have added the emphasis in the above quote. The “senior expert” does not even realize that it higher education and “commercialization” go together. That commercialization can be legal and in the open (as it is, say, in the US) or it can be part of the underground corrupt system. The latter is an inefficient system that arises out of the government monopoly control of the system. Of course, governments don’t do things without a reason. The reason in this case is that it allows the government to extract rents through bribes. The people in government gain at the expense of the economy.

Related post: Lynching is too good for some.

About 350,000 foreign students study in Australia. India gets 8,000.

Adjusted for population size, relative to Australia, India gets 133 foreign students. That is not a typo. Let me spell it out: it is a hundred and thirty-three, not one hundred and thirty-three thousand. Australia get around three thousand times the number of students per capita compared to India. (India is approximately 60 times Australia’s population.)

How much do Indians spend in studying abroad? Estimates range from a conservative $5 billion to a generous $10 billion per year. That a humongous sum. Why do Indians go abroad to study? Because they are forced to. India does not have the colleges and universities for them. Why? Because the government does not allow free entry into the education system. It’s the Congress party with its Nehruvian licence-quota-permit-control raj. It makes them money. It helps them get votes by restricting supply and then doling out the limited supply to favored vote banks based on religion and caste. They — the people of the Congress party — make money while the country suffers huge losses.

What sort of losses? First, there are the obvious financial losses of the order of billions of dollars. And that too the expense is in foreign exchange. A sh*tload of stuff has to be exported out of India to earn the dollars that go to pay for the education abroad. Then there is the loss of human capital. Many students who study abroad — especially the most competent and talented — end up migrating to the developed countries such as the US and Australia. The estimated loss has to be in the tens of billions of dollars a year. Add to that the personal costs that students have to bear in xenophobic societies that they are forced to live in.

What are the root causes of all these losses? It is government policy. Who made the policy that has reduced India to this horribly dire straits? The party that has ruled India for practically all its existence as an independent country — the Congress party led by the Nehru-Gandhi family.

How can we be sure that it is the policy that is to blame and not some inherent characteristic of Indians that make it impossible for Indians to create and run educational institutions that will serve the needs of the citizens? I don’t know. It appears to me that Indians are fairly average as far as human standards go. They do well when they are given the opportunity. They can become artists and engineers, scientists and philosophers, dancers and carpenters as easily as anyone elsewhere in the world. They do well in practically all spheres of human endeavor anywhere they are in the world — except in India. So there’s something special about being in India that makes Indians end up in the bottom of the barrel.

Let’s get back to education. Do Indians have the money to pay for education? Certainly. See they privately spend billions of dollars in India and abroad to get an education. Even very poor people spend a significant amount on education. A recent study revealed that middle class families spend as much as a third of their household income on education. The demand is undeniably huge. And the supply is also undeniably meager. Just to get into those average (by international standards) engineering schools called the IITs, superhuman effort is required. Families spend years of income and undergo years of stress and worry for the 2 percent chance that the kid will get admission to an IIT.

So the ability and the willingness is there among Indians for education. One side of the market exists without a doubt. The other side of the market, the supply side, would have been there naturally but it is artificially constrained from operating. That is what policy does. That, we must never forget, is the policy that the Congress party has instituted from Nehru onwards to the most recent prime minister of India, Dr Manmohan Singh.

The bottom line is that India lacks a decent education system because the government has seen to it that the education system is as pathetic as it can possibly be. The system guarantees India’s backwardness and makes it pathetically poor but it enriches the people who run the government. The money extracted through the pathetic government-controlled education system ends up in foreign banks, and must account for at least a part of the reported $1.5 trillion stashed away in Swiss and other off-shore banks.

Manmohan Singh is an economist. He of all people should know the value of human resources and therefore education. That he fails in his job despite being an economist is the most blatant indication of his incompetence and general spinelessness. And talking of Manmohan Singh, the next time I read how decent he is, I am going to throw up. The man is as lacking in ethics and morality as the moon lacks oceans and forests. His is a barren landscape littered with sterile craters devoid of any humanity. That’s Dr Manmohan Singh for you.

And the next time I read that he was the architect of any economic reforms, I am going to blow a friggin’ fuse. It was his boss, Mr Narasimha Rao who gave the orders. Dr MM Singh follows orders. His present boss is not so smart as Mr Rao.

Do you know what the unspeakably pathetic specimen of the human species did about the attacks on the Indian students in Australia?

The attacks have been the discussion of talks at the highest levels of government. The Indian Prime Minister Manmohan Singh expressed concern in a phone conversation with the Australian Prime Minister Kevin Rudd late on Friday.

Expressed concern? EXPRESSED CONCERN? How about covering your head in shame, you pathetic loser! I suppose you cannot lose sleep over this matter — losing sleep appears to be the limit of your abilities to do something about something — since that is already done for the families of Islamic terrorists.

But let’s be clear about one thing. Where is the outrage? I am not talking about the outrage on the matter of Australian attacks on Indian students. I am talking about the outrage that the population should feel about the disastrous condition of the education system that the Congress governments have brought about. Should the people not be literally dragging the unspeakable bunch of immoral greedy lousy cretins that rule the country on to the streets and flogging them to an inch of their lives?

Forget the outrage, the people actually go and elect them to run the country.

It’s all karma, neh?

No surprise to me as I have observed the same sort of insanity in the case of the children of friends and family.

Kids are pretty much forced to do school related activities nearly 14 hours of the day. They go to school for classes, and then go to “tuitions,” and then come back to get homework done, and . . . By the time they are done for the day, they have had no free time. They don’t have time ever to just sit and stare. There is no time for self-reflection. They are becoming narrowly focussed and self-absorbed through all the constant doing of required things.

The textbooks are horrors.

I saw the economics textbook of a kid in the 10th grade. He goes to an IB school in Mumbai. It is a fat tome of about 600 pages long and has within its covers every conceivable topic on economics. It is dense with information. If I had to read that book for comprehension, it would be work for me. I only have a PhD in economics and I would find it hard going.

The kid was struggling with “effect of expansionist monetary policy on aggregate demand” or some such nonsense. Dear god in heaven. What the hell was wrong with these idiots who try to teach macro to 14-year olds? I read the relevant pages and I could not make too much sense of it. The kid of course was so out of his depths that he didn’t know even the most basic of concepts, forget “aggregate demand.” I asked him to explain to me what a demand curve was and got a look of helplessness and worry. He tried in vain to recall from memory some definition of a demand curve.

It was a pitiable situation. I explained that I was not looking for a definition. What I wanted was an explanation of what it was. Then I took a few minutes to explain what it was. By starting at the beginning, I said that it’s an observed relationship between this and that. What do we mean when we say that two things are related? It was a series of questions and answers, slowly building up to the concept. It took so little time but at the end he got the concept so thoroughly that you could shake him up from deep sleep and he will be able to explain to you what a demand curve is and not have to struggle for a definition which he could parrot without comprehension.

I felt that all that his economics course and the book had achieved so far was demonstrate to him that the subject was incomprehensible and that he was inadequate. It had turned him off the subject.

Schools are turning the kids into uninteresting and uninterested people. Their learning so shallow that it all evaporates at the slightest disturbance. In all the furious teaching, what is lost is learning.

What’s the way out? I think there’s a need for a “back to the basics movement.” One of the things that needs to be done is to reduce the amount that is force-fed to the kids. It may appear paradoxical but I believe that school curricula have become obscenely obese.

They say that perfection in a work is achieved not when you have nothing more to add to it but rather when you have nothing more to subtract. The irreducible core is what matters. And one needs all the time in the world to understand that core.

There was a time when it was easy to keep the focus of teaching and learning to that irreducible core. We did not have fat tomes with excruciating details on every conceivable topic. Neither we nor the system could afford fat books. We did not have access to a gazillion web pages with dancing doo-daahs on every topic in the known universe. We were not under the constant pressure of learning new stuff every single day. We did not feel overwhelmed by it all. It was really a very relaxed time. Sit in a few classes every day and when school was over, just run around the neighborhood. Maybe do a bit of homework every now and then but not every day.

We could just sit around and not feel that we were not going anywhere. These days they have designed the Alice-in-Wonderland school system where kids have to run as fast as they can just to stay in the same place.

I think I know what the problem is: people with pre-www mindsets have wandered into a www-world and are totally lost. Their pre-www mindset says that you must commit to memory whatever information you have access to; in the www-world, memorizing available information is not only impossible but it is also totally unnecessary.

Technological change is rapid and is accelerating at an accelerating pace. That’s a function which is differentiable at least twice. Humans adapt to change much more gradually. Human institutions are even slower than humans in adapting to change. The education system is perhaps the slowest human institution when it comes to adapting to change.

Information technology has created an ocean where previously there used to be at most a small deep well. The educational system, a heavy concrete structure anchored to the ground, was designed for a world where water was limited and precious and could only be drawn from a small well. That all changed without much warning. Now the ocean of information has drowned that building since it cannot float. What we need are boats, not buildings. Where previously one had to work at drawing water out of the well, now the task is to keep afloat in the ocean and keep the water out of the boat. Take in too much water and you are sunk.

So here’s an opportunity. Forget the submerged huge buildings. You cannot uproot them from the ground, and even if you did, they will be impossible to float. Those who are stuck in the buildings — the people from the ministry of education mainly — are beyond rescue anyway. Instead, build boats that can float on the ocean of information.

Rebuilding education is perhaps the greatest challenge and the greatest opportunity the world has had in a long time. Technology matters of course and it is easy to note that the most important and innovative technology companies are located in the developed world. That’s so because they co-evolved. Since technology will be at the core of the rebuilding of the education system, it is quite likely that the best new education system will also be created in the developed world. But the real need for a new education system is in the developing countries because they have the populations and the demand is huge.

India could be the home of the new education revolution. India passed up an opportunity for becoming a manufacturing giant; China got that one. I just hope and pray that it does not pass up on this one. The large corporations in India could do it but the government of India will not allow that to happen. Why? The Congress government has not allowed Indians to become fully literate. It cannot afford an educated citizenry because it depends on the poor and illiterate to vote for it.

It’s all karma, neh?

Related posts:

1. The World is (Information) Fat. June 2005.

2. The Age of Superfluous Information. Oct 2005.

3. The High-tech Puzzle. July 2007.

4. Infinite Information, Infinite Ignorance. March 2008.

Just as an aside I recall that the US elected George W Bush in 2000. He gave plenty of indications during his first term that he was not good for the US (and by extension for the world.) The American voter disregarded it all, and going against all reason and sanity, voted once again for George W Bush. In the eight years that Bush ruled, he wrecked the US economy. No empire lasts forever and the US’s preeminent position was not guaranteed forever. Bush Jr hastened the day when the US loses its position. The American voter cannot escape responsibility that it, through its mindless support to a criminal (recall invasion of a country and the use of torture) retard (can barely express a coherent thought, leave alone have one), is complicit in the downfall of the US.

Indians have been electing the Congress for decades. India is a third-world country, a country that is listed together with sub-saharan African countries such as Burundi, Uganda, and Burkina Faso. Congress brought that about by following insane economic policies. The tragedy is that even if the party wakes up and realizes that the policies are absolutely mindless and wrong, they still cannot follow other policies — for it would then have to admit that the worthies who made these policies were retards like George W Bush. But those worthies have to be worshiped because the Indian population will vote for any progeny — regardless of any merit — of the worthies.

That is what nails India to a cross: the Indian voter will vote for the Nehru/Gandhi family, and the resulting government can never change any of the disastrous policies that Nehru set in place. India is caught between a rock and a very hard place. India’s future is bleak because good people can never head the government and make rational policy. India suffers ignominy in international forums because India is too poor. India’s poverty is the direct consequence of the insane policies made by the governments of India — and did I mention that practically of of those have involved the Congress?

Sorry for the digression but let me come back to the point that I was making on education. The system is a disaster. Let me put it this way. If you want to know if something is good or is a p o s, just look at the demand for it. If a lot of people go for it, it is good; if the demand is low, it is a p o s.

Let’s consider one measure: number of foreign students in the Indian education system. Why is this measure reasonable? Because foreign students have a choice in which education system to enroll in — unlike the majority of Indian students who cannot just up and leave for a foreign education (because India is a poor country, and that poverty is the result of Congress governments . . . you get the picture). So here’s a number that will not come as a surprise to you if you have been paying attention: About 350,000 foreign students study in Australia. India gets 8,000.

Adjusted for population size, relative to Australia, India gets 133 foreign students. That is not a typo. Let me spell it out: it is a hundred and thirty-three, not one hundred and thirty-three thousand. Australia get around three thousand times the number of students per capita compared to India. (India is approximately 60 times Australia’s population.)

You can do the same for other developed countries. And how is China doing? In 2005, it had around 140,000 foreign students and probably has around 200,000 by now. Compared to India, China attracts 25 times as many students as India does. And you know what’s the worst part? The numbers for India are shrinking.

There is practically no demand for education in India by foreign students. Ergo, it is a p o s. QED.

I got those numbers from Arun Shourie. He gave a Foundation Day Lecture in Sept 2006 to the IIT Kharagpur Alumni Association Delhi. (Hat tip: Akshar Prabhudesai.) You should click over there to read the article but for the record, I am reproducing it here in full.

Just remember: those policies that have prevented the Indian education system from developing (much like the policies that have prevented India from developing) have been brought to you (to paraphrase them programs on PBS) by the generosity of your fine Congress governments, and by voters just like you!

Enjoy! Or should I say, weep for India?

About 8,000 foreign students are studying in India. In Australia, on the other hand, there are about 350,000 — and remember, we add to our numbers every year more than the total population of Australia. Nor is it just that foreign students studying in India are less than a fortieth of those studying in Australia. The number of students who come to India has actually been going down: according to government figures, in 1990/91, there were over 12,765; last year there were 7,745! (By contrast, the increase in 2004 in the number of foreign students studying in China was three times the total number of foreign students that came to India: China hosted 141,087 foreign students in 2005.) We could be educators to the world — just as we could be surgeons to the world. But here is another opportunity missed: while Dubai, Singapore, Australia, to say nothing of distant US, etc. are positioning themselves as education hubs, we remain mired in that bog — the HRD Ministry.

It isn’t just that we are missing an opportunity. We are paying a huge cost every year. One estimate puts the amount that is spent on Indian students studying abroad at a figure that would be sufficient to set up 30-40 IIMs or 15-20 IITs every year. And going abroad to study is just the first step. Having studied in that country, having got familiar with the place and people, most decide to take up work there. Soon enough, they settle down there. Science and Engineering Indicators, 2006, reports that of Indian students who received doctorates in Science and Engineering between 2000 and 2003, close to 90 per cent said they planned to stay on in the US; two-thirds had firmed up “definite plans to stay.” The proportions were the same in one critical discipline after another: 91% and 62% in biological and agricultural sciences; 92% and 72% in mathematics and computer sciences; 90% and 70% in engineering…(Science and Engineering Indicators, 2006, Appendix tables, A2-96 to 100.)

The fault is by no means that of the youngsters. And there is no doubt that those who have stayed on in the US, etc. have also done much for India — they have, among other things, helped change the world’s perception of India, and, thereby, India’s perception of itself. But imagine how much our country would have gained in actual productive potential if we had educational institutions of such quality that these youngsters did not have to go abroad. Imagine how much our country would have gained if they worked here, that is if the work environment here had been such that they had felt confident they could develop to their fullest potential, and reap rewards commensurate with their capabilities and with the effort they put in.

And if we persist in the obscurantist policies and practices that mar our educational sector, this drain will only increase in the coming years. Countries are straining to develop themselves as the more attractive destinations — for students, for investors, for firms. Nor is the matter confined to choice, there is a compulsion too, a compulsion of which these leading countries are well aware and to counter which they are taking focused steps. In regard to the US, for instance, National Science Foundation data reveal that in 2003, 85 per cent of those holding Science and Engineering doctorates and working were above 55 years of age; 76 per cent were above 60 years; 20 per cent were 70 and above. The proportions for those holding Master’s degrees were equally significant: they were 85%, 65%, and 16% respectively. (Science and Engineering Indicators, 2006, Appendix tables, A3-43.) And this is just one among many reasons on account of which these countries will continue to aggressively court researchers and skilled workers from India and elsewhere.

Indeed, the threat now is not just that individuals will be wooed away. Countries — from Singapore to South Korea to Taiwan to China to the EU-25 — are making even greater efforts to woo entire firms away, in particular R&D firms. Singapore, South Korea and Taiwan have already become significant research-hubs. But the suction for entire R&D firms can come from farther a-field too. We think of the US as a high-cost economy, as one that is now compelled to outsource R&D efforts to a country like India. But that is just one side of the picture, and that is true only for one end of research. In 2002, US firms spent around $ 21 billion doing research in foreign countries. As against this, foreign firms spent close to $ 26 billion doing research in the US. (Science and Engineering Indicators, 2006, Volume I, 0-4, 0-5, 18.) And that stands to reason: researchers are less costly in countries like India, but today a great deal of research, and almost all of frontier research, involves such high-technology infrastructure that it is best executed in countries like the US.

Things to do

The first thing to do is to stop counter-positioning primary, universal education against higher education. We need both. We can afford both. Second, we must see both — the threat as well as the opportunity: the threat that we may lose our best minds at an even faster rate than the rate at which we have been losing them in the past decades; on the other side, the opportunity that we can be educators to the world.

Third, to ward off the threat and to tap into the opportunity, we require the same sort of measures. To arrest and reverse the alarming deterioration of standards in most of our institutions of higher learning. To ensure that in regard to both – students as well as faculty – merit, performance here and now, alone counts. To ensure that rewards are strictly commensurate with performance.

And resources. A large proportion of these will have to come from the government – for instance, private entrepreneurs just do not have the long horizons that basic research requires. Equally, government alone will just not have enough resources for this sector. Thus, one service that finance ministers can do is to give the most generous incentives and tax-breaks for industry to invest in education and in R&D. For every trifling misuse, a Manipal will come up.
And the resources have to be defrayed not just on equipment – that is what is done ever so often: and by the time the underpaid, under-motivated faculty learn to exploit the equipment to its full potential, the equipment is obsolete. A good proportion of the resources have to be set apart for making salaries and allowances of faculty and researchers and their work-environment attractive enough for them to forego careers in private industry and to choose instead to be in universities and research institutions.

It is obvious that we cannot do any of this so long as higher education and research is dominated by governmental institutions. China, for instance, has launched an aggressive drive to bring back the very best Chinese faculty who are working in universities in the US, Europe and the like. To attract them back, China is giving them remuneration and allowances and work facilities that are better than what they have in universities where they are working. This is being done irrespective of what existing faculty get in the Chinese establishments in which these returnees will be lodged. Can such a thing be done in a governmental organisation in India – what with its scales and unions; what with the fact that the salary of a professor cannot be higher than that of the vice chancellor, and the salary of a vice chancellor cannot be higher than that of secretary, HRD…? I am, therefore, wholly against the current rush for affiliation, etc. We should encourage institutions to de-affiliate, from existing universities and the like. Colleges and research departments and institutions will come to be known by the work they do, by the standards to which they adhere. Along with this movement to de-affiliate we should develop first-rate, wholly objective and reliable methods to rank institutions.

But the gaps are so vast that mere resources will not do. We need to adopt unconventional methods to scale up this sector. The remarkable success that F C Kohli, one of the fathers of IT in India, has achieved with the “total-immersion” method in making absolutely illiterate persons literate enough to read a newspaper within 8 to 10 weeks; his analysis of “gaps” between the best engineering college in Maharashtra and other colleges in the state, and how these can be bridged by using modern IT and communications technologies – these are the sorts of measures we need to put in place. And, instead of stuffing IITs and IIMs with mediocrities just because they were born to one set of parents than another, we should induce them to multiply faculty, and to upgrade existing faculty in other institutions.

Two prerequisites

But for any of these measures to be executed we need two prerequisites. The first is to outgrow clichés. “Do not make a commodity of education,” our politicians shout every time there is the slightest effort to make educational institutions self-sustaining. “Do not sell ma-Saraswati,” they shout every time there is an effort to induce industry to take up education. All such shouting ensures is that existing scarcities continue, and the existing education-czars rate off the lolly. All it accomplishes is to enable a dental college here, near Delhi itself, to pocket a “donation” of Rs 28 lakh from every entrant…Is the way to deal with the fact that 150,000 students have just applied to the IIM, Ahmedabad, for 250 seats in its two-year course, to force it to take in 27 per cent additional students — that is, sixty two more students — on the basis of birth? Or is it to give incentives to industry to set up 62 institutions of comparable worth?

And then there is the even more urgent task — to reverse the recent trend in regard to the few islands of excellence that remain: the recent trend of interfering in the IITs and IIMs. The recent edicts regarding reservations are just one — though by itself fatal enough — lance of such interference. Appointments of directors; hauling them up before Commissions because some congenitally disgruntled employee keeps writing letters to high-ups; the insistence of a legislative Committee that they switch to Hindi as the medium of instruction…There is an all-round assault to breach their autonomy.

To ward off such senselessness, three things are required. First, do not temporise: do not think that the way to meet the assault is to concede a bit – those concessions will not assuage the grabbers; on the contrary, they will become the reasons for the political and bureaucratic class to grab all: “See, the director himself is saying that they are ready to abide by our order – all he is asking is that he be given a little time to do so…” Second, as those who are working in these institutions are in a sense under the thumb of government — and I have been struck dumb by fear to which faculty themselves testify in open meetings — outsiders, in particular the alumni of these institutions, have an important duty: they must constitute themselves as firewalls around these institutions.

But the assault on such institutions is but an instance of the general assault on excellence in India today: from legislatures to civil service to educational establishments, mediocrity is being asserted as norm, vulgarity as right, intimidation as argument, assault as proof. Two classes today stand in counter-position to this assault on standards – entrepreneurs and the professional middle class. Accordingly, the pan-Indian organisations of professionals should get together to contain, roll-back and eventually eliminate this assault.

One of the many important point he makes is that the current school system kills creativity. In a more recent talk, he goes into how the current school paradigm needs change. That topic is of enduring interest of this blog. So below the fold, you will find the video (hat tip, Nihar G.)

Once again, Sir Ken Robinson is entertaining while instructing. He cracked me up with his ” . . . as if we were refugees from Riverdance . . .” (around the 11:50 mark.) It’s a nearly an hour long video but I think it is worth watching, if for nothing else but to learn how to keep the audience engaged by interspersing serious bits with lighthearted irony. The English are masters of irony and understatement.

The serious point he makes — and which I too have been saying for a while — is that the system is broken and needs to be radically changed, not just patched up because it needs foundational change. Fortunately for India, most of India’s children are not even in the broken legacy system, and therefore a new system would not have the difficult task of extracting them from the old to fit them into the new. These children could (to use the hackneyed expression) leapfrog the broken system and get a decent education.

Post Script: I neglected to point out that in this talk, he observes that imagination is the one faculty that sets us apart from other creatures on earth. I could not agree more. It brought to mind J K Rowling’s speech which I had posted about last year June in the blog post “On Failure and Imagination

Given a time machine or a Time Turner, I would tell my 21-year-old self that personal happiness lies in knowing that life is not a check-list of acquisition or achievement. Your qualifications, your CV, are not your life, though you will meet many people of my age and older who confuse the two. Life is difficult, and complicated, and beyond anyone’s total control, and the humility to know that will enable you to survive its vicissitudes.

You might think that I chose my second theme, the importance of imagination, because of the part it played in rebuilding my life, but that is not wholly so. Though I will defend the value of bedtime stories to my last gasp, I have learned to value imagination in a much broader sense. Imagination is not only the uniquely human capacity to envision that which is not, and therefore the fount of all invention and innovation. In its arguably most transformative and revelatory capacity, it is the power that enables us to empathise with humans whose experiences we have never shared.”

If you think about it, most if not all failures, are the result of failures of imagination. Failure of a society to develop (economically or otherwise) is a failure of imagination. You can make it big only if you think big and make no little plans.

In the following I will argue that the system is ripe for another of those disruptive events that will push the system from its current state to a qualitatively different higher state. As this is a personal view, my argument boils down to a lot of hand waving and no data. I will also introduce an analogy to explicate the changing role of the level of skills required in the production of education. I will use the manufacturing system — specifically automobile manufacture — as an analog.

Since education involves the transmission of information between sender and receiver, technologies related to information and communication have always mattered. First there was the oral tradition — the teacher had the knowledge, which was communicated orally to the student. The student heard the spoken word (that’s information) and internalized it into knowledge in his head. The information transfer had to be real-time. Then came the first breakthrough: the written word. That disruptive change made it possible for an absent teacher to communicate knowledge. Instead of real-time synchronous transmission of information, writing made it possible for asynchronous learning and also preserving information outside the human brain.

But that first change required the learning of a skill: how to read and write. The teacher had to know how to write and the student how to read, at a minimum. That was “skill-biased technological” change. Those who had the required writing and reading skills were better off in the education process relative to those who didn’t. Investment in the skill of reading and writing had positive returns.

The invention of movable type and the printing press was the next disruptive change. Previous to that, only a few had access to the limited number of book manuscripts. The press made it possible to mass produce books. The printing press was a labor-saving invention but it was physical capital intensive and also required specialized skills to produce and operate presses. The press enters the education production function “multiplicatively,” not additively.

This feature of technology entering multiplicatively in the production function is a general feature of technology. This is worth noting because errors arise from neglecting this fact.

The features listed above — skill-bias, physical capital intensive technology, and technology as a multiplicative factor — is also characteristic of the latest technological change in education: the world wide web and the internet. Great physical and human capital is needed for inventing, implementing and using the web and the internet than what was required for the printing press technology.

*

I will get back to the latest disruptive technology and education. But for now, a digression to the automobile sector. Automobiles were first hand crafted. It required very highly skilled manpower to make them. Then with the advent of the assembly line, and mass-produced interchangeable, standardized components, the degree of skill required to make an automobile decreased. Mind you, the design of the components required engineering skills far greater than that required for the hand-crafted period of automobile production. Also the production of machines that manufactured the components themselves required greater skills and more investment in physical capital.

The major change occurred in the demand for skilled labor shifted from the actual manufacture — which now could be done with much less skilled labor on the shop floor — to the design of machines and the design of the components the machines produced, which was done by highly technically trained human capital. In other words, the demand for “white collar” workers increased, and with increased production volume, the demand for “blue collar” workers also went up.

Then with further development of technology — especially robotics and numerically controlled machines — even the blue collar workers became increasingly redundant. A few very highly skilled workers produced the machines which were computer controlled, and these machines made the components and assembled the cars. This was a skill-biased technical change.

*

So now I am set to draw a few parallels, with more to come later. Both in the production of education and in the production of automobiles, the relative demand for skilled and unskilled workers has fluctuated. In the first period, for the automobiles, the demand for skilled labor was high, then it declined relative to the unskilled labor demand, and then finally once again the demand for extremely highly skilled labor overwhelms the demand for relatively unskilled labor.

Similarly, the demand for skilled labor in the process of education was high. The live teacher was a must before the first disruptive innovation of writing. With writing, and later books, the process of education could happen asynchronously and it became possible for the first time for the process of education to occur without a teacher at all: one could read books and internalize the information. But the skill demand at the production end of the process went up because the writing of excellent books required great skills. Using these books, relatively unskilled people could be involved in the education process. They could do a little bit of personalized hand-holding when required.

A few very highly skilled people was all that it takes to produce a small set of great books. Then you need a large number of “brown collar” workers to be teachers who with the aid of these books help students learn. So the demand for skilled teachers saw a relative decline. And now we come full circle: the demand for very highly skilled people is going to be on the upswing and the brown-collar worker (the teacher in the school) is going to decline dramatically.

*

When cars were handcrafted by skilled workmen, only the very rich could afford them. It was a low-level equilibrium: high costs, therefore high prices, which meant low quantity demanded, leading to low quantity supplied. Assembly line mass production made cars affordable for the masses. The substitution of physical capital for human capital in the manufacture of cars was what increased the volume of production and reduced costs. That was a high-level equilibrium: low costs, therefore low prices, which meant high quantity demanded, leading to high quantity supplied.

The printing press and books made education affordable similarly. High fixed costs notwithstanding, the low cost of duplication brought down the variable costs sufficiently that average costs declined dramatically. More people could afford the low-priced education and thus the high quantity supplied.

That trajectory continues to accelerate rapidly now. The fixed costs are going up but the marginal costs of duplication is approaching zero asymptotically. The high quantity supplied in response to the high demand ensures that the average cost is low and the market clears at a very low price.

*
In summary, there have been two related shifts. First, the shift from low fixed and relatively high variable costs to high fixed costs and relatively low variable costs. This expanded the quantity demand and supplied and the market cleared at a low price. Mass education became possible. Second, the shift in demand for skilled labor from the direct production of education (the skilled teacher) to the production of indirect goods (the books) which are used by relatively unskilled teacher to produce the final good (the educated person.)

There is another aspect of automobile manufacture that has an analog in the education process. In the automobile world, it is the move towards horizontal segmentation and away from vertical integration. In the next post in the series, I will explore that and see what it means in the education process.

Last evening, I was talking to a sibling’s son. Here’s how the conversation went.
**
Me: So which grade do you go to?

Sibling’s son: I will be going to class 12 after this summer vacation.

M: Which school?

SS: I go to college.

M: What’s it called?

SS: RYK.

M: What does that stand for?

SS: Don’t know.

(One of the parental units added that the “K” probably stands for Kirloskar or something.)

M: So you don’t even know what the expansion of “RYK” is? Did it ever cross you mind to find out?

SS: No.

M: So what are the fees?

SS: Six thousand rupees.

M: Is that per day, per week, per month, per year, or what?

SS: Per year. And two thousand for IT.

M: So you pay about eight thousand a year as tuition?

SS: No, I go for tuition as well. I don’t go to college at all. Nobody goes to classes. We all go to tuition and only during exam time do we go and appear for the exams at the college.

(Parental unit: They don’t even take attendance at the college. We just pay the fees and that is that.)

M: How much do your “tuitions” cost?

SS: About 12 thousand for maths, for physics and chemistry about 30 thousand.

M: Is that per month or per year or what?

SS: Per year.

M: So what is it that you learn at “tuitions” that you cannot get in the college you pay tuition fees to?

SS: I don’t know.

M: I suppose you have heard of these things called “books.” Did you know that you can actually learn stuff by reading the books?

SS: < silence >

M: I hope you realize that no amount of paying money for “tuitions” is going to magically make you understand the subject. What you need to do is to put in effort. If money were the essential ingredient in the process of learning something — and not effort — clearly the rich would all be learned without having to lift a finger.

SS: < more silence >
**
Thus ended the short conversation. I told the parental units that the problem is that they are basically making their son stupid by giving him the false impression that learning has something to do with paying a lot of money to “tuition.” What is being missed in the whole exercise is the main lesson: that you have to read stuff to understand stuff. No one else can read it on your behalf.

They complained about their son to me. This is most bizarre that they are complaining about their son to me. He’s not my responsibility. They are responsible for creating the problem in the first place. They said that he refuses to sit with his books until his demands are met. His demands? Yes, he demands this particular cell phone and that particular sneakers. Cell phone? He demands cell phones? Yes, because all his friends have the latest models and their parents buy them stuff and so he must have them as well. Otherwise he refuses to study. And so the Rs 15K phone and the Rs 3.5K sneakers. And then does he study? No. He listens to music on this cell phone — which he is forced to do because the parents refused to get him an iPod. And he plays the guitar.

And what if you don’t give in to his demands, I asked. Then the boy threatens to leave home. Which he has done a few times already.

So basically, I told the parents, you have rewarded his unreasonable behavior with goodies and thus reinforced the behavior. The kid now knows that all he has to do is threaten to leave home and he will get his way.

This case is not the only case I know of lately. The details are somewhat different but the script is essentially the same. Another of my siblings had a similar story. And a friend in Mumbai told me the same story about their son. They send the kid to Dhirubhai Ambani school at an eye-popping cost of Rs 6,00,000 a year. Then they have to engage tutors for the kid’s “tuition.” And then the parents have to beg, plead and cajole the boy to study for a bit instead of being on his cell phone or on the web surfing for god alone knows what.

It may appear as if the kids are screwing up. I don’t think the kids are the problem. It’s the adults who are primarily to blame. And the retarded system of “education.” It needs change. Too bad that the change will happen too late to help the present kids.

It’s all karma, neh?

[Continue on to part 2 of "The future of Education and Technology."]

This month’s Pragati is about “What the new government should do in its first 100 days.” I have a piece in there about the structural changes required in education. What else is new, you’d ask. Below the fold are the editorial comments for the issue. Please read and distribute.

India goes to the polls in a few weeks’ time. A new government will be in place in a couple of months.

The ‘honeymoon’ period of the first hundred days offers a new government the opportunity to implement important reforms that might otherwise face the greatest resistance. Of course, follow-through is important, but setting the momentum early is crucial. Most importantly, the honeymoon comes but once in a government’s life: so it is important to have a plan of action to make the most of it. Plan ahead, as they say, to avoid disappointment. This issue outlines a honeymoon agenda for the new government in three vital areas: economic reforms, national security and education.

Some of you are involved in preparing policy agendas for political parties. A few of you are even contesting the elections. We hope reading this issue will help you make a difference.

Our proposals are ambitious. How can they not be? But we are also realistic about how much a government can accomplish. Our recommendations, at the least, will allow readers to see how far the actual performance falls below our benchmarks.

This leads us to the other theme in this issue: the importance of voting. At an individual level you will make a difference when you vote. Don’t wait for the perfect candidate to come along—please vote for the best of the existing lot, and encourage your friends to do so. The articles in our perspective section make the case for voting as the necessary condition to effect change.

In addition to the other regular features, we present the results of our reader survey in this month’s issue: we had asked you if you’d subscribe to a print edition of Pragati. Two-thirds of the respondents said “Yes”, but those who said “No” gave some good reasons. Your feedback was extremely useful: we’re acting on it. More on this later.

[Download PDF of Pragati April 2009]

Quick, what’s the source of America’s greatness?

Is it a tradition of market-friendly capitalism? The diligence of its people? The cornucopia of natural resources? Great presidents?

No, a fair amount of evidence suggests that the crucial factor is our school system — which, for most of our history, was the best in the world but has foundered over the last few decades.

As I wrote in 2001, “The most devastating impact of our dismal educational system is that we are condemning ourselves to a future of exceedingly low economic development. If there is one thing that growth and developmental economists have learnt, it is this: education is the most important factor in economic growth. Education has more impact on economic growth than natural resources, foreign investment, exports, imports, whatever. Neglect education and you may as well hang yourself and save yourself the pain of a slow miserable death.” [Link.]

Do the movers and shakers of the Indian state understand that fundamental point? Apparently not because precious little is being done about it. Instead of sending silly probes to the moon, the nation should be dedicated to figuring out what to do about the education system. Anyway, barely educated people cannot be reasonably expected to fully comprehend the value of education.

If you were to read the archives on education on this blog, you will find a lot of proposed solutions. All of the solutions start with getting the government out of the system.

Here’s a recent article in the Wall Street Journal, “India’s Colleges Battle a Thicket of Red Tape” (link thanks to A Sarda.):

Loosening the Indian government’s famously bureaucratic “License Raj” when it comes to governing businesses has helped spur an economic surge that has transformed the country and its standing in the world. In contrast, critics say India’s educational system remains mired in red tape that stifles expansion and innovation.

The system falls far short of meeting the demand among young people for places in good colleges and universities. And it deprives India of the ranks of well-educated graduates it needs to supply crucial industries such as information technology and pharmaceuticals.

Sad really. Here’s more

“Nothing has gotten in the way of educational improvement and expansion here in India more than the government’s own regulators,” says Anil Harish, chairman of the Hyderabad (Sind) National Collegiate Board, a nonprofit organization in Mumbai that governs the Kundnani pharmacy college and 16 others.

Too Few Good Schools

Very few of India’s higher-education institutions were ranked in the top 500 world-wide in Shanghai University’s 2008 annual ranking.

India 2
China 30
Brazil 6
Japan 31
U.S. 159
Source: Center for World-Class Universities, Shanghai Jiao Tong University

The National Knowledge Commission, an advisory committee appointed by the prime minister, is proposing to set up a new independent regulatory authority, invest more government funding in higher education and build 50 national universities.

“There is a quiet crisis in higher education in India that runs deep,” said Sam Pitroda, chairman of commission, in a report. “The system as a whole is overregulated.”

India’s national and state governments are pouring billions of dollars into expanding higher education. The Indian government, which funds about a third of India’s public higher-education costs (states pay the rest), plans a ninefold increase in spending to $17 billion over the next five years, according to a plan unveiled in 2007.

But reducing the bureaucratic burden on the sector won’t be easy. Any change in the powers of the All India Council for Technical Education requires a vote of Parliament, whose members can derive influence by pressuring educational institutions to admit children of supporters, several officials of colleges and college boards say.

“Education is a vote-getting patronage item,” says Ajit Rangnekar, deputy dean of the Indian Business School. That school, launched in 2001 with the support of India’s business elite, isn’t under the purview of the Council for Technical Education.

ISB is a shining example of how the private sector can fix the problem. But it won’t be allowed to because with a good education system, it will mean the politicians who depend on an illiterate and poor population will not be electable.

India is being raped by criminals who are dressed up as politicians. It makes a body weep bitter tears.

Related link: A series on the Indian Education System.

It’s coming up to that time of the year again when a very large group of completely self-absorbed people with very inflated egos gather to congratulate themselves on how astonishingly amazing they are and how they are the almighty’s gift to humanity, if not the entire creation.

The PanIIT 2008 site declares: “IIT Alumni 2008 Global Conference is being held at IIT Madras, from 19th to 21st December. With 3000 alumni participants from around the globe, a galaxy of eminent speakers, and selected sponsors who are leaders in their industry, the 2008 Global Conference will be the most impressive ever. The focus this year is to inspire IITians to innovate and transform India.” [Emphasis added.]

The Bright and the Beautiful

Really very impressive. Especially the globe and galaxy bits, and the eminent speakers. Shilpa Shetty and Hema Malini are eminent speakers. Not impressed, are you? Well, then consider this. Not only will Prof Amartya Sen be there, but the “Nobel Laureate has rescheduled his busy schedule to make time for us”.

Now are you impressed? Do you have any idea what it means when a NL flies in to attend even though it means major disruption of his other engagements? What on earth could be more important than the annual PanIIT circus?

Now that I am done with expressing my disgust with the organization and its c-j antics, it is time to move on to more substantial and important matters. It has to do with gratitude, credit constraints, education, fairness, development, and India.

As the above graphic from the PanIIT ad shows, around 300,000 have passed through “7 hallowed portals” (don’t you just love the hyperbole?) in 52 years and have gone on to grant their benevolence in 100 nations. Very impressive. What the ad fails to mention is that every one of those 300,000 has been the receiver of a major transfer of resources from an extremely materially poor society.

The Unfair Deal

The full cost of a decent 4-year technical education today is around Rs 20 lakhs (or around US$ 45,000.) That’s a conservative estimate. So in today’s nominal rupees, the full cost of educating 300,000 engineers is Rs 6,000,000 lakhs (or US$ 13.5 billion.) The IITs do charge some fees but those fees have been a small fraction of the true cost of education. It is reasonable to peg the total subsidy to be of the order of the estimated Rs 6 million lakhs. The objective of this exercise is to get a feel for the total transfer of resources from the general public to reasonably well-to-do upper segment of society.

That subsidy is a pure transfer or a grant, not a loan. The beneficiary is not required to return, either directly or indirectly, the money spent. There’s only an expectation that the return will be indirect. Moreover, not everyone has an equal chance of getting the subsidy. To get into an IIT, you have to have an excellent school education, for otherwise you fail in the intense competition for admission. Therefore you must be from a family with means much above average. Therefore the subsidy is targeted at the already fortunate.

It is also important to explicitly state that the opportunity cost of the spending is the foregone opportunity to use the same resources for the education of the segment of the population which is too poor to even afford basic education. It can be argued that primary education is more of a public good than tertiary education. We will not go into that here as I have argued that case elsewhere on this blog. For now I will merely note that the spending on higher education when the lower levels are not adequately funded is regressive and harmful in the long run.

It is reasonable to argue that the public spending on elite technical education does have some positive returns on investment. The graduates of IITs have made a name for themselves in India and abroad. It is a respected “brand” and India gains in the reflected glory of those IITians who have made billions such as Vinod Khosla, Desh Deshpande, and others. Without the subsidy, many of these worthies would not have been as successful.

The counter-argument is also very simple. The benefits of any spending have to be considered not in isolation but relative to those conjectural benefits that would have accrued from alternative uses of the resources. What would have been the benefit of subsidizing three million technicians instead who would have gone on to become highly productive factory employees? Or subsidizing 30 million fully literate and numerate people whose 100 million descendants would also have been literate as a consequence?

There are reasonable arguments on both sides of the issue of subsidizing tertiary education. At one extreme is the pure neglect of tertiary education, and on the other, the pure neglect of primary and secondary education. I believe that it is possible to take the middle-wayed way that avoids the extremes. I propose a model of tertiary education which preserves the benefits of the subsidized system without having its obvious flaw of it being regressive. But before that, I will quickly take a detour and explore what it means to be poor and what the phrase “credit constrained” means. It is important for us to understand the model I propose.

The Poor and Credit Constraints

One way of defining a poor person is to say that the person does not have money (or other equivalents of money.) That is a natural definition but it is surprisingly not quite accurate. I define a poor person as one who is “credit constrained.” I could have no money at all and yet be not poor provided that I have the ability to borrow and be able to repay the loan at a later date. Note the three conditions necessary and sufficient to be really poor: (1) having no money, (2) inability to borrow, (3) inability to repay the required loan.

By my definition, a person can have a negative net worth and still not be poor. You can think up of examples of people who for some reason lost all their money and were in fact in deep debt. But they had the ability to borrow more and use the resources to rebuild their businesses and thus repay the loans and get out of debt. The moment that a person is unable to borrow — that is, the person faces a credit constraint — is the moment that you can term a person as poor.

Just a side note. The US is not poor not merely because it has a lot of accumulated capital (people, infrastructure, etc.) but also because it can borrow from the rest of the world and does borrow around US$ 700 billion a year currently. The US does not face a credit constraint, unlike many developing countries.

Back to the main argument. Person C with no money but the ability to borrow is clearly better off than person D with no money and facing a credit-constraint. Now consider person B, who has no money, has the ability to borrow, and has the ability to repay the loan at a later date. Finally, consider person A, who has no money, has the ability to borrow, but right now does not have the ability to repay the loan. However, person A can by using the loan appropriately become capable of returning the loan.

The Returns on Education

It is easy to see where I am going with this. It makes a lot of sense to lend money to A types provided the loans are made specifically to build their capacity to repay. I will use my personal example as a typical case. Being born in a middle-class family, I had the advantage of a good school education. That allowed me to compete and get a subsidized engineering education up to the postgraduate level. I could not have paid the full cost of my engineering and computer science education. But — and here’s the main point — after receiving the education, my earning capacity increased sufficiently that I became capable of repaying the education subsidy I benefited from.

Note a very important fact. The returns on education in a well-designed (appropriately defined) system is always positive. That is, the benefits are higher than the costs. If your productivity (and therefore, your lifetime income) does not go up by at least the total cost of the education, it does not make sense to acquire that education. This is an important argument against not doing full-cost pricing of all education. I will not go into this right now but will write a separate note. (That’s a true promise.)

My Address to the IITians

What holds true for me — that I can repay the subsidy that I received for my tertiary education — holds true for every one of the 300,000 IIT graduates. So here’s my short speech that I composed for delivery at the PanIIT 2008 conference:

Dear Fellow IITians:

A good morning to you and how are you all?

I see that you are all having a wonderful time. Isn’t Shilpa Shetty quite a bomb? I tell you, the stuff of dreams. Aren’t we just great? We must be. Otherwise why would such a stellar personality — a phoren star — come to strut her stuff here? Aside from the money we paid her, of course.

Not just good looking people, we are so important that India’s only living Nobel Laureate, Prof Amartya Sen, has changed his schedule just to fly in and deliver his usual spiel about inclusive growth. Wow! We’re the best. The cat’s whiskers, the loin’s (sic) roar, the cheery on top of the sundae, the crème de la crème. Isn’t that precious!

But I got some bad news for you, sunshine. We have all fed at the trough of public largesse. We’ve sucked at the teat of involuntary public generosity. We, the select, the few — our fancy education was funded by denying a very large number of the really poor the opportunity to even get a basic education.

So my precious sweeties, don’t you think that it is time that you actually paid the full cost of your education now that you can? Should we not today, now, here, at this very convention — and a very nice convention it is — decide that every one of the fortunate 300,000 should contribute at least the full amount spent on us for a fund which will do for others what was done for us?

Let me make the promise of paying Rs 20 lakhs today into this fund — the IIT Graduates’ Gift of Gratitude Fund (IITGGGF) — to be used for the future generations of IITians. I don’t have that cash lying around in my checking account but I am sure that I can get a bank loan today and pay back that amount I owe.

In other words, put up or shut up, my preciouses.

Thanks and may you all have a wonderful time congratulating each other on how wonderful you all are.

Just Kidding

Now you know that the above is just a joke. I will never be invited to speak at the PanIIT 2008 in a million years. I attended the 2006 event in Mumbai and wrote about it. It did not go down too well with the organizers. They would like me to speak over there about as much as they would like a huge hole in their cranial cavity.

But seriously, what I propose should make sense to the meanest of intelligences. The IITians are mean but not unintelligent. OK, I take that back. Not all IITians are mean. Only some of them are self-absorbed and delusional.

The Proposal

This should have been done a long time ago. It could have been done but then of all sad words of pen or tongue, the saddest of all are “it might have been,” as the man said. They who made the rules were simply not smart enough, and it had to wait till I articulated it (he said modestly.)

Imagine this. Someone has demonstrated preparedness and aptitude for elite tertiary education. The full cost is Rs 20 lakhs. The person does not have the money. Give him a loan for the full cost of the 4-year education, with the understanding that the payback period start four years after graduation and last for four years. The payback will include the principal and the interest. (We neglect inflation in this exercise for now as it does not alter the basic argument.)

This means that the first payback occurs eight years after the loan is issued. So there has to be sufficient resources to give loans to the entire batch of students for the first eight years of the existence of the educational institution. The money required for Year 9 will be the money paid back by those who attended in Year 1.

Let’s do the arithmetic. Take, IITI. That is, IIT Imaginary. It teaches 1,000 students. Cost per year, Rs 5 lakhs per student. For eight years, total cost (8 x 5 x 1000=) Rs 40,000 lakhs. That’s the total investment required. From then on, each batch will receive a loan from the amount of the loan repaid from the batch eight years previous to it. The IITI is totally self-supporting.

If this scheme had been followed, the total money required to initiate the loan process for the 7 IITs would have been around Rs 200,000 lakhs. Compare that to the Rs 6,000,000 lakhs spent so far. In other words, the same resources would have made possible not 7 but 200 IITs. It would have meant that India would have been graduating 200,000 IIT graduates each year. The mind boggles, doesn’t it?

Not Too Late

It is never too late to do the right thing. Let’s assume that there are 200,000 living IITians today. Let each of them chip in Rs 10 lakhs in partial repayment of the cost of their IIT education. That would net Rs 2,000,000 lakhs (or US$ 4.5 billion). That’s a lot of money in the aggregate but is not an unreasonable amount for the average employed IITian. Remember, they are not credit constrained. They can take a loan, if needed.

With that money, you could pay for the educational loans of 400,000 student-years (at Rs 5 lakhs per student per year.) In other words, you could give educational loans to 50,000 students a year and do so for eight years. From Year 9 onwards, the loans recovered from the old students will keep the system going indefinitely.

In other words, you could fund the operational expenses for 50 new IITs (each of them with 1,000 students). What about the startup costs of infrastructure? That could be part of the public expenditure and could even be funded by high net worth individuals and institutions.

If we got started today with this scheme, one can imagine that the 50 new IITs can start operating in 2010, and from 2018 onwards, it would be totally self-financing, and graduating 50,000 graduates a year from year 2014 onwards.

India’s immense and young population can become its greatest asset provided that we can figure out a way of educating its population. India does need to have a large number of highly qualified engineers and technologists. It can be done provided there is political will and the smarts to properly allocate resources using good policies.

What I have outlined above is a very simple scheme. It appeals to the sense of fairness which we all have. IITians, despite their claims to the contrary, are not special either. They are neither better nor worse than the average. However, they have been more fortunate than the average Indian. It is time for them to think deeply about what it is that they owe to others. And it is important that they do a bit of collective introspection and ask what it is that they can do aside from the airy slogans of “Inspire, Innovate and Transform.”

That’s all.

Previous related posts:

1. Over three years ago I had a post on a new educational model. It is an “inter-generational transfer” model. I liked re-reading that post and the follow up to it.

The article “Who Actually Paid for My Education” is also quite popular.

2. IIT: Inspire, Involve and Transform –Part 1.

3. IIT: Inspire, Involve and Transform — Part 2.

4. PanIIT’s Reach 4 India.

Jonathan Drori: Why we don’t understand as much as we think we do. (Filmed Feb 2007)

[Thanks to Manish Dharod for the links.}

For a while I have been convinced that it is better to separate teaching from testing and evaluation. See this post “De-linking Teaching and Testing” (Feb 2005) where I wrote:

It is my contention that in the information age, the time has come when schools should de-link instruction from testing, and should concentrate only on instruction and leave the testing to institutions that are specialized in testing.

There are many examples of testing institutions. One familiar example is the “Educational Testing Services” (ETS) in the US which administers, among others, the GRE and TOEFL exams around the world.

For quite a while I have been advocating a new way of educating people. I propose a new system which is learner-centric in the sense that anyone who is interested in learning a subject can do so at his or her pace at whichever institution suits the needs of the learner. The student has the freedom to continue until he or she achieves the desired proficiency in the subject. An important component of this method would be the availability of a testing and certification agency. The WSJ article explores the idea in the context of the US college system. It has implications for India as well.

That the world has changed radically in just this generation is nowhere more evident than in matters that have something to do with information and communications technology. The evidence is all around us — including this fact that I am writing this on a laptop somewhere in India and anyone with a connected computer anywhere in the world can read it. It is hard to overestimate the profound changes. Perhaps because the changes are so overwhelming that we consider them normal and so unremarkable. However, understanding the consequences of that change is going to be important in how successful we are in meeting the evolving challenges and indeed making the most of it. Here I will argue that education — the process and its objectives — has to change dramatically in this new world.

Optimum, not maximum

From a specific viewpoint, the new world is one in which information is cheap. In fact, one can plausibly argue that as time goes on, the price of information will go from positive to zero and eventually to negative. How can something that is an economic good have a price that is negative? Only economic “bads” — such as pollution — have negative price; economic goods have a positive price. I submit that information, beyond a certain threshold, ceases to be an economic good and its price becomes negative: the point at which people will pay to have less of something rather than more.

The general principle is that there are optimal quantities for any good. Beyond an optimum quantity, a thing becomes less than useless; it becomes positively harmful. There is such a thing as having too many cooks, and the broth getting spoiled. Having too much of a good thing, way beyond the point of satiation, is a bad thing. The optimum could be a fairly wide range, somewhere between the extremes of drought and flood. The maximum available is not necessarily the optimum. Depending on the need, the optimal usually is much lower than the maximal.

Let’s talk specifically about information. Some fun facts.

Large Stock

First, the total amount of information available today is huge. Information accumulates and unlike material things, it is a public good in the sense that it is non-rival in consumption. The stock is growing even faster compared to before because the flow is accelerating as more people are producing information. The creation, storage, transportation, and accessing of information is aided by the ever more powerful information technology tools. Anyone with the most fleeting acquaintance with the world wide web is well aware that his or her optimum information needs lie far below that which is accessible with just a browser and connected computer.

Search Problem

The stock of accessible information is of course very very large but with respect to any individual, it is virtually infinite. This poses a difficult problem, namely, how to identify the best (appropriately defined) information from the accessible stock. The larger the stock, the harder it is to find the best (or even the really good.) It is a search problem, and the problem will continue to grow as the stock grows. It sounds impressive to know that google has indexed umpteen billion pages and responded to your search request with six million odd pages in less than 0.2 seconds. But one rarely ventures beyond the first couple of pages of results. One manages with those pages even though it is possible that somewhere in the six million pages resides the best answer. The results are filtered for relevance and importance but software can only do so much.

Two penguins

So there were these two penguins just hanging out on an iceberg. (Where else would they hang out, anyway?) One of them turns to the other and says, “Hey, you look as if you are wearing a tuxedo.” The other one replies, “How do you know that I am not wearing one?”

That is apropos nothing. I just got bored of writing this and thought it would be nice to insert a joke. As it happens, it is one of my favorite jokes. Now back to our regular programming.

Free and good

The amazing thing is that much of the information we find on the accessible web is free. Why is it free and is it any good? More importantly, is it really free to you? The truth is that you cannot really ever acquire information for free. It may be given away for free (like this blog post) but you have to spend time reading it for you to “have it” in any meaningful way.

Is it indeed true that even if you don’t reward an author financially, that the author is not getting paid anything? The reward may be entirely psychic: the satisfaction that one derives from creating something that one values and perhaps that others value. There are indirect rewards in the creation of a work undertaken for the sheer pleasure of it.

But is the work any good? Can someone who is not directly being paid to produce something actually produce something good? I think so. Work for hire can be really good because the paymaster may demand quality. Nevertheless, work created for the heck of it can actually be higher quality because the reward is intrinsic in the work and the better the quality, the higher the reward.

Still, intrinsically motivated work could be the work of rank amateurs and amateurs naturally outnumber professionals. My belief is that when the number of amateurs increases sufficiently, the top of end of the quality of their work compares very favorably with the best efforts of the professionals.

Professionally filtered

Do professionals also give away their work for free in some instances? Yes, indeed. Researchers spend enormous effort and then give it for free to journals (and most journals charge authors a fee to examine the submitted piece.) The journals then turn around and charge and an arm and a leg for journal subscriptions. What’s going on over there? Nothing is given away for free — the researchers get fame and therefore fortune when they get jobs based on publications; the journals are expensive because they add value by bringing to the readers high quality papers. They add value by filtering.

All this has relevance to the future of educational content, as I intend to argue below.

Educational content

For around a couple of decades, people have been creating educational digital content. Certainly much, if not most, of this is professionally produced in the sense that the authors are paid for it, just as they were before the digital age. But there is a certain amount of non-professionally produced digital educational content. By that I do not mean that the authors are not professionals in their fields but that they are not paid for producing it and they do so out of their own interest.

There is a parallel in publishing. Before the digital age, published authors were (except for a bit of vanity publishing) people who were paid for their work and the work was published only by publishers who had the resources to bring the work to market. The business model was easy to understand: readers paid publishers, publishers paid authors. With the advent of desktop publishing on the internet, anyone could be a publisher and millions did — on blogs, for example.

The more the merrier

They (like yours truly) publish because they are intrinsically motivated to express themselves without having to mess around with a publisher. Of course, not everyone can be good. But out of the horde of millions of authors, the very top end of these amateur writers is really very good. So you have the interesting phenomenon of very high quality work being done at considerable personal cost but given away entirely free. Not just given away, authors actively promote their wares. The more takers there are for a certain piece, the more it motivates the author to produce higher quality.

Creative Commons licenses

The market works. Whereas in the pre-digital age, authors used to jealously guard their work from being distributed without payment, now authors are pleased to see their work being widely available to others. Moreover, some authors even don’t mind derivatives of their work. The market soon enough produced the appropriate licensing mechanism: a family of creative commons licenses which anyone can use (for free, naturally.) {See the license under which I publish this blog.}

Good free educational content

For years I have been noticing the growing pile of great free educational content on the web. Produced by amateurs, the quality leaves me envious and depressed. How I wish I had access to this or that particular piece when I was learning stuff from rather mediocre (or even bad) educational content. If only, lord if only, I had learnt using the absolutely amazing piece, I would have been much smarter.[1] I envy the kids who have the potential to learn stuff really well and without so many tears.

When I learnt stuff, I just had some plain old text with some pictures and graphics thrown in. Today you have text, audio, video, graphics, and other bells and whistles. There are technologies which allow you to interact with the content.

A small sample

In school I read about galaxies and deep space only in a book. Now you have access to Hubble’s Deepest View of the Universe Unveils Bewildering Galaxies across Billions of Years: you can see photographs, videos and get links to related matters.

Want to learn about optics? Try out this optics simulator. I just did. I added a lens in the blank simulator window, then adjusted the focal length of the lens, then added a mirror and adjusted its focal length, and then added a beam to the left of the lens and voila! The result is below.

Want to build an atom? Do it here. Here’s what boron schematically looks like:

And while there, learn that a proton is huge compared to an electron. How huge? See this image. The text reads:

This web page shows the scale of a hydrogen atom. The diameter of a hydrogen atom is roughtly 100,000 times larger than a proton. Therefore, if we make a proton the size of the picture above, 1000 pixels across, then the electron orbiting this proton is located 50,000,000 pixels to the right (but could be found anywhere in the sphere around the proton at that distance). Your monitor displays 72 dots per inch (dpi), so you would need a monitor that is nearly 11 miles (17.5 km) wide to view the whole page! Go ahead and grab the scrollbar at the bottom of the page to get a feel for exactly how far away that is!

Note: For illustrative purposes, this is a simplification of the subatomic particles. Standard quantum electrodynamics (QED) treats the electron as a point particle and through experiments has placed the diameter to be more than 1,000,000 times smaller than the one depicted above.

You can spend a lot of time learning stuff on the web. Want to figure out the speed of light using a bar of chocolate and a microwave oven (and a few other basic bits of knowledge)? Try this out in your kitchen.

Try this 3-body flash animation.

There are nearly a hundred physics flash animations where that came from. The categories are:

* Chaos
* Classical Mechanics
* Electricity and Magnetism
* Fluid Mechanics
* Micrometer Caliper
* Miscellaneous
* Nuclear
* Optics
* Oscilloscope
* Quantum Mechanics
* Relativity
* Sound Waves
* Vectors
* Waves

Entropy is simple

I have collected hundreds of bits of educational content over the years. Today I saw a free introduction to economics book on the web. (Hat tip: Rajesh) I thought it was nice but not really a style that I liked. That’s another point: there’s so much free stuff out there that you are bound to find something that strikes your fancy. Some years ago I found an excellent physics book: Motion Mountain — the free physics text book. (It’s a 50 MB pdf download, and 1,366 pages!)

That web page introduces the book with:

How do objects and images move? How can animals move? What is motion?

How does a rainbow form?
Is levitation possible?
Do time machines exist?
What does ‘quantum’ mean?
What is the maximum force value found in nature?
Is ‘empty space’ really empty?
Is the universe a set?
Which problems in physics are still unsolved?

It’s free! And it says, “Motion Mountain is downloaded over 30 000 times a year. It aims to be among the best introductory physics texts available. Do you have an idea for improving it? Add it to the suggestion wiki! For a valuable suggestion, I will add you to the sponsor and acknowledgment list, or send you a reward.”

I have spent days reading that book and marveling at the sheer quality of the work. I will end this bit with just one more example.

Entropy is not a simple idea. But if you go here, you will learn entropy simply. Who wrote that? As the page says, “A chemistry professor with experience in teaching thermodynamics to non-science majors, not just chemistry students.”

Did you know

. . . that according to the first Annual State of Education Report (ASER) report, nearly half the children in standard V in the worst performing Indian states could not read at standard II level and that nearly two-thirds could not do simple division?

End of aside. Back to the main text.

A million authors now

So what’s happening here? What’s happening is that you are getting lots of stuff produced by gazillions of people. And some of that stuff is so excellent that it makes your head spin. So the problem is not that there is not sufficient good stuff. The problem is that it is a very hard search problem to identify the bits that are best suited for one’s needs.

What are the implications? First of all, it is rather pointless for any institution to create educational content because it is prohibitively expensive to match the quality of the content that already exists out there and which has been created by self-motivated authors. Sure this-or-that foundation is spending a couple of million dollars creating content — but to really compete, they would need not millions but billions. It is a fool’s errand to try to do so. It cannot be done and it is a waste of time.

Why? I call it the “poet” problem. You could employ a bunch of people to write technical manuals but you can never hire a bunch of people and expect them to turn out great poetry. Great poetry comes out of people who want to write poems, not just because you pay them to write poetry. Also, one does not know before hand who will write great poetry. It just happens that out of a large outpouring of poetry from a very large bunch of people, some great poetry is found.

So also, the best content is not going to be created by some institution (although they may contribute some bits that go into the best content category.) The best content is going to be the aggregation of small bits of work from a lot of self-directed authors that we will come to find out about only after they have done the work and made it available on the web.

The second implication is that if you solve the problem of identifying the best content, you have something that will be useful for millions of others because the solution itself is an information good and therefore can be shared endlessly. The cost of doing the search and identify could therefore be distributed over a large set of users, thus reducing the average cost arbitrarily.

Filter will be king

The third implication is related to institutions. In the future, institutions which filter content will evolve. They will not actually produce any content nor will they give you a billion pieces of information. Their job would be to deliver a very restricted subset of the available content, filtered to suit your need. Like the publisher of research journals, they will add value to something that they essentially obtain for free but charge you for doing the filtering job.

Core Education

Education will have to change, as I mentioned before. The current system is anachronistic. Relying on this system for education is like using Roman numerals to do arithmetic. You could do some simple arithmetic with some difficulty using Roman numerals but it is rather pointless to do so when you have the alternative of using the decimal positional number system easily and manage to do a great deal more.

In the past, you had to know facts; now you have all the facts (and more) at your fingertips. What you need to know now is how to use the facts. What education has to do is to teach the skill of learning how to learn. That is the larger goal. But fundamental to all learning are a few basic skills: literacy and numeracy, to name just a couple. These can be learnt easily enough by anyone given a little bit of instruction and a bit of effort.

Core education does not require humongous amounts of content. Depending upon how one defines the core, I estimate that much less than a gigabyte of content is sufficient. What has to be added to that content is the one thing that is the most precious of all resources: time.

It is much better to give a little amount of coherent and good content to a student and allow him a great deal of time to internalize the lesson, rather than to give a huge amount of content and only a little bit of time. I despair that today students are inundated with content and have so much of their time taken away by teaching that they have very little time left over for learning.

A Solid Foundation

I don’t want to dwell too much on the faults of the current system. For now I will just note that the current system does a particularly bad job of building a solid foundation of understanding. The average student, I have discovered, has fundamental gaps in his grasp of the basics. (Aside: I hate having to write “his or her”. At the risk of sounding sexist, I will just use “he” and “his”.) He knows that he does not fully understand something but is forced to move on by the system. He lacks confidence in his understanding of the subject and having lost his grip on it, is forever slipping. This has to stop.

It is possible to comprehensively teach the basics to anyone who is not a certifiable moron. Once the basics have been learnt, anyone can continue to build upon it as preferences and motivation dictates.[2]

The future

So what would the schools of the future be like? First of all, I believe that they will be quite different from today’s schools. Instead of “one size fits all” types, they will be places which offer personalized schooling. The technology affords that possibility. Recall that once upon a time, in the age of industrialization, you could have any color of Ford Model-T as long as it was black. We have moved on from those days. Even IBM with their mainframes and their vertically integrated offerings are history. Today we have Dell. You can go to Dell and personalize your laptop, just like you can pick different attributes of your car at the GM website and have a made-to-order car delivered to your car dealer.

There is no reason why instruction cannot be personalized similarly. The technology exists and the only thing that is stopping the transition is the imagination of the bureaucrats that control the education system.

But all hope is not lost. Market forces will force the change.

I am sure that on the horizon are looming firms that will promise a new education paradigm. These firms, due to competitive pressures, will transform education in ways that are easy to contemplate. They will make it more efficient (less number of hours, months, years spent in learning the skills) and relevant (the skills that matter in the long run).

Of course, in the period of transition such as we are currently in, some firms will try to shoe-horn technology into the current system. Their successes in doing so are going to be limited, however. Technology can help mask some of the obvious shortcomings of the current system but only temporarily. The larger transformation will soon enough make obsolete the patched-up older system.

It’s a different world

The education system is anachronistic for a number of reasons. We live in an age of plenty, not of scarcity, with regards to information. The system was designed for scarcity and naturally performs miserably in conditions of abundance. See how unfit modern humans are to live in a world where calories are abundant, whereas their evolutionary history was predominantly in environments where calories were scarce. Obesity and related diseases are killing them just because their bodies have hard-coded in them the tendency to hoard calories.

Information obesity will be as debilitating. Our education system is still predicated on a condition of information scarcity. It will predictably lead to coronary diseases of the brain. (Not sure that that is what I mean.)

We also live in an age where the dominant system is not one of command and control but of free markets and competition. The education system was designed to serve the needs of a centralized command and control order. Socialism and centralized planning is a decided failure. Their colossal wrecks are impressive sights to behold. India suffered (and how) from Nehruvian socialist planning in industry. Only recently are there some hopeful glimmers of liberation in Indian industry. Yet the same old socialist control of education persists. It is certain that it too will be relegated to the dustbin of history. The major concern is how long do we have to suffer this and how many hundreds of millions of humans will have to be sacrificed to Nehruvian socialism before rationality prevails.

I hope for the sake of the future of India, and its hundreds of millions of school-going age population, that we wake up soon.

NOTES:

1. The mind boggles, doesn’t it? I know it is a frightening thought since as it is I am a quite a bit of a pain.

2. I speak from experience. I am not the sharpest knife in the drawer but fortunately I had been able to get a solid basic education. That allowed me to move from engineering in the undergraduate level to an entire different field of study at the post graduate level, namely, computer science, and then from there to yet another field (economics) at the doctoral level. If I can do it, I am certain that anyone can do it.

UC Berkeley, my alma mater, I regret to say shows up behind Harvard, and — horror of all horrors — behind a junior university which shall not be named here. The only consolation for me is that the university that my nemesis attended — Cornell — shows up way down the list at rank 12.

It is a matter of some pride and considerable astonishment that two Indian universities make the list of the top 500: IISc and IIT-Kgp figure in the 303-401 space. I say astonishment because I am constantly amazed that given that the Indian government has done all it can to destroy education in India, even in this ranking by a Chinese university, two Indian universities are mentioned. But I am sure that given what the government is doing to cripple the IITs, they will be also-rans in the rankings race soon enough. After that, I suppose the government can set its sight on the IISc and kill it in short order.

India’s position in the emerging world of globally interconnected economies will doubtlessly be dictated by how successful it is in overcoming the severe limitation of its education system.

With an estimated 360 million of its citizens in the school-going age—a third of its entire population—it has an unmatched potential of becoming a major economic powerhouse. It has an opportunity to shape not only its own future but the future of the world at large. The challenges it faces in realizing that potential are many but the most formidable of them are those that are in a sense “self-inflicted.” The greatest hurdle in India’s path to the future is the near-monopoly government control of the education system.

The Numbers

A quick review of the numbers illuminates the challenges and opportunities. Of the total 360 million who should be in the K-12 system, around 140 million children are not in school. Not just a private loss—they will never have the opportunity to participate fully in the global economy—it is a loss to society because they will never be able to fully contribute to it.

Yet the spending for education is large. The Indian government has allocated around US$ 8.6 billion for FY2009 for education; private spending annually on K-12 tuition is an additional US$ 20 billion; tutoring adds another US$ 5 billion a year; private professional education is another US$ 7 billion. The education sector is expected to grow to around US$ 70 billion by 2012. Compare that to the US$ 45 billion spending for power, telecom, and transportation infrastructure in the 11th Plan.

Failed Public System

Regulations allow only non-profit trusts to run educational institutions. The results are disappointing and point to a failed public education system. The private sector schools do deliver much more than the public sector schools and do so comparatively more efficiently. Private schools account for only 7 percent of around 1 million K-12 schools and yet they accommodate 40 percent of the total enrolled. Studies show that public sector schools are plagued by teacher absenteeism, lack of basic infrastructure, and poor performance. India urgently needs to remedy the shortage of quality private schools.

The situation in tertiary education is not very good either. Published figures show India graduates 350,000 engineers and IT professionals a year, compared to China’s 600,000, and the United States’ 130,000. The quantity appears reasonable until one recalls that only about one out of four engineers is employable. This creates the paradoxical situation of vast numbers unemployed engineers on the one hand, and on the other employers desperately seeking skilled engineers.

Compared to China

Comparison with another comparably large developing country—namely China—is instructive. By 2005, China was graduating around 12,000 PhDs a year, about seven times what is did in 1995; India maintained an average of 700 PhDs every year during the same period.

The education system is supply-constrained. Around 400,000 compete in the IIT-Joint Entrance Examination for 10,000 seats in the few Indian Institutes of Technology, for instance. Another 240,000 took the common admissions test for the Indian Institutes of Management. On aggregate, over 2 million students take entrance tests for seats in the 1,200 private and 400 public professional schools. Test preparation is a huge market but ultimately the spending is directly unproductive and only serves as a means of rationing the limited quantity on supply relative to demand.

Foreign Education

Unable to find the opportunity domestically, Indians spend an estimated US$ 10 billion every year for higher education abroad. This lends support to the claim that if the education sector were to be liberalized—that is, if for-profit domestic and foreign private sector entities were allowed entry—then the capacity constraint will be released. Furthermore, market competition would ensure that the quality of the education would also improve.

The private sector is essentially denied the opportunity to fully participate in the education sector. Resistance against commercialization of education is held with what approaches religious conviction. Profit from education is anathema to Indian policymakers. The Supreme Court of India in a 1993 decision wrote:

“Imparting of education has never been treated as a trade or business in this country since time immemorial. It has been treated as a religious duty. It has been treated as a charitable activity. But never as a trade or business. . . The Unni Krishnan Decision does not imply that private schools cannot exist but states that they should not ‘commercialise education’ and impart education with the motivation to profit from it.”

The Market Response

But the market does find a way around and somehow manages to overcome to some degree the serious defects of the hobbled education system. However it is a costly exercise. Infosys spent US$ 120 million for a training facility employing 300 teachers to train its raw recruits; Wipro trains its recruits for three months before putting them to work; Satyam trains thousands in-house similarly. Therein lies a very clear and important lesson: that for-profit entities can and do promote social welfare in the education sector—they train people to become productive, thus enhancing private and social welfare.

Education as an Attractor

The argument for liberalizing the education system is simple enough to state. Globalization, which is essentially the free movement of capital in pursuit of profits, is an established fact. It means that global capital will continue to move differentially to those parts of the world where it most profitably complements the human capital available. Even though motivated by profit, global capital has the capacity to contribute directly to rapid economic growth, as evidenced by the growth stories of the East Asian economies in the past and of China more recently.

Only those economies that have the human capital to absorb global capital will benefit from globalization. Modern manufacturing is the basis for any large modern economy. It requires skilled manpower and therefore the emphasis on education and training. Currently India does have a small but significant position in the skilled services sector of business process outsourcing and information technology enabled services. But the news there is that shortage of skilled manpower is becoming a reality.

Diversifying the Economic Base

India needs to diversify its talent pool because economic development demands the ability to produce a diverse set of goods and services. Furthermore, for India’s economic growth, it has to serve as a global talent pool for all aspects of a modern economy—from services to manufacturing to research and development. Otherwise the unskilled and poorly educate will find themselves unemployed in the structural changes that are guaranteed in a globalized world. Most importantly, for driving domestic innovation, at the higher end of the education spectrum, one not only has to have quantity but world-class quality which can only be achieved if one has world-class institutions.

Manufacturing Human Capital

India has the raw numbers but lacks the financial resources to transform them into human capital in world-class educational institutions. Fortunately, global capital itself can help India build capacity for creating human capital. The argument for it is straightforward. Return on investment in education is positive and significant in the case of individuals. Therefore, given the ability to pay for it and the opportunity to gain an education, most people would educate themselves to their full potential. Therefore there are immense profits in education in India that global capital cannot afford to ignore.

The Indian government has to withdraw fully from tertiary education. The private sector has the incentive and the ability to provide tertiary education. Private sector investment will release the capacity constraint in education. For those who are unable to pay for the education upfront, they face what is called a credit-constraint, and they can be helped with educational loans from private and public sector financial institutions.

For K-12, the private sector already does address 40 percent of the market. By removing the restriction that only allows non-profit institutions, the capacity will grow and thus permit the scarce public funds to address the needs of the 140 million children not in school currently. The role of the government could then shift from funding schools to funding school children.

Paradigm Shift

What Indian education urgently requires is a paradigm shift, a different way of approaching the matter. The ostensible reason for not allowing private for-profit institution is to safeguard the interests of those who are poor. But one can be skeptical of that and a reasonable hypothesis advanced that through its monopolistic control, the government and its agents find an opportunity to extract rents from the supply-constrained market. This creates a system in which only the rich can afford to pay the rents and the poor get rationed out.

India cannot afford the current education system any more. Too many of its children are denied an education today. Globalization is a double-edged sword: it rewards talent as handsomely as it penalizes those who are unskilled. It is quite possible for India to employ global capital to solve its local problems—provided that it understands that voluntary trade is beneficial to both parties and both profit from it. Undoubtedly global capital will profit from investing in education in India. But that is only because India will profit even more from an educated population.

The two broadest generalizations one arrives at from a study of economics are that markets work and that incentives matter. People respond to incentives because that is at the core of what it means to be rational. To the extent that humans are rational, their behavior is predictably in the direction that existing incentives point to. Trade between humans is rational because both parties in any voluntary trade benefit. The abstract mechanism which enables trade is called the market. Markets work in the sense that they maximize the gains from trade among an arbitrary number of entities. There are other methods of enforcing trade among people, such as the command and control mechanism often employed by communist governments. But they are at a distinct disadvantage relative to the market because the latter is based on the premise that rational actors respond to incentives.

An Example

An illustration of markets working and incentives propelling action is contained in a recent paper by Vivek Wadhwa of Duke University, et al, provocatively titled “How the disciple became the guru“. Based on the paper, Wadhwa wrote a couple of pieces in the popular press, published on 23rd July: the BusinessWeek article is “What the US can learn from Indian R&D“, and the Wall Street Journal one is “India’s Workforce Revolution“.

The authors note that in the past 15 years or so, Indian IT companies have developed competencies by learning how to compensate for poor infrastructure. Now Indian companies, not just in IT but also in global R&D, are doing well and are compensating for another major deficiency in India: India’s education system. In the popular press articles (both are essentially the same), Wadhwa reports that Indian companies are, in essence, educating their employees in-house. Workforce training is being used by Indian companies to correct for the failure of Indian high-schools and colleges in providing properly skilled graduates.

Wadhwa’s Lessons

Wadhwa, writing from an US point of view, draws lessons from the success of Indian firms despite being severely handicapped by the quality of the Indian education system and concludes his BusinessWeek piece with:

The achievements of companies in India show that employee investment, development, and empowerment are central and critical means to building and sustaining long-term competitiveness and innovative capacities in a global knowledge economy. The U.S. can learn and incorporate these lessons from India as it rethinks how to train and develop its workforce to maintain its global competitive edge. U.S. companies have long played the guru. Perhaps the time has come for the guru to learn from a disciple.

Wadhwa concludes his WSJ piece with:

The result of this workforce productivity is clear to see. In the aerospace industry, Indian companies are designing the interiors of luxury jets, in-flight entertainment systems, and collision-control and navigation systems for American and European corporations. In pharmaceuticals, Indian scientists are discovering drugs and performing clinical research for nearly all of the largest multinational drug companies. In the automotive industry, Indian engineers are helping to design bodies, dashboards, and power trains for Detroit vehicle manufacturers — and soon may develop entirely outsourced passenger cars.

The Indian experience highlights what can be achieved by investing in upgrading workforce skills. That lesson has implications for policy makers in the U.S. who worry about how the economy will adapt to globalization. If workforce training can take the output of an education system as weak as India’s and turn its graduates into world-class engineers and scientists, imagine what could be done with an American worker base that has received amongst the best education in the world.

Lessons for us

There are larger lessons we can take away from the paper and the associated reports. The first and the most obvious one is that incentives matter. The firms have an incentive — profit — to create the human resources that they need. It is profitable for them to invest in the training of people and do so cost effectively and efficiently. The training they do has to pass the market test of the benefits exceeding the costs. The corollary to it is that in their drive to seek profits, they are increasing the human capital of the society and therefore are contributing directly to economic development and growth. The corporations are obviously promoting the social good even though that is not their aim. Adam Smith’s invisible hand very much in evidence there.

The second lesson is that markets find a way around. The educational system is under a command and control regime and produces not surprisingly very faulty products. Yet the market given sufficient time figures out a way of recovering from the error the government system leads to.

The third lesson is that the private sector has the ability and the incentive to intervene positively in education. If allowed to, it can not only employ people but it can make them employable. This limited demonstration has a wider implication. Right now, only at the high end of the employment spectrum are firms engaged in creating the human resources they need. But there is only so much demand for high-tech research and development as in aerospace, pharma, automotive design, etc. There is a much larger untouched potential for employment in more mundane sectors of the economy.

Not everyone can be trained to do high-tech work. An economy not only needs a wide spread of abilities and skills, any large population has people with a matching wide range of abilities and who have to be trained appropriately. There’s a need for plumbers, mechanics, carpenters, other skilled craftspeople, and as there is a need for scientists, doctors, engineers, and teachers. Just as in the high-tech sectors firms where training is demand driven, in the other sectors as well one can reasonably expect firms will do their respective training provided that these skills are required in the organized sector.

That last clause — skills required in the organized sector — is important. The organized sector of the Indian economy is estimated to employ only around seven percent of the labor force. The overwhelming majority of the labor force in the unorganized sector is most likely not skilled and is probably poorly educated. Consequently their productivity is low. As the organized sector expands to include more activities within its sphere (retailing is a good example), it too will require trained employees. Here one can foresee the private sector once again stepping in to fill the required gap in the education sector.

As the spread of skills required widens, the private sector will widen the areas in which they do their own private training. The expansion of the organized sector, a natural consequence of market forces, will force a change in the human capital resource base.

Policy Implications

For me, the implications are simple and strong. First, liberalization of the education system. The private sector is quite capable of providing tertiary education. Tertiary education has very high private returns and therefore the market can be expected to provide it. Here’s how it works in short. Take an engineering degree, for example. The cost of the degree has to be less than the net present value of the future stream of earnings. If it were not so, then it is clearly not privately beneficial (nor socially beneficial) to gain the degree. Therefore if one desires and has the ability to gain an engineering degree, one should be able to pay for it as well, unless there is a credit constraint. If there is a credit constraint, then once again the private sector can step in and provide the loan.

What about secondary education? The middle class (and above) is quite motivated to educate its children, and also has the ability to pay for secondary education. Only the poor need financial assistance for secondary education. This can be publicly funded as the returns to secondary education are significantly social.

And what about primary education? The returns to primary education are mostly social and the return on investment is long term. Therefore, primary education has to be entirely publicly funded for the poor; the non-poor can and do pay for primary education.

If the government withdraws from funding tertiary education entirely, it will have funds for the public funding of primary and secondary education for those who require it. Here I would stress one thing: I am talking about government funding, not government provisioning. Providing the education should still be in the private sector. (See the post “How to make India 100 percent literate in three years” for more on this.)

Second policy implication is that there should be greater range of educational institutions. After secondary school, one should have the option of going to a four-year degree college or to going to a two-year “junior college” (the equivalent of a community college in the US.) The junior colleges can be the equivalent of vocational education institutions. These can teach freshly minted high school graduates or even people who want to update or learn some new skills.

The Market Driven Future

If I were to put on my predict-the-future hat, this is what I believe is going to happen. The private sector, driven by sheer necessity, is more or less on track to enter the tertiary education business. This it is doing in a disguised way, as reported in the Wadhwa paper. It is making the best of a bad situation. It would have been much better if India did have a good tertiary education system. But there are limits to how long this disguised education will go on. I strongly suspect that the private sector will eventually twist the arms of the government and force the liberalization of the education system. It is in their interest to see that the people they hire are as whole as possible–it is better to not have to fix damaged goods, so to speak.

The second change I see is the growth of junior colleges, or as I like to call them, “Advanced Basic College” or ABCs. It would take a person about 2 years after high school to become good at some vocation. The graduates of these ABCs will be younger than the graduates of current 4-year colleges and will be better prepared to enter the workforce. These ABCs will be privately owned and will turn a hefty profit. I also believe that they will use information and communications technologies rather intensively for training.

With the LAFIA Delegation

Last month I spent a week in Delhi and Chennai with a delegation from Australia on a program called “Leading Australia’s Future in Asia-Pacific” or LAFIA. It was comprised of senior government officials from Australia and NZ. LAFIA is a joint program run by the Australian National University and the Australian Public Service Commission which visits a set of countries each year to get an in-depth understanding. This year it was Singapore, India and Thailand. I got the opportunity to present my views of where I thought India was headed (and also got to meet and hear some interesting people across a wide spectrum of activities.)

Discussing India with LAFIA delegates was an intensely learning experience. It helped me figure out how I feel about India and it revealed to me what I knew subconsciously but that I had never articulated. What I figured out is this: that India is going to succeed. And that the success is going to be driven by the people of India — through the private sector. Remember that the private sector is made up of people, just like the public sector. It is the people of India with their entrepreneurial skills and their desire to do well that will end up with India doing well.

What I finally realized was that the government could have been a force for good but it isn’t and we have to live with it. The education sector is government controlled and it is bad. But eventually, at significant cost, that system will be made irrelevant. It will become irrelevant because it cannot be reformed. It cannot be reformed because the government won’t allow reform.

It has been observed by many that China’s growth is top-down, or government driven. India’s growth, to the extent that the government has allowed it to grow, has been enterprise and entrepreneur driven, or in other words people driven.

I suppose it was nationalistic pride in me when I was talking to the Australians that made me come to the defense of India. It was not they were attacking India; on the contrary, Prof MacIntyre of ANU who was leading the group, had observed India over a number of years and had been remarking on the positive trends that he saw. He was clearly optimistic. It was that I felt that I had to somehow give a more positive image of India than what was evident to the delegation — the inefficiency, the senseless bureaucracy, the evident poverty and crowding.

In Conclusion: India will be Free

In my concluding statements I told them that India is not really a lost cause because the people are becoming aware of their potential and that they are struggling to get free from the clutches of the government. The quest for freedom is an exponential process. The nature of exponential processes is such that eventually growth is rapid even though the initial changes are not that perceptible. The people through the private sector, as the main driving force behind the private sector, will overcome the limitations that are currently imposed by the government, and eventually overthrow the government where appropriate and make the government irrelevant in others. This can and will happen with a speed that will astonish.

That India of the Nehru rate of growth — 2 percent a year — is a thing of the past.

I read in Wadhwa’s paper a clear indication of what is to come. The story he told was meant for the Americans. He told them that they don’t have to worry too much about the US losing competitiveness as long as its corporations learn to train their workforce more effectively. The story that I took away from his paper is that what Indian corporations are doing in learning best practices from abroad and training their employees is just the thin edge of the wedge. Soon enough it will transform the Indian education system. India would have achieved freedom finally from a rapacious government.

It’s about time, don’t you think so?

It’s a sort of a reversal to the caste system of the days of yore, only now it’s the backward classes who are the privileged sort, with access to education and perks at any of the country’s institutions. The most premier of these, the Indian Institutes of Technology, have a 22.5 percent reservation for backward classes. Even as the wisdom of this decision is being debated, the country’s HRD Ministry is proposing to increase the percentage to 49.5. While the government is looking at the issue entirely in terms of its vote bank and its popularity with the lower classes (who make up a large chunk of the voting majority), here are a few reasons why this move could be considered detrimental to the general education policy of the nation:

• For starters, the standard of education is considerably lowered when institutions of the highest standards admit students on any basis other than merit and ability.
• Statistics show that around 20 percent of students who enter IITs through the quota system drop out without completing their degree, a figure that supports the argument that they are not prepared for the rigorous and harsh schedules and standards that these institutions set.
• While the IIT institutions are bound to set aside 22.5 percent of their admissions for students from the backward classes, they are not compelled to fill all those seats each year. Only those students who meet the institutions’ relaxed admission criteria for backward classes are eligible for admission. If the colleges are unable to fill the reserved number of seats, they are not allowed to allocate them to deserving upper caste students, thus doing them a gross injustice.
• The quota system in general is discouraging to backward class students since it does not motivate them to do their best. They are secure in the knowledge that they do not have to work as hard as their counterparts from the higher castes in order to be able to secure the same kind of, if not better, education opportunities.
• The quota system does not set rules for people belonging to backward castes in name only – they are extremely rich and enjoy all the luxuries in life but still hang on to their lower caste status only because it gives them an undisputed advantage in the field of education.

This article is contributed by Sarah Scrafford, who regularly writes on the topic of top online universities. She invites your questions, comments and freelancing job inquiries at her email address: sarah.scrafford25@gmail.com.

Their objective:

We intend to motivate both institutions and scholars to have a web presence that reflect accurately their activities. If the web performance of an institution is below the expected position according to their academic excellence, university authorities should reconsider their web policy, promoting substantial increases of the volume and quality of their electronic publications.

In the around 15,000 universities surveyed, 326 Indian institutions were included (compared to 891 Chinese and 671 Japanese institutions.)

In the final 5,000 rankings, there were 30 Indian institutions. The top ranked Indian university was IIT Bombay (ranked 559 of 5000) and last to make it into that list was IIIT Allahabad (ranked 4723 of 5000). In the top 1000, US had 369, India had 4, and China had 17.

Unsurprisingly, 44 US institutions were ranked in the top 50. After all, the web and the internet were not only born in the US but the midwives were US universities.

(I am especially pleased to note these rankings: IIT Kanpur (995th in the world), Rutgers (28th), Berkeley (5th), and Stanford (2nd) — schools that I attended.)

As India is around a sixth of the world population, to be at par, India should have had around 600 universities in the top 5000 instead of the 30 it has. We do hear all the time that “India is an IT superpower.” Well, that claim will be more credible if its educational institutions actually did have something to do with the use of IT.

So the lesson for Indian institutions is that it is time to look sharp and get their act together on the web. Web presence ranking has a correlation with academic quality and prestige. I think that all of these must be and can be improved if — repeat after me — “we free the Indian education sector.”

(Thanks to Nitin Pai for the link).

I sincerely doubt if Indians are capable of building LARGE world class institutions EFFICIENTLY, without external assistance.

While asking for help does not make anyone particularly proud, I don’t see any shame in approaching a university system consistently known for its high standards and asking for administrative, structural and vision related guidance. This is not a begging bowl scenario, in my opinion. Learning from the best and involving them formally and intimately is an excellent idea, and a respectable form of learning.

Self reliance

I am all in favor of learning from others. In fact, one can achieve very little if one steadfastly refuses to learn from others. (See related post “Ideas on the road to development“, where I discuss briefly the two gaps: the ideas gap and the objects gap. The ideas gap is more constraining and can be bridged by judiciously learning from others. Also see “On Gandhian self-sufficiency” where I argue that ” A goal that seeks self-sufficiency (at any level of analysis) is a prescription for poverty — not just of the body but also of the mind. We are deeply and inalienably connected with all others, however one defines the ‘other.’)

A sure-fire recipe for poverty is to insist on inventing everything before you use it. “Not invented here and therefore we will not use it” is the philosophical underpinnings of the disastrous “import substitution industrialization” (ISI) that Nehru thrust down India’s throat.

Now it is silly to expect Indians to build world class educational institutions by 6 PM next week Saturday if they are only allowed to do so. Today’s world class educational institutions were not built last week. It took them hundreds of years. Indians will not take that long because it has the benefit of the learnings of those institutions. But I am confident that India can have excellent institutions within our lifetimes, iff the government allows Indians the freedom to do so.

Learning by Doing

I am repeating myself but this point is worth repeating till there is no mistaking the essential lesson. There is such a thing as learning by doing. If you allow people freedom to do something, then over time you find some people who get pretty good at doing something. This is a natural process — as natural as natural selection. The marketplace is a strict but fair taskmaster and given sufficient time, it picks winners.

The problem with Indian education is that it is not free. It does not allow the natural selection to take place. The government either runs the institutions (Type 1) or permits some to run educational institutions by licensing them (Type 2). IITs are an example of the former. Those who get the permission to run educational institutions are generally those who have political power or can buy political power. They buy their permissions and run the Type 2 institutions.

IITs

Let’s stick with Type 1 for now. Aditya in his comment writes about his experience at an IIT and his assessment of the quality of teaching there which was good. (Note “was” as opposed to “is.”) But he points out that even the IITs are inflexible and don’t keep up with the times. He thinks it is the mindset which is rigid. I am not surprised. The IITs receive public funding and that is a good thing but only to a limited extent. The drawbacks of public funding are many but the most debilitating bit is that they are prone to political meddling. But aside from all that, IITs operate in a sellers’ market and therefore have very little incentive to actually perform.

Just to remind ourselves, IITs are not universities. They are technical teaching colleges. Their job is to teach some useful technical skill. How good are they at that? I am not sure whether they are any good or not. No one can dispute that some IIT graduates are extremely successful. It is, however, not clear how much value addition the IITs actually do. The top 1 percent of any population can be expected to be good. The IITs, because of their reputation and the fact that they operate in a supply-constrained environment, have the luxury of picking about one or two percent of the applicants. Take any highly motivated bunch of people, select the top few from them, make them compete for grades for a number of years, and it does not matter whether you are good at teaching or not — the resulting graduates are bound to be good.

What if there were hundreds of IITs? What if there were so many that the IITs had to compete amongst themselves to get the best students, instead of the students having to compete to get into a handful of IITs? What if the IIT tuition fees were priced at full cost instead of the heavy public subsidy? What if the intake of the IITs were the average student (instead of the cream of the high-school classes)? If with an average quality intake the IITs produced above average output, one can confidently assert that the IITs do indeed add value; otherwise one can reasonably suspect that the IITs are simply sorting mechanisms merely separating the good students from the not so good.

Other institutions

There are hundreds of type 1 (that is, government funded and controlled) institutions. Most are nothing to write home about with the possible exception of the IITs and IIMs. These successful type 1’s don’t face much competition because free entry is not allowed. Those that the government allows are what I have labeled type 2. Type 2’s don’t pose a threat to the premier type 1’s because the type 2’s are not really interested in performing. Once an institution has the permission from the government, it can get into the business of recovering the costs it had incurred in getting the permission. It can recover the costs because it is also operating in a sellers’ market. Desperate for any sort of degree, people scramble to get into one of these and parents often go into considerable debt to pay for the outrageous under-the-table bribes. Because these type 2 institutions never lack willing customers, they could not really care less about what they teach.

Shifting gears

Let me shift to a different sector to illustrate the major point that I wish to make in this post. Consider the automobile sector in the 1970s in India. There were two manufacturers only and free entry was not allowed. The two companies turned out shoddy cars that were of 1950s vintage. They had no incentive to improve the product because people would be willing to take anything they could get their hands on — and indeed waited for years to get their “allocation.” There was a thriving black market for cars as well. People were willing to pay a premium even for those shoddy cars just so that they won’t have to wait for years. The sector was controlled by the government and for the best of reasons: because manufacturing cars was too important an economic function to be left to free private enterprise that only government control could ensure a plentiful supply, assure quality, and prevent the public from being cheated by unscrupulous private companies.

Imagine that someone had claimed that India could not ever manufacture cars that could meet global standards back in the 1970s. Absolutely reasonable claim. It takes decades of manufacturing cars in a competitive market to learn how to make cars. By not allowing not allowing that learning to occur in the Indian manufacturing sector, the government guaranteed that Indians could not ever manufacture cars.

We all know the rest of the story in the automobile sector. It was liberalized and now Indians are manufacturing cars that can compete in the world markets. But note: India is not a Japan or a Germany in terms of the automobile sector. Indian manufacturers are learning. For now they are collaborating with foreign firms but soon enough they will be competing with the best. For a while now India has been a supplier of intermediate goods to the global automotive sector. (Note especially the phenomenal success story of Bharat Forge.)

Free markets

Analytically the free-market story is simple. Allow firms to enter the market. Let them compete. Firms learn by doing. Let the market pick the winners. The result: world class products. So also the socialist-economy story is analytically simple. Rigidly control who enters the market by predetermining the “winners.” Forbid competition and thus ensure that there is no learning by doing. The result: shoddy products.

The lesson is simple to learn provided one is willing to learn: competition that arises from allowing firms free entry into the market is good for everyone. Refusing to learn that lesson is too costly and India cannot afford not to learn that lesson.

Now back to education. Aditya writes:

I don’t believe Indian universities are far enough along that with the improved communication methods and additional money available that they could be transformed to a world class institution, completely indigenously.

Quite true. India cannot build world class institutions without learning from others. But even learning from others requires a certain degree of preparedness. India cannot build Stanford, Harvard, MIT and Berkeley overnight and cannot do so under the current system of absolute government control of the educational sector. What can it do? India can allow free entry into the education sector. Indian firms will figure out as best as they can what to do. Some will collaborate with foreign institutions perhaps or figure out some other strategy. In the end, the competition will ensure that those that have been most successful in learning succeed in the marketplace.

What will not work is for an “education minister” to go around with a begging bowl to foreign officials for aid in building world class universities while continuing to keep the same old rigid system of government control of the sector. Even in the unlikely event that some foreign government agrees to help, what can it actually do? What does help entail? Will the governments come and build the infrastructure, hire the faculty, set up the research labs, determine the curricula, admit students, teach the courses, conduct the research, administer the tests, and grant the degrees? The best they can do is to say, “We have good universities in our country. Do come by and see what they are doing. Do the same thing.” If Indian cannot learn by carefully observing what it is that makes those institutions tick, I don’t see how else India can emulate — and later surpass — their success.

Liberalization as a dirty word

Now to address the question that Pramode CE raised:

Atanu’s solution?

Liberalise. Liberalise. Liberalise.

That brings up my questions. One, isn’t the Indian education system already “liberalised”?

First, I have often (though not in the present instance) found that “liberalize” is thrown back at me in an accusatory tone, as if I was recommending something dishonorable and immoral. For the life of me I cannot understand what it is that people don’t like about freedom. Does it frighten them to think that they have freedom? Are they so insecure that they find comfort in restrictions on behavior? Have decades of living in a socialistic state where some official sanction is required for even the most trivial of enterprises warped their psyches to the extent that freedom is seen as threatening?

Which part of the cry, “Freedom, freedom, freedom!” don’t they understand? What makes them think that living under bondage and under the paternalistic dispensations of politicians and bureaucrats is preferable to living as free humans? That’s the question that I struggle with. I think that Indians have to introspect deeply and answer that question first before India can truly hope to achieve its potential.

Let me throw out a conjecture: Indians have lived so long in the socialist prison that they have forgotten the meaning of freedom. They falsely believe that they are already free. Are Indians the largest group to suffer a sort of collective Stockhold syndrome?

That could explain the frequently raised objection: “Isn’t the Indian educational sector already liberalized?”

In India today, you cannot run an educational system without government permission. That permission is not given freely but under certain conditions. One condition — not mentioned in the books of course — is a very fat bribe. The other conditions require that you have to be a “trust” or a charitable organization and whatever resources you put into it, you can never ever recover. Then the real shackles come out: everything that you do, you will do only as the government dictates. Whom you hire, how much you pay, whom you admit, what you teach, how long you teach — every trivial matter is dictated by the government. What is worse, the dictations of the government are usually harmful to the whole enterprise and process of teaching and learning.

If this system is called “liberalized,” I am sure that the word means something else to others than what I think it means.

Conclusion

We have a long way to go. The path to development is not easy even with eyes wide open. With eyes firmly shut, it is well nigh impossible to make any progress. India is poor today because Indians lack freedom.

Let’s remember that India was a British colony and therefore Indians did not have freedom, and were dictated to by their colonial masters. The result of that lack of freedom was a steady decline of the economy. By the time the British departed, India was impoverished. In fact, having extracted whatever they could, the British left because the well was sucked dry and little of economic value remained. The institutions that the British had built in India were for the extraction of wealth from India. Controlling every aspect of the economy was the means that the British employed for enriching Britain at India’s expense.

The British have been gone from India for over 60 years. In their place, Indians inherited the system of extraction and exploitation. The Indian government continues in the grand old tradition of the British: control, permit, license, quota. And the effect is the same: impoverishment of the economy and continued misery of the people. Yes, the gora sahibs left but in their place the indigenous brown sahibs are doing quite well.

I am quite sure that corporations are not benevolent higher beings whose only motive is universal peace and prosperity. I am sure that firms supply to my needs out of their self-interest. But in a free market, the firms have to compete for my patronage because otherwise I will go to their competitors. That is what essentially distinguishes private firms from governments: firms have to please me but the government knows that I am a captive and I am powerless against its whims and fancies. That is what frightens me about government control of education: it prevents me from choosing, it denies me freedom.

The denial of freedom is a common enough occurrence in the world for us to be sure of one thing: someone gains and that gain is at someone else’s expense. People wouldn’t be in the denying of freedom business unless it made sense to do so. This is so trivially true that I feel stupid even mentioning this. But then, how frequently do we ask who exactly is gaining by the denial of freedom in Indian education? Someone has to be gaining and we must have a national debate to expose them because the nation is losing any hope of a decent future as a result of their greed. These people should be identified and charged as traitors.

New Delhi, May 27: India has asked Britain for financial and technical assistance to set up a new “world class” university (WCU), nearly half a century after it last asked for foreign help in starting a premier education institution.

Junior higher education minister Purandeswari Devi has also asked her British counterpart Bill Rammell for assistance in upgrading facilities and teaching standards at the Indian Institutes of Technology, government officials told The Telegraph.

I hang my head in shame to see India debased so pathetically. Indians are second to none when it comes to talent, drive, hard work, and entrepreneurial ambition. Whenever they have had the freedom to do so, Indians have demonstrated all those through their considerable success. Until very recently, those success stories have mainly been associated with Indians abroad because it was in free countries such as the US that they had the freedom to achieve their destiny. The government of India, until very recently, following the enlightened policies of socialism, denied its citizens the freedom to achieve, to build, to compete in the world, to serve domestic and foreign markets. To the limited extent that the government has deviated from its avowed socialistic goals of scaling the commanding heights of the economy by controlling every minute aspect of the economic lives of its citizens, the people and corporations of India have prospered and gained global respect and attention.

Why does the government of India continue to imprison the educational system even now? What is the reason that it will not allow Indians the freedom to build educational institutions in India? Why does the government then go out with a begging bowl to foreign governments asking for help with building “world class universities” when Indians are quite capable of doing so?

Do you have any doubts that Indians can build world class institutions of learning? Let us recall that the world’s best universities were in India once upon a time. That was a time when India did not have “The Ministry of Human Resource Development of the Government of India” and did not have a minister for higher education or an education minister. Do you have any doubts that India has world class scholars and professors? Just two days ago I had the honor of meeting two celebrated Indian professors — both working in world class universities abroad. You cannot examine the faculty list of any top class American university without picking out dozens of Indians on it.

Why, oh, why does the government of India have to imprison the education sector? There may be many reasons for India’s pathetic economic performance. (Yes, ladies and gentlemen, let’s be honest about this. India is pathetically poor. Sure the GDP is growing at a respectable rate after decades of 2 and 3 percent Nehru rate of growth but that growth rate is on a really small base. India’s per capita GDP of US$700 cannot be compared to the per capita GDP of the US of US$28,000.) It is my opinion that one of the primary reasons is that its education system is flawed. It is also my considered opinion that the reason for India’s pathetic educational system is that the government has total control over it.

So back to the question: why does the government control the educational system? I believe it does so because it is the life-blood of the economy. By controlling that, it gains a stranglehold on the economy which it can exploit for its objective of extracting every bit of rent that it can. Let’s remember that government is made up of people — the bureaucrats and politicians. People are motivated by self interest. Through their control, they gain personally in terms of power, prestige and most importantly money. Like any monopolist, these people limit the supply of educational opportunities and then ration out the limited supply to favored groups to buy their allegiance. Reservations based on caste, religion and other non-relevant criteria are obvious symptoms of this rent-seeking rationing.

Control is the operative word. The last paragraph of that Telegraph article is revealing. It says,

The universities will be controlled by the Centre but kept distinct from existing central universities, and will be nurtured to compete with institutions like Harvard and Cambridge.

Centralized micro-level control is inimical to growth and development at the macro-level. We have to continually refer to those sectors where the government has relinquished control (even partially) and note how those sectors have prospered. And why shouldn’t they prosper? As I never tire of pointing out, there is nothing inherently lacking among Indians that they cannot build world class companies. It need not be necessarily so but the broad generalization is forced on one after even a cursory examination of India’s economy that the Indian government is the greatest impediment to India’s economic growth, and that the government of India is perhaps the greatest enemy of the Indian people.

Allow me to quote some more from the Telegraph:

Sources said Purandeswari told Rammell at a meeting in Delhi yesterday that India needed assistance in modernising teacher-training programmes in higher education.

Faculty support — a euphemism for greater participation of guest lecturers from the foreign country — was another request put forward by Purandeswari, the sources said, adding that she also dwelt on skill development — educating students for the job market — as a “key issue”.

Rammell is learnt to have told the minister that the UK was in the process of restructuring its own skill development process, and was willing to share its experiences.

The two ministers are expected to meet again in London on July 18 or 19.

The sources said India, at yesterday’s meeting, indicated its desire to firm up details of the plan before the end of the year. Higher education secretary R.P. Agrawal asked Rammell if the deal could be finalised by July, but the British minister evaded any commitment to a timeline. [Emphasis added.]

Now why would the British government official not be overly eager to help India in this regard? Let me try to answer that. If my allegiance were to Britain, the last thing I would like to see is that India become so successful in the education sector that it hurts British interests. In fact, I would wake up every day and give thanks to the gods that the Indian government has crippled India’s education system and thus ensured that Britain continues to gain from the flight of human capital from India. Lacking educational opportunities in India, those among the talented Indians who can afford it are forced to go to the UK and the US for higher education. Once there, they add to the human capital of those foreign countries as they settle down and further enrich their adopted countries. I don’t blame them. Humans value freedom like they value the air they breathe: without it, they suffocate and die.

(Aside: Just moments ago, the power failed. Yesterday afternoon where I live in Pune, the power failed about a dozen times, with outages ranging from a few minutes to half an hour. God alone knows how long this failure would be. Power here is predictably unpredictable. My laptop power will last about 3 hours and I just hope that the power returns before too long. You need not ask which agency is responsible for power in Pune. It is the Maharastra State Electricity Board — a government undertaking. Now back to the current rant.)

So will the US and the UK help out India build world class universities in India? Like hell they will. Indians are forced to spend billions of dollars each year in education abroad. (Estimates are of the order of US$10 billion annually.) They have to be stupid to do something that will hurt their national interest. They will not only lose the income from providing education to India, they will lose out on the added human capital. And most of all, they will lose jobs that Indians educated well in India can do in India.

Here’s a story from the NY Times of April 4, 2007, which should scare the pants off of the Americans: India’s Edge Goes Beyond Outsourcing. They are witnessing job flight to India on a scale that they had not anticipated. Corporations such as Boeing, Morgan Stanley, Eli Lilly, Accenture, IBM, Airbus, Cisco, and Microsoft are mentioned in the context of the number of jobs they are transferring to India. Here’s a bit:

With multinationals employing tens of thousands of Indians, some are beginning to treat the country like a second headquarters, sending senior executives with global responsibilities to work there. For example, Cisco Systems, the leading maker of communications equipment, has decided that 20 percent of its top talent should be in India within five years; it recently moved one of its highest-ranking executives, Wim Elfrink, to Bangalore, the center of the Indian industry, as chief globalization officer.

(Just by the way, last month I met Wim Elfrink at the opening of a Cisco Systems training and development center in the Zensar campus in Pune.)

So what is happening over here? Globalization. It is the erasing of national boundaries with respect to jobs that can be outsourced through the magic of the recent revolution in information and communications technologies (for services) and manufacturing jobs through the magic of the 52-year old shipping container revolution. Transnational corporations shifting jobs wherever they find labor-cost arbitrage opportunities.

Yes jobs are moving to India. So far, the foreign corporations are picking up the low-hanging fruits among the employable in India. But that well (to mix metaphors shamelessly) is going to go dry very soon. From the NYT article:

. . .specialists warned that a continued flow of work to India required drastic improvements in its educational system and basic facilities. Water and power shortages are endemic, and industry experts predict that India could lack 500,000 engineers by 2010. Yet the country has already tapped a deep well of English-speaking engineers, attracting more outsourced work than any other country.

(Oh goody, the power just came back on. Now I can save this draft and continue my rant.)

Within just two years, India will face a shortage of half a million engineers! If that is so, the labor-cost advantage of India will most certainly disappear as the price of engineers will be bid up. As it is the reported churn among software engineers in India is phenomenally high and wages are going up 30 percent per annum by some estimates.

Wouldn’t liberalizing the educational system be the most rational response to solve the shortage of skilled manpower? Yes, it would. Will it be done? Not if India continues to have a ministry of higher education and a minister of education of the likes of Arjun Singh.

Economist Alan Blinder has characterized outsourcing as “the third Industrial Revolution.” The first one was missed thanks to the British: they were the colonial power ruling India and it was not in their interest to see that India become an industrial giant. I don’t blame the British. If I was a loyal Britisher, I too would not like to hurt Britain’s interests. The second industrial revolution (I am guessing) that Blinder refers to is the off-shoring of manufacturing that mainly happened to the East Asian tigers and later to China. India missed that because of the Nehruvian socialist policies of barriers to foreign investment, archaic labor laws, xenophobia’s, and plain old fashioned stupidity.

This third industrial revolution bus is about to depart. India does not seem too eager to get on that one. No, I take that back. Indians are desperately impatient to get on this one. They are struggling to get on board. But the government of India is doing its best to prevent that from happening. It is as if the government is saying, “Just try to get on that bus and we will break your kneecaps for you. Don’t you dare escape from our clutches.”

If I had my way, I would charge junior higher education minister Purandeswari Devi with treason for having debased the country by begging a foreign nation for assistance with doing something that Indians can do. She has shamed Indians and implied that Indians are incapable of creating world class universities. I think that all Indians in the education professions — both at home and abroad — should tar and feather her for her direct insult at them. Shame on you, Ms Devi. Just resign from your post and go beg for a living instead of feeding at the taxpayers’ expense — the tax payers whom you insult so deeply.

End of rant.

Sam Pitroda, chairman of the National Knowledge Commission says that of the 90,000 MBAs that come out every year, only around 10,000 are worth employing. Kiran Karnik, former NASSCOM president, puts the blame at the door of India’s education system, saying that only 25 per cent of the country’s engineering graduates deserve jobs. No wonder companies today have to invest heavily in training fresh graduates, helping them to unlearn and pick up skills. As there are dramatic changes in politics and business as well as international scenarios, there is a need to keep updating the syllabus almost every year. Manohar Chellani, Secretary General, Education Promotion Society for India, New Delhi, points out that there is tremendous scope for improving the quality of education in India, and delay in doing it will cost us heavily.

The National Knowledge Commission has said that India will have to bring in education reforms if it has to emerge as the workforce of the world. India today needs at least 1,500 universities, but has only 370. There are more than 550 million young people in need of education but do not have educational institutes to go to. India also needs around 1,500 IITs, 1,500 management institutes, and 1,500 medical schools. A million good schools are also required. All that the present education minister, Arjun Singh, has done in his tenure is to fool around with reservations and suggest that Rahul Gandhi be made prime minister.

Though the IT industry needs 3.5 lakh engineers a year, only 1.5 lakh are available. This could lead to a shortage of over five lakh engineers in the next few years. A recent Nasscom-Crisil report says that the IT industry is expected to create about 11 million jobs by 2010. In another two years, the II sector would need half a million professionals. Presently, it employs over 350,000 but is short of around 90,000 workers. In another year, the shortfall is expected to cross 200,000. In 2007, the job market was vibrant. 2008 promises to be better as India goes on to vitalise its various sectors, which require over 1,000 CEOs across industries.

Read the whole article. Here’s the puzzle: Why is it that the writer, a documentary film maker, is alarmed by the situation that apparently the honorable education minister never seems to lose any sleep over? Actually, most dispassionate observers of the Indian economy invariably point to the disaster which is the Indian education system as the greatest obstacle to India’s development. What needs to be done to fix the education system is also fairly well-understood. The problem does not have the complexity of quantum mechanics or brain surgery. The solution to the problem is certainly as well-known as the problem itself. So what is it about the problem and its solution that evade the sainted policy makers of the Indian government? What is it that they don’t understand?

Upton Sinclair had noted that it is difficult to get a man to understand something when his job depends on not understanding it. That is a specific instance of the more general principle that economists consider to be a fundamental truth about human behavior: “Incentives matter.” The system does not provide the policy makers an incentive to improve the educational system. Conversely, they have an incentive to keep the system dysfunctional. Given the current structure of incentives, they would lose whatever advantage their gain from the existing system.

The demand for education is overwhelming and urgent. In any system in which demand outstrips supply massively, rationing of the limited supply is the only option. Those who control the rationing system gain tremendously. The Indian education system is a victim of vote bank politics. If the supply were to expand to meet the demand, those in charge of handing out quotas and reservations would suddenly find themselves without the levers that not only give them political leverage but also allow them to extract huge rents that arise from a monopolistic control of the system.

There’s a follow up puzzle. It is widely reported that India is a democracy. If democracy means anything at all, it surely means that the people are in control and are the principals, and that the political leaders and policymakers are the agents that implement the will of the people.

Does the Indian population have a definite will to have a good education system? One could cynically note that they have gone through the same educational system and therefore perhaps are not fully equipped to even understand what’s wrong with it. If we don’t take that unkind stance, then we could conclude that the will exists but that will is not communicated to the policy makers. Perhaps if the people expressed their preference for a good education system, the policy makers will deliver. But the situation could be worse. It could be that the people prefer a good system, and effectively communicate that preference, but in the end the policymakers simply ignore the will of the people. Ignoring the will of the people is something that comes rather naturally to rulers of an imperial bent of mind.

So here’s my conjecture. I think that it is an unholy mix of unfortunate factors: the people only weakly understand what the problem is; they articulate that understanding imperfectly; that articulation is imperfectly communicated to the policy makers; and, the policy makers choose to ignore what is good for the country because it helps them in their narrow interests.

Final question: will we be able to get out of this whole sorry scheme and if so how?

My feeling is that the market forces will become overwhelming and change the situation. The solution will not be bottom-up from the people but top-down from the corporations. They have an incentive to have productive workers because it adds to their bottom line. The Indian industry will drive policy change. My guess would be that within the next decade we will see a massive overhaul of the education system.

I am very optimistic.

So that’s it for now from JP’s hangout in Edison NJ. The weather is nice and sunny.

Reservations in educational institutions for specific groups are essentially a flawed response to a problem. It is flawed for a number of reasons. The first and foremost is that it does not even begin to address or even recognize the actual problem, namely, that there is a mismatch between supply and demand. Any attempts at allocating a limited supply among the competing demanders for it is definitely not going to succeed in correcting the basic problem. This follows from a general principle that to solve a problem, one should address the cause(s) of the problem rather than merely attempting to suppress the symptoms that give evidence of the problem.

Let’s start by asking if there could be a situation in which something akin to reservations for groups can be reasonably legislated. Suppose, for example, the educational system has sufficient capacity to cater to the needs of a specific group but due to bigotry the group is denied the opportunity. I can certainly see that mandating that members of that group be given the opportunity to seek and gain entrance into the system is an appropriate response. But this is not the case currently. The system is just not able to cope with the demand.

Just to be sure, I should emphasize that we are talking only about reservations in institutions of higher learning. We are not talking about primary or secondary education, although the primary and secondary educational system has something to do with the problem of reservations in higher education which we will go into presently.

Also important to keep in mind is that the world has changed, and is changing at an accelerating pace. The old systems developed for a more staid world are outdated and inappropriate in this new world. Besides being a good thing in and of itself, higher education has an instrumental role. For purely utilitarian purposes, a significant number of people need to have higher education if the economy has to function at any level of efficiency.

The old system of government-controlled education is inadequate to meet the needs of the present world because it is not flexible and responsive enough. We need not just an increase in the capacity of the system but we also need the system to respond rapidly to changing requirements of the market.

Here’s a recent news item that illustrates how the private sector responds to market needs. The International Business News of April 17th reports that Microsoft and HCL are collaborating on selling a very low-priced laptop. That collaboration is not limited to manufacturing and selling computers, however.

In addition, the companies will also collaborate to train and certify 50,000 students on Microsoft technologies, over a period of three years, across 100 HCL Career Development Centers that would be set up by HCL. The centers would create a sustained supply of skilled and certified manpower to address the demands of the IT and ITeS industry, the official said.

The lesson is simple. It is in the commercial interests of corporations to have workers who know how to do the jobs that needed done. So as long as a person has the minimal qualification to be trained, market dynamics will ensure that private entities will do the required training.

Let’s pause here for a moment to reflect on this: there is no shortage of jobs for qualified candidates. In fact, there is a shortage of qualified people. The shortage arises from the limited supply of seats in educational institutions. That shortage of seats is mandated by the government. The government mandates the shortage and then assigns itself the power to dictate how the rationing of seats will be done. That rationing is motivated primarily by vote-bank politics.

Now artificially created shortages are good for those who control the supply – whether it is about controlling the supply of diamonds or the supply of educational seats. In India’s case, government mandated shortage for the private profit of the politicians and bureaucrats is nothing short of criminal. It is responsible for much of the existing poverty in India and unless this situation is urgently changed will perpetuate poverty for the foreseeable future.

The reasonable thing to do is simple. I have written about it elsewhere in this blog. But let me restate it. First, remove all restrictions on entry into the provision of higher education. Any institution willing to get into the business of higher education should be allowed.

Second, support what I have called “foundational education.” Foundational education is something like high school education but a bit more. Everyone must have foundational education – whether they have the means to pay for it or not. If they don’t, then public support must be provided. And once again, there should be no restrictions on who can supply foundational education (FE).

To ensure that there is no cheating by providers of FE, there has to be an institution whose only purpose is to test students and certify whether a student knows a particular subject. That is, this body just tests and evaluates students; it does not teach, it does not dictate curriculum, or anything else. Based on the aggregate results of these tests, any FE provider can be judged. This information will ensure that the FE providers actually perform. Market competition will ensure that no FE provider is able to make above normal profits.

In other words, the strict separation of teaching and testing has to be implemented so that free entry into the market for FE education is efficient

Given that everyone has the FE, it is just a matter of aptitude and interest which will sort the people into various streams, some of whom will go for higher education. Because of free entry of higher education providers, no one will have to be discriminated against based on caste or any other irrelevant criterion.

Among the usual objections to free entry of private firms in higher education is that “the poor will not be able to afford the high fees.” This objection is pointless and rather silly.

Prices in competitive market reflect underlying costs. And therefore, if the price is high in a competitive market, it just means that the costs are high. If costs are high for a private sector firm, it is not likely that the costs will be any lower for the government. In fact, what is certain is that private firms are more efficient (that is, their costs are low) than public sector firms in all known cases. The government has no particular advantage in doing anything more efficiently than private firms.

There is no reason to believe that the government will be able to provide higher education more effectively and efficiently than private firms for the simple reason that the government cannot and has not ever been more effective and efficient than the private sector.

The only thing that the government can do is to tilt the playing field in its favor so that it kills any private sector competition. It can make Anil pay for Sunil’s education. It transfers wealth between people and often does this arbitrarily. The worse thing is it uses very sticky fingers in moving wealth around and therefore it has an incentive to move as much wealth as it can.

Asking the government to take care of education is a good way to ensure that it is done in the most inefficient and shoddy manner. The statistics speak for themselves.

So anyway, what about someone who is unable to pay the market price for a particular bit of higher education? The answer is student loans. If the benefit of that bit of higher education is higher than the cost, then the cost is worth incurring. Loans will bridge the gap. If the costs exceed the benefits, then of course that higher education should not be undertaken. This hard constraint will ensure that one does not graduate an army of scholars of medieval sociology if the market is not interested in medieval sociology.

All this talk about education and reservations is fairly boring. The solution is accessible to anyone who takes care to ponder the issue for a moment. Why the solution is not tried is not because it is not a good solution but because it will kill an extremely valuable source of ill-gotten wealth for those who have political power. Rent seeking is a fact of life as much as death and taxes.

Related post: Reservations about reservations. Really worth reading, even if I say so myself.

I find it hard to comprehend very large numbers. For instance, when I consider that India has 1.12 million schools (primary and secondary), I am dumbstruck. I have to translate it down to relative numbers because the absolute numbers are beyond me. So, I would roughly estimate that out of population of approximately one billion people, about 200 million are in the school-going age. If you have one school per 200 kids, that means India must have approximately a million schools. Now the number of schools makes sense to me.

What continues to evade comprehension is how they define what constitutes a school. If you have a place which does not have even a single blackboard or a teacher, no classrooms, no toilets, no playground, and no discernible educational facilities, would you still call it a school? Is that school a state of mind, an abstraction that exists in the imagination of some government bureaucrat?

According to a study done by an education think-tank (NUEPA), “Elementary Education in India: State Report Cards 2005-06″ (PTI report, July 2007), nearly 90,000 elementary schools do not have a blackboard. Of these, around 22,000 do not have teachers.

Besides blackboards, thousands of the schools also did not have buildings, drinking water facilities, toilets, boundary walls and playgrounds. As many as 1,02,227 schools — or 9.54 per cent of the total schools imparting elementary education — had only one classroom, the report said.

If you have a bladeless knife without a handle, can you meaningfully claim to have a knife at all?

This is the most damning indictment of the Indian state controlled education system – it fails in the most elementary task of providing elementary education to tens of millions of children. Given this failure, is it any surprise that it fails in the more challenging task of managing the later stages of the process?

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What I find most disturbing is the lack of understanding among the policymakers about which problems have to be solved and in which order. In any system, there are multiple problems. Harder than solving the problems is figuring out which problem to solve first. Getting the sequence right is absolutely critical.

In any sequential process, an error earlier in the process propagates and gets magnified later in the process. Fixing a failure earlier in the sequence prevents the propagation of the failure and involves much less effort than in later stages. If a person does not have the opportunity of getting a proper elementary education, the person is forever handicapped. Regardless of how natively talented the person is, she will not be able to make much use of any other educational opportunities she is presented with later in life. Reserving seats for her in institutions of higher learning only serves to compound injury with insult. It says to her, “You are not actually capable of competing. The others are more talented than you. So we will do you a favor and reserve you a seat.”

I think thoughtful people should be more concerned about the fact that someone – anyone irrespective of which group they belong to – is denied basic education than with the matter of which group gets what sort of reservations. That individuals numbering in the millions are denied, either by design or by incompetence, basic education is what should keep us awake at night.

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A Rant about Ignoring the Individual

Let me underline one matter. I am concerned about and interested in an individual, not a group. I think that an individual is the proper unit for policy considerations, not groups. Policies that are made with reference to groups are immoral, wrong-headed, and stupid. Unfortunately, groups have always been the target of most, if not all, public policy debates.

I think it goes back to the leaders of India. They never appreciated individual freedoms and individuality. Perhaps they were merely stupid. Or perhaps they were smart enough to realize that treating people like sheep makes them easier to be herded. Gandhi was especially astute. He focused on groups and exploited them. He went so far as to rename a group as “the children of god” – which necessarily implies that the rest are the devil’s spawn.

Gandhi’s heirs are the current crop of Nehru’s spawn, and they and their handmaidens continue that policy of naming groups and pitting one group against another. The chief handmaiden of the Gandhi family, Dr Manmohan Singh, went so far as to explicitly state that Muslims have more claims than non-Muslims. He did not say that any individual who is disadvantaged due to circumstances beyond her control deserves a little help from society; no, he said that Muslims as a group have a higher claim to resources than non-Muslims. That Dr Singh said that is astonishing enough. What is truly staggering is that most people did not even notice the immorality of his stance. His statement is the most potent combination of stupidity, immorality, cynicism and insanity that could be uttered by anyone who is probably not actually stupid, immoral, cynical and insane.

End of rant.

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Foundational Education

Let’s consider a counter factual. Imagine sufficient resources (financial and institutional) were available so that every child had an opportunity to get a basic education. By basic education I mean the ability to read, write, think logically and be numerate. Unless a person is mentally handicapped, the outcome of having the opportunity is predictable—everyone becomes sufficiently educated to be at least minimally productive. Let’s refer to this as “Foundational education” to indicate that without this foundation, an individual can neither function even minimally in society nor go up the education system at all. I am assuming that everyone needs foundational education and is capable of acquiring it.

The middle-class (and above) in India can afford the cost of foundational education (FE). The children of the poor cannot. Public resources are required for them. Imagine an efficient and effective system of aiding the poor exists.

I believe that individuals vary in their abilities and their preferences. Not everyone wants to be a brain surgeon and not everyone is capable of becoming one. Besides if everyone were to become brain surgeons, we’d have an acute shortage of rocket scientists. What we need is a system which allows an individual to climb as high up any educational ladder—accountant, brain surgeon, computer programmer, dentistry, engineering, forensic medicine, tinker, tailor, soldier, spy—of her choice that she is capable of and wants to.

Moving on with our counter factual scenario, let’s now imagine that our individual is interested in becoming an engineer. So she appears for a test that evaluates her ability and preparedness for undertaking engineering studies. Happily she is found to be capable, and she gains admission into an engineering school. In this story, we imagine that there are no capacity constraints in any field of education: if someone is capable of undertaking the study, he or she has the opportunity.

What about the cost of this higher education? If she has her own means (through her parents, say), paying for education is not an issue. But if she needs financial assistance, student loans are available. In our imaginary system, the benefits of education exceed their costs. So repayment of the loan is not a problem.

In this system, there is no need for reservations. The system has the capacity to supply to the demand for any kind and any level of education.

Now back to the real world of India today. To start with, there are a huge number of people who don’t have access to the foundational education. Around six percent actually pass high school. And then this small percentage faces the incredibly hard task of scrambling for a limited number of seats in colleges.

To take one example, consider the IITs. To a first approximation, no one gets to go to the much-celebrated IITs: two out of every hundred who aspire actually get to study in one. Quite possibly, the top 10 percent of those who compete for IITs are fully qualified for it. But there are just not enough seats.

It is a dismal situation. But what is worse is the response of the policymakers. Instead of expanding capacity, they do the brain-dead thing: introduce quotas and reservations that are based on group identity.

Reservations in educational institutions based on caste and religion are bad for a number of reasons. First, it ignores the individual. It is immoral to discriminate against an individual based on any characteristic that is not only outside his control but is also immaterial in a given context.

Second, it induces inter-group rivalry and hostility. This imposes enormous social costs.

Third, it distracts attention from the real problem. The real problem is that the system is unable to meet the demand. This problem is solvable provided the political will is there. The hoopla over quotas and who is getting how much makes people lose sight of what needs to be done.

In the next bit I will go into how we can create a system which is not supply constrained and therefore has no need for reservations.

Next post: Part 3.

As one can expect, the place is a sort of transportation hub where you get trains, buses (both private and public), taxis, and rental cars. Walking along that stretch of the road is like running a gauntlet. A dozen people descend on you, each offering to immediately transport you to Mumbai in great comfort, quickly and cheaply. They compete for your attention and tell you why you should take their bus or their car. One over here says the new Innova (a comfortable Toyota minivan) is about to depart and will be in Mumbai before 10 AM; the other over there insists that the Neeta Volvo will charge much less and they will not even stop midway, and so on. The competition is loud and enthusiastic.

It is a delight to see the market working. On Sunday evenings and Monday mornings when demand is high, I have noticed, the private buses charge about Rs 250, which drops to about Rs 180 by mid afternoon when demand is low. Shared cabs constantly adjust their prices as well. During peak hours, prices often increase by as much as 50 percent. I sometimes hire a cab and a bit of bargaining is sufficient to discover a reasonable price. Sometimes I take the Volvo bus operated by the public sector. Surprisingly, even the state service is quite good and I am sure that competition from the private sector buses has something to do with it.

Traffic between Pune and Mumbai is increasing rapidly. I estimate that in the last ten years, it must have doubled at least. I am confident that the supply will keep pace with the demand for the service. Except for the occasional unpredictable shock, the buses and cars will neither be consistently bursting at the seams nor going empty. If there are too few seats, the prices will rise and with it the profits. The increased profits will attract the operators of more buses and cars on the route. With increased supply, the profits will once again fall back to normal.

Super-normal profits cannot persist in a competitive market for the same reason that chronic shortages cannot exist: the possibility of free entry and exit from the market. If there is one thing that one can confidently stake one’s reputation on, it is the claim that unimpeded markets adjust the supply to meet the demand. More about this in a bit.

Let me tell you a story. Many years ago, one evening around 7 PM I was rather puzzled to see a very long line of squatters around one of the main train terminuses in Mumbai. The line appeared to snake around the building for hundreds of meters. What were they waiting for, I asked one person sitting in the line. He was an office peon and his office had sent him to make a railway reservation. He, like the hundreds of others, was waiting there overnight for the ticket counters to open the next day at 6 AM. If he didn’t wait in line, his chances of getting a reservation were very slim. This was a daily occurrence.

Man-hours are cheap in India. Given the chronic shortage of train seats, waiting overnight in a queue was a rationing mechanism. I once found out about another mechanism one could use to jump ahead in the queue. You could go to the railways office and write an application addressed to the Member of Parliament in that jurisdiction stating that you had a particular emergency and that you should be given a seat from the reserved “VIP quota.” Every important long-distance train has them. The VIP quota is something that the MPs and other government officials either use personally or else hand out as rewards to those who are favored.

In the good old days, the same used to happen with flights when the only airline flying in India was the state monopoly airline. If you had connections, you could get a seat out of turn. Nowadays, unfortunately, the private sector airlines have totally killed the power that government officials had in determining whether some of us could take a flight or not. Allowing free entry does that – it eliminates chronic shortages and consequently eliminates the power that officials have in controlling people.

A brief note on basic economics is apt here. Shortages and gluts are transient phenomena in competitive markets. For chronic shortages, you have to engineer it. One has to work hard to maintain persistent shortages because left to its own devices, the market corrects shortages (and gluts) by the simple mechanism that more suppliers enter (or exit) the market. So to understand why shortages exist in some markets, one has to just follow the money: who exactly gains as a consequence of the shortage? The answer to that question would reveal who engineers the shortage.

Talking of basic economics, let’s just briefly touch on a related matter. There are three variables: supply, demand, and price. The quantity supplied and the quantity demanded are equal only when the price is discovered by the market. If the price is determined in any other way – say by diktat – then it is only by chance that the quantities supplied and demanded will be the same. In most cases, the moment you dictate the price, you will find that you either have an excess supply or an excess demand.

In other words, you can only choose two of the three variables. If you choose price and supply, you cannot also determine demand. Specifically, if you dictate the price, for any given demand, you will either be unable to meet the demand or overshoot it. Nobody – least of all some government bureaucrat – can figure out simultaneously (as the market can do) the quantities supplied and demanded, and the price at which the two are equal.

Here’s a lesson: only people who are so seriously deluded that they think they are god almighty believe that they can determine all three variable – supply, demand and the price – simultaneously. Mere mortals can only control two of the three.

Indian politicians and bureaucrats, judging from the kind of policies they try to implement, appear to be seriously deluded. They think that they know. But the truth is that they don’t for the simple reason that nobody knows. Everyone only has partial information since no one is omniscient. The fundamental problem is that no one is smart enough to aggregate all the partial information efficiently and accurately enough to reach the conclusion that the market can.

Let me underline this point. Nobody knows. Not eminent judges of whatever court, not bureaucrats, not politicians, not the leaders of industries, nobody. No single individual or committee knows. Yet what cannot be even in principle be known can be discovered by the market because the market is that one mechanism which can aggregate the dispersed local information to arrive at a solution that no individual can possibly obtain or process.

The market is the ultimate democratic institution. It discovers things.

All the above is merely a prelude to what I really want to discuss here. Recently, the Supreme Court of India ruled 4 to 1 that reservations in institutions of higher education for OBCs (other backward castes) are constitutional. I am not an authority on the constitution and so I am going to get into that question. My intention here is to ask a more fundamental question: why is there a need for reservations in the first place. The answer to that question may have some utility beyond the matter of education, important though the education question may be on its own merits.

The first thing about reservations is that it is a mechanism for rationing—for allocating a scarce resource among people when the demand exceeds the supply. Persistent shortages have to be engineered, as I have previously mentioned. So reservations have something to do with benefiting those in charge of rationing something in short supply. Therefore, those who benefit from the rationing through reservations are naturally inclined to engineer the shortage.

Pardon me for belaboring the most obvious but here goes. If there were no shortages, there would not be any reason for reservations. So shortages have to be engineered by someone because that someone stands to gain by having power over the rationing process. Shortages persist because someone gains.

My conjecture is that Indian politicians and bureaucrats gain from the persistent shortage in the supply of educational services. They deliberately engineer the shortage by controlling the supply. Monopoly control of education is the best mechanism for limiting supply. Disallowing free entry into educational services is the best way to ensure limited supply. They do this so that they can then buy patronage by rationing the limited quantities to favored groups.

I will develop this line of thought in the next post.

Next post: Part 2.

The actual spending may not be $13 billion annually but the argument does not change even if the figure was much lower. What matters is that it is indicative of a problem and we should be concerned about it. It should be noted that this spending is an outflow of resources. That in itself is not a bad thing, however. We need to ask if this is a net outflow in the education sector. That is, what is difference between the inflow and outflow.

Suppose that the outflow were $13 billion a year but the inflow were $20 billion. The net outflow then would be -$7 billion. That just means that there is a trade surplus in favor of India to that extent. In an increasingly integrated world, cross-border trade in services is a good thing. It indicates a healthy system since it implies that there are comparative advantages among the trading partners and therefore trade is welfare enhancing for each party engaged in trade.

I will briefly touch on the benefits of having a large domestic market for education. Large domestic markets allow an economy to achieve scale economies, and efficiencies through learning-by-doing, and therefore gain comparative advantage. India has a potentially very large domestic market in education. It is only potential and not actual because the supply is deliberately not allowed to expand to meet the demand. As I have touched upon the reasons for this elsewhere on this blog, I will not repeat them here. Here I will only note that if free entry were allowed into the sector, it would reduce costs and therefore reduce prices, while raising quality, and inducing efficiency in the sector.

Competition for the market and in the market

Let me take a brief digression into markets and competition. Entities — individuals, firms, groups, whatever — compete against others for gaining something that they value. This drive is hard-coded even at the most basic level of existence. Genes compete in making copies of themselves. This induces competition for resources. At the broadest level of analysis, we see nations compete for resources such as land, water, and energy. They go to wars for this. Competition cannot be avoided given finite resources.

It is generally true that economic agents (individuals or firms) compete in the marketplace for profits. As profits are the difference between costs and prices, there are two avenues for increasing profits: reducing costs and increasing prices. You would do both if you could but in most cases where you have little power to dictate prices, you have to reduce costs. If even after doing your best in reducing costs, you still cannot make a profit at the prevailing market prices, you exit the business. Other low cost producers survive and the game continues.

Memorize this line: competition IN the market leads to the elimination of the high-cost producers until such time that only the remaining (that is, the lower cost) producers are able to meet the demand.

That line appears to be trite. But there is a reason for memorizing it. Competition in the market is a cut-throat business and no one would like to face competition. If only you could somehow have a captive market, you would not have to deal with pesky competitors. Is there a way out? Yes, there is. Here’s what you do: you carve out a space in the market where you do not allow others to intrude into. In other words, you become the sole supplier, the monopolist. Then you can set the price by determining the profit-maximizing quantity, and only supply that quantity.

Excellent idea, that one. But wait. Others would also like to have that deal, wouldn’t they? So that gets us to the other line which is worth memorizing.

You can reduce competition IN the market by competing FOR the market.

That’s the truth: you cannot escape competition. You can merely move it elsewhere. For reducing competition in the market, you need to move up the hierarchy and compete for the market.

Where there is free entry into the market, competition within the market essentially guarantees that there are no huge profits to be made. So how much is it worth to you to be the monopolist in that market? How much would you pay to compete for the market? The maximum you would be willing to pay is the maximum profits you can make as the monopolist. If every year you could make $1 billion, well then that is the maximum. If you can buy the right to be the sole supplier to that market for anything less, that is money in your bank.

It’s competition all the way up

This idea of competition for markets can be generalized. Here’s how. Let’s take a concrete example. Imagine free entry into the mobile space of a certain region. Suppose you could only make $1 million a year profit when you face competition in that market, but you could make $100 million a year if you were the sole supplier. So, if there is someone, let’s call him Big Guy, who can guarantee you monopoly control, you would be willing to pay him up to $99 million (your excess profit.)

Now it is a game between you and the Big Guy. You tell him that you are willing to pay $10 million a year as a “license fee.” You negotiate back and forth and finally settle at $20 million. The Big Guy could have made the same deal with your competitor, however. So, you sweeten the deal for him. You say you will give him $2 million on the side into his personal Swiss bank account. But so is your competitor. So negotiations go on till your competitor has dropped out in the competition for the market. Finally, you pay the license fee of $20 million to the Big Guy above the table, and below the table you wire $10 million to the Big Guy’s swiss account. Then you go into the market, provide mobile service, charge the price that maximizes profits, thus recover the license fees and the bribe, and all is well. Note, however, that the consumers eventually pay a price that is higher than what they would have paid if there had been free entry into the market (that is, no license fees) rather than the competition for the market which involved a license fee.

So let’s go up one level, the level of the Big Guy. At some point, he was not the Big Guy. He had to compete with others who also wanted to be the Big Guy. So how did he become the Big Guy? He bought the right to be the Big Guy. And how much did he pay? First, he estimated how much his personal Swiss bank account will grow by if he were to become the Big Guy. And then he paid something less than that to become the Big Guy. Suppose he estimated that his wealth would go up by $100 million, he took a gamble and spent say $50 million on his election campaign to become the Big Guy.

The moral of the story: the more there is at stake, the more you are willing to pay to be the Big Guy.

A corollary: the more stuff you can control, the more stuff you have the power to license, the more you are able to tilt the game from being a competition in the market to a competition for the market. The more competition for the market, the more money you can make. So it should come as no surprise that Big Guys want to get into the game of License-Control-Quota-Permit business. That’s where the moolah is.

Government control of the economy allows the functionaries of the government (politicians and bureaucrats) to reap private benefits. That is why they have in incentive to increase the scope of the government.

Back to education

Education is heavily controlled because the ones who do the control make out like bandits. If all license requirements were to be entirely eliminated, then suddenly the profits will disappear because it will mean competition in the market. The market will guarantee that the inefficient suppliers will exit the market.

What about quality? The quality is guaranteed in a competitive marketplace for the simple reason that if a supplier does not meet the consumers’ expectations, no one will buy from that supplier.

I have noted previously that there is a role for the government in a liberalized education sector. But I will write more the next time.

Let’s pause for a moment and figure. $13 billion every year. Or in the last 10 years, about $100 billion. Imagine what you could buy for that money. How about 100 colleges with first class infrastructure with housing, classrooms, labs? Each year India could have an additional capacity for 10,000 college students and in 10 years you could have 100,000 additional capacity. Imagine the multiplier effect of that spending — in construction, in salaries to teaching and non-teaching staff. Imagine the boost to the industry from creating human capital. The imagination boggles at the sheer waste.

Imagine how much infrastructure you could build for $100 billion.

One of the principal lessons one learns as one studies economic development is that success or failure depends largely on the set of economic policies that govern the economy. India, for instance, is poor and economically a failure because its economic policies are extremely brain-dead. Of course one can explain why these brain-dead economic policies exist. We will not visit that now. Here I would only mention that the policy on education is the most brain-dead and that educational policy is largely to blame for why India is poor today, and if the policy is not changed, then it will certainly doom India in the future.

In other words, India is poor because Indian policymakers are either (1) morons who are too bloody stupid to realize that they are continuing to keep India poor and are killing any future that India may have, or (2) they are evil immoral bastards that know what they are doing to the country but do it anyway because by controlling the system they line their own pockets. Or perhaps a combination: some policymakers are of the first kind (morons), and some of the second (bastards.) In end result is the same, however.

Here’s the text of that article — for the record.

Industry body Assocham said on Monday that over $13 billion is spent every year by about 450,000 Indian students on higher education abroad.

Over 90 per cent of students appearing for the Indian Institutes of Technology (IIT) and the Indian Institute of Management (IIM) entrance examinations are rejected due to capacity constraints, of which the top 40 per cent pay to get admission abroad.

“Over 150,000 students every year go overseas for university education, which costs India a foreign exchange outflow of 10 billion dollars. This amount is sufficient to build more IIMs and IITs,” it said.

The primary reason for a large number of Indian students seeking professional education abroad is lack of capacity in Indian institutions. The trend can be reversed by opening series of quality institutes with public-private partnership by completely deregulating higher education, Assocham President Venugopal Dhoot said in a statement.

Higher education in India is subsidised as an IIT student pays an average 120 dollar monthly fee, while students opting for education in institutions in Australia, Canada, Singapore, the US and UK shell out 1,500-5,000 dollars as fees every month.

Deregulation of higher education in the country will result in creating annual revenues of 50-100 billion dollars, besides providing 10-20 million additional jobs in the field of education alone, the chamber said. India has only 27,000 foreign students, as compared to four lakh in Australia.

Assocham further said vocational education in India is a meagre five per cent of its total employed workforce of 459.10 million as against 95 per cent in South Korea, 80 per cent in Japan and 70 per cent in Germany.

[See follow up article on Educational Spending.]

For many years past, those who have known India best have recognized that one of her greatest, if not her greatest, problem was that of education.

The article goes on to quote experts who have concluded that even if the government were to decree compulsory education for everyone, and even if money did not matter, the problem is finding the teachers required. I concur with these experts that finding teachers is a challenge at least as great as finding the money and the political will to educate — or at least make literate — India’s vast population. The article also recognizes the deep-rooted conservatism and the resistance to reform in education. I could not agree more.

Here’s a bit more from the article.

There can be no question that … education in India has largely failed because … education has been made far too much a question simply of intellect . . . one of the most pressing needs of India is to foster more widely in schools and colleges, those ideas of duty and discipline, of common responsibility and civic obligation on which a sound political life depends.

It is specially welcome to find that an increasing number of prominent Indians are beginning to recognize the truth of this contention, and the importance of securing for their fellow-countrymen an educational system rightly founded.

The article concludes with a quote from Sir James Meston at Delhi referring to the apparent obstacles to progress in India’s path: “Only education will help the liberal mind and understanding heart to surmount these barriers, and prevent the majority from becoming a tyranny and the minority from chronic rebellion.”

The NY Times does highlight every now and then some issue facing contemporary India. The aforementioned NYTimes article is timely and to the point. The sad fact is that the article was timely and to the point when it was published nearly a century ago. Yes sir or madam, the date on that article is October 1918. The situations remains the same; only the numbers have changed.

In 1918, British India had 300 million illiterates. That means, within the boundaries of present day India, there must have been around 200 million illiterates in 1918. Today we have 400 million illiterates. Nearly a century has passed and the number of illiterates have doubled in absolute numbers. And consider this: the government of India has been at the job of educating its population for over 60 years.

India’s greatest problem is this: the government has been doing its best to keep the population uneducated and illiterate. Public funds for education are channeled in only such ways so that it is least capable of delivering education. Corruption and inefficiency collude to keep the funds from actually educating anyone.

India’s great problem is education. India’s greatest problem is the government.

[Hat tip: Ashok Bardhan for the NY Times link.]

These are some commonly agreed upon facts related to education. First, it is an investment and the benefits arise much after the costs have been paid. It therefore requires foresight and will, and also disposable resources. Second, it is a process which takes time. The time taken can be somewhat shortened if sufficient resources are available but it cannot be arbitrarily speeded up. Third, the level of education determines the future capacity to produce and be productive. Fourth, an appropriate education provides more benefits than it costs. Fifth, in our contemporary world of dynamism and rapid change, education is indispensable.

Those facts and many others like them hold both at the individual level and the collective level. An economy cannot prosper without an educated population in just the same way that an uneducated person cannot. One good predictor of the success of an economy – which generally means that it is able to meet the requirements of its population in terms of producing goods and services – is the level of education. By that measure, India’s historical and contemporary poor economic performance is understandable given that its educational system is extremely poor.

Why India has a flawed education system can be explained at least in part by recognizing that it was an instrument created by and for the benefit of its colonial rulers. By restricting education to only a select minority, they were able to control the economy more effectively. The colonial objective was to exploit the economy for extractive purposes and it was never development oriented, as is natural for a colonial government. But even after political independence, the objective of the government did not change. The institutions and processes established by the British served the narrow interests of the post-colonial rulers just fine and so the education system continued to be controlled by the state. It remains so today and unsurprisingly the system is dysfunctional at its core.

Universal primary education is guaranteed by the constitution of India but the system fails to deliver. The literacy rate is around 60 percent. India has the largest number of illiterates, around 400 million, in the world. That is, India has more illiterates than the combined population of the US and Mexico. Secondary school enrollment is around 25 percent and higher education only 8 percent of the relevant population. Furthermore, tertiary education is poor as only about one of four college graduates is employable.

Very few receive any vocational education. China has 500,000 vocational schools which train 60 million a year; India has only 12,000 vocational schools and graduates only 3 million students.

Hundreds of thousands of Indian students study abroad at an annual estimated cost of around US$ 1 billion. There are very few foreign students in India. India has around 27,000 foreign students. Compare that to tiny Singapore (population 5 million) which has 100,000 and Australia (population 22 million) which has 400,000 foreign students.

The public expenditure by the center and state governments is of the order of Rs 100,000 crores which is around 3.5 percent of GDP. What explains the dismal failure of the education system? One possible explanation is the license permit quota control raj.

Briefly, the government bureaucracy has a monopolistic hold on the Indian educational system. Monopolies maximize profits by restricting quantities so that the prices people are forced to pay are much higher than the costs. The established rules and regulations do not allow the supply of educational services (through schools and colleges) to expand to meet the demand. The excess profits are siphoned off by the politically connected. The presence of these excess profits acts as a powerful deterrent against the liberalization of the education system.

Aside from the profit motive, there is another very powerful reason why the supply is kept limited. Where there are shortages, political fortunes can be made by rationing out the limited supply to groups in exchange for their patronage. This is what reservations based on caste and religious lines achieve.

The general solution to much of India’s educational problem is to liberalize the sector so that the market is free to adjust its supply to meet the demand. The government must be fully out of the education business; its role must be restricted to regulating the sector. As in all other markets, the educational market will also have its share of market failures. Correcting for these market failures will be the job of the regulator. The regulator must be independent of the government.

The foreseeable market failures can be dealt with simply and cheaply. First consider primary education. Very poor people cannot afford to pay market prices for primary education. They need financial support. This can be delivered via vouchers that allow them to choose among various supplier of primary education. Once universal primary education has been ensured, the same method can be used for secondary education. And as for tertiary education, it should be entirely merit based. That is, if everyone has had an equal opportunity to be educated to the secondary level, they can compete for entry into tertiary education.

Tertiary education should be priced at full cost. Those who are eligible for tertiary education but are credit constrained, the role of the government would be to create the credit market for such students to be able to borrow what is required. This not only helps those who need the help but also does not subsidize those who can afford to pay. In the current system, the rich benefit more. They are able to afford a good education up to the secondary level and then are able to compete for the limited seats in tertiary education and often are the only ones who enjoy the subsidies in tertiary education.

When a way of doing something for decades does not work, it is reasonable to consider alternatives. The market and for profit entities have been barred from participating in the education sector. This needs to change. We do know that markets deliver a wide range of goods and services quite efficiently. There is no reason to believe that education as a service cannot be as effectively and efficiently delivered by the market. And where there are obvious market failures, the solutions are well known and can be implemented without difficulty. It is time for a different way of approaching the problem.

[For more on education related posts on this blog, see the education category.]

For now, here’s a story. A correspondent who is a faculty member at IIT Bombay recently wrote to me asking me to consider what he called “a sordid mess.” Here’s what he sent me. It is a posting by a professor on an IIT Bombay course forum:

On Friday, 29th Feb, I wrote: “Also, I will bring out the second assignment during the weekend.”

To which Jinesh responded: “The first assignment is not yet published”.

This was shocking, to say the least. As per my records, I marked HW1 as “out, 2/10; due, 2/28″ and emailed it to the TAs on 10th or 11th Feb at the latest.

So I wrote to Jinesh, CCing the TAs: “I sent hw1.pdf to the TAs many weeks back”. At which point, Dhaval responded: “We do not have privileges to upload documents. We will do it soon. Kindly grant us permissions.”

So for three weeks, the TAs were waiting for me (without telling me, btw) to add permissions to Moodle so they could post the homework. When they could just have posted a forum message and attached the PDF file, like I am doing now.

Or hey, used carrier pigeons. Or gone to hostel rooms and read the homework aloud to each and every student taking the class. Which is what they would do if a document related to their job or their health was at stake. I was expendable.

This says a lot about how Indians (do not) work as a society. It is extremely depressing to me. And now the TAs will say they are sorry, of course. But that won’t change anything.

The homework is still due on 2/28. Which means none of you submitted it. In a relative grading world, and especially a world where the job market will not evaluate you on how dependable you are in such matters, why would you care?

[NOTE: Names above may not correspond to actual people.]

Let me see. The TAs for the course must have had at least 16 years of schooling (12 years of school, and 4 years of college). At least in this case, they have demonstrated that their schooling did not teach them anything about taking initiative, of solving problems themselves, of not waiting to be told what to do. The system had successfully implanted in their brains that they have to follow orders, and sit quietly if orders have not been sent.

Yes, we are talking of IIT here. My correspondent cynically remarked, “The best and brightest that are still miraculously within our borders.”

Deva, deva.

The world has come a long way since the 1960s when the future was defined by one word – “plastics” – as Mr McGuire advised the young graduate Ben. Now the future is defined by another word and the word is “information.” Plastics was a wonder product of the world of industrial technology which fundamentally transformed the world of objects. Information is the new thing, the product of information technology, which is going to transform the world of ideas. Actually, information is not a “thing” in the usual sense of the term. So it is the new non-thing which defines the new and exciting future.

Let me enumerate some fun facts about information. First, people produce information. So now that more people are producing information, a lot of information gets produced. Second, information accumulates. Once produced, unless every copy disappears, it persists. Third, it is a “public good.” One person’s use of a particular bit of information does not preclude another person from using the same information. Fourth, when information is “internalized” it becomes knowledge in a human brain. So the monotonically increasing stock of information raises the potential of acquiring knowledge by other humans. Processing information is one of the necessary steps in the acquisition of knowledge. Knowledge in turn is a necessary ingredient in the process of generating ideas. Ideas eventually fuel the engine that drives human civilization.

So this note is about information, knowledge, ideas, human civilization, and the rest of it. A pretty large subject which I will necessarily deal with fairly superficially given my own limitations. First I will explore the subject from a micro perspective and then move to the macro. The objective is to draw some plausible conclusions about where we as a collective of humans are headed.

Rejecting Information

The object of analysis at the micro level is the individual human. At the bare minimum, a human has to have a brain and a set of sense organs for acquiring information. Mostly it is through hearing and seeing that one receives input information – touch, smell and taste are not as important in the modern world as it would have been in our pre-literate past. Only if one is blind, or cannot read and is unable to comprehend language, do touch, smell and taste predominate – with the possible exception of tasters, noses, lovers and toddlers. Observe a toddler and note how he or she acquires information.

Physiologically the sense organs take in a huge amount of information that gets filtered and most of it is rejected. For example, from the total visual input from the eyes only a tiny fraction of the information gets processed by and stored in the brain. What we perceive is much smaller than what we see. Our brains would be overloaded if it were to process every bit of information that is presented to it. The different kinds of living organisms filter out different bits of information from the environment. Who you are determines what you perceive.

Biological versus the Artificial

A person acquires information from the environment and also the ever-increasing stock of created information. At this point it is useful to distinguish between what we can call the biological (or natural) environment and the cultural (or artificial) environment. The natural environment is that world which our species evolved in over evolutionary time scales. Our sense organs and our brains are in a strict sense biologically fit to deal with the natural world. The ability to deal with the information from the natural environment is hard-coded within us. We don’t have to go to school to learn how to process the information.

The artificial environment is created by human action. The information from it comes in terms of language and words. We have to go to school to learn, so to speak, how to process that information. An artist and a neurologist could see the same brain scan images but perceive it entirely differently because their training is different. The neurologist has over the years taken in a lot of information about brains and internalized it into knowledge. That knowledge allows the neurologist to process the information of the brain scan differently and thus acquire additional knowledge. The artist also acquires additional knowledge from the brain scans but that knowledge is different from that of the neurologist.

Sequencing

The point is that what you know already determines what you are additionally capable of knowing. There is a path dependency in the knowledge sphere that is tied to the sequence in which information was presented. Though the information available may be comprehensive (in the sense that it is complete), if the sequence of presentation of that information is out of order, it will not be comprehended. Graduate level physics information has to be presented after the undergraduate level physics has been internalized for it to make sense.

Knowledge accumulates in a human brain to the extent it is presented information in the correct sequence. It is not even theoretically possible for an external agency to determine what the correct sequence for a particular individual is. It is so because an external agent cannot fully know what the knowledge base of an individual is at a specific time. The solution is therefore to let the individual himself or herself pick out the next bit of information to internalize from a reasonably broad set of information.

Teaching versus Learning

This is where we need to distinguish between teaching and learning. Traditionally “teaching” is when an external agent presents information and expects the individual to internalize it into knowledge. “Learning” is when the individual picks up the next bit of information from the available collection. Learning can never be out of sequence. Teaching often fails in its attempt to impart knowledge because it is not even theoretically possible for an external agent to fully comprehend the internal knowledge state of the student and therefore competently present the information in the right sequence.

Summing up the points so far: information is the basis for knowledge in the brain; knowledge accumulates by internalizing information in the correct sequence.

Infinite Ignorance

The totality of information available to humans is enormous. Let’s call that “public information.” From that collection, each human being internalizes whatever little bit it is able to. That is “private information” leading to “private knowledge.” Since there are around 6 billion brains in the world, each brain has unique private knowledge but derived from the same public information. The larger the population, the greater is the stock of public information. But given the limitations of the human brain, progressively any human’s private information shrinks relative to the public information. In other words, a person becomes more ignorant relative to what is potentially knowable. All of us are privately ignorant in a world awash in information. Some time ago – perhaps as recently as a few hundred years ago – a person could potentially know a reasonable fraction of the available public information. Today that percentage would be approximately zero.

A world of infinite information is also necessarily a world of infinite individual ignorance.

This poses enormous challenges for the individual as well as humanity as a whole. As individuals, we have to accept that we cannot know everything that we potentially know. A trivial example. A few decades ago, you could have enjoyed watching within the year every movie made anywhere in the world that year. The trouble would have been that you would have had to be fabulously rich to go see them. You had the time but accessing the movies would have been costly. Today, it is fairly trivial to have access to all movies produced. But you just don’t have the time to watch even the good ones produced in just one year. World enough but time.

The Challenges and Opportunities

The challenge for the individual is how to choose which bits of the public information to consume and in which sequence. We are biologically equipped to filter out the massive amount of information coming at us from the natural world. We are not equipped to naturally filter out the currently massive amount of information coming at us from the artificial world. An individual’s success in doing so determines how successful one is in this artificial world. One of the primary jobs of the education system we need is to give us that skill. We did not need that ability and therefore our current educational system which was created for a different environment is totally ill-equipped to handle this task.

That brings us to the macro level. Any organization which does the filtering of the public information for individual use is going to be phenomenally successful. The largest corporations will be those that deal with information in the future. One can be accused of Monday morning quarterbacking for saying that. You could point to information technology giants of today and say that the lessons are plainly evident. But I don’t think that we have fully understood what the real lesson is. The point isn’t making a lot of information available to the individual. The point rather is that any institution that most efficiently and effectively reduces the information available to an individual will succeed.

General Purpose Machines

The other lesson pertains to education. The old paradigm was one-size-fits-all because only one size was available. It was an older, simpler, static world where you could learn a small set of skills and hoped to cope with the world for the rest of your life. The dynamic world of today requires constant learning and the acquisition of new skills. A useful analogy would be the distinction between a special purpose machine and a general purpose machine. A typewriter is a special purpose machine while a computer is a general purpose machine. Depending on what software you load, a computer can do a range of things – from guiding spaceships to controlling your microwave oven. People have to become the equivalent of general purpose machines. People must become capable of “loading the appropriate software” to handle any task they want done.

The education system of today churns out special purpose machines. To make it produce general purpose machines requires a few basic changes. First, it has to teach a set of very basic skills so well that everyone is literate and numerate. That is equivalent to designing a machine which has a complete set of machine instructions which it executes very efficiently and all the other tasks are just the execution of a long sequence of these basic operations. Once you know how to competently read, write, do arithmetic, and reason logically, you can pretty much learn how to do pretty much anything that the human mind is capable of.

That bit is the “teaching” bit of the educational system. Nothing else needs to be taught. The rest is entirely dependent on what the individual is interested in and capable of learning. Here the job of the educational system is to make accessible to the student a comprehensive information set – and NOT the entire public information – for the student to pick from, and in the sequence that he or she feels naturally inclined to, and internalize it. By allowing the student freedom to choose what he or she wants to internalize, it releases the information constraint (that is, the problem of knowing what the student knows) which otherwise is impossible to circumvent.

Development

The age of agriculture yielded to the age of industrialization. Agriculture did not go away. It just became sufficiently productive that it released labor that was absorbed in producing non-agricultural goods and services. The percentage share of agriculture declined – not the absolute amount of agricultural production. Wealth, standard of living, or whatever you call it increased in pace with the decline in direct employment in agriculture.

The industrial age is giving birth to the information age. Once again, it is not that the amount of goods produced by the industrial sector is itself declining. It is not. Indeed, it is increasing. But that increase is due primarily to an increase in productivity and hence it releases labor to the rising sector – the information sector. As the labor force increases in the information sector, the production and subsequent consumption of information is bound to increase.

In the agricultural age, those parts of the world which were the most productive agriculturally prospered. It largely depended on the endowment of natural resources and a bit of human capital. It was a simple world and the social order was commensurately simple. Not much investment in terms of human capital was required. Education was largely an informal affair.

In the industrial age, prosperity depended on industrial productivity, which in turn depended on a reasonably educated work force. Education had to be formalized and the requirements could be met with standardized schools. The public information was limited but sufficient to meet the needs of the industrial worker.

In the information age, prosperity depends on how efficiently the people can produce and consume information. It is critically dependent on a very highly educated labor force. Needless to say that agriculture and industries will continue to need labor as well and that that labor would not need to be highly educated. Conversely, if a population is very minimally educated, then it can only be engaged in agriculture; if the population is moderately educated, it can move up to manufacturing.

So at the highest level of abstraction we can reasonably say this. Prosperity in the world to come depends on how highly educated the population is. So those economies that are able to create the most effective and efficient educational system will count. The rest will be forever falling behind.

Most of India lives in the agricultural age because overall our educational system is only able to supply to that. A small part of India lives in the industrial age. That part is increasing but slowly because of the inability of the educational system to provide the human resources required. Less than one percent of India lives in the information age. To a first approximation, the Indian educational system does not create any human resources for the India to live in the information age.

This is a dismal assessment. But there is nothing in the laws of the universe that actually prevents the Indian educational system from creating what is needed for India to prosper. What is lacking is the understanding, the vision, and the will of the people and their leaders.

High-school students here rarely get more than a half-hour of homework a night. They have no school uniforms, no honor societies, no valedictorians, no tardy bells and no classes for the gifted. There is little standardized testing, few parents agonize over college and kids don’t start school until age 7.

Yet by one international measure, Finnish teenagers are among the smartest in the world. They earned some of the top scores by 15-year-old students who were tested in 57 countries. American teens finished among the world’s C students even as U.S. educators piled on more homework, standards and rules. Finnish youth, like their U.S. counterparts, also waste hours online. They dye their hair, love sarcasm and listen to rap and heavy metal. But by ninth grade they’re way ahead in math, science and reading — on track to keeping Finns among the world’s most productive workers.

I have noticed that these days in India, kids spend way too much time sitting in classes at school, then they go to “tuitions,” then they come home and do endless hours of homework, and the parents are in a constant state of panic about how well the kids are doing in their exams.

I have also spent a lot of time talking to teenagers who toil under this regimen and find that they are fairly uninformed, rather narrow in their outlook of the world, and worst of all, don’t have the slightest interest in the subjects that they are forced to study. Learning, for them, has become one of the most unpleasant aspects of their life. They do all this studying not because they enjoy it but because it would allow them to crawl their way up the ladder — and they are not particularly clear where that ladder is supposed to take them.

I don’t think the kids are to blame. It is the system. The system is such that the love of learning is beaten out of the kid. It fails at the most basic of its tasks: to motivate the study of the subject. If properly motivated, any subject can be made interesting to the average kid. Instead of awakening the desire to find out the answers for themselves, the kids are force-fed canned “answers” without the least attempt at justifying how or why knowing something matters.

I think that the biggest failure of the Indian education system is that it does not respect children. It treats them as captive slaves that have to be flogged into submission. It withholds that one essential ingredient in the learning process: freedom. If a child is not free to explore his or her interests, is not free to express his or her feelings and desires, is not free to develop those unique innate talents, learning is not possible. The unfortunate result is that the system is raising an army of automatons that have lost their ability to seek, to find, to question, and to think.

It is my belief that those who have designed this hellish scheme have not understood the distinction between quality and quantity, and that there is a necessary trade off between the two. There is an optimal quantity of information that can be processed by the human brain which maximizes the quality of acquired knowledge. Try to push too much information and you end up with very little understanding. The problem isn’t that Indian students are not spending enough time studying but rather that they are spending too much time.

What amazes me is that back in the days when I was in school, things were much better. We really did not spend too much time studying. We did sit in classes but that was about all. A minority of the kids who went for “tuition” were generally considered dumb and if you had to go for it, you did not advertise it. Things have changed. The other day I was talking to a friend and she said that she spends over Rs 10,000 a month in “tuitions” for her two kids — much more than the school fees. Does anyone really care that the schools are clearly unable to teach if you have to do it all over again outside school? Would you like to pay for a meal at a restaurant and then afterwards go home and do the cooking and have your meal?

When sufficient numbers of people accept a certain way of doing things, it becomes the norm regardless of how irrational the thing is. In this respect, people can be seen to be very closely related to sheep.

It is really a crying shame that we are not taking advantage of the wonderful opportunity that our present technological wonders present us in making our educational system absolutely marvelous. We don’t have to make prisoners of the children. We don’t have to flog them into memorizing useless garbage. We can help them become thinking fully self-actualized beings.

In a sense it is understandable why the system is broken. It is broken because it is controlled by a monopolistic hand. That controlling body has a vested interest in perpetuating the system. Without the discipline of competition, the system can continue to rob hundreds of millions of children of their future. If there is one reason to despair for the future, it is that we are saddled with an educational system that we are powerless to alter.

Also see the Online Education Database.

So we are now living in an age where there is not shortage of content for learning. What we are short of is time — to learn the various things that we have to learn. The challenge is therefore to somehow reduce the amount of information that a student has to internalize. We have to increase the efficiency of the consumption of information — not increase the amount of information available to the student. This is a totally different challenge than what we faced earlier.

So here in a nutshell is what we have to do. First, bring to the student only those bits of content that are the best. That means, we have to have a very efficient filtering system which rejects say about 99.99 percent of the educational content that is available. Whoever does that job is going to be very successful in the education business. The motto should be: Less is More.

The second thing is we have to teach kids those skills that will help them internalize the filtered content more efficiently. Reading, writing, arithmetic are the basic skills of course. But now we have to add critical thinking and reasoning skills as part of the basic.

I believe that the greatest challenge now is not that of creating the equivalent of the Library of Congress in every school but rather creating a library that is indeed a very small library. A small library which if you were to browse in, you will be getting nothing but the best. It will not be a static library — it will continually change as the best of the world is being included in it and the second best replaced. It has to be a dynamic library. And it has to be accessible to everyone in the school.

The methodology for implementing these is what I am working on.

“Entrepreneurship creates immense wealth that permeates healthy economies. Entrepreneurship alone has the capacity to create innovations in education that no bureaucrat or centralized planning authority can ever hope to achieve. Yes, central control can control, but it cannot create.

“In an age where each of us is immensely ignorant relative to the sum total of human knowledge, the skills that the individual acquires over a lifetime of learning cannot be imparted by an educational system that was created for a different world. The resources for building that educational system are already there. All that society has to do is keep the state out of it so that private enterprise can do its job—which it invariably does. The role of the state is limited to light-handed regulation.

“Liberalization of the educational system from the political-bureaucratic nexus is absolutely necessary. Without economic freedom, we cannot expect the entrepreneurial innovation required to make the educational system in step with the dramatic changes that the future has in store. It would be profoundly ignorant to not liberalize education.

India is a large country and Indians are definitely not slackers when it comes to ingenuity, hard work, and drive. The resources required for creating a large supply of quality educational institutions are well within the reach of the Indian population. There is ample evidence to suggest that whenever some sector of the Indian economy has been unshackled, the people and corporations in India have produced results. So how does one explain the state of affairs in the Indian educational system? Why does the government continue to maintain a stranglehold on the system even though it leads to such obvious failings? More importantly, why do the Indian leaders go around begging foreign nations for assistance with improving the education system when Indians themselves are fully capable of helping themselves with creating great educational institutions?

Consider this report in the Indian express of 21st August: “Help us build eight new IITs, with money and faculty, India tells Japan” (Hat tip: Ashish Asgekar.)

Within a week of the Prime Minister’s Independence Day announcement of eight new IITs, India today asked Japan for helping in building these institutions, sources told The Indian Express.

The government’s request comes in the wake of a massive infrastructure upgradation exercise in the higher-education sector being planned by the government, which includes seven new IIMs and 30 new Central universities.

India is not just looking for “financial assistance” but also “technical expertise” in building state-of-the-art infrastructure for these new institutions.

(See also a related report in the Times of India of 9th August: “Japan to help in setting up IIT”.)

So here’s the puzzle. The physical and human resources exist domestically to solve India’s educational problems; yet the Indian leaders go around begging other governments to help improve the system. Wouldn’t it be far more rational and exceedingly dignified to just unshackle the educational system from the clutches of the government and let the people of India work out their own educational system? So what gives? Why don’t they do that?

To address not just this question but a whole family of related questions, I propose a general theory of “Power, Scarcity, and Corruption.” Basically, the three form a nexus, with mutually reinforcing influences. Scarcity in general is not a chronic condition in any functioning economy; it has to be engineered. Given economic freedom, people work their way out of any transient scarcity. For persistent scarcity to exist, it has to be carefully nurtured. The motivation for engineering scarcity is that it allows the consolidation of power. This is Econ101 and even a superficial reading of the chapter on monopolies is sufficient to persuade one that monopolies do restrict quantities to maximize “profits.”

The relationship between power and scarcity is bi-directional. You have to have power to engineer scarcity, and through that engineered scarcity you gain power. Political power allows you to dictate policies that give you monopoly control and then you use that for gaining even more political power. Then of course, where there is scarcity, corruption cannot be far behind. Corruption is therefore a mechanism which allows the collection of rents that arise from the scarcity.

If scarcity were to vanish for some reason, both the corruption and the power to extract rents would disappear. For those in power, therefore, the primary objective is to somehow maintain an artificial scarcity both for maintaining power and for gaining from the corruption.

Now back to our educational system. The government has a monopoly control of the sector through many institutions such as the Ministry of Human Resources and Development, the University Grants Commission, etc. Licenses and other requirements force the private sector from fully and freely participating in providing education. The resulting scarcity gives the government a handy lever for manipulating voting blocks. Quotas and reservations are handed out to favored groups. And more directly, the bureaucrats and politicians extract rents from handing out the licenses and permits to those who have the deepest pockets.

So now it becomes clear why the government would not liberalize the educational sector and instead shamelessly go with a begging bowl to foreign government. The begging bowl into which the foreign government throws its money is in the hands of the government. This gives the bureaucrats and politicians even more power. If instead the government were to relinquish its monopoly control of the educational system, they would lose power as the private sector steps in and removes all scarcity. And with no scarcity, corruption also disappears. This, of all things, cannot be allowed to happen.

It is India’s misfortune that it is governed by a rapacious, stupid, narrow-minded, immoral, shameless bunch of politicians and bureaucrats. But then, it is hard to see how it could be otherwise given that we have a “democratic” system and the basic characteristic of a democratic system is that it reflects the wishes of the people. Democracy is a cruel joke when instituted among a population that is not informed.

It’s all karma, neh?

The future is not what it used to be. The future of a century ago was not as unpredictable as today’s because the set of possible futures was small. Our present uncertainty about the future has expanded not just in the size of the set but we don’t even know what each possible future contains. The trend is undeniable: as we humans become more powerful in controlling our present, the future becomes less predictable. The boundaries of our ignorance and the range of uncertainties expand beyond human cognition. Our “unknowledge” of the future is unbounded.

It took thousands of years to go from the invention of the wheel to powered flight; it took only an additional 65 years for humans to walk on the moon. Just 50 years ago, IBM’s 5 MB disc drive was state of the art. It cost (in today’s dollars) approximately $250,000 and was as big as a fridge. Today 5 GB – a thousand-fold more storage – costs a dollar. Each year humans create additional exabytes (10^18 bytes) of information. That is, each year more information is created than was created in the entire history of humanity. Technological advance can no longer be plotted on linear graphs; they require logarithmic scales.

Impressive technological advancement at a collective level implies that any individual is totally incapable of even comprehending the technology, leave alone control it in any meaningful sense. It is obvious that nobody knows how to build, say, a modern commercial jetliner. One may know a bit about the avionics, another may know a bit about jet turbines, and yet another about advanced composite materials, and so on. But no one knows it all.

Human ignorance manifests itself on three other dimensions in the production of goods and services. First, no one knows what the future goods and services will be. Second, no one knows who will produce those. And finally, what their impact on human society will be is a mystery. Look no further than the Internet to evaluate human ignorance along those dimensions. Could anyone have predicted any of the services we take for granted today even 25 years ago? Could anyone have picked the winners? Too many young people are doing jobs today that did not exist when they were born.

So how do we prepare to meet an unknowable and uncertain future? Not surprisingly, the answer must lie in the same forces that actually create the future. Every advance in human technology – which is essentially embodied knowledge – is the result of entrepreneurial activity. The innate drive to build ever higher upon the existing base of knowledge finds its full expression in economically free societies. Economic freedom and the freedom to organize lie at the core of humanity’s remarkable successes.

It was possible in the static past to organize society under dictatorial authority. The feudal lords, and later kings and emperors, managed somehow to control relatively primitive society in a manner. But progress imposed enormous informational demands which no central authority could even theoretically possess. Communism’s fall is evidence that even a slightly complex economy cannot be controlled because even if one has the power of coercion, no one has the knowledge to do so. Free enterprise created the complex modern world of today and free enterprise alone will not only continue to shape the future but will provide us the means to meet that future.

To prosper – indeed merely to survive – in the future would require skills that we cannot fully imagine. Certainly a small percentage of the people will continue to be engaged in occupations that have existed for generations but the majority, especially in advanced economies, will be working at jobs that require high degrees of specialization and years of training. Those who are entering the educational system today will retire around 2070. That world is as hard for us to imagine as our world would have been for a caveman. Which imposes some very special requirements on the educational system.

The current educational system was geared to a world of the past, a world where command and control was still not entirely impossible. In India, that system served the needs of a very small segment of society and achieved only a very qualified success. It is strictly out of the bounds of the possible that the present system can ever meet the future needs and for the population at large. Innovation in India’s education system is absolutely essential and continued state control will condemn not only the system to irrelevance but the entire economy as well.

So how do we get an education system that works for the present and the future? Private enterprise and innovation are conjoined twins, sharing the cardio-vascular system of economic freedom. Entrepreneurship creates immense wealth that permeates healthy economies. Entrepreneurship alone has the capacity to create innovations in education that no bureaucrat or centralized planning authority can ever hope to achieve. Yes, central control can control but it cannot create.

In an age where each of us is immensely ignorant relative to the sum total of human knowledge, the skills that the individual acquires over a lifetime of learning cannot be imparted by an educational system that was created for a different world. The resources for building that educational system is out there. All that society has to do is to keep the state out of it so that private enterprise can do its job – which it invariably does. The role of the state is limited to light-handed regulation.

Liberalization of the education system from the political-bureaucratic nexus is absolutely necessary. Without economic freedom, we cannot expect the entrepreneurial innovation required to make the educational system keep pace with the dramatic changes that the future has in store. It would be profoundly ignorant to not liberalize education.

{This article was published in the Aug 2007 special issue of Pragati called “Rejuvenating India.” You can download the entire issue here (pdf 2.3MB). }

Education has positive returns. That claim is certainly not the most extravagant generalization about education that one can make. It is true unless of course hundreds of millions of people over centuries have been systematically paying for education and not fully recovering their investment.

An investment is an expense in the present which pays benefits in the future. The discounted net present value of the future benefits has to exceed the present costs for an investment to be rational. The fact that people invest in education – whether their own or their children’s – strongly indicates that this is so. If it is individually rational to invest in education, then collectively as a society it is also rational to invest in education. These are obviously reasonable propositions. So why do some people and some societies fail to invest in education is a question worth asking.

Discount Factor

One factor that enters the calculus of cost/benefit analysis of activities that have a temporal dimension is the discount factor. A discount factor is like a personal interest rate which is distinct from the interest rate that one gets from, say, putting money in the bank. If the discount factor is greater than the bank interest rate, then it is rational to not put money in the bank and instead just consume it in the present. In other words, the more present consumption is weighed heavily relatively to future consumption, then you can say that the future is discounted heavily. If one faces a very uncertain future, then one has to discount the future. Or if the present needs are extremely pressing, then also one has to discount the future.

Let’s take a concrete example. Should I plant that tree? Suppose it will cost me Rs 100 today to buy the seed and all the resources that will be needed for growing the tree. Suppose further that when fully grown in 20 years, the tree will sell for Rs 1000. Assume that I have only two investment options: plant tree or put the money in a fixed deposit. If the bank interest rate is less than 3.5 percent a year, clearly I should plant the tree. Now let’s introduce uncertainty. What if there is some chance that the tree will die before reaching maturity? What if I were to die before 20 years? Each such factor will increase the discount rate that I will use to calculate whether to plant the tree or not.

Credit Constraint

Someone who is not well-off (however defined) in the present is likely to have a high discount rate for the future. But even when one does not have a high discount rate, it is possible for the person to not make the investment because of what is called a “credit constraint.” Indeed, my definitive test of a poor person is whether the person is credit-constrained or not. The sufficient condition for someone to be poor is to be credit-constrained. Only he is poor who is unable to borrow. You could even be in heavy debt but as long as you have the ability to borrow money (and this will only happen if the lenders know that you will be able to repay the loan), you are not poor.

Back to education and the question of why some don’t invest in education.

Education has positive return on investment as one suspects from just looking around. So if some fail to do so, it could be for a number of reasons. First, incomplete information. That is, one does not know that it pays to invest in education. This is “information failure.” Second, one knows but one does not have the money to invest in education. This is “credit constraint due to incomplete credit markets.” Third, one knows the benefits and has the money but the schools don’t exist. This is “education supply constraint.”

Each of these failures bear a bit of investigation. And I hope to make the case that in the present world, none of these are unsurmountable. Indeed a bit of pondering will reveal that our dismal education system and its pitiable results are quite fixable if only we have the right policies in place. Let me get to that the next time.

I keep in mind my own educational experience. I went to a school (same one from grade 1 to 11) and by all standards, had very limited information. I recall that we had fewer than a dozen textbooks for every grade. They were not massive tomes. They were fairly slim. My estimate is that the information that was contained in all those books would easily fit on a single DVD with room to spare.

My point is that it is not the humongous amount of information that is necessary for a quality education. It is sufficient to sit very quietly with a little bit of information and internalize it appropriately. A bit of uninterrupted time, a bit of good information, a bit of sweat and a bit of inquisitiveness helped most of us get educated. It may have been great if we had Macs and Digital Whiteboards and low-orbiting satellites and digital editing suits and quadruphonic surround sound and IPods and iPhones and Facebook and MySpace and YouTube and broadband internet connections. Or maybe not. I know that I would have ended up futzing around on the web and flunking basic arithmetic.

I could be mistaken. Perhaps some genetic mutation has occurred in the intervening years since I went to school and suddenly kids cannot learn unless they are immersed up to their necks in high-tech gizmos. Perhaps they have lost the ability to learn from internalizing a bit of information. Perhaps they have to be simultaneously SMSing their pals, surfing the web, downloading gazillion giga-bytes of information, creating their digital profiles on FaceBook, capturing hi-def video and editing them to actually learn the basics.

I just don’t know.

The information exists out there. The challenge is to make it accessible — both physically and mentally. Physical accessibility is a technical problem and therefore requires a bit of hardware and software. It is only a matter of time before technology will be cheap enough that it would not matter whether you are rich or poor — you will have all the information accessible. Mental accessibility is a different matter. Those who don’t have the basic pre-requisite to make sense of the information will be at a disadvantage relative to those who have the skills to use the information. The challenge for India is to provide basic education — reading, writing, arithmetic and reasoning.

The liberalization of the education sector in India, that is, allowing free entry – especially for-profit firms – will result in increased supply of educational services. Here I will explore the predictable consequences of this. We begin by recognizing that education is not an undifferentiated homogeneous good; there are distinct levels within it, from basic primary education to post-secondary and tertiary levels. Each level has different pay-back periods for the “return on investment.” Furthermore, different people have different abilities to pay for the various levels of education.

Let’s graph the ability to pay along the x-axis, with the very poor at the left and the very rich on the right. On the y-axis, let’s graph the level of education, with basic primary at the bottom and specialized tertiary (Ph.D level) at the top. The top right quadrant of this diagram represents rich people and higher education, the lower left quadrant poor people and basic education. Recall that higher education has a short payback period and the payback is both private and social, that is, it has positive externalities. So the rich will pay for both higher and basic education if the capacity increases. Basic education, however, has long payback periods and most of the returns are social, and therefore poor people will under-invest in basic education given their shorter planning horizons.

Firms will profitably supply to the two right quadrants because the demand and the ability to pay, both, exist. The left top quadrant is also served by the for-profit firms. For the poor, who have basic education but are unable to pay for higher education they desire, if credit (educational loans) were available them, they would be able to pay for higher education and firms will supply to that need. That leaves the left lower quadrant: if the poor have public support (grants), they would be able to pay for basic education and thus the for-profit firms will supply to that market as well.

By allowing the private sector firms into education, the capacity for greater human capital increases and thus the economy itself grows larger and the growth rate increases. This increases the revenue base for the needed public support of basic education for the poor. Universal primary education can be a reality if the government raises the resources from a larger economy and allows the private sector to efficiently provide the education. Note that the funding is public but the provisioning is left to firms that compete in the market.

Guaranteeing universal basic education is a must for ensuring equality of opportunity. Even the poor, if given the opportunity, will be adequately prepared to continue on to higher education if they so wish. While for basic education the poor needed a grant, for higher education the poor will need a loan. Banks can easily enough provide these if the funds are efficiently spent on acquiring suitable higher education – which again depends on the availability of wide range of choices. And the choices will exist if the education sector is liberalized.

India is stuck in a low-level equilibrium: a US$50 billion education market and a GDP of US$500 billion. It is possible to move to a higher-level: a US$150 billion education market and a US$1.5 trillion GDP, if education were freed. But those who extract their annual US$100 million today from the low-level equilibrium by controlling the education sector, will not allow the liberalization of the education sector for then they will lose the rent. Year after year, they extract the rent but keep the economy effectively shackled.

Let me stress this: education is an amplifying mechanism for economic growth and development. If we fix our education system, what we will get for our efforts is going to be far greater than what we put in it. In today’s dynamic world economy, the returns to education are staggering, and so also are the losses that accumulate from a dysfunctional educational system. If need be, we should even borrow – money, people, ideas – from others to fix our system.

If I were a billionaire industrialist, here’s what I would do. I would get a few of my fellow billionaires to create a corpus of funds – say US$200 million – for a “Golden Goose” strategy. With the money, I would simultaneously buy out all the politicians of every party so that they will en masse vote to liberalize the education sector. It will be a one-time cost for us billionaires. But that would lay the foundation for an India with such formidable growth that we would recover our “investment” in short order.

But alas I am not a billionaire and nor are you. We, as the saying goes, are up a creek without a paddle.

By liberalizing the education sector I mean that it has to be made totally free of government control and involvement. Whoever wants to provide educational services must be free to do so, be it domestic or international, for profit or not for profit, at the primary, secondary, or tertiary level. What would be the expected benefits of doing so?

The supply of educational services will increase, the quality will improve, and prices will come down. These are all everyday first-order efficiency effects of letting markets work. The second-order effects will be increased productivity, increased production, and better allocative efficiency within the sector. The third-order effects will arise from the increasing returns to scale associated with the production of education. Finally, there are very important forward and backward linkages that bind the sector with the overall economy. One of them is the use of information and communications technology (ICT) tools. It will give a boost to the IT sector in a way that is unthinkable in any other endeavor.

Increase in the supply of education is a natural outcome of removing all barriers to entry. Domestic and foreign institutions will invest in educational institutions. One can imagine corporations such as Tata, Reliance, Harvard, and Stanford opening shops in India, all eager to make a profit. This is no different from a large number of automotive companies starting manufacturing in India to supply the domestic market. The effect is predictable: an increase in the variety and therefore expanded choice for the consumers.

No longer will one have to fight to get into a good school or college. Instead of a sellers’ market, we would have a buyers’ market where the consumer is king and therefore the producers will be ever eager to reduce their costs and deliver a quality product. The best part is that with competition, even the incumbents – the public sector institutions – will wake up from their “lack of competition” induced slumber. Competition for students will force institutions to be nimble on their feet and therefore provide education that is relevant. No longer will the education system be producing graduates the majority of whom are unemployable.

Think about the waste of resources that accompanies the current supply-constrained system. Just one example: each year hundreds of thousands of students spend incredible amounts preparing for the entrance exam for IITs. That is directly unproductive use of time and money. That spending would be sufficient to fund a dozen IITs every year. Or think of the estimated US$10 billion that Indians spend in getting an education abroad.

In today’s world, an educated population is more valuable than any natural resource. Yes, India has a large population with favorable demographics. But only the private sector has the resources to provide the investment required for educating them. The operative word is “investment.” Firms don’t invest unless they expect to make a profit. And yes, there is profit to be made from providing education because education itself has positive returns and therefore people will pay for education.

Servicing such a large domestic population necessarily implies a very large installed base. That results in the industry learning by doing, and the economy gains what is called a comparative advantage in producing educational services. Which means that education in India will have a quality/price ratio that would attract foreign students. That would make India the education capital of the world, if India plays its cards properly. India’s income from producing education could dwarf what it earns from IT and IT enabled services today.

Which brings us to a very important point. Producing education will be massively dependent on the use of IT to reduce costs and improve quality. Private firms will use it intensively and effectively to produce education. Meaning that instead of a few computers sitting around in a dusty room in your average school, you will find the best technologies being used in schools and colleges. Students will be learning to use the IT tools while learning other things. More importantly, one will not have to worry about the much lamented digital divide: whoever attends an educational institution will become a digital native.

And who, you may ask, will be attending schools and colleges? My answer is: everyone. If India liberalizes the education sector, then everyone – rich poor, minority, majority, this caste, that caste, this religion, that religion, you name it – will be able to get an education. Only problem will be: the politicians will have to figure out some other way of dividing the country. But that is their problem, not ours.

In the next bit, I will explore why everyone will be able to attend school if they so wish.

[Previous post: Part 8. Next post: Part 10.]

Consider this list: cars, scooters, telephone service, airline ticket, seats in schools and colleges, electricity, and railway tickets. Think of the year 1980. Notice the common feature of the list: shortages. Now consider the list in the year 2007. Notice some things on the list are no longer scarce. It cannot be mere coincidence that only those items which the government has released it stranglehold on are no longer scarce. Could it be possible that if the government lets go of its vise-like grip of schools and colleges, that shortage of educational services will also be a thing of the past?

Given sufficient time, shortages have a way of entering into our worldview so that we simply start considering them as normal and acceptable. Today the power supply where I live in Pune failed for over two hours. It is remarkable that I have accepted that power in India is unreliable and don’t work up a sweat (only figuratively speaking, though.) It is part of our survival mechanism. We adjust to unreasonable situations. That’s how it is, we explain, and cope with it. We have become inured to the mad struggle that people go through to get their children into schools and colleges. We forget how astonishingly unnatural it is that something as basic as a good education involves almost superhuman effort.

Chronic shortages do not occur naturally. You can have acute sporadic shortages due to shocks to the system. But chronic shortages have to be carefully engineered and the machinery that creates shortages has to be kept in good working order. Otherwise the natural tendency for a market is to close the gap between the quantity demanded and the quantity supplied. This is a fundamental truth about the world of humans.

One effect of persistent shortage is low quality. Lacking the discipline enforced by the customer’s freedom of choice, suppliers don’t have an incentive to ensure quality. The consumer is happy to receive even shoddy goods and services because it is a struggle to get anything at all. Take it or leave it, is the basic attitude of the producers in a sellers’ market.

In summary, it is misguided government policy that lies at the root of our dismal education system. The policy change required is to allow the private sector unfettered access to the education market. Will the private sector supply educational services? An unqualified yes because there is money to be made. Currently around 10 percent of GDP is spent on education, which amounts to around US$60 billion. Half of India’s population is below 25 years of age. That defines the addressable market for educational services. If the supply of educational services were to meet the suppressed demand, the annual spending on education will be many multiple times the current level.

Which brings up one of the most important matter associated with education. There is an implicit ban against for-profit educational institutions in India. Why this is so is hard to understand. For-profit producers of other goods and services are not banned. Indeed, it is clear to see that for-profit organizations produce most of the critically important goods and services. The only caveat is that these for-profit firms have to face competition. That’s the bottom line: allow all firms to enter the market, regardless of whether they are for profit or not. The market forces will regulate the firms so that the supply rises to meet the demand, the quality improves, and the prices reflect the underlying costs.

One final point: what about the poor? First, for education up to the secondary level, those who are unable to pay for their education should be publicly supported through vouchers which are redeemable at private schools of choice. Second, for post secondary education, those who are unable to pay should be given loans. Recall that post secondary education has a short payback period and the return on investment in education is positive. So the loan recovery with interest is not a problem.

In the remaining two pieces, I will explore the consequences of liberalizing education in India.

[Previous post: Part 7. Next post: Part 9.]

Imagine for a bit what it would be like if education were provided by private sector firms. Can it be done? Would a socially optimal amount, variety, and quality of education be provided? Would there be market failures? If so, how can those market failures be corrected? Can one devise mechanisms to correct those failures?

The answer to whether the private sector can provide education is clearly ‘yes’ because around the world for a very long time private firms have provided education very successfully. Both private sector for-profit and not-for-profit business models exist. Education, at some level of description, is a service like any of a very large variety of goods and services provided very efficiently by the market. The generalization that markets work holds quite meaningfully in the specific case of education broadly.

It may be worthwhile to briefly expand on what “markets work” means, say, in the context of a good such as computers (both hardware and software.) Basically, there is a demand for computers, or in other words, people are willing to buy them. Firms supply to the market to make a profit. They innovate to increase the variety of the goods to increase their revenues, and figure out ways to reduce their costs so that they have greater profits. Like the large number of profit-seeking firms on the supply side, on the demand side, a very large number of consumers also enter the market with the generalized desire to get the most bang for their buck. The competition that arises from the self-interested behavior of consumers and producers ruthlessly forces unfit computers (and therefore the firms that make them) out of the market and relentlessly drives up the quality and variety, while prices constantly fall.

It is a Schumpeterian world out there – red in tooth and claw. But out of the dance of creative destruction, emerges things that no one—however smart or wise—could have ever predicted. Let me stress that: no one knows what amazing stuff the market will deliver, who will make it, how it will be made, how much it will cost, how it will be improved upon and by whom. Nobody knows, and that includes government bureaucrats or politicians, regardless of how strenuously they claim to know. The inescapable fact is that every innovation, every object that you use, every service that you enjoy, arose overwhelmingly in the private sector, through the risk-taking, imaginative, innovative, entrepreneurial spirit of individuals driven by a basic desire to make a buck.

So is there no role for the government? Yes there is. First, it has to ensure what is called a “level playing field,” to set the rules, to resolve disputes, and maintain such institutions that are necessary for supporting the functioning of the market. Second, in case of market failures (which we will not go into here as this is not a text book on basic economics), to do what it can reasonably do without making the problem any worse. If the government cannot do better than the imperfect markets can, then it is better for us to live with the results of the market failures.

Here then is the basic recommendation that one is forced to make: let the private sector supply educational services in India. The government must not be in the business of providing education at any level. Let the market have a go at it. The government of India is not capable of providing education. It has demonstrated its incapacity over decades, and there is no reason to believe that it is even theoretically up to the job. Education is too critically important for the future of India for it to be left to the government. In today’s world, more than ever, education is a dynamic service. It requires innovation, creativity, entrepreneurial talent, risk-taking ability and human resources—all of which are sorely missing in the government. It is government control of the sector which has had the unfortunate consequence of Indian education to resemble Keynes’ characterization of education as “the inculcation of the incomprehensible into the indifferent by the incompetent.”

Let’s imagine what would happen if private sector firms were allowed to provide education, next.

[Previous post: Part 6. Next post: Part 8.]

Alistair Cooke in his weekly radio broadcast on BBC Radio 4, A Letter from America, once explained the theory of public choice to his listeners as “the homely but important truth that the politicians are after all just the same as the rest of us.” It is an accessible, though incomplete, definition of what public choice is about. You could read James Buchanan, who in 1986 won the “The Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel” (popularly known as the Nobel Prize in Economics) “for his development of the contractual and constitutional bases for the theory of economic and political decision-making.” But Cook’s version is adequate for our needs to explain why the Indian educational system is a disaster.

Politicians and bureaucrats are motivated by self-interest, and the will to power and control is deeply ingrained in them, perhaps more so than in the average person. Monopoly control of any market or institution is heady power. Controlling the educational sector is gives them an enormously powerful lever for controlling the economy. It is therefore quite understandable that the opposition to relinquishing that power would be formidable. The greatest challenge that India faces in reforming its educational system arises from this, not perhaps so much from a lack of understanding of what needs to be done, or how it is to be done. It is hard to overestimate the power of vested interests amassed against doing what is rational in education.

Here we look into what needs to be done, and leave aside for the moment the question whether it will be done, and if so how it is to be done. What needs to be done can be stated in one word: liberalization. The system is in chains.

In a socialistic economy, the state controls everything with the stated objective to reach the commanding heights of the economy, as the Indian leaders have always loftily boasted of achieving. What actually happens is that the state commands and controls and flies the economy into a very deep ditch. Remember USSR? It’s gone. A land lavishly gifted with natural resources and industrious smart people reduced to rubble. We have not fully learnt from their failures of the shackling of their economy. But there is a small possibility that we could learn from the successes of the limited unshackling of our own economy.

It is of course possible for governments to efficiently produce goods and services. The question rather is whether it is probable. The evidence is strong – at least in the case of the Indian government – that it is highly improbable. The list of government failures is too lengthy to list here. But a few instructive examples which illustrate the general idea are worth considering.

Telecommunications was the government’s sole preserve. The waiting times were measured in years, the prices were high, the quality poor. When the private sector was allowed entry, the prices dropped, quality improved, demand soared, supply expanded, and best of all, the public sector incumbents started performing as well. The same story can be told about the air transportation sector.

It is important to stress that the problem is one of government control of the sector, not whether it is served by private firms or not. Even if there are no public firms in a sector, government can control the sector by restricting entry (think license) of firms into the sector, thus limiting competition. The resulting low quantities (think permits and quotas) support high prices – therefore high profits. The competition for acquiring licenses is part of the rent-seeking game that is played by the politicians, bureaucrats and private sector firms. It is a nice little game (racket?) where all the players win, and the only losers are the poor consumers and the economy.

Let’s look at the education sector against this backdrop.

[Previous post: Part 5. Next post: Part 7.]

One feature of the Darwinian world we live in is that there is always competition. It is good to be the king because the king has power. But the more power the king has, the greater is the competition to be the king. Sure, the monopolist is the king in the market, extracting rents and imposing social welfare losses. But somewhere along the way, the monopolist has to pay the king-makers. There is a competition for the market as if to compensate for the lack of competition within the market. The competition for the market leads to welfare losses, a sort of negative image of the social welfare gains from competition within the market.

One parsimonious explanation for not allowing free entry into the market for education is that by retaining monopoly control of the education sector, the government acts as a monopolist. By requiring licensing from the government, and by restricting the licenses, the government encourages competition for the right to serve the market and thus reduces the competition within the market. Restricting the licenses increases their “price.” Bribes, in other words. This is the rent collected by the government, or accurately by the agents of the government such as bureaucrats and politicians.

The licensed firms (schools and colleges) have to recover the costs incurred in obtaining the licenses. They in turn, given the legal protection from reduced competition, have the means to dictate price and the outcome is predictably low quantities (shortages abound), high prices, and rampant corruption.

This is purely anecdotal but is useful in clothing the bare outlines of what I conjectured above. Some institution wants to start a medical college somewhere in India. It applies for a license and is told off the record that the price is Rs 20 lakhs (approximately US$ 50,000) per seat. For the 200-seat license applied for the price is Rs 4,000 lakhs, to be delivered in unmarked bills in a large plain brown envelope. That “fee” is routed through the licensing bureaucracy with appropriate payoffs to different people—the lion’s share ending up in the appropriate political hands. After all, securing top positions at the bureaucracy is not cheap; and running elections is a costly business.

The firm having paid the whopping fee to operate a medical college, now has to recover its costs. Perhaps its actual cost of training a medical student is Rs 5 lakhs per year. It adds on a “special college entry fee” of say Rs 10 lakhs (remember to bring in unmarked bills in a plain brown envelope) to the normal tuition fees. The hapless students are forced to pay because seats are limited. The four year medical training which should have cost only Rs 20 lakhs if free entry were allowed into the field now has to pay Rs 30 lakhs, and perhaps gets substandard training. Further down the line, doctors are in short supply and therefore they command some market power and thus are able to recover their costs. The patients suffer but that is why they are patients—they suffer.

What needs to be done will occupy our attention the next week.

[Previous articles in this series : Part 1, Part 2, Part 3, Part 4. Next post: Part 6.]

If India had solved the basic literacy issue by the mid-50s, it would have developed more rapidly. It would have had a lower population (population of developed nations grow less rapidly), the aggregate wealth of the country would have been higher, and per capita incomes and wealth would have placed India in the running. Even now it is not too late and it is quite possible to make India fully literate within three years, provided the political will is there. The returns on that investment would have been staggering. I have outlined one mechanism for doing this here.

Both at the micro and at the macro level, return on investment (ROI) in education is positive. In other words, the net present value of the increase in the lifetime income of the person is greater than the cost incurred in educating the person. National spending on education is akin to investing in productive assets such as roads, ports, factories and power plants.

One immediate implication of the positive ROI in education is that it makes sense to borrow the money required for education as long as the ROI on education is lower higher than the interest rate – which in most cases it is if the labor markets are not distorted and if there are no information failures.

The other implication is that higher education does not require public financing if the credit market is complete. In the case of a person whose parents can afford to pay for his college education, clearly the credit market is complete: the person implicitly “borrows” from the parents for the education and the returns accrue to the family. It is easy to see that the ROI must be positive, because it is universally true that people systematically educate their children.

That has an important public policy impact: public financing of higher education is not required; all that is needed is to make credit available to those who face a credit constraint. Give loans to all those who seek, and qualify for, higher education, and which loans are repayable over a suitable period upon employment. Thus, for example, IITs and IIMs can be entirely self-funded instead of being subsidized by the public. More importantly, by removing the subsidies and allowing the capital markets to provide the credit required, the market for education will efficiently provide adequate supply to meet the demand.

Which brings us to the question: if the market can solve a severely supply-constrained education system, why is the market not allowed to function in the education sector? Let’s look at that the next time.

[Previous articles in this series : Part 1, Part 2, Part 3. Next post: Part 5.]

Universal primary education was especially neglected because it would have given rise to universal literacy. Universal literacy is not a good thing if the status quo is to be maintained in a regime which allows freedom of the press. It is safe to allow a free press if two out of three people cannot read. Freedom of the press is not meaningful — and is not a threat to the power structure — in a society of illiterates. We should note in passing that whether literate or not, people can hear and speak. So while the press was allowed freedom in a largely illiterate society, radio was absolutely government controlled, consistent with the aim of an exploitative and extractive system.

To be perfectly clear, whether a system is judged to be a failure or not depends on the objective that the system was created to serve. The Indian education system is definitely successful because it does meet the objectives that the British created it for, and which the successive Indian governments have implicitly endorsed: control the supply of education and dictate to the finest detail the nature of the education provided and to whom. Universal primary education, or even universal literacy, was never its goal. To fault the current educational system on its inability to meet the needs of a developing society is to miss the point that it was meant as an instrument for extractive purposes.

If the preceding picture painted hastily with broad brush strokes is reasonably accurate, then it implies that for the education system to serve the needs of a developing nation, the objectives of the system will have to change. Since the same structure cannot serve an orthogonal set of objectives, the whole system will have to be redesigned. If there is one thing I would like to convey in this brief series, it is this: change the system radically if it has to serve a different objective. It should be evident that anything less than a radical re-thinking of the system would be a pointless waste of time.

The current educational system has an objective dictated by the British and which the governments of independent India inherited: To choose from within the huge population a small subset and educate them so that they will serve the needs of the government. That objective should have been replaced with something like this: To develop the human potential of every citizen in the broadest sense, so that the individual is best able to serve his own interests and the interests of the world he lives in. In other words, the citizens are not seen as serving the interests of the government but instead the government’s objective is to serve the people.

The alternate objective would require liberalizing the education sector from government control. I will go into some specifics of the liberalization of the sector later in the series.

[Previous articles in this series : Part 1, Part 2. Next post: Part 4.]

There are many reasons for modern China’s meteoritic rise from its humble beginnings. But one of the most important factors must be their youth literacy rate, which is defined for the population between 15 and 24 years of age. In 1970, China’s youth literacy rate was a whopping 83 percent, compared to India’s 46 percent. It is more than a little depressing to note that more than half of India’s youth were illiterate, leave alone educated, as late as 1970. By 2000, India was just at 73 percent, not even at the level at which China was 30 years before. Now China has achieved nearly universal youth literacy. The lesson is unavoidable: compared to China, India’s prospects are dim if education has anything to do with economic prosperity and potential.

It is important to note the sequence of development. Literacy preceded economic growth for China, as it does for every successful development story. Note that China was more literate than India in 1970 even though it was poorer than India. Thus poverty does not automatically condemn a population to illiteracy. It is a matter of choice: like individuals, countries can also choose to invest in education.

I deliberately chose China as a counterpoint to India in this narrative. I can tell the same story of how Singapore transformed itself from a mosquito infested swamp to a developed economy within a single generation. But then the usual objection is that Singapore is a tiny city-state and a behemoth like India cannot transform itself. It is a just-so argument, supposed to be compelling enough that no reason has to be advanced why the Singapore’s tiny size in the context of development is relevant.

But another just-so argument is introduced when India and China are compared. It says that China cannot be compared to India because India is a democracy. Again, no reason is provided why democracy prevents policy makers from choosing to invest in education. However, one can argue that India’s political structure has something – naturally – to do with India’s dismal failure in educating its population. I describe India as a “pseudo-democracy,” something that has the superficial trappings of democracy but just below the surface it is anything but.

Democracy, if it means anything at all, is more than mere head-counting. It has something to do with informed choice of the population at large, which in turn depends on the population’s ability to understand the issues, which finally rests on the ability to read, write, and carefully consider the alternatives that confront them. As it happened, when India achieved political freedom from the British, the population was told that their emancipator knew best and all they had to do was vote for them, and the government so constituted would magically take care of their every wish. How that transformed India from being the darling candidate for becoming a developed economy in the 1950s to actually being a laggard in economic development we shall briefly note the next time.

[Previous post in this series: Part 1.]

Next post: Part 3.

India’s present economic standing – both in its limited successes and its myriad failures – is to a large extent a reflection of its education system. It takes justifiable pride in the successes of its handful of elite institutions of higher education in turning out world-class super-achievers. But that exceptional success of the few is overshadowed by the dismal failure of the educational system as a whole. At the primary level, the enrollment is around 90 percent but studies have revealed that even after five years of schooling, around 50 percent of the students fail basic reading tests and are unable to perform single-digit subtractions. Ninety percent of Indian children drop out by the time they reach high school.

Of the ten percent who do get post-secondary education in India’s around 300 universities (comprising of 17,000 colleges), their results are disheartening. India produces around two and a half million college graduates, including 400 thousand engineers annually. But the quality is so poor that only a quarter of them are actually employable. Stark statistics reveal the oversupply of raw graduates and the undersupply of employable graduates. Infosys, an IT giant, last year sorted through 1.3 million applicants only to find around two percent were qualified for jobs, according to a recent report in The New Yorker.

That India is not an economic success today is significantly attributable to its failed education system. More importantly, its prospects of even moderate economic success in the future are bleak unless the educational system is urgently fixed. The fatal flaw in the system most likely arises from its near-complete government monopoly control. Practically all aspects of the system suffer from political and bureaucratic meddling. Who can run schools and colleges, what is to be taught, who is going to teach, how much they are to be paid, who is going to learn, how much fees must they be charged, what will be tested and how—every minute detail of the enterprise is rigidly defined and mindlessly enforced. Consequently the system has degenerated to become ineffective, inefficient, and irrelevant.

In this series of brief articles, I present a personal perspective on what is wrong with the Indian educational system, and why. I believe that if we have to fix the system, we have to necessarily first understand the system and what ails it. To the extent that the problem is understood, it is tractable. I hope to present the broad outlines of a solution as well.

[Continue reading: Part 2.]

The aim here is not to complete an argument but to begin a discussion; not to present policy prescriptions, but to plead for greater realism in our outlook on education. Accept that some children will be left behind other children because of intellectual limitations, and think about what kind of education will give them the greatest chance for a fulfilling life nonetheless. Stop telling children that they need to go to college to be successful, and take advantage of the other, often better ways in which people can develop their talents. Acknowledge the existence and importance of high intellectual ability, and think about how best to nurture the children who possess it.

There are lots of quotable lines in there but it is best read in context.

Intelligence in the Classroom — Half of all children are below average, and teachers can do only so much for them.

What’s Wrong With Vocational School? — Too many Americans are going to college.

Aztecs vs. Greeks — Those with superior intelligence need to learn to be wise.

A few years ago, at the university, all of us in the student housing co-op were required to attend a presentation by a HIV+ man. At one point he took out a small polythene bag. It had about 70 pills and he said that he took them daily for avoiding getting sick. The pills would make a substantial snack. So why so many? Well, there was this one yellow pill which boosted his immune system. But that made him nauseous. So the red pill was to suppress that. The three green ones were to compensate for the side-effect of the red pill, though. But if you take the three green ones, you had to take the 8 white pills to give you back the vitamins that the green ones made you lose. Now the large blues pills were required for the upset stomach that the white ones gave you when you had them in combination with the yellow pill, the one that you actually needed. The story went on till about 70 pills had been accounted for.

Simplicity is beautiful, to paraphrase E. F. Shumacher. Education is a simple exercise. Basically, it is the ability to think and internalize information. There is a native intelligence that we are all born with along with a few native skills. What education does is to boost the skills we already have, and to give some direction to how we think. To take an example from the domain of language. We humans are born with a grammar engine. Non-humans lack this. We therefore can learn language, even invent one when needed. Without the grammar engine, you cannot learn nor teach a language. What can be taught is the vocabulary and the syntax of a particular language. The semantics is derived by our brains. Parrots can be taught vocabulary but they don’t have any semantics associated with the vocabulary.

What we need essentially, every child possesses natively. What we can teach is the equivalent of the “syntax and vocabulary” of the language. This bit can be taught and learnt in a relatively short time. The sequencing of this bit of instruction is important. And it is important that only this short bit be taught. The rest the child will work out on his own. If you try to teach or force into his head what he should learn on his own, he will not really learn what he needs to learn and it would just confuse the heck out of him.

Let me give you another analogy. When you start a computer, it “boots” up. That word “boot” comes from the idea of “bootstrapping.” Bootstrapping is the impossible task of lifting yourself up by pulling up on your bootstraps. Nevertheless, in computerese, they use the word for the process which starts the computer. The computer is just a bunch of electronics. It needs instructions which it can follow. These instructions when collected in a bunch is called a program. So you have to load the program. But to load the program, you have to give the computer instructions. Where does this end? It ends by keeping a very rudimentary small program resident in the memory which the hardware executes, and the execution of this little program — called the bootstrap program — loads the actual huge big program called the operating system and then the computer starts.

Education is all about loading the bootstrap program in the brain of a child. And after you have done that, the child himself is capable of loading the other bits of software required to do everything else, or what we call learning. The important point is that the bootstrap program has to be loaded first and it has to be very small and very efficient. I think that there is sufficient evidence around that the bootstrap program is very small. One only needs to know how to read and write (at least in one language), do a bit of arithmetic, and understand a bit of rudimentary logic. That is all that is needed as part of the “bootstrap” program. The rest does not have to be taught. The rest has to be learnt. To learn a subject is then just a matter of time and effort on the part of the student, given that relevant subject material is accessible.

I learnt a new subject. I had no prior training in it but I did my PhD in it. How? I knew how to read, how to do arithmetic, and how to think logically. The professors pointed me to a few books and a few papers. I pondered over them and spent some time in classrooms talking with my professors and more importantly with my peers, and I learnt the subject.

That is what I am going to do in education. First, teach a very small core set of skills: a language and some basic vocabulary, a bit of arithmetic, and logical reasoning. That is the sum total of the teaching. The next bit is learning and that is what the student will do. They will not be taught history or physics or geography. They will be pointed to the resources and they will learn what interests them by studying the material, cogitating about them and talking to others about it.

Has this happened before? Yes, numerous times and people have missed drawing the lessons. Let me take only one example. Abraham Lincoln had only a few books and had less than two years of teaching from informal teachers. No laptops, no access to the world wide web, no multimedia presentations, practically nothing. He learnt everything he needed to as he went along. Became a lawyer and then the president of the US.

Even an average person like me can do it. I estimate that I probably had in my entire schooling about 70 books — not very substantial books even. I am sure that the entire contents of those books can be put on a USB drive of about 256 MB with room to spare. Today it will cost you Rs 200 to store the entire information base that I constructed my high school education out of. I learnt not because I had gazillions of gigabytes of information at my fingertips, but rather because I had a reasonably small information set but I took the time to go through them a few times slowly, internalized them consciously, and discussed what I had learnt with my peers. I did not learn huge amounts of physics, mathematics, geography, astronomy, calculus, world history, moral science, civics, law, or whatever. I learnt only how to read, write, do sums, and think logically. But because I unhurriedly took the time to learn the small set of core skills, I was confident of my understanding of what I knew. The rest I picked up when I needed.

My method is therefore: teach the kids the basic bits in a relatively short time, perhaps two or three years. In those two or three years, give them instructions for maybe at most 3 hours a day. The rest of the time, they must not study. Then when they have mastered those basic skills — that is, the bootstrap program is loaded — let them have free access to a large set of high quality information in all subjects. And let them learn whatever interests them on their own. No teaching, only pointing to resources from this point onwards.

In software engineering, programs have bugs. To fix a bug, you put in what is called a software “patch.” When you do, the patch may cause or reveal some other bugs. So you need more patches. After a few years, the system is full of patches. Because different people have at different times patched the system, the system is hard to comprehend due to the complex set of patches. At some point, it may be better to scrap the entire heap and write an entirely new program.

Our education system has got too many patches. We need to re-write that one. The new program must be well-designed and one of the main design principles would be that it will be short. And because it will be a short and simple program, it will not have too many bugs. And if there are very few bugs, you will not have zillion patches.

The education system has become like the guy’s collection of 70 daily pills. The core problem is with the attempt to push too much insanely incoherent stuff into a child’s head. Then when the child is unable to learn – primarily because it is not appropriate for the child – more stuff is pushed at him. The pile keeps growing and the more the child struggles, the greater the burden placed on him. “Daily floggings will continue and even intensify until morale improves,” appears to be the strategy.

We need to go back to the basics because we are ruining the lives of millions of children. The teachers don’t know what it is all about and it is not surprising that they can’t help with education. Some of the most dearly held beliefs of this entirely patched system is fundamentally wrong. How many teachers actually believe that homework is good for children? About 99 percent of them, I would guess. Perhaps only one percent know that homework does no good and actually hampers learning. How many know that the less time you spend teaching, the more time the child has for learning?

Our problem is that we have lost our way. We have forgotten that education is not about competition or exams or endless hours of drudgery in classrooms and in tuitions, offline or online. It is about having an inquisitive mind, reading a little, thinking a lot and then talking with others. It is about the exercise of one’s imagination, not about rote learning. Not everything can be taught but everything can be learnt. We need to understand the futility of teaching and the desirability of learning. We need to make that distinction. In our obsession with teaching we have forgotten the core idea that it is about learning. My idea is to stop teaching them so that they can start learning.

It is a great thing for a university to turn out engineers and doctors in regiments. It is a fine thing for a given engineer or doctor to a mastery of his technique. But the highest tribute to a college is not to have produced masses of technicians with a perfect technique. It is to have stamped on its sons and daughters the priceless imprint of the reasonable mind. Just one such person—thoughtful in his judgments, fair in all his dealings, unruffled in his sweetness of temper, fearless because he has looked before and after and made his terms with life and death—just one such person may give light to a whole community. His spirit is beyond price because you cannot buy quality with any amount of quantity. And if he lives at an altitude hard to reach, we may remind ourselves, with Spinoza, that all precious things are as difficult as they are rare.

Here’s something you may enjoy listening to. A Scientific American podcast (mp3 download ~9.5 MB) on what it takes to become an expert. Anyone can provided one puts sufficient sweat into it and does so smartly over an extended period of time. So all of you who have small children, pay special attention.

The Expert Mind and the Interplanetary Bicycle Ride

In this episode, Phil Ross talks about what scientists have learned is necessary to achieve expertise in virtually any field. Ross’s article on the subject, The Expert Mind, is in the August issue of Scientific American. And Sheldon Schafer, who sports the title of Curator of the Solar System (a huge model of the solar system centered in Peoria, Illinois) discusses the Interplanetary Bicycle Ride, coming up on August 12 and 13. Plus we’ll test your knowledge about some recent science in the news. Websites mentioned on this podcast include Spectrum.IEEE.org; www.lakeview-museum.org; and the Scientific American Digital Archive, www.sciamdigital.com.

Anyway, you mentioned to me earlier that you feel choosing the right topics very carefully to influence young person’s minds can make a tremendous impact in understanding concepts. I think these QED lectures example serve as a Q.E.D. for that principle!

I post this email because in case you haven’t seen Feynman explain QED, you have to do so one of these days.

Even if one does not go all the way to meditation, I think it is good to sit and relax and do nothing for a change. Just stare at the grass growing. It could make you more creative or whatever. But one should not just do stuff for instrumental reasons, I believe. Sometimes one should do things just for the heck of it. Taking time out is a luxury and one should indulge oneself from time to time. It is the reward for having worked and earned.

Right now I would like to ponder this old article from the Guardian UK titled “What’s the big idea?”.

Time out feeds the quietness of mind that is essential to creativity.

Experiments have shown that creative people have different brain patterns when actively creative. Colin Martindale, professor of psychology at the University of Maine, conducted tests on what he calls the ‘inspiration and elaboration phases’ of the creative process. That is the ability to be receptive to ideas and inspiration, and then to be able to focus and work on those ideas. While all participants – both creative and non-creative – were able to apply themselves to the elaboration phase, only the creative people were able to relax their minds enough to dream and let things come to them during the inspiration phase. Part of the trick of creativity is being able to move backwards and forwards between these two states of mind. And while the more creative people couldn’t do this to order during Martindale’s tests, they intuitively knew when it was right to be relaxed and open-minded and when it was time to be focused and concentrated.

It is not impossible to learn how to be more creative. Experiments have shown that just by encouraging people to relax, you can increase the number of ideas that they come up with. Certain forms of meditation are effective as a means of learning how to enter a creative mental state – one that is relaxed and receptive but also awake and alert.

Essentially, creativity is all about learning to listen to the unconscious and being able to cultivate that relaxed and alert time that is typical of meditation and dreaming. Very creative people may be able to do this intuitively, but it is important to realise that we were all born with creative minds.

The piece resonates deeply with my own feelings about the goals of education. He says, “Life is a succession of big and little crises, and one main aim of education is to supply us with the strategies necessary for dealing with them. Furthermore, dealing with them thoughtfully may become a habit. Indeed, my thesis today is that if you have acquired that habit of reasonableness, you will have acquired the best thing that an education can bestow.”

Here are the concluding paragraphs of his address.

Begin quote.

I have been speaking of thought on practical problems, but we must remember that the great masters of thought had access to two worlds at once, the world of eternal truths and the world of common sense. The founder of that line was Socrates, who first showed to the race what condor flights of speculation the human intellect could rise to, and yet, homely as an old shoe, was a stonemason himself, at home with soldiers and sailors, farmers and carpenters.

That is why my last word to you is: Whenever you choose a vocation or a spouse, a party or a candidate, a cause to contribute to or a creed to live by—Think!

End quote.

PS: Read another essay by Blanshard about growing old. Quote: “In my philosophy of value, developed in my book, Reason and Goodness, the only thing in the world that has value is consciousness or experience, and the only experience that has value in itself is one that fulfills a felt need of our nature. If the felt need, the want, the interest is not there, the mind lacks yeast and will sag like a lump of dough, even if surrounded with stimuli. The rich minds are the yeasty ones that never stay put, not even at 70, or 80, or 90. Goethe was an example. “He achieved anyhow the greatest of all triumphs,” said Lowes Dickinson, ‘‘Which is continuing to live to the last moment instead of dying prematurely at 40 and then lingering on as a rather malicious and destructive ghost, as most of us do.” His last words were “More light!”

Why is Indian education system in the pits? Primarily for the same reasons that the Indian economy is in the pits: government control, indeed governmental stranglehold. It is instructive to see that wherever for whatever reasons the government has let go of the stranglehold (or was not involved to start off with), that sector has flourished, and how!

For example, consider telecommunications. In five decades of governmental monopoly the telecommunications sector had a base of 20 million users; now that the monopoly is released, we add 20 million users in three months.

Let me reiterate that: 3 MONTHS as opposed to 50 YEARS. Sure, technical progress (cellular technology) is a factor. But it is not the major factor. See the air transport sector in India. The seats go abegging now compared to earlier when you had to beg a bureaucrat to allow you to get a ticket on a plane. Consider the two-wheeler and the four-wheeler markets. You had to wait for 7 years to get a scooter, and you had to choose between 2 models of cars, models which were of 50’s vintage. Today the firms drag you off the street and arrange financing for you to buy one of the several hundred models of cars and two wheelers, and give you coffee while your loan is processed and give you a toaster as your drive off with your new car or scooter–all before you know what hit you. Compare 7 YEARS with one AFTERNOON. What happened? The government let go of its chokehold on that sector.

I could go on for a long while demonstrating why government intervention in the Indian economy explains why the Indian economy performs miserably. This background information is relevant in understanding whether OLPC makes sense in the Indian context.

Here is an abstract of my argument. Indian education suffers from government intervention and lack of resources. Resource constraints are both finanical and human capital. Furthermore, the limited resources available are leaked away through bureaucratic and political corruption and ineptitude. The major barriers are not technological and therefore a technological solution is not going to alter the situation. Indeed, the OLPC would make the situation worse in the Indian context, what I would call the “immiserizing technological intervention.”

First however allow me to state up front that I am all for the use of technology in education. The educational system evolved before the advent of the amazingly powerful technological tools of today such as TV, radio, PCs, the internet and the world wide web, html, java, and affordable multimedia. ICT provides the most powerful tools that can fundamentally change how education is provided efficiently and effectively. In fact, in my day job I am working on creating a system which uses ICT intensively to radically transform Indian education. I would be happy to share my vision.

I have learnt an immense amount using computers and the web. I would have loved to have a connected computer when I was growing up. Unfortunately, I saw my first computer only near the end of my undergrad work in engineering. It was a IBM mainframe. Punch card era. Anyway, I learnt reading, writing, arithmetic, and some other useful skills entirely from going to an average school with great teachers and a few books. The fact that I hadn’t even seen an electronic device till I was 20 years old does not seem to have hampered my education. Indeed, 99.99999 percent of all humans who have ever got educated have done so without the benefit of any electronic devices.

Electronics is neither necessary nor sufficient for education. Sure it is going to transform education but the lack of laptops is not the barrier that faces our educational system. Therefore merely providing laptops is not going to solve the problem. I will argue that the so-called digital divide is at best a misguided notion and at worst a device used by self-serving money grubbing powerful vested interests to milk the poor for all they are worth.

I will show that in the Indian context, the OLPC will in fact widen the “digital divide” and make the system far worse off than it is today. I will then outline the solution to India’s educational challenges. And I promise you that the solution will use technology intensively, only that it will have little to do with children toting laptops around the place.

Atanu:

I read your article on name change and I found it fascinating. Do you have a numerologist you could recommend? I’ve just written my first novel and I need to choose between my name and married name. Thanks so much.

All the best,
Novel Writer

Thank you kindly for any help.

In 1979 a sudden wave of unemployment hit Coventry school-leavers and prompted me to start Jobs for Coventry Foundation in order to give training to some of these youngsters. This was at the beginning of a problem which has affected the British economy for almost 30 years since then and which is only just being corrected by immigration — particularly the recent surge of 300,000 young Polish workers with the skills and, just as importantly, the motivation to work.

In the 1960s the government ran a very successful training organisation called Skill Centres under the Manpower Services Commission (MSC) which repeated something which the Army had discovered during the war years. This is that you can teach skills very quickly if you set your mind to it. Thus, in short six month training sessions, thousands of trainees every year learned skills such as milling, cutter-grinding, electrical work, plumbing, carpentry and building work and so on.

Skill Centres were brought to an end when the MSC discovered that, although the they were good at training, they were not very good at forecasting just what skills were actually needed. As the ’70s came the MSC could only successfully extrapolate skill shortages two or three years ahead. On top of that, the bulk of their end-users, the industrial firms, were rationalising or closing down fast, computerisation was coming in and the job market was changing in all sorts of mysterious ways.

But by closing down the Skill Centres the government threw out the baby with the bathwater and the civil service mandarins became infected with a quite new philosophy of education and training. This was that because it was difficult to forecast just what skills would be needed in the future, then the state secondary schools needn’t teach specific skills but “versatility” instead — without needing to worry about teaching basic skills such as maths or manual dexterity.

If anything, the scorn poured on manual skills by the middle-class educational establishment was even more serious than the lack of maths. Educationalists had still not learned from the neuroscientists that a disproportionately large part of the cortex was occupied by manual control and was thus importantly involved in overall intelligence or from sociological research that the children of skilled manual workers tendeed to be more intelligent than the average.

Nor did educationalists notice another phenomenon taking place before their eyes. Computerisation was coming in apace and software was being being led by youngsters who hadn’t even reached the sixth form at school and certainly long before university age. It took another 10-15 years before secondary schools and universities started putting computer subjects in their agendas.

What should this have taught educationalists? The same as the pre-1979 employment scene should have taught them. In those days parents were the chief agents in placing young people in work — in their own factories and many other places of work — because they were in touch with the real economy. Increasingly, the state education system was becoming isolated. Attempts at correcting this huge mistake are only just now being made with the launch of City Academies but the first results of these are not encouraging.

If we do some simple maths and multiply the 12 years spent at school by a factor of 3 to account for the length of the average working life, then the 7% of the children educated at private fee-paid schools comes to something like the 30% of the working population with the most interesting and important jobs — whether in the sciences, arts, media or financial services, etc — and the cause of the yawning income gap which is now occurring in most developed countries. We may also note in passing the curious phenomenon — until the Poles arrived! — that some of these privileged people were actually going “downstream” as it were by learning skills such such as plumbing and so forth because these niche skills were in desperately short supply and thus highly paid.

In adjusting to a new skill-world in which automation and massive Chinese imports continue to take traditional jobs away we need competition between schools and more choice by parents. Why should parents be trusted in buying better quality goods and services by means of competition but not in exercising more choice in schools? The educational establishment is gradually waking up to the need for more choice within the state system but this needs to be accelerated by bringing education vouchers into being and thus bringing parents into the process. There is nothing more inevitable than education vouchers but it’s about time that they were brought in before we are overwhelmed with youngsters with no future except crime and state benefits.

The most damaging thing India is currently doing to stay poor and divided instead of realizing its great potential of being a superpower is its politics of creating a new caste system and enshrining it in its constitution. . .

Unfortunately, the current government in Delhi is trying to enshrine a caste-based quota system in the educational system of India where your categorization based on the caste you were born into in pre-Independent India will give you a certain quota in higher education. This is in addition to existing job quotas based on similar considerations, different standards of your qualifications and performance in tests as well as your current economic status. In other words, an attempt to bring about forced equality of result instantly.

It may be called creation of a new Soviet-type system of equal distribution based on your caste. One cannot imagine a worse selection of historically failed ideas and social and political systems based on them. This is something India should do without if it wants to be a powerhouse economy and a great society in the future. Equal opportunity in building human capital is what is needed, not forced equality of result through discriminatory quota systems for various castes and religions that would inflict much harm to the future of India.

A much better and positive alternative is to create educational opportunities for all regardless of caste and history. An educational system that gives a full range of choices where equality of opportunity in a merit-based system leads to realization of one’s potential. That is the vision of the future India deserves and not a divide-and-rule caste-based potential to break up India.

Pretty close to what I hold dear: equality of opportunity, not equality of outcome.

“Suppose you have two integers, each between 0 and 5. You add them up. What is the range of their sum?”

“It can vary.”

“Sure, it can vary, but what is the largest possible value of the total?”

“Five.”

“I said sum, not average. What is the maximum possible value of the sum?”

“Five.”

[FYI, my original intention was to say these two random numbers were uniformly distributed and ask what the distribution of the sum was. This person had traveled to IIT by train, possibly using IIT money, to do an interview like the above, with the hope of doing a PhD some day. Your tax rupees at work here, folks. Lest you think there was a language problem here, I give another example below.]

“Consider the loops below:
for i = 1 to n
for j = 1 to i
loop body
How many times will the loop body execute?”

“n times”

“How much time does it take to sort n items?”

“Big oh of 1.”

["Uh oh"]

Let’s remember that this student has spent at least 16 years of his life in school (four of which in undergraduate studies). This is a telling vignette which is indicative of how woefully inadequate our educational system is.

Allow me a personal anecdote. Some years ago, my friend and thesis advisor Peter Berck at UC Berkeley requested me to receive a visiting faculty from Delhi University at San Francisco International. The visitor was coming to Berkeley for a summer teaching and research appointment. I went to the airport and hung about for about three hours fruitlessly. The guy was not on the flight.

Later that day I received an email from him from Delhi. It seemed he needed permission from some Indian governmental bureau to take up the summer appointment at UCB. They kept him waiting and denied him permission at the last moment. He did not get on the flight. He was severely disappointed as he was looking forward to being back, however briefly, in Berkeley where he had received his PhD.

Governmental policies matter. And they differ from country to country. Peter told me later that Israel not only allows their faculty to take short-term positions abroad, but that they actually encourage it. They give their faculty full pay even when they are working abroad short-term. They consider it a win-win situation: the faculty member grows professionally through contact with the outside world. The country gains because the terms of employment include the freedom to come and go as they please and therefore a professional is more inclined to work in the country.

I can imagine that really competent professors give up on trying to build a career in India after a few years of struggling with the bureaucratic machinery of India. Not only are the teachers paid poorly but to add insult to injury, they are arbitrarily denied the freedom to pursue their professional goals. The list of top-notch economists (just to take one small sample) that the Delhi School of Economics has lost to the US makes dismal reading.

The hollowing-out of Indian universities should be a major cause for concern. Without the foundation of great universities, it is unlikely that India will ever be able to compete in the world. We should take a break from patting ourselves on the back about how many BPO call centers we have and take a serious look at what ails our education system. Granted that many non-resident Indians are returning to India by the droves, at least as compared to before when the traffic was mostly one-way. But the picture does not look quite as rosy under even minor scrutiny.

The returnees are mainly those who come to India as ex-pats employees of multinational corporations such as Yahoo, IBM, and others. They are managers and executives whose contribution to the economy certainly cannot be ignored but is nothing as substantial as those of professors and researchers. If there is any flow which can be termed as “brain-drain,” it is the one-way migration of those who form the cornerstone of a modern economy, namely, top-class highly educated researchers and teachers, and who not just make the university but are the university. Ultimately they are the ones who train the thousands of bright young men and women who go on to build society in all its aspects—social, commercial, political, and educational.

Clearly, those returning are doing so for personal and professional reasons, just as those leaving are doing so. The liberalization of the economy from the clutches of the government has offered some degree of opportunities in India and thus the limited reverse migration of the managerial and executive class. That should give us a clue: to halt the migration of educators and indeed reverse it, what is needed is liberalization of the educational system. This may be equally, if not more, critical to India’s development as was the liberalization of the economy.

Liberalizing the educational system must begin with the dismantling of the bureaucratic control of the system. There are examples of countries freeing up their educational systems. New Zealand abolished their Department of Education and transformed their dysfunctional school system within a few years to one which is world-class. It is hard to fathom what good bureaucratic control of the educational system does in the first place. What do bureaucrats have to do with education anyway other than not allowing the moribund system from changing?

Bureaucracy rules in the Indian school system. Who is allowed to run a school, what is to be taught, who is allowed to teach, how much a teacher is to be paid, who is allowed to attend and for how long, who must be allowed to attend, how much can be charged—all these things are bureaucratically determined and no freedom of choice is permitted. The system lacks freedom and the not so surprising effect is the system is dead.

I am confident that Indians are no less smart than any other group. Indians are poor because they lack freedom to act, to perform to the best of their abilities. Given the opportunity, in free societies Indians do just as well as the others. It is time for Indians to build world-class schools and universities. It is time for Indians to have real freedom from the government of India, not just the political freedom won from a colonial power over half a century ago.

Right now, in the education sector there is severe competition for the market—a limited number of entrants are allowed. So there is limited competition in the market leading to high prices (and economic rents, part of which has to be paid to the operators of the state control machinery to gain their patronage). Limited competition in the market implies not just high prices but assures low quality also. The people, given the supply constraints, in desperation put up with high prices and low quality.

My prescription is simple. Allow free entry into the education business. Give absolute freedom to schools and universities to charge what they wish, to hire who they wish, to pay what they wish, and to admit who they wish. By allowing free entry in the education business, there will be no competition for the market. There will be competition in the market. Prices will reflect true costs and quality will improve.

One hears the argument that if you allow free entry, would not all sorts of shady fly-by-night operators open up schools and bilk the general public? Let’s paraphrase that argument a bit. If you allow anyone to open a bakery, would not people who have no expertise in baking open up shop and sell garbage to the general public and make tons of money? Now that is a stupid argument, is it not? After all, unless the general public is totally brain-dead, the bakeries with crappy bread will go out of business because given free entry, there will be other bakeries. It is only when the government hands out limited number of licenses for bakeries that the people don’t have any choice but to take what they can get from government licensed bakeries.

Of course, one must distinguish between different levels of education. First, there is primary and secondary education: all, irrespective of their ability to pay, must have access to that. The government must help those who cannot pay by financing their education. School vouchers is the mechanism. The government must not be in the business of running schools—whether primary or secondary.

Next there is college education. Again, the role of the government is limited here. For those who cannot pay and are credit constrained, the government should guarantee educational loans which are given by financial institutions.

That’s it. Get the government out of the education business. And within a generation you would have India really shining in education.

At its most general, cell phones are a subset of information technology tools. Of course, IT tools have a hoary history and a very large family. They include carrier pigeons, smoke signals, tom-tom drums, marathon runners, the telegraph, landline phones, radio, TV, satellites, the internet, and so on. As time goes on, the IT tools become more efficient. Compared to smoke signals, cell phones are more handy, can be used on dark and stormy nights, and are considerably less polluting.

Cell phone technology—more generally information technology—is definitely a gift of the gods when it comes to India’s economy. Sure IT enables the employment of thousands of Indians in BPO and call centers. But that accounts for a very small part of the Indian economy. The greater gains are when IT use is tightly integrated into the economy as cell phones have become in India. Yet, in some sense, what we have seen is only the first act of a three-act play. There is much more to come and if we at Netcore are correct, the mobile web will have an effect on the Indian economy similar to the one the internet had on the US economy. You ain’t seen nothing yet.

I appear to have gone off on a tangent. Sorry. I was telling you about the Murky News (as we like to call Mercury News) report. What caught my eye was a quote by Rajesh: “The next Microsoft, Cisco or Google of the world is going to come out of countries like India …” If I had a dollar for every time that I have heard Rajesh say that, I would be pretty well off. OK, maybe not well off, but I could certainly buy myself a neat gizmo. Anyway, the question is, how likely is it that the next MS or Google will come out of India?

One way to address that question is to ask what factors lead to the creation of a Google or a Microsoft and whether those factors are present in India today. The Silicon Valley in California is an incubator for world class innovative technology companies. Why is that? Perhaps it has something to do with the presence of world class universities. The August 21/28th issue of Newsweek has an article titled “World of Knowledge” which focuses on education and global universities. Newsweek’s ranking which shows “that the world’s top 10 includes eight American universities plus Oxford and Cambridge.” It goes on to note that “of the next 40, 22 are American, five are British, five are Swiss, three are Canadian, two are Japanese, two are Australian, and one is Singaporean.”

Curiously, the combined populations of the countries that account for the top 50 global universities in the Newsweek ranking approximate the population of India. Not one of the 272 universities in India figures in that list, however. Four of the top 10 universities are in California. Stanford (established 1885) ranks 2nd, California Institute of Technology (est. 1891) is 4th, UC Berkeley (my alma mater, est. 1868) is 5th, and UC San Francisco (est. 1873) is 9th.

Of the top 50 universities, 30 are American. Is it any wonder that the US leads the world in innovation and technology? And of the top 10, four are in California. Is it any wonder that within the US, California is the home of the Silicon Valley? Not just that, Yahoo!, Google, SUN, and a whole host of lesser known global firms have been born at Stanford University. Something in the water in northern California? Or does it have something to do with the universities?

[Just as an aside, I should add that UC Berkeley, my beloved alma mater, is a much better school than Stanford, which one must remember is after all a “junior” university. “Leland Stanford Jr University” if you must know the full name of that school. Mind you, I don’t have anything against Stanford. I slummed there for a year as a Reuters Fellow, as it happens. Stanford can’t be all bad compared to UC Berkeley, is what I say. Go Bears! ]

My proposition is that world class innovative firms are built upon world class universities. And world class universities don’t spring forth fully formed like Athena out of Zeus’s head over night. It takes time to build them. I deliberately noted the dates of establishment of the various top universities. They are institutions that have a very long lead time. Time is an important factor. Admittedly they are built on real estate but the most important ingredient in the recipe for an university is ideas and ideals. Ideas and ideals come from very smart inspired people with acute vision.

So to me the sequence appears to be this: people with vision create universities in a conducive environment created by wise government; over time, the universities become centers of excellence; finally the universities give birth to Googles. Miss any of the elements in the sequence, and you will not find a Google, no matter how hard you search nor how devoutly you wish.

It is clearly possible that the next Google will come from India. It is not the possibility that is doubted. The question is how probable is it? It is always good to distinguish very clearly between “possible” and “probable.” It is possible but very highly improbable that the next Google will be out of India. Why? Because none of the links that form the mechanism for creating a Google is available in India.

Still, it is not too late. If we want India to produce excellence, we can get started on it now. It will take a 100 years or so, but then sometime we have to make a start. I am sure that we have visionaries in India. Next we need wise governance. Given the current political leaders, this one is a very difficult order. But let us hope and pray that one day we will become collectively wise enough that our government (which is a reflection of our collective will and wisdom) will be good. And then it will become not only possible but probable for India to give rise to a Google. I look forward to that day.

What sets ITJ apart is not the fine 18th century hacienda in which the Mexico City campus is housed. What distinguishes ITJ is one word: values. The values of the founders form the foundation upon which the school is built and it is no surprise to learn that the school has been recently judged to be the best school in Latin America.

I visited the Mexico City campus for two days and got the opportunity to talk to students, faculty, staff, and of course got a lot of time to talk with Ricardo. I know that Mexicans are warm and hospitable people. But Jeanene and Ricardo were exceptionally generous and welcoming. I was their house guest. It is possible that my opinion of ITJ is colored by my genuine regard for them, but I think I am sufficiently objective to recognize excellence when it comes to matters of education.

It has been two months since my visit to ITJ. From time to time, I have pondered how to best describe the school. I think I have it: dynamic. The school’s attitude of dynamism reflects the essential aspect of the world we live in, a world of growth, of advancement, of constant striving towards goals and ideals.

Here is just an aspect of that attitude. There is a department in the school which focuses on attempting to predict what the world is going to be like 15 years hence. It is what I call a “look ahead” – try to discern what is the world going to be like by the time the kids entering the school today graduate. By doing so, you can better prepare the students to meet the challenges of the world to be.

The “look ahead” program is called “Vision 2020”. ITJ uses in-house staff as well as experts around the world to make educated guesses about the skills that will be valuable in the future. Thus, for instance, the kids learn how to effectively use video conferencing; or the use of the best technology tools. They learn not just the subject matter but also the use of the most effective tools. Heard of “mental maps”? They use it at ITJ at the elementary level.

Talking of experts from around the world, I must mention that I was introduced to Ricardo and Jeanene by Dr Gordon Dryden. Gordon is a dear friend who is the best-selling author of the book “The New Learning Revolution” (which made publishing history by selling over 10 million copies in less than a year when it was released in China.) Gordon lives in Auckland, New Zealand. Gordon visited ITJ as an expert.

What Ricardo stressed to me is that more than anything specific, they teach values. And how to be a good, effective, thinking person. They have a program which teaches how to effectively express your emotions. Subject matter is well and good but you need to teach kids interpersonal skills. They teach the kids to “STOP, THINK, and DO.”

The atmosphere in the school was one of happiness. Whenever I entered a classroom, I was greeted by eager faces. They were confident and did not shrink from expressing themselves. They posed for the pictures and told me excitedly about what they were doing in class. And they greeted Ricardo with affectionate hugs.

I asked Ricardo about discipline issues. They don’t have much of an issue. Why? Because the kids are given a very large space to explore but—and here is the important bit—the boundaries are extremely well defined and everyone knows what the boundaries are. There are no surprises and there is no arbitrariness in what is allowed and what is not. This makes immense sense. You must have freedom to be before you can learn. But that freedom has to be within the confines of well-understood mutually agreed upon rules. Transgressions mean immediate dismissal from the school.

Are there specific focus areas for various age groups, I asked. Yes. In the Kindergarten years, the focus is on love and affection. In the primary school, they stress basic knowledge. In the junior high years, it is values and interpersonal relationship skills; in senior high, it is leadership. Thus they have a model UN at school. Teaching teamwork is a core goal. So is high critical thinking skills.

Creativity matters to ITJ. They have a strong theatre program and every year they stage a Broadway play. I saw some pictures of the plays they have staged. Professional quality.

They do things in style. For example, in KG, while learning about, say, marsupials, the kids will then take a virtual tour of a zoo in NY or in Australia through video conferencing and interact with people in remote locations.

Ricardo was especially proud of their science curriculum. The school has taken the top three places in the National Contest for Chemistry. It has featured in the top 10 in the last nine years. They have video conferencing with NASA astronauts. ITJ is definitely the sort of place (unlike some school districts in the US) where evolution is taught. ITJ seeks out the best. It has relationships with Harvard University, and joint ventures with universities in Florida and California.

Though my visit was brief, it was as enjoyable as it was instructive. I got to meet wonderful people. Mariana and Ivana (whom I have mentioned before here) were great. So was Carlos who drove me around in the notorious Mexico City traffic. I had a short visit to the famous Museum of Anthropology. During that visit I saw the biggest flag I have ever seen in my life. Mexicans obviously love their flag but this one at the military academy was the mother of all flags: it must have been a 40 feet tall and 100 feet across.

I close this one with gratitude to all who gave so generously of their time during my visit to ITJ. Thank you.

(Pictures of my visit to follow shortly.)

First, it is very gratifying to note the volume of emails I received. I will, time permitting, respond to all of them. For now, I think it would be proper to answer some frequently raised questions.

1. Is it related to rural development and/or RISC?

No. The education venture is about education, not directly about development, rural or urban. It is a purely business venture where the primary goal is to make a profit and give investors a return on their investment.

It is a for-profit enterprise. Private for-profit investment has to be part of the solution we desperately need for educating the millions who have the ability to pay but due to supply constraint are priced out of the market.

2. What kind of people are we looking for?

This is a start-up. All start-up conditions apply. Such as, you have to fully understand what the whole business idea is and you demonstrate that understanding by quickly catching on and even extend the idea or suggest meaningful modifications to it.

Needless to say, every employee in the start-up phase will have a stake in the company.

3. So that is the big idea?

Provide an end-to-end managed service to educational institutions which will make education more effective, efficient, and relevant.

The service will be to provide all educational content (rich, multi-media, massively hyperlinked across domains) and tools (learning, teaching, testing, evaluation, teacher training, administration, reporting), and the technology platform to host the content locally and to access it.

4. Why would educational institutions use the service?

The service will use technology intensively. Like all appropriately used technology, it will reduce the costs for existing and new educational institutions.

It will be costly to develop the ICT-based solution which will be at the core of educational institutions but given that there are hundreds of thousands of schools in India, the average costs can be brought down low enough to make quality education a reality for tens of millions of Indians.

5. Isn’t everyone and his brother talking about ICT and education? In what way is your idea different?

In a number of ways. Firstly, it is not PC-based. It does not call for hundreds of PCs in schools, nor laptops for kids. It provides the technology platform on the school premises and everyone accesses the content on site.

Thirdly, it does not create content; it aggregates existing content and tools. Indeed all components of the system are taken off the shelf and assembled into a general purpose — and therefore flexible — solution which can be used across a broad spectrum of educational institutions.

6. Where will be the company be located?

The head quarters are likely to be in Pune, India, and all full-time people will be located there, at least initially. People who are located outside Pune (whether in India or abroad) but who wish to be associated part-time can also be accomodated. There are no rules. If you can add value, you are welcome to join.

Remember: the idea is to do a good job, have fun, and make money (exactly in that order.)

~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~

If you are interested in learning more, please email me. I would appreciate it if you would include a brief biography with some specifics relevant to the context. (Some people have neglected to tell me who they are and why they are interested. While I appreciate their brevity — “Tell me more.” — it would be useful to know a bit more for having a meaningful conversation.)

The University of California, Berkeley is the preeminent public research and teaching institution in the nation . From classic literature to emerging technologies, the curricula of our 130 academic departments span the wide world of thought and knowledge. Supported by the people of California, the university has embraced public service as an essential part of its mission since 1868. The content on this page —drawn from campus seminars, courses and events—is just one part of UC Berkeley’s commitment to the broadest possible dissemination of knowledge for the benefit of our state, the nation and the world.

As it happens, I am writing this from Giannini Hall on the UCB campus where I spent seven wonderful years learning economics. I am visiting my alma mater for a couple of days.

[Thanks to Bhargava Swamy for also sending me an alert on this one.]

India has an astounding number of schools: more than one million by some estimates. But it is deeply disappointing that over ninety percent of India’s children drop out of school by the time they reach the 12th standard. Of the small percentage that actually go on to college, very few graduate as professionals.

It is quite impressive to note that 350,000 graduate out of colleges every year. Yet the quality of our colleges are so dismal that only about 15 percent of our graduates are employable. It is sad that after spending nearly 8 percent of GDP in education, the system is a disastrous failure to the vast majority of the people of India.

And yet we hear of the immensely successful NRIs who had their undergraduate education in elite institutions such as the IITs. Clearly the system has worked for this tiny minority as spectacularly as the system has been a tragedy for the overwhelming majority.

To explain the failure of the system, one has to start at the beginning. The criminal neglect of primary education starts with the involvement of the government in providing primary education. Universal primary education is too important an activity to be entrusted to corrupt and inept public sector bureaucrats. To actually deliver a quality product most efficiently, the only option is vigorously competitive private sector participation in the provision of not just primary education, but all levels of education.

It is true that the private sector will only serve those segments which have the ability to pay. The role of the government is therefore to support financially those who don’t have the ability to pay on their own. Then the poor will also constitute paying customers for the competitive private sector educational institutions.

The operative word is “competitive” – competition must not merely be allowed in the private education sector, it must be actively encouraged. Only through the forces of competition would the immense task of making education available and affordable to all be accomplished.

There are a number of distinctions between the way the private sector operates and the way that the public sector operates: the private sector firms are constrained by hard budget constraints and have to operate at a profit. They can only make a profit if and only if the benefits of the service which they provide exceeds the cost. Private sector competition ensures that the profits are not super normal.

To survive in a competitive environment, private sector firms are forced to innovate. Innovation which is sorely required in the education sector will be missing as long as the government is involved in it. Monopolies in general don’t have an incentive to innovate, and it is a theoretical impossibility (supported by empirical evidence) for a public sector monopoly to innovate. As long as the government has a monopolistic control over education, there is little hope of innovation.

The policy prescription is straightforward to state. First, liberalize the education sector and not merely allow but actively encourage private sector participation and competition in education. Second, provide need-based financial support for universal education up to the secondary school level. Third, provide loans to all those who qualify for enrollment in higher education. Fourth, for those who do not qualify for higher education, provide channels for vocational education.

The educational sector is ripe for innovation. The most appropriate innovation will be the use of information and communications technology (ICT) tools. There have been phenomenal advances in ICT. More than any other sector, education can benefit from it because ICT has the potential to reduce the cost of providing quality education. The use of ICT in education will be as fundamentally transforming as the invention of books was in the previous revolution in education.

Books reduced the cost of education because they could conveyed information across time and distance, and were cheap to reproduce. Books were an innovation compared to the system where humans had to be directly involved in the transmission of knowledge. The time has now come to replace books with its cheaper alternative: information in digital form. Among the great advantages that digital information has over books is that content can be far richer than mere textual information: now it is possible to have hyperlinked content in the form of audio, video, text, and graphics.

It is easy to predict that education will be transformed by the use of ICT tools. There are huge potential commercial gains and at the same time, there is the opportunity to do good. We are only constrained by our imagination.

The stories we tell each other reaffirm to us our shared humanity. The best ones are the ones which have been told over millennia, have evolved organically, have encapsulated the wisdom of thousands of tellers of tales.

The quintessential story is The Mahabharata composed long ago in our part of the world. “What did my sons and the sons of Pandu do, O Sanjaya, when they assembled together on the holy field of Kurukshetra, eager to do battle?” the blind king Dhrtarastra asks Sanjaya, and thus beings the Bhagavat Gita, the story within a story whose enormity is matched by its complexity. Listen and you will learn.

Listen to the world’s epics, for one has to listen, not just read. The human voice is essential for over evolutionary time our brains have evolved for extracting meaning from what we hear. Listen to all the great epics such as the Ramayana, the Mahabharat, the Odyssey, and Illiad.

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Each of us is intimately familiar with our own story. Is it not that knowing which leads us to know ourselves? And if I were to tell you my story, and you were to listen, would you not also know who I am? So to know the world, we need to listen to the stories of the world. There are an infinite number of stories, told and retold, over the thousands of years that humanity has found a voice. We humans are the tellers of tales, spinner of yarn which weave dreams.

To know is to know the story. To be able to convey meaning, you have to be able to tell a story. To teach is to be able to tell a story which makes sense to the listener, the student. To learn is to be able to listen to a story and extract meaning from it. “Once upon a time …” is the beginning of the process of teaching and learning. “Thus have I heard …” is how the communication of wisdom begins.

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For ever since I can remember, I have associated learning with stories. Since childhood, my best teachers have been those who have had the gift of telling a good story. My grandfather was one such. In high school, our English teacher was another master of tales.

When I was struggling with the formulation of my PhD thesis, my advisor told me, “Tell me a story. If you can tell a story which is interesting, you have a PhD thesis.” It was indeed that simple.

Can you tell a story, with a beginning, a middle, and an end? Can the beginning make me wonder about something, which you expand on in the middle, and by the end, you have taught me something that I did not know? If so, you have created a story which is an original contribution to the sum total of human knowledge. You have a PhD thesis.

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He holds him with his glittering eye
The Wedding-Guest stood still,
And listens like a three years’ child :
The Mariner hath his will.

The Wedding-Guest sat on a stone :
He cannot choose but hear ;
And thus spake on that ancient man,
The bright-eyed Mariner.

I have learnt a lot (I think) over the years. But only a very small part of it was during my years of formal education. The majority, I believe, I learnt outside the classroom. Of that, I am convinced that I have learnt a lot from TV and radio. It is easy to understand why this is so.

The best TV programs are those which aim to entertain first, and then inform. To inform you have to first hold the audience’s attention. That is what public TV (US mainly) programs such as Nova did. The creators of those programs know how to capture your imagination. Like the ancient mariner who stops the wedding guest and makes him “listen like a three year’s child,” those programs force you to pay attention and you learn without meaning to.

My TV teachers are numerous. I explored the Cosmos with Carl Sagan; I learnt the Connections which bind the history of science and technology with James Burke; I learnt of creatures great and small and of our place in Nature with David Attenborough; the list goes on. Philosophy, science, technology, history, economics, art, music—there is hardly a subject that I did not learn about just from watching TV. And from listening to radio.

TV and radio did more for me than all the time I have sent in classrooms. Why? Because TV and radio told me stories. And I was interested in the stories because they told me interesting stories. Without intending to, I learnt. And therein lies a lesson.

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If I were in charge of designing an educational system, my focus will be firmly on gathering the best stories and telling them to anyone who wishes to learn. There is no subject on the face of the earth which cannot be told as a story, and most importantly, as a combination story of mystery, drama, thriller, adventure, and even love.

School will be a place where you go to listen to stories. You would have to drag children away from school to get them to come home. The stories will be so entertaining that you feel happy, and relaxed and excited, and without your knowing you begin to know.

Behind every known fact of the world, every scientific discovery, behind every advance in medicine and technology, every progress in the arts, is a story the principal characters of which are people. And people are connected with each other. Learning their stories and their connections teaches us the connections that exist in the world. We can only comprehend the word as a connected whole. Parrots can be taught to repeat a set of disjointed facts but that has nothing to do with comprehension. Humans needs stories that make sense to comprehend the world.

The stories I would tell would be connected to each other. They will be hyperlinked. Reading one of Tagore’s poem with a reference to the monsoons of Bengal, you move to the story of how the monsoon weather pattern encircles the globe; or you could move to the history of Bengal and its culture and people; or from weather pattern you could move to learn about global climate change, and then to global warming, then to energy and resource use, to industrial revolution, to the economics of global trade, and so on.

No subject is immune to learning from a good tale. The electron has a story associated with its discovery. It is not so important to know what the exact amount of charge an electron has, as to know who figured it out and what an ingenious method he used and what were the principles involved which made the discovery possible.

Statistics can be extremely dry. But not if you start with the story of gambling and how odds had to be calculated. Start off with the mystery of how they (whoever they are) figure out how many people there are in a country without having to count every one? Tell them of the mystery first, then add the drama of the importance of solving the mystery, then relate the adventure that was the process of trials and errors, and then the thrill of finding out.

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It is easy to tell stories these days. And people like good stories well told. That is why the movie industry is so huge. Tens of millions of dollars are spent in crafting a two-hour tale of wonder and magic, and then these are watched by hundreds of millions of viewers.

Hollywood (and its numerous wannabe’s) mostly turn out frivolous mindless junk for sure. But it is still an industry which uses the most advanced technologies to entertain.

Education must have at its core stories if it has to teach effectively and efficiently. The technology exists and the talent exists. We just have to be smart enough to bring it to those who need to learn.

I have come to the end of my tale. Perhaps a tale told by an idiot, full of sound and fury, signifying nothing.

Be well, do good work, and keep in touch.

Watch that video. I am doing so right now as I write this. Here is a bookmark: around time-stamp 6:15, he talks about the distinction between knowing a thing and knowing the name of the thing, which his father taught him. That idea keeps bouncing around in my head. Much too often our education system concentrates on naming things and not so much on understanding the nature of the thing. Feynman was an absolutely amazing teacher because I think he was an absolutely amazing student. It was from his father that he learnt to observe and after observing, ask questions.

This is very important and I wish to highlight it. First you observer, feel puzzled, and then you ask questions. And the amazing thing is that you can ask questions that nobody knows the answer to. Watch the video around the 7:00 time stamp to see what I mean. He notices how the ball moves and asks his father why it does what it does. His father’s answer is illuminating. He starts his answer with “Nobody knows …” and then teaches the young boy a deeper lesson that merely naming something is not sufficient.

He was a moral person. His contribution to the success of the Manhattan Project caused him pain eventually because he believed that his continuation with the project even after Germany has surrendered was an immoral act. Only a morally courageous person has the capacity to judge an action of his as immoral.

Around the 20 minute time-stamp, he talks about how the freedom he had to do what was fun for him and was not under any pressure to do “good work” that he was relaxed enough to do the work in QED which won him the Nobel Prize.

I take that lesson very seriously. You cannot produce stuff of any value when you are under pressure. Nobody can think deep thoughts while fighting fires. That is why those who went up the mountain as mere humans, after a few years came down the mountain as sages. Academic freedom is important and so is financial freedom. Why doesn’t India produce fundamentally good work? To a large extent, I believe, it has to do with the environment in which Indians in India have to do things which is the equivalent of fighting fires: worrying about where the next meal is coming from.

Feynman talks about science and what it means to him. His attitude is one of wanting to find out what the world is like. He says that he is not frightened of not knowing and is comfortable with doubt and uncertainty. He knows that he doesn’t know and is not ashamed to admit it. It is an attitude that is fertile with the possibility of learning because it affords one the joy of finding things out.

My interest in that interview arises to no small extent from what he says about teaching. I interpret his position to be that the process of learning is not “one size fits all” and therefore different methods and techniques will work on different people.

Which brings me to my favorite topic: how can education be made more effective? By making the system more flexible, more “learner-centric,” more broad to appeal to the broad spectrum of talents and interests that people exhibit. The technological tools exist today which can make possible a fundamentally different method of teaching and learning.

I am aware that I am learning all the time. I am sure that I did some learning during the many years I spent in formal educational institutions. But I am convinced that I learnt much more afterwards. As someone said, “learning is what happens when you are busy doing something else.” That I think is the key. If you are busy doing something that interests you, then as a side-effect you will learn.

For the past few days, I have been scouring the web for content on Physics. It is part of the work that I am involved in: figuring out what is out there available on the web that can be aggregated to form the comprehensive core of an education in Physics. While doing that, I have learnt a lot more than I had anticipated. It will take days for me to simply begin to state what wonderful things I have learnt, and so I will not even begin to do so. There is simply too much stuff out there.

I did a search on del.icio.us tag “physics” and found 21,895 links. Just going through the first few pages of links has given me more things than I could reasonably do in a week. It is a problem of plenty, of an absolute affluence of information. Where there is a problem, there is an opportunity. But more about that later.

For now, just a few examples. Want an amazing physics textbook absolutely free? Here is the Free Physics Textbook . Want to do physics simulations? Go do it at MyPhysicsLab or at the Interactive Physics Simuation site.

In a very strong sense I envy the kids of today who have access to the web and can afford the time to learn from the stunningly large repository of content. Thirty years ago, the average kid could have had the experience of watching Feynman’s interview while sitting at home. Today that ability is nothing special to those who have a broadband connection and a computer.

When I was growing up, I was lucky to have good science teachers and I suppose some adequate textbooks. But I can well imagine that had I had the content and the tools available absolutely free on the web today, then I would had a lot more fun learning, and consequently learnt my lessons better.

But what about the hundreds of millions who don’t have computers and don’t have broadband connectivity? What can we do for them? The technology is there but the affordability is not. It is too expensive in time and money to identify and access the phenomenal amount of educational content and tools. The answer to that problem is a no-brainer – which is why I have figured it out.

People cope, somehow. When faced with severe shortage, they are willing to pay seemingly impossibly high prices. The monumental struggle to somehow gain access to the limited seats in educational institutions that middle-class Indians have to face is stunning to behold. The pity is that this shortage is entirely man made, a manufactured shortage. The persistence of this shortage can only be explained by understanding that those who have engineered it gain immensely from it. It is a bureaucratic and political racket that has its own logic and compulsions. All sorts of shady businesses have evolved to cater to its needs. Academic corruption is one such business, as illustrated by the next anecdote.

A friend, Anil (not his real name), who I had gone to school with came over one evening to my sister’s place to visit with me. My sister’s son had just finished his 10th grade exams and Anil started discussing his son’s 10th standard exams with her. Anil said that he had “to do some fielding” in his son’s case. What the heck was that, I asked.

It seems that he got an anonymous call a week or two after the exams. The caller said that Anil’s son was not doing too well in two subjects, and offered to have it taken care of for Rs 25,000. Anil was apprehensive, like pretty much all parents, that his son may have not done too well in some subjects. Not willing to take the risk of having his son fail, he agreed to pay the amount. Did the caller say which subjects, I asked. No, all this is very urgent and one does not go into the finer details, said Anil.

The 10th grade board exams are critical. Parents are willing to be party to deep corruption because they are unwilling to risk failure. The number of seats in good junior colleges (11th and 12th grade) are seriously limited. Miss a good junior college and you may end up not getting to a decent college. Your life can be ruined if you don’t get good grades in the 10th board exam; and if you are afraid that the grades will not be good, you could try to ensure that by paying some shady operator who would fix the grades. That is called “fielding.”

Corruption is a basic fact of life in India. It is fairy simple to understand why this is so. India is a socialistic economy. Socialism is short for “shortages.” Shortages imply high price. Generally the list price is far below the “market clearing price” and the gap between the two is bridged through a payment in “black.” The degree of socialism in a sector is correlated with the amount of shortage, and the amount of shortage is correlated with the amount of corruption. It is an unholy trinity: socialism, shortages, and corruption.

In a recent report (from the World Bank or some such organization) claimed that the education sector was the most corrupt. The amount was around Rs 27,000 crores (or US$6 billion) per year, and it was more than the figure for corruption in politics, bureaucracy, police, organized crime, etc. (I don’t have the reference handy and will update this later. So don’t quote me for now.) I am not surprised at all.

Corruption is a corrosive and it poisons the blood of the economy. But it is a symptom of a deeper problem: shortage. Most shortages are engineered. One way to manufacture an artificial shortage is to declare something illegal. The US experience with prohibition epitomizes this. The resulting shortage gave rise to massive corruption. Another way to manufacture shortage is to exercise monopolistic control in the supply of goods and services. The government of India is a past master in this variety of manufactured shortages.

Monopolies are capable of tremendous damage to an economy. Over the centuries, people have figured that where possible, monopolies must be broken, and if for some reason they are dictated by economic logic, then monopolies have to be regulated so as to mitigate some of the harm they would otherwise do. The regulation of monopolies naturally falls as one of the roles of the government. Clearly, the government cannot be expected to break up or regulate a monopoly business if the government itself is the monopoly supplier.

The lesson is then clear. The government of India must get out of the business of education and it must constitute an independent regulator which will make the rules for the private sector provider of educational services. Furthermore, the education sector will gain immensely from allowing foreign institutions to do their business in India. Corruption will be a thing of the past as soon as the shortages disappear.

It is time to stop the insanity of government mandated shortages. If logic is insufficient to persuade us that corruption is a consequence of shortages, there are many significant examples in recent history where this was demonstrated. When will the masses rise up and revolt against the socialism in the education sector?

It is interesting to note that the author himself is a member of the OBC group.

If you haven’t had proper schooling and if you are just airlifted into an IIT by virtue of your scheduled or backward caste, you will be a miserable misfit in the intellectually and socially elite IIT atmosphere. You cannot cope with the courses; you cannot speak the campus lingo. You feel ostracized, intellectually and socially. I am saying this based on my decades of long experience with such students at IIT. Even after special coaching for a year at IIT and being exempted from the dreaded Entrance Examination, the SC/ST reserved students cannot perform. Often they require further academic concessions, albeit unethical, to barely pass the courses. It helps nobody, least of all them. I do not know what happens to them in their post-IIT life; some commission should study it. But I doubt whether many second generation SC/ST IITians make it to the IIT directly through the JEE.

It takes enormous, dedicated, and sincere effort for decades on the part of the government if quality universal school education is to be provided to all, as decreed by the Constitution and as Independent India has miserably failed to deliver in over 50 years. But it is far easier to shortchange and hoodwink the SC/STs and OBCs by making a legislative flourish of the pen offering useless, humiliating backdoor entry to them in the Institutes of higher learning. This political gimmick even distorts the meaning of ‘higher’ learning.

Further

If segregation is a legislative imperative, I suggest that it is better to have it on different campuses, rather than on the same campus. That is a win-win, 100-100 reservation situation. The SC/ST, OBC, BC and FC all having their own IITs with 100 per cent reservation, not only for students, but for faculty and staff too (why stop at students?). Maybe we could thus have healthy academic caste wars. Each group on its own racetrack.

The criminal neglect of education, in my considered opinion, is the most important charge upon which the policy makers of India stand indicted. An entire generations of Indians have lived and died since independence—a reasonable estimate would place the number around 500 million humans—about half of whom were illiterate, not just uneducated. The lost potential is stupefyingly mind boggling. How many Ramanujans and Einsteins have they condemned to obscurity and waste, how many did not even see the insides of a school or learn to read, write, reason and do arithmetic?

The answer would break the heart of any thinking human being.

It is time for a full disclosure. My interest in education is not merely academic. I want to transform the current system, which is outdated, outmoded, irrelevant, inefficient and ineffective. Shameless plug follows: if you are interested in working with me in creating the educational system of the future or know someone who may be interested, do get in touch.

Back to the criminal neglect of education. Not only did they—those who were in charge of Indian policy—not create an educational system that works, they are now busy figuring out a way to sabotage a system that seems to sort of work. I am talking about the recent announced policy of increasing the reservations for scheduled castes and tribes, and for other backward classes (SC/ST, OBC—as they are termed) in the institutes of higher education. I have expressed some of my views here (see Indian Reservations, and Imagine No Reservations). This piece is an elaboration of the basic theme. My assessment is that it is madness. Whom the gods would destroy they first make mad, observed old Euripides. I worry about the upcoming destruction of the Indian educational system, which if carried out efficiently enough, effectively dooms India.

Here is a recapitulation of my argument from the previous pieces. Reservation in higher education institutions for SC/ST and OBC candidates is idiotic. The better alternative is to help disadvantaged people—those who I label “sufficiently poor”—with resources so that they can afford an education. If that is done, then even the poor will have equal opportunity to be able to compete and find their place in the world. Assuring equality of opportunity is mandated but equality of outcome is not only not mandated but is an objectively silly goal to aim for.

There are disadvantaged groups and many of these groups have been historically discriminated against. An absolutely valid argument can be made that these groups need help to redress past injuries and injustices. The question is not if they have to be helped, but rather how. Are reservations in higher education the way to go? The answer is no if even after securing admission they are ill-prepared to make use of the opportunity.

I have spoken to faculty members at IITs who have recounted that most quota candidates have to face an uphill struggle and many give up after a few years. It is not that the quota candidates are intrinsically inferior; fact is that they did have the disadvantage of not having had a decent schooling. The only quota candidates that actually do well are those from the upper middle class. One medical college dean revealed that as a last resort, he gets quota students who don’t make the grade to swear that they will not practice medicine and will only take on administrative jobs (there are job quotas there, too), and only on that condition does he pass them so that they exit the system without loss of face.

Let me once again stress: the children of disadvantaged groups are not naturally incompetent. It is the lack of opportunity in the earlier stages of the educational system that handicaps them in the later stages. The playing field has to be leveled at an earlier stage of the game. The solution therefore is not reservations at the higher education level but assistance at the school level.

The question of why reservation in higher education for disadvantaged groups is irrelevant is plain if you do the arithmetic. Even if you do 100 percent reservation in the elite institutions, at most you will have something of the order of 10,000 seats. This is an insignificant number relative to the total number of students in the disadvantaged groups—which is of the order of tens of millions. Indeed, compared to the potential demand for higher education, the actual supply is laughably insignificant.

The IITs attract 300,000 potential students and admit around 5,000. To a first approximation, nobody gets into an IIT. The wide gap between the supply and demand is bridged by a system which has evolved into a grotesque caricature of competition. To enter one of the IITs, there is an exam called the Joint Entrance Exam (JEE). The objective of the exam is not to test whether a student is qualified to study at an IIT but rather to weed out about 98.5 percent of the candidates because the IITs are capacity constrained. This leads to enormous economic loss, and at time loss of human lives.

Let’s dwell on the JEE for a bit. Markets work, as we economists are prone to declare at the drop of a hat. Given the supply constraint, the market response is an entire industry which prepares students to do well in the JEE. So there are coaching institutions which charge an arm and a leg to help a student do well in the JEE. It gets surreal when you realize that to get into one of the more successful coaching classes, you have to appear for an admissions test. So, here is the deal: you have to pass an admissions test to get into a coaching class which will prepare you for the JEE so that you can get into an IIT. What next—that there will be second- and third-order coaching classes? That is, you will have to appear for a test to enroll in a class that will help you take the admissions test to get into a coaching class which prepares you to pass the JEE.

Here is the economics of this surreal system: an IIT education is worth, say, Rs 100 lakhs (around $220K). But the total private cost is only Rs 5 lakhs. So the “profit” is Rs 95 lakhs. So even if you have to pay Rs 5 lakhs to increase your chances of getting into an IIT, it makes sense. That is therefore what the market delivers: high priced coaching classes. About one hundred thousand go to coaching classes and of these about 5,000 make it to the IITs. The 95,000 who don’t make it have to lump it, and some even take the extreme route of killing themselves. Why? They realize that their parents have spent money they could not afford to send them to coaching and they failed their parents.

Let’s take stock. 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.

For now, here is the hint: barriers to entry. What are they, why do they exist, and how can they be removed? That I will do in the next piece. Stay tuned.

The situation today would have been unthinkable then. Now dealers of two-wheelers practically drag you off the street, give you a cold drink, and by the time you have finished it, they have arranged financing and you roll out the door on your new bike clutching your free gift of a toaster oven. Then your choice was severely limited to four or five models; now a reasonable estimate must be a hundred different makes and models of two-wheelers.

There is no shortage of examples of shortages, some of which persist till date. One plausible answer to why these artificial shortages were engineered is rent seeking by those who were in charge of handing out the licenses and quotas. Where the government was the monopoly provider (as in air and rail transportation, telephone services, etc), shoddy quality, inadequate quantity, high prices, high costs, commercial losses, and institutional corruption was the norm. In those instances where private sector providers were allowed, the entry was limited and rent extracted by introducing competition for the market. When firms have to compete for the market, competition within the market is limited and results predictably in low quality, high prices, and shortages.

Here is a thumb rule to figure out if the government is involved in a particular endeavor. Is it characterized by poor quality, shortages, high costs and prices, and corruption? If yes, then the government is involved; if no, then the government is most likely not involved in that business. Let’s apply the rule to electrical power since I am sitting here on Sunday afternoon with no grid power, a regular feature of daily life in Pune. The backup generator is on.

Poor quality: check
Severe shortage: check
High price: check
Corruption (“T&D losses”): check
Null hypothesis: government not involved
Empirical evidence: null hypothesis rejected

I leave it to the interested reader to apply the rule to other instances and test it. The cumulative effect of government involvement in all those sectors gave the Indian economy what I call the “Nehru rate of growth” with a long run annual average of 3 percent or so. India’s poor economic performance—and the resulting poverty—is due to poor economic policies. India is poor out of choice.

For now, I will move on to education in general, and in particular the matter of reservations in higher education, a matter we have visited before here. By the 12th standard, the drop out rate reaches an astounding 94 percent. Of those who finally graduate out of college, only around 15 percent (or, one percent of the those who enter grade one) are employable, leading to a severe shortage of qualified college graduates. The sheer economic waste of human resource is the greatest scandal that very few people pay any attention to.

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.

On average, fewer than two out of every one hundred who appear for the entrance exam for IITs get admission. If you were to choose the top two percent of any population, the average quality of that group will be a few sigmas higher than the population average. The IITs turn out good students because those who get in are good to begin with. Then for four years, these way-above average kids compete fiercely among themselves for grades. Finally, from this bunch of super-achievers, those with the highest grades and potential are snapped up by the best American universities. By the time these graduate out of the American universities, they are the crème de la crème who have self-selected themselves for intelligence, drive, ambition, and vision. We read about them as the Silicon Valley millionaires and billionaires, and pat ourselves on the back for having a wonderful educational system.

That is most definitely not so. The dysfunctional Indian education system is the saddest and costliest example of governmental ineptitude and malfeasance. The solution to the problem of the Indian educational system has to have at its core getting the government to let go of its chokehold on the system.

The question then is: what exactly is the problem with the government? My answer is that it is a mentality of scarcity and poverty. It does not believe (and here I am guilty of anthropomorphism) in abundance. It treats the citizens as if they are incompetent children who will not be able to work out solutions for themselves without the patronizing paternalism of the socialistic control of every aspect of economy.

There is one apparent paradox: if the government does not allow economic freedom, why does it allow political freedom? Would it not make more sense to restrict the latter and relax the former? I believe that the paradox is solved by the realization that most of India is abjectly poor and illiterate. Lack of economic freedom over generations cause poverty and that leads to illiteracy as well. Poor, illiterate people cannot meaningfully use their political freedom. Indeed, it is easy to politically manipulate very poor illiterate poor people for electoral gains. Promise them free electricity, free TVs, free land, and they will vote you into power. I am not making this up since I am neither that cynical nor that imaginative.

Is there no role for the government in the education sector? Yes, there is, but it is severely restricted to three functions:

• First, funding (but not the provisioning) of universal education up to high school level
• Second, providing an independent regulatory authority for the higher education sector so that private firms can compete fairly on a level playing field
• Third, providing educational loan guarantees to banks

Sufficiently poor people cannot afford to send their children to school. The total cost to them includes not only the direct cost of going to school but also the opportunity cost of the lost earnings of the children. But since the total life-time benefits of a high school education must exceed the total cost of that education, there is a role for the government to subsidize the education of the sufficiently poor. But the government should not run primary schools. It should leave that to the competitive private sector. Give vouchers to the poor which they can use to pay for the private schools. This is not rocket science and pretty much all possible problems can be anticipated and proper mechanisms designed to fix them. (I will be happy to do this separately.)

The role of the government in higher education is simply to ensure that private providers of education compete fairly. The government must empower an independent regulatory body. Independence is important so that politically motivated interference into higher education is minimized.

There must be no subsidies for higher education. Higher education, for all intents and purposes from the point of view of an individual, is a private good. That is, the private benefits of higher education exceed the private costs. Sure higher education also has positive externalities (and therefore has public good characteristics), but that externality does not have to be internalized by subsidizing higher education for those who are rich enough to afford it.

But what about those who cannot afford higher education even though they are qualified for it? The answer is that they have to be given loans by banks and these loans have to be guaranteed by the government. The basic point is simple: the credit constraint that the poor face with regard to higher education can be released with little effort. This the government must do and if done competently, it will take only one generation for the every poor family to become non-poor.

Let’s see how this would play out in the case of a hypothetical “sufficiently poor” family. Abhi and Anu’s parents are daily wage earners who need the Rs 10 each kid earns every day to keep the family going. So sending them to school where the tuition fees and other school related expenses are Rs 400 per month per child is out of the question. Their total cost of sending a child to school is Rs 400 plus the foregone earnings of Rs 300 per month.

So the government gives vouchers that Abhi and Anu use to pay for the privately run school in their neighborhood that they attend. And on top of that, the government gives the parents Rs 600 every month as long as the kids continue in school. Net cost to the family: zero.

All the way to finishing high school, Abhi and Anu continue to receive free schooling and the parents are given an incentive to continue to keep the kids in school. By the time they finish 12th grade, both Abhi and Anu are as properly schooled as any other kid from a middle class family who are not poor. As it happens, Anu is the bright one and she wants to go to engineering school. She appears for the entrance exam and clears it. It is not an entrance exam to select only a small percentage of a huge pool of qualified students. It just ensures that the student has the required motivation and skills to study engineering. She is bright and is well prepared and she gets in. That is not surprising because about 75 percent of those who apply do get to study their subject of choice. Her brother, Abhi, is into medicine. Same story as his sister: a simple entrance exam to test for eligibility and he is in.

But then they are still poor. So they go to one of the several banks and show proof their acceptance and the bank gives them the loan that they need to go to college. When they graduate from their professional courses, they will pay off the loans with interest. Their children will not be requiring support from the government at all. Only one generation needs help.

Not just that, no one is even remotely interested in knowing the caste of anybody. If you are qualified, you get to go to college. If you are poor, and have admission, you get a loan.

Imagine there is no reservation; no one cares what caste you are; no one denied a chance to study and learn because of lack of money. (Sung to the tune of John Lennon’s “Imagine.”)

Imagine if I stopped here for now. And carry on some days later. Wouldn’t that be wonderful?

Allocating quotas and reserving seats for economically backward classes (and for other historically discriminated and disadvantaged groups) in higher educational institutions is economically inefficient, morally wrong, strategically flawed, and tactically ineffective. The policy does not help the underclass and ends up victimizing both the underclass and the so-called privileged class. The policy epitomizes what is called a “lose-lose” solution, while foregoing a “win-win” situation.

A general observation is in order here. India is an extremely poor country of over one thousand million people. This state of poverty could not have come about without India following a consistent set of economically flawed policies over a substantially long time. Persistent and widespread poverty is a consequence of asinine policy choices, just as much as prosperity is a consequence of wise policy choices. Since the mindset which in the past consistently evolved and doggedly pursued illogical policies has not changed, it is reasonable to expect (after all, we are all Bayesians) that any proposed new policy is also going to be flawed. To move beyond the clichéd observation that a proposed policy is idiotic, one has to look inquire into the different ways in which it is so, and that is what I propose to do here. Later on in this series, after pointing out the specific ways in which the policy is flawed, I will outline the solution which will evolve naturally enough once we have understood the problem in detail.

Observing the Indian educational system brings to mind John Maynard Keynes’ skeptical definition of education as the inculcation of the incomprehensible into the indifferent by the incompetent. I would extend it by defining the Indian educational system as a structure created by the incompetent and uneducated to produce more of the same sort of people. It is a system which ensures its survival through self-replication.

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.

Now on to the specifics of why quotas in higher education for disadvantaged groups is bad policy. First, the economic efficiency argument. All economic policies create gainers and losers. If the gainers gain more than the losers lose, then it is theoretically possible for the gainers to compensate the losers for their loss so that after the compensation, the losers are not any worse off than before and the gainers are better off than before. Such a policy effects what is a called a “Pareto improvement” and is therefore an economically efficient policy. Conversely, if the losers lose more than the gainers gain, then the policy is economically inefficient and there is an overall welfare loss.

Quotas, if they have any effect on the system, effectively replace qualified candidates with otherwise unqualified candidates. Unqualified candidates who enter the system are by definition unable to benefit from the opportunity to the extent that a qualified candidate would have done. The quota candidates are unable to compete within the system. Aside from the welfare loss in terms of wastage of real resources, the quota students suffer psychologically as they fall behind their colleagues who are better prepared for the academic rigors. They are looked down upon by those who “earned” their place in the school. (I say “earned” because it is strictly not so, as I will explain later.) This reinforces the perception—within both groups—that the group which enjoys the quota is intrinsically inferior. This is perhaps the most pernicious of all the unfortunate effects of a quota system in higher education.

This brings us to the point why quotas in higher education for disadvantaged groups is morally repugnant policy. It penalizes certain people based on their group membership. Discrimination based on caste, creed, origin, color, etc, is morally wrong. So is reverse discrimination. The right thing to do is to remove discrimination, not impose it from up on high. If, for instance, a person from a certain caste is not being allowed to enroll because of his caste, then the right policy is to remove that barrier. If students from economically backward classes were being denied admission despite being qualified, then the policy response should be to remove such discriminatory practices. Since it is not the case that qualified candidates of economically backward groups are being discriminated against, imposing quotas for them is not the solution.

So then, what is the solution? Pardon me for repeating my mantra (precisely why it is called a mantra—it is repeated) that before one can propose a solution, one should understand the problem. Here are two facets of the problem:

1. Seats are limited. If they were unlimited, you would not need a quota for anyone. They are limited because the government does not allow free entry into the higher education business.
2. Students from certain groups are unable to gain entry into the supply constrained system, and once inside they are ill prepared to compete within the system. If they were qualified, they would not need quota protection in the first place, and would be able to compete once there.

Both aspects of the problem need to be addressed by any proposed solution. The quota system addresses neither. The real solution has two main thrusts. First, get the government out of the business of controlling the supply of higher education. There are real opportunities for commercial establishments which will eagerly enter the business of education if allowed to do so. I use the phrase “business of education” advisedly since higher education should be a business like any other supplying a service which is essential for the larger economy and should yield a profit.

The second thrust is has to do with sequencing. It is undeniable that certain segments of the population are ill prepared to compete for seats in higher education. They are not intrinsically inferior in any sense; they are not naturally stupid. The fact is that they have not had the opportunity to prepare themselves for higher education. The solution therefore is that they have to be provided help in preparing for higher education, which basically means that they have to be given assistance at levels that precede higher education. They are handicapped at the level of higher education because they are handicapped at the earlier stages of education. If their handicap in the school level were addressed, you would not have to make special provisions for them in the post-school levels. This should be evident to the meanest intelligence, it would appear, but then perhaps our policy makers don’t make even the meanest intelligence grade. This is the most charitable explanation of why the minister in charge of education has not figured out this elementary point. The less charitable explanation is that the minister is a cynical opportunist out to ensure his re-election by giving out worthless gifts to unsuspecting victims of his own ambition.

This brings me to the point of whether those who compete on their merit have “earned” their place to enter these institutions of higher education. Sure, they have had to work hard at school and learn their lessons instead of goofing off. But they were lucky enough to have had the opportunity of going to good schools because their parents were rich enough to afford them. While commending them on their hard work (to the extent they had to work hard), it is important to keep in mind that they were privileged in having the opportunity which are not available to those who come from the backward classes. Much of the outcome rests on the luck of the draw which dictates which socio-economic class one is born into, and that fact should induce some degree of humility in those who protest that their merit is not being recognized as a result of the quota system.

The disadvantaged segments of the population are not disadvantaged only in their ability to gain admission to higher education, they are disadvantaged in all levels of education. The solution then is to help them with providing them opportunities in the lower levels first. Equality of opportunity at the lower levels (primary, secondary, and high school levels) is a necessary and sufficient condition for the disadvantaged segments to have a shot at competing with the others. Equality of opportunity is to be desired and can be engineered, but of course that does not guarantee equality of outcome. The policy makers need to understand the distinction between the equality of opportunity and the equality of outcome: the former is a necessity for social justice and can be obtained, while the latter is neither possible nor desirable.

At this point you would forgive me for repeating my other mantra: distinguish between the causes and symptoms (or consequences), and address the causes, not the symptoms if you want to solve the problem. The inability of backward classes not being able to compete in gaining admission to higher education is a consequence, not a cause of their backwardness. The cause of their backwardness lies elsewhere (which I will not go into now) and so by forcing them into higher education will not magically remove their backwardness.

Quotas, as I claimed earlier, are economically inefficient. Assume that the full cost of, say, a 4-year IIT education is $50,000 (or about Rs 22 lakhs). Further assume that a quota student ends up benefiting less than the full cost, say, $10,000, while a non-quota student gets at least $50,000 of benefits. The net loss is then at least $40,000. Instead of wasting $40,000 on one backward class student at the IIT, if the money were spent school education, 20 students could have been educated (with an average spend of $2,000) and out of which perhaps one would have been sufficiently bright enough to gain admission in the IIT on merit and subsequently compete within the system as well. This is the tactical flaw with the quota system: they have the sequencing wrong, and instead of creating more opportunities at the school level, it tries to equate outcomes at the college level.

To summarize: the fact that IITs and IIMs don’t have sufficient representation from some economically and socially disadvantaged groups is a symptom of a deeper problem. Therefore merely increasing the numbers from these groups by fiat will do no good, and indeed may end up harming the groups. I will outline the solution of the underlying problem in a subsequent post.

Let’s start off with a specific case of a specific activity and explore it to lend support to some general points. At the risk of sounding ego-centric, I will use my education as the activity. It had a cost – both private and public – and it has yielded (and will continue to yield) stream of benefits both private and public. First, the costs. There were some private costs which were borne by my family. They spent their private time and money out of their pockets to pay for part of my education. I too spent time; time which has an opportunity cost. I could have been doing some menial work and adding to my family income instead of going to school. That needs to be added to the account for the private costs.

Aside from the private costs, there were public costs. My family did not pay full price for my education. The government picked up part of the tab. Of course, the government did not actually pay since the government does not have a private source of income. The government took resources from others and subsidized the cost of my education. In other words, the general public paid for part of my education and I think the major part of the cost was paid for by the public. I, and indirectly my family, benefited from this subsidy which was achieved through a transfer of resources (taxes.)

Adding up the private and public components of the costs gives us the “social” cost. A rough estimate of the private costs in my education is (in today’s terms) about Rs 1 lakh (or $2,000) and the public costs around Rs 60 lakhs (roughly $140,000). The public subsidy, I estimate, was around $60,000 (five years in engineering and a masters degree in computer sciences) given by the Indian taxpayer, and around $80,000 given by the taxpayers of NJ (I studied computer science at Rutgers for 2 years) and CA (got my PhD in economics at Berkeley). The social cost of my education was mostly public, therefore, since very little of it was private.

{Disclaimer: The numbers are approximate and the exact figures do not materially alter the conclusions I wish to draw. Also, it may be tedious to go through all this, I assure you that there is a point to all this.}

Now on to the benefits. Like the costs, the benefits can also be distributed as private and public, and the sum of the two is the social benefits. The private benefits are easy to account for. Had I not acquired the skills during all those years in school, I would not have been able to earn the mega bucks (just kidding) I earn today. Let’s just say that the difference between my lifetime earnings I would have had had I not gotten all those degrees, and the expected lifetime earnings after the degrees is perhaps in the millions of dollars – far greater than the private costs of around $2,000. The returns to the private investment in my education, thus, is not just positive, but astoundingly positive.

What about the public benefits? Because of my education, I am a more productive worker and hence create more stuff than I would have had I not been educated. Though it is hard to quantify, I add some amount of wealth to society. It is trivially true that I must add more wealth to the society than what I am paid as salary. This is so because what I produce must be worth more to my employer than my salary. (I am fudging just a little bit because otherwise this already long discussion will become even longer.) The difference between my salary and the total wealth I produce is what is the public benefits of my existence. Add the private and public benefits, and we arrive at the social benefits.

Now here is the punch line. If the social benefits exceed the social costs, then society is better off investing. And, if private benefits exceed private costs, then a private person is better off investing. In my case, both conditions obtain. Society is better off for having subsidized my education and my family is better off for having invested a little in my education.

This brings us to the stage where we can do some “what ifs.” What if, for instance, private costs exceeded private benefits but the social benefits exceeded the social costs? Clearly, society would have benefited from the activity, but the private person would not have undertaken the activity. That is, the private party is unable to “capture” sufficient amount of social benefits to offset the private costs. The policy prescription is then that society must subsidize the private costs so that the net benefit to the private party is positive.

Illustrative numerical example:

* Private Cost: $1,000
* Private Benefit: $800
* Social Costs: $2,000
* Social Benefit: $8,000

The private person will only lose $200 if he makes that investment. But if he does not make the investment, then society will lose $6,000, the net benefit to society foregone. So it would be better for society to give a subsidy of at least $201 so that the private costs come down below $800. Note that giving this subsidy does not change the net benefit to society. By reducing the private cost, society gains $6,000.

The other “what if” is more important and has tremendous relevance for a country like India. What if there is a credit constraint? Let’s do the numbers again but this time have benefits exceed costs in both private and social accounting.

* Private Costs: $1,000
* Private Benefit: $4,000
* Social Costs: $2,000
* Social Benefits: $8,000

Clearly, the private person will invest and society will be better of for that. But what if the person does not have $1,000 to invest? Then the person will not do the investment and society will have a net loss of $6,000. The policy prescription is therefore simple: loan $1000 to the person to invest in the activity at an interest rate such that the total interest cost is below the net private benefit.

If you have stuck with me so far, I think it is only fair that I conclude this one for now with this thought. People do gain net benefits from investing in education, and so does society at large. In our case, we who are fortunate enough to be surfing the web and reading blogs, we have the money to invest in education or we have been privileged enough to get subsidized education, and are reaping the benefits of that education. But unlike us, the poor are credit constrained. They too would privately benefit from investing in education, and society too will benefit from having them being educated, but as it happens, the poor cannot afford to make that investment.

The way forward is straightforward: give loans to people so that they will invest in education.

The next time I will go into where the resources for these loans should come from, and why it should be priority number one.

It depresses me that our society is so poor that it makes criminals of ordinary citizens. It all begins at the top levels, of course. For getting votes from particular segments of the population, the government has various entitlement programs. If you belong to a certain caste, you are entitled to this or that. As if the society was not divided enough, the divisions are legally strengthened and enforced. Instead of abolishing caste, the government cynically entrenches those divisions and hands out goodies depending on the caste of the citizen.

It has come to such a sorry pass that the government in some states has (indirectly) gotten into religious conversions: there are moves under way to reserve seats for people from “minority” religions – which is of course Islam. In effect, only a Muslim can occupy a seat reserved for a Muslim in an educational institution. And like the case where my associate was wondering if he should declare himself an SC or ST to allow his son to have a shot at those reserved seats, it would happen that people would convert to Islam just so as to have a better chance at getting into that school or to land that job. I suppose it is the pinnacle of secularism – the Indian variety – where the government gets into the business of promoting a specific religion so as to get more votes from that vote bank.

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Shortages – the excess of demand over supply – can be engineered and predictably profited from. In the absence of shortages, the opportunity for excess profits (called rents) disappears. Monopolies can restrict supplies and thus extract rents from consumers who have no recourse. When the government gets into being a quasi-monopolistic supplier of goods and services, it can engineer shortages for profit.

There are shining examples of government monopolies (and government sanctioned oligopolies) and its attendant short supplies, high prices, poor quality and deep corruption. With liberalization, some of these have become history, and predictably the corruption, the rents, the shortages and corruption have disappeared. There is one very big sector where the government stranglehold still extracts blood out of the population: the educational sector.

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The guy had worked hard. Not just the guy, his family had practically put everything on hold for the big event: the interview. They all worked hard to prepare him and spent months worrying whether he will get through or not. In the end, the big day came, and after the test followed by an interview, the guy got rejected. The entire family was devastated. The mother broke down in tears. Her three and a half year old son would not be unable to attend the lower KG school because his performance in the entrance test and interview was not up to scratch.

Imagine: a 3-year old kid being put through tests and interviews to get admission in kindergarten. It is surreal the way people consider this a normal state of affairs.

I am told that there are schools where you can pay an advance to reserve a seat for your yet to be born children. It is surreal. Supply constraints induced shortages do have that effect. Not too long ago, people used to apply for telephone connections for the households of their children – households that would materialize in ten years or so when the children grow up. The waiting time for a telephone connection was about that long.

Why was the waiting time that long? Because, the argument went, telecommunications is a vital sector of the economy. Therefore, the government had to be the monopoly supplier. Why? Because only the government could be trusted to provide such a vitally needed service. The result was long waiting times, shoddy service, corruption—and most damaging of all, astronomically high social welfare losses and an economy which had one of the lowest teledensities in the world.

The telecommunications story has a happy ending. The monopolization of the sector was ended, the private sector was allowed to enter, and suddenly you could get yourself a telephone connection within days, if not hours. Instead of bribing someone to please let you have a connection, the telephone companies fought to have you as a customer. Phone call prices (both local and long distance) used to be one of the highest in the universe; now India is one of the cheapest – if not the cheapest – places on earth to use a phone.

Private monopolies are bad. But I think that government monopolies are more damaging because they are more difficult to dismantle. Governments are made up of people, and it is very difficult for people to give up power and control. For in the end, it is power and control that motivates people in government to keep meddling in areas where the government has no business to be in. The story is very old: restrict supply, extract rent.

There is a reason why I am weaving the telecommunications story with the education story. The former can teach us a thing or two about why education in India is in shambles, and also suggests the solution.

This I will go into the next time. Stay tuned.

To meet the challenges of the different world we live in compared to the one for which the existent educational system was designed, we have to fundamentally rethink the educational institutions. Merely tinkering with the system will not suffice. However much one modifies a bullock cart, one cannot transform it into an efficient fast all-terrain vehicle.

The fact that our age is characterized by high technology is both a challenge and an opportunity. To participate in today’s economy, one needs not only to be literate and numerate, one has also to be fully competent to use the technology. Fortunately, it is technology itself which can help in the transformation of the educational system.

Here is a short list of specific problems that plague the system and a brief suggestion on possible solutions.

1. Financially too costly. If money was no object, then the tens of millions who need education could be accommodated with ease. A good education is affordable only for a vanishingly small percentage of the population. The costs can be brought down by substituting the most costly factor: teachers. Use ICT (information and communications technology) as a substitute for costly teachers.
2. It wastes too much time. The current system does not efficiently use time. It should not take over a decade to provide students with the basic foundations of a good education. It can be done in much less time, so that the student has more time to build upon that foundation. Greater specialization of the economy requires that the foundation be laid more efficiently so that more time is available for specialization. The recommendation is to reduce the time spent in the foundation to about 8 years and allow five years for specialization, to arrive at a fully qualified employable person by age 20.
3. Students are overburdened. The few who are lucky enough to be in school, have a pretty hellish life. They have very little free time, between attending classes, doing homework, going for “tuitions” and so on. A lot of disjointed information is thrown at them and they are never able to fully comprehend what it is all about. The solution is to reduce the amount of information that the student is fed, and instead motivate the whole exercise of learning so that the student spend more time internalizing a comprehensive coherent set of information. The system has to allow the student more free time.
4. The system is inflexible. It does not encourage creativity and does not reward individuality. The system must be made ‘student-centric’ instead of ‘teacher-centric.’ The student must have the freedom within to system to follow the path that is most natural and which is consonant with his or her talents.
5. The system is supply constrained. The competition to enter the limited number of educational institutions is fierce beyond description. In the scramble for limited seats, a very large number do not get a chance at getting an education. The supply has to be increased.
6. Credit constraint. Even after the supply is increased, individuals have to be able to afford the quality education. The returns to education are positive. Which means that those who cannot afford the education due to credit constraints are unable to get the returns of education. The solution is therefore to increase the amount available for loans and to massively subsidize primary education.

Education is the master key which can unlock the potential of the nation of over a billion people. If we continue to neglect education, all our efforts in other spheres is likely to be in vain.

They follow the International Baccalaureate Organization’s curricula. About half their students are Indians and the others are the children of expatriates working in multinational firms in Pune.

It is the kind of school that if you have to ask what the tuition fees are, you probably cannot afford it. With only 167 students, it is as exclusive as it is expensive. The annual fee is mind-boggling—to me at least—over half a million rupees a year. The top fees is Rs 5.7 lakhs ( approximately, US$ 13,000) and the one-time fixed cost is Rs 3 lakhs.

I visited them for a few hours yesterday. The Director of MBIS, Mr Michael Thompson, is English. Over coffee and biscuits he explained what the school was all about. Later we walked around and had a look at the neat little campus nestled in among a lot of IT companies in the industrial area called Hinjewadi. Infosys, Wipro, and others of that ilk are beautifully laid out in what is called the “Rajiv Gandhi IT Park.”

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The Mercedes Benz school is very far away from where I live. Physically it is about an hour away, or about 30 kms on the other side of town. In a very different sense, it is farther away from me. The school that I went to when I was small had a fees of Rs 70 a year, undoubtedly somewhat subsidized by government grants. The MB school is about 10 thousand times as costly. Even accounting for inflation, I would say that the MB school is about a thousand times more expensive than the school I went to.

>>>>>

Why is everything in India named after the Gandhis? The huge national park in Borivali in north Mumbai is called the Sanjay Gandhi National Park. Did not know that Sanjay was a great nationally renowned nature lover. If I had not known better, I would have figured that he must have been the John Muir of India.

Pretty much half the things around India are named after the Nehru-Gandhi family. What astonishes me most is when educational institutions are named after the family which does not have a single graduate degree among the whole lot of them. Not that they could not afford to go to college. No, they all attended colleges and attempted to get degrees but failed to get one.

On second thoughts, given the moribund state of the Indian educational system, perhaps naming educational institutions after the luminaries of the Nehru-Gandhi family has a certain aptness to it.

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The kids in the Mercedes Benz schools were having fun. One large group was having their lunch in the school cafeteria. A smiling, happy, noisy bunch of I guess 8 to 10-year olds. We walked past another bunch which was evidently the school chorus and band. They were led by a couple of music teachers, one a Canadian-Indian and the other Danish. We looked around the classrooms and the labs and the library. Everything was neat and tidy.

I regretted not bringing my camera with me. But then this school was very similar to the very upscale schools that I had visited during my recent visit to New Zealand. I had pictures of those schools and this one was in no significant way different from them. I made a mental note that I would have to write to Gordon Dryden, mine host in Auckland, who had taken us to all the schools in NZ.

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Since I don’t have a car, I had rented one for my visit to MBIS. On my way back, I was thinking about what I had seen. A world that I live very far away from. Education that costs every year the equivalent of 30 times the annual income of the average Indian.

The traffic on the way back was, needless to say, absolutely horrible around the Shivajinagar area where they have been doing some road construction work for the last two years or so. The dust and the din is awful and makes one wonder what went wrong that we have to suffer this.

But I should not complain. In the stopped traffic an old man with a very shriveled face appeared at the driver’s side. I dug into my pockets and handed the few coins I had to the driver to give to the old man. He turned away with gratitude on his tired face. On my side of the car then appeared a little girl, about 7 years old. She had in her hands a couple of packets of Q-tips.

I shook my head to indicate that I did not want any. But she pleaded with her eyes, asking for some help. Usually I carry about fifty rupees in change to give as handouts but I was out of change. My wallet I recalled had only one-hundred rupee bills. I was not totally sure that I had any lower denomination bills. For some reason, I was against giving out a Rs 100. But I did not want to reach for my wallet and check. If I had done that, it would have raised her hopes, only to be dashed if I did not give her any money after all. I sat there feeling miserable shaking my head no until she gave up and went to the next vehicle.

>>>>>

Life is a random draw. She should have been in school, doing singing practice or perhaps having her lunch with a bunch of her friends talking loudly. Instead she was barefoot in the dusty street breathing in car and diesel truck exhaust for hours hoping to make enough money to survive another day to do the same the next day. Her parents had produced her and somehow she had survived the neglect so far to reach this age. One day, perhaps in less than 10 years, she will herself get into the role of producing more like her.

This is a sector of the economy. The labor sector. They reproduce themselves very efficiently. They survive on very little. They work in the dust and the heat and in dangerous conditions. Around where I live, the construction industry is booming. Huge apartment complexes are rising up as thick as forests. I admit that since no trees are being planted, this is a substitute forest. Anyway, the laborers toil away with no protective gear. Twisted steel bars used for reinforcing concrete they handle with their bare hands. Bare-footed, they wade into a pool of cement. Their children walk among all the rusted steel bits, barefoot.

>>>>>

There are lots of IB schools coming up in India. Pune itself has about a half dozen. Education is really big business. And for education to be really delivered well and efficiently, it has to be run like a business. Currently education is supply constrained. I am hoping that sufficient providers enter the sector so that the increase in supply will drive down the prices and competition will increase quality.

>>>>>

When I look at the vicious cycle of poverty that the majority of India’s children are caught in, I have only one hope and that is education. If we can educate just one generation fully, we have some hope of solving India’s problems. That is the challenge but given the uneducated leadership, I am afraid that it may not come to pass.

During the last ten to fifteen yeras, there has been a tremendous advancement in Science and Technology, which has affected the quality of human life to a great extent. The future citizens of the country can reap the fruits of this advancement if they are conversant with different aspects of Science and Technology (sic) …

I spent some time looking through the book. It is distressing to see the awful quality of the book. The sujects are totally unmotivated and lack coherence. The matter is dry and in some places actually wrong.

It is a book about science and technology. Nowhere do they even ever try to distinguish between the two. In the section called “Evolution,” it even gets the basic fact about Darwin’s contribution to evolution wrong. I cannot actually do a full review of the book because it is too depressing for me. But I have confirmed my suspicion that it is the poor quality of the teaching material that is partly to blame for the dismal quality of our educational system. Of course, lousy teaching also compounds the problem.

I am working on figuring out a better way of delivering education.
I have written a bit about it on this blog. More to come later.

But before I go, I cannot resist the temptation to add some humor in this rather tragic subject. The science text book for grade six is called “Science Ahead.” The authors are Anton Siromani and Vandana Tirath both of Delhi Public School, and E Doris James of Sacred Heart High School in Chennai. I mention these worthies by name deliberately.

Right in the start of the book, they have a page titled “Famous Scientists.” The page has a dozen or so pictures of notables of scientists from around the world. They are, in the order of their appearance on the page, JC Bose, CV Raman, Homi Bhabha, —–, Archimedes, Galileo Galilie, Issac Newton, Michael Faraday, Madame Curie, Albert Einstein, Alexander Fleming. I leave it as an exercise to the reader to fill in the blank Indian world-class scientist. The answer I will put in the comments.

Post Script: Here is the answer to the missing scientist.

Education has something to do with learning, which in turn has a relationship with knowledge and understanding. The raw material for knowledge is information. Somehow in the human brain, information properly processed and internalized results in knowledge. Somehow the whole body of knowledge further gets processed into understanding.

I feel that there is an optimal amount of information that any given brain can process into knowledge, and that this optimal is less than the maximum capable of being absorbed. It is like calories derived from food: the maximum possible is far greater than the healthy amount.

Processing of knowledge for understanding requires time and effort, just as time is needed for internalizing information to acquire knowledge. Since time is a ultimate binding constraint (you cannot release time constraints unlike all other constraints), what time you spend in internalizing information (gaining knowledge), you cannot spend in understanding. Knowing too much is as much of a hindrance to understanding, as having too much information is a barrier to knowing.

It was in Hermann Hesse’s novel Siddhartha that I got a lot of hints about the nature of understanding. For example, in the final chapter called Govinda (here is a handy copy), the relationship between searching and finding is discussed. Govinda says that he has been searching for a long time but has not found the answers. Siddhartha says:

Perhaps that you’re searching far too much? That in all that searching, you don’t find the time for finding?”

“How come?” asked Govinda.

“When someone is searching,” said Siddhartha, “then it might easily happen that the only thing his eyes still see is that what he searches for, that he is unable to find anything, to let anything enter his mind, because he always thinks of nothing but the object of his search, because he has a goal, because he is obsessed by the goal. Searching means: having a goal. But finding means: being free, being open, having no goal. You, oh venerable one, are perhaps indeed a searcher, because, striving for your goal, there are many things you don’t see, which are directly in front of your eyes.”

Later on in the dialog, Govinda presses Siddhartha to tell him what wisdom he has gained from all his years of searching.

Quoth Siddhartha: “I’ve had thoughts, yes, and insight, again and again. Sometimes, for an hour or for an entire day, I have felt knowledge in me, as one would feel life in one’s heart. There have been many thoughts, but it would be hard for me to convey them to you. Look, my dear Govinda, this is one of my thoughts, which I have found: wisdom cannot be passed on. Wisdom which a wise man tries to pass on to someone always sounds like foolishness.”

“Are you kidding?” asked Govinda.

“I’m not kidding. I’m telling you what I’ve found. Knowledge can be conveyed, but not wisdom. It can be found, it can be lived, it is possible to be carried by it, miracles can be performed with it, but it cannot be expressed in words and taught. This was what I, even as a young man, sometimes suspected, what has driven me away from the teachers. I have found a thought, Govinda, which you’ll again regard as a joke or foolishness, but which is my best thought. It says: The opposite of every truth is just as true! That’s like this: any truth can only be expressed and put into words when it is one-sided. Everything is one-sided which can be thought with thoughts and said with words, it’s all one-sided, all just one half, all lacks completeness, roundness, oneness. When the exalted Gotama spoke in his teachings of the world, he had to divide it into Sansara and Nirvana, into deception and truth, into suffering and salvation. It cannot be done differently, there is no other way for him who wants to teach. But the world itself, what exists around us and inside of us, is never one-sided. A person or an act is never entirely Sansara or entirely Nirvana, a person is never entirely holy or entirely sinful. It does really seem like this, because we are subject to deception, as if time was something real. Time is not real, Govinda, I have experienced this often and often again. And if time is not real, then the gap which seems to be between the world and the eternity, between suffering and blissfulness, between evil and good, is also a deception.”

It is in this chapter that I felt the greatest shock of recognition when I read the lines, “The world, my friend Govinda, is not imperfect, or on a slow path towards perfection: no, it is perfect in every moment, all sin already carries the divine forgiveness in itself, all small children already have the old person in themselves, all infants already have death, all dying people the eternal life.”

But now to bring this piece to a close. The written word is all well and good, but for real poetry, you have to hear the spoken word. And you can do worse than to hear Sir Derek Jacobi read Siddhartha in his flawless evocative style. You cannot hear the final bits without breaking out in goose bumps, where Govinda sees a vision while touching Siddhartha’s forehead with his lips. The vision is that of the entire evolution of life played out in a timeless stage.

I believe there is a small set of very powerful tools, or mental models, that can help us comprehend the dynamic world we live in. It is surprising that such a complex and complicated world is amenable to comprehension using only a small set of tools. But it is indeed true. The tools that I refer to are immensely powerful and flexible. That these tools exist is a powerful testimony to the ingenuity of humans. Seemingly innocuous and simple ideas have profound implications.

Take, for instance, the universal tool called arithmetic. Simple enough that even a five-year old can be taught to use it with ease. But profoundly powerful in the hands of a person who is trying to make sense of a world enormously complicated but often enough yields to a bit of arithmetic. Not using this tool is dangerous. Those who refuse to do arithmetic are doomed to speak nonsense. Not just speak nonsense, but wreak havoc by implementing policies that are patently harmful.

You want to figure out the world, then be prepared to do some figuring (arithmetic.)

It is important to keep in mind that tools are tools, and while you can get an instruction manual of how to use the tool and learn to use it, the more difficult bit is to learn when to use it. That is what separates the novices from the experts.

In my toolkit, I treasure a bunch of tools. I don’t claim that my toolkit is complete, of course. But I am fairly certain that what I have gathered so far must be part of a complete set. Gathering this set has been a delightful experience with its “aha!” moments. It is a profoundly moving experience when something that has been at the back of your mind begging for an explanation and then you one day find the tool that makes it all make sense. My response is usually to jump up and get all worked up and want to grab people by their shoulders and shake them and say, “Can’t you see how great this idea is?”

My greatest regret is that there are people all over the world with perfectly functioning brains who have no idea that these amazing tools exist. It is as if they have been given very powerful processors by evolution but they have not got the great software which is open source and free. With only a little mental exertion, all these tools can be internalized. I am an unabashed hedonist and I claim that the joy of using these tools compares favorably to any other pleasures one is capable of experiencing.

Our current educational system does a mighty poor job of equipping people with these tools. Why this is so is a matter that I will leave for a later date. For now, I will list a few that I find especially handy and delight in using them to make sense of the world. So in no particular order, here are some that I learnt while studying economics.

The tragedy of the commons. Want to figure out why the world is a mess, learn this one. It also will help you figure out a way out of the mess, with particular regard to population and pollution.

The Prisoner’s Dilemma. Nothing beats this one when it comes to understanding why we end up screwing up when a perfectly reasonable outcome is possible but unattainable. Understanding the PD (and all its variations) is the first step to solving some of our most pressing problems, from global disarmament to terrorism.

The Theory of the Second Best. Developed in the context of trade, it is an idea which has a much wider applicability. When you wonder how well-intentioned interventions go wrong, you can pull out this tool and figure out the real problem.

The Idea of Markets. The unreasonable effectiveness of markets for allocating resources is as astonishing as it is counterintuitive.

The Theory of Comparative Advantage. When I first learnt about it during a course in international trade, I was blown away by its simple profundity. But be warned that its simplicity is deceptive. It is a very tricky tool and is often clumsily wielded even by some otherwise sane people.

Regression to the Mean. I list it under economics although it should correctly belong to the “statistics” group. I learnt it while studying economics. Paradoxes and puzzles often rely on the ignorance of this idea for their power.

Well, that is all for now. The next time, I will take the last tool and analyze a recent column (subscribers only) which appeared in the magazine Fortune in which Geoffry Colvin asks the question Can Americans Compete?.

I came across your blog and the intergenerational model. I thought it was brilliant. My only concern was to do with making graduates realize that they owe something back to the institution. I went to a REC, received a highly subsidized education but do not have immense feelings of loyalty toward it, at least not enough to give back to it.

However, for the way it is structured, I think that the model will work. Keep me posted on what you plan to do about it. I would definitely want to contribute my two cents.

My response to P:

My proposal does depend on reciprocity but that notion has to be agreed upon prior to getting the education and the education itself should inculcate into the student the social responsibility that he or she has towards others. If it fails in that regard, as I remarked, the institution deserves to fail.

I am afraid that I am just an armchair theorist and don’t think I have the capacity nor the funds to make anything of any significance happen.

Go back far enough in time and you will find that we are related to not just the apes and anteaters, but to all living things from the giant sequoia to the squid. These are the physical connections in the biosphere. At the abstract level, it is also connected. Pick up one any topic — however little and circumscribed — and you will find that it is related to another topic. You cannot study anything in isolation because the underlying reality to which it corresponds is not isolated.

And here is what I am going on about. What is the reason for the unreasonable success of the world wide web? The world wide web is an analog (although somewhat crude at this stage of its development) of the real world (TM). The real world, like the abstract world we study, is a web of relationships. The success of the world wide web is due to its ability to reflect that underlying connected of the world of things and ideas.

What flows though the internet is information. Like the nervous system of a living body, the internet carries information that is critical for the continued existence and stability of the organic entity we call the world wide web.

To fully comprehend the world we live in, we have to appreciate the connectedness of the world. Any educational system which does not appreciate that connectedness and therefore does not emphasize that fact through the way it teaches about the world, is failed to the core. Until now, there was some — only a very minute though — justification why education involved the delivery of isolated disjointed unconnected facts. Perhaps it was really very difficult to put history and phyiscs and social studies and every other topic into one book. Now that reason cannot be cited anymore for the fragmentary method of delivering education.

Technology with its powerful tools for presenting hyperlinked rich audio, video, textual and graphical content is available and affordable. It can edify and entertain and educate with fascinating ease. Here is a brief history of the United States, for example. It would have to be a very dull and uninterested student who will not gain a good deal in those 10 minutes of watching that animated history. This little module can serve as the index to a whole range of interesting topics, for slavery to war to agriculture to migration. (Do take a few minutes to check out that link.)

There are great and wonderful things out there in the web which can be used to provide a complete education. All you have to do is aggregate all the content, the tools, the collective wisdom of many thousands of great teachers and educators, and make it available to students in schools and colleges across the nation. It is not expensive at all: at most a couple of hundred rupees a month per student. But the results will be to create a class of educated kids who would not only be smart but also understand the magical world we are lucky to be in.

. . . CIDA City Campus – has become a remarkable success story, gaining blue-chip sponsors, a campus and a reputation for innovation. Five years later, it has taught 1,600 students.

Apart from only being available to poor students, who get a virtually free education, it is unique in what it expects from its intake.

Students have to help run and maintain the university buildings, and in their holidays they have to teach young people in their home villages – reaching hundreds of thousands.

When they graduate, they have to pay for the university costs of another student who will follow in their footsteps.

[Source: How to Think, to Fast, and to Wait.]

I went to North Fork, a small town close to Fresno, CA, to learn Vipassana. Introductory courses run for 10 days and you have to be resident on campus because the regimen is very exacting and fills the entire waking hours. You are provided lodging, boarding, and instruction. And the price? To you, it is zero. Totally free. How on earth do they meet the expenses, you may ask. The simple answer is what I call intergenerational transfers.

Here is how it works. You go through the course and after finishing the course, you decide at some later time what it was worth to you. Depending on what your valuation of the whole exercise is, you decide whether it is something that is worth doing, and make a donation which goes to support those who will come after you to learn meditation. After all, you learnt meditation because someone before you donated the resources for your instructions and your stay at the center. The current generation’s instructions are made possible by the generosity of previous generation, and the current generation provides the resources for the instructions of future generations.

Why does this model work? First, it does because it makes excellent economic sense. By that I mean, the persistence of the institution is based on the fact that the benefits of the institution exceed the costs, both aggregated over a suitable timeframe. A measure of the benefits is the aggregate donations made by its alumni. The total benefits have to be at least as much as aggregate donations, both monetary and voluntary work, obviously. The monetary donations clearly cover the monetary costs, since the institution does not depend on deficit financing.

The other reason that the model works is that there are almost no free-riders. People don’t just help themselves first and then don’t donate later. Part of the reason is that if you are interested in meditation, you are more likely to be a decent human being. That is, the system does not suffer from the problem of adverse selection. The other bit is that Vipassana teaches compassion and loving kindness. Even if you were a selfish clod to start off with, by the time you are done, you are likely to be a more caring and decent individual. Thus the absence of what we call moral hazard, the opportunistic behavior often exhibited by self-seeking rational individuals in most market interactions. Because of the nature of the institution and subject under study, both adverse selection and moral hazard problems don’t occur.

[A brief aside: Markets sometimes fail due to adverse selection and moral hazard problems. Insurance markets are particularly susceptible in this regard. Only those whose risks are higher than average (and therefore they are costly customers from the insurer’s point of view) would enroll, which is called adverse selection. And once insured, the person may exercise less caution such as driving less carefully, which is what the term moral hazard captures.]

Intergenerational transfer is a very common mechanism in human society, especially within the institution we call family. You take from your parents and later as a parent you give to your children in turn. In a sense, we are all temporary custodians of what we received from our parents. The least we can do is to see that we don’t give to our children less than what inherited from our parents. While on the topic of intergenerational transfers, we should note that reciprocal transfers are also common. When we are young, our mother is our care-giver; when our mother is old, we become the care-giver. Intergenerational transfer predates the existence of markets by a tens of thousands of years, I guess. (Markets are so pervasive in modern society that we find it surprising that human society existed for a good period of time without the existence of markets.)

I meditated on the Vipassana institution model of intergenerational transfers and realized that there is another institution which could benefit from the use of intergenerational transfers (IGT). It is one that every one of us is intimately familiar with. I spent about 26 years of my life in there. I am talking of educational institutions, of course. Want to go to engineering school? Fine, simply apply to the college of your choice, and if you get accepted based on your educational background, you get to attend college and be given a living allowance without having to spend a penny more than you can afford. The only requirement is that you promise to pay for at least one person’s engineering education in the not too distant future.

This means that irrespective of whether you have money to pay for your own education or not, if you have the interest and have demonstrated ability to learn a certain discipline, you will get a chance to learn and in the future help others learn.

The obvious question is then: where does the first generation get the resources from? From philanthropists, government, or wherever they get funding for right now for colleges. Take the Indian Institutes of Technology. Currently a large part of the costs are met from government grants, which means that the society in general pays. And pays on a continual basis, decade after decade. Thus a significant part of the costs are public (the average citizen pays the costs) but the significant part of the benefits are private (they accrue to the graduates of IITs.) This is ethically and morally indefensible in a poor society such as India.

The IITs essentially transfer resources from a very large number of quite poor people to a very small number of beneficiaries who were fairly well off to begin with but as a result of this transfer become even more wealthy. Instead of that, the government of Cha-cha Nehru should have given a one-time grant to get the infrastructure in place and for the first batch to finish and get on their feet. After that, the system should have been funded entirely by funds from IGTs. See Who Paid for My Education for more on this inequitable system put forth by the Cha-cha and for which he regularly is congratulated by those who benefited from it. (I cannot avoid taking digs at the Cha-cha and I beg forgiveness from all his bhatijas.)

Anyway, let’s get back to what can be done now. Here is what I propose as a model for higher education. First, start an institution which will teach qualified students for free and provide those who need a living allowance. Only admit those who promise to give back to the institution according to their means later. And during the years of study, the least the institution can do is to produce human beings who are not only capable of earning a living, but are decent enough to recognize their obligation and fulfill them. If the institution fails in either of these two objectives, the institution does not have a reason for existence and should be allowed to go out of business.

This brings a question to mind: would the IITs survive if its graduates were told that they need to now turn around and pay back the subsidies they received while at IIT and that payback was the only revenue stream? I don’t think so. I think IITs make very good engineers but they are not as good at producing decent humans, in my humble opinion. I base on my years of having been around IIT graduates. Why is that? I think that all they teach is technology, all they emphasize a fierce competition for grades, and for nearly two-thirds of the students the goal is to somehow get to an American university and migrate abroad.

Coming back to the proposal which I think I will call “DIGEST — School for a Decent Education through InterGenerational Transfers”. Perhaps not. In any case, naming is not the most important bit now. First Step: Get a bunch of people who are passionate about education. Second Step: Raise funds. Third Step: Get a huge amount of land and start a small college there.

Why a huge piece of land? So that you have room for expansion. The first year may have 1000 students. Keep adding capacity for, say, 20% additional students every year. This is so because when the payback time comes, each graduate should on average pay to support 1.2 students. Anyway, I leave the arithmetic up to you for now.

So here is the dream. We start off with 1000 students. In years to come, with additional funding, we increase this to 10,000. In about 20 years, it could have 100,000 students. I have yet to work out the details but I know I can do it. With a bit of help from you, of course.

Postscript: Followup of a real example of intergenerational transfer here.

The present educational system evolved in simpler times when technologies were comparatively rudimentary. All you had were books, blackboards, and hard-copy libraries as teaching and learning tools, and live teachers giving real-time instructions. Now we have (the possibility of) broadband access to the world wide web, electronic libraries, distance education, radio, TV, CDs, DVDs. Things that were not written about or heard about just a generation ago. The tools and technological capabilities have evolved astonishingly. Therefore the educational process cannot but be subject to radical change as well.

One such change that I foresee is that of the separation of instruction and testing. Allow me to elaborate on that. Currently, educational institutions deliver instruction and at specific intervals, test the student and certify whether or not the student has successfully internalized the instructions and to what degree. The success of an institution can be judged by how many students pass the tests. The institution therefore has an incentive to declare as many students successful as
it can subject only to a ‘reputation constraint’. That is, if it graduates a lot of ill-prepared students, then the institution will be seen to have low standards and will not be able to attract high quality students. Thus, an Ivy League school will set high standards, while a small-town community college will have relatively lax standards.

Reputation is hard currency. It takes time to build up a store of reputation and conversely one can coast along on one’s store of reputation for a long time without actually delivering. There is significant time lag between actually delivering quality and being recognized as one who delivers quality. That is one problem with the ‘reputation constraint’. The other
problem is that for reputation to work, informational requirements are high. One has to have information about the reputation of a school or college for one to make an informed judgment about it. In a world where there are thousands of schools and colleges, this could prove costly.

The point is that the basic charter of a school (I will use the generic ’school’ to refer to any educational institution) is to instruct or deliver education. That the school also tests the students it instructs and then declares whether or not any specific student has met the standards that the school sets is an unfortunate fact that is taken for granted. It is my contention that in the information age, the time has come when schools should de-link instruction from testing, and should concentrate only on instruction and leave the testing to institutions that are specialized in testing.

There are many examples of testing institutions. One familiar example is the “Educational Testing Services” (ETS) in the US which administers, among others, the GRE and TOEFL exams around the world. In India, we have common admission tests such as the Joint Entrance Exams for the IITs. These are all entrance tests and not exit tests. They are standardized tests the results of which are used by schools for judging how well the student is prepared for the next course of education.

To be sure, for high schools, there are standard “boards” such as such as the Central Board for Secondary Education (CBSE) which conduct “exit” tests for high school students in India. The problem is not that some standard testing and certification agencies do not exist but rather that too many “standards” exist.

For the moment, I will leave aside the question of how many standards are right and who will set them. For the sake of argument I will assume that it is possible to evolve one standard for a particular educational level. Then it would make eminent sense for a school to just concentrate on delivering instruction and to leave the testing to the testing agency.

One can argue that given the advances in information and communications technologies it is possible — not just that, it is necessary — to bring about a radical change in the education process and one component of that change has to be the standardization of tests and specialization of testing. The advantages of this would be many and I will explore them in the next post.

I believe that there are two factors that explain this unfortunate phenomenon. First, education is a public good. And second, the socially optimal provisioning of public goods require collective action. India is particularly prone to a failure of collective action, which in turn leads to an under-provisioning of public goods, including the most fundamental of public goods — education.

Education is the linch pin

… which holds the entire economic machinery together. It is so fundamental and basic that without an educated population, there is no conceivable way for an economy to prosper. Show me any economy that has ever done well, and I will show you that at its foundation is an educated population. I grant you that for short periods of time due to special circumstances, an economy may flourish without an educated workforce, such as an economy bouyed by a natural resource such as oil. But it is a hollow sort of an economy and cannot survive in the long run.

On the question: Does educational spending promote growth?, my position is this.

… that basic education (not higher education) is a necessary (not sufficient) condition for economic development (not growth). I can well imagine that spending on higher education beyond a certain amount under specific circumstances may not be found to be statistically correlated with economic growth. If an economy is already very rich and economically developed, it may be close to its potential economic growth rate and therefore any extra spending on higher education will not have any significant effect on the growth rate.

India has the largest collection of illiterates and semi-literates in the whole universe. India is also very poor and therefore cannot afford the luxury of going the traditional route as regards education. The tradition route of having fancy classrooms and well-paid teachers is beyond the reach of the majority. What is the way out, then? [Source]

My prescription for India is to invest massively in education. I presented a modest proposal for making India fully literate within three years. I followed that up part two of the proposal where I wrote:

Around 1950, India had about 200 million illiterates. Suppose India had taken a big bang approach and instead of spending $1 billion that year, it had allocated $10 billion each year for 3 years on primary education and make India completely literate. Then the total cost to the public would have been $30 billion and it would have solved the problem once and for all. On top of that, having a literate population from 1953 onwards, it would have developed more rapidly (if the country had not screwed up in other ways), and it would have had a lower population (population of developed nations grow less rapidly), and the aggregate wealth of the country would have been higher, and hundreds of millions of fewer people would have led mean, brutish, nasty, desperate and short lives. And we would not be having this discussion. We could have spent the time reading poetry or playing online games.

In part 3, I argued that information and communications technology tools have to be used to make the task of education tractable and proposed that a regulatory body be constituted for education.

It is my position that to develop, we have to use ICT domestically instead of merely building ICT tools for developed countries to use. I keep repeating the word tool because that is what it is. ICT is a means, not an end. Which means that we need to first figure out what we want to get done and only then seek the tools required for the job. If you go and first purchase an expensive hammer, you are out of luck if what you really need done is make a cup of tea.

Part four of the modest proposal and part five went into some implementation details.

Following a presentation at a conference on development, education and ICT at Bhopal in December 2004, I considered the matter of reinventing education in a brave new world of IT.

Since the dawn of civilization, the store of knowledge has steadily increased. The rate of increase has now accelerated and the stock of knowledge is growing exponentially. This has some major implications for education because unless one has a good handle on the existing stock of knowledge, one cannot meaningfully use it nor add to it.

Education today faces a challenge. Part of that challenge arises due to its past successes. I call it the “supply-side” part: the stock is too huge already and the flow seems to be exponentially increasing. There is a complementary “demand-side” challenge: there are immense numbers of people who need to be educated. The combined effect of two increases the cost of education. In this short series I will explore the use of ICT in meeting the challenge.

In Re-inventing education part two, I noted:

… [that] disruptive technology increases the production possibilities frontier, and to obtain the gains from that technology, you may have to replace the older structure with one that is more consonant with the new technology.

I believe that we have to move from a teacher-centric to a learning-centric education model

… the learning-centric model recognizes these two basic truths: that the universe is connected, and that every student is unique. The model makes available to the student a very rich, deep, and connected set of content which the student navigates through a process which can only be called discovery. Although the basic material is accessible to students is common, the path that a specific student takes is unique to the student. Conceptually, the content is a fully-connected network which can be traversed in a potentially infinite set of ways. One can start from any one of a very large set of nodes, and then move from one node to another till entire structure has been visited.

That is a quick index of some of my posts on this blog dealing with education. I concluded with some musings on what the goal of education to me is: it teaches one how to think, how to fast, and how to wait.

I believe that learning how to think may be something alike to learning a language. It appears that we have a language learning sub-system in our brains which shuts down sometime around age 12 or so. Before reaching that age, you can very easily learn languages; after that, learning languages is extremely hard. So also, I believe that if you catch a kid early enough, you can teach him or her to think. It is as if the brain circuits are just a lot of firmware in early childhood and then as one grows up, the firmware hardens and become hardware that cannot be re-programmed.

Here is my prescription for a good education. Focus primarily on teaching how to think and on teaching how to learn. Teaching how to think is like giving kids a very high powered CPU. Teaching them how to learn gives them control of a very broadband channel through which they can have access to content that the CPU can process. Alternative analogy: good thinking skills is like have a good operating system. And good learning skills is like having a great set of applications.

I hope to coninue to ponder the matter of education more on this blog.

Knowing how to wait is an excellent skill. It is freedom from the universal tyranny of time. A lot can be accomplished by someone who can afford the luxury of patience in a world where both favorable and unfavorable events occur randomly. Only the gods can be totally free with respect to time, of course. I like the story about Indra and the householder. Indra, one of the manifestations of Bramha the Supreme god, was asked by a man what the nature of time was. Indra said that he will tell him but first he needed a drink of water and could the man go and fetch him some. The man agreed and went off to get a glass of water.

The man knocked on the door of a house and a very beautiful girl answered the door. He was captivated by her charm and fell in love with her. He courted her and in a short time they were married. In a few years, he had a wonderful family. His business flourished and for many years, life was without any troubles. Then one day a tsunami hit the land. The giant waves washed away his family and his house and all his belongings. He found himself clinging precariously to a tree as the waters raged around him. In desperation he called out to god, and Indra appeared and said, “Were you able to get me the drink of water I asked for yet?”

Waiting and fasting are skills that enable one to interact with the world external to oneself. The ability to think is, in contrast, a skill that is internal to oneself. With waiting and fasting, one has mastery over others. Only thinking allows one to gain mastery over the self.

The Eight-fold Path, the Fourth Noble Truth set forth by the Buddha, is accessible only to those who have the ability to think. Thinking, not belief in some big daddy in the sky, allows one to follow the eight-fold path: right view, right resolve, right speech, right action, right livelihood, right effort, right mindfulness, and right concentration.

Of the eight, I think the most important is the right view bit.

Depending upon your point of view, you will see things different from the way that others see it. If you clearly perceive the reality (which others see differently from you but not necessarily incorrectly), then you can undertake the right action and apply the right effort.

I think that at a minimum, an educational system must teach people how to think. How to fast and how to wait would be good but perhaps it is too much to ask for right now. Does such a system exist anywhere in the world? I don’t know for sure but I doubt it very sincerely. I realize of course that there are people who have gone through the current educational systems and they are also able to think. But I would be wary of ascribing that result to the present setup. It is more likely that despite the present system, those people have learnt how to think.

I believe that learning how to think may be something alike to learning a language. It appears that we have a language learning sub-system in our brains which shuts down sometime around age 12 or so. Before reaching that age, you can very easily learn languages; after that, learning languages is extremely hard. So also, I believe that if you catch a kid early enough, you can teach him or her to think. It is as if the brain circuits are just a lot of firmware in early childhood and then as one grows up, the firmware hardens and become hardware that cannot be re-programmed.

Here is my prescription for a good education. Focus primarily on teaching how to think and on teaching people how to learn. Teaching how to think is like giving kids a very high powered CPU. Teaching them how to learn gives them control of a very broadband channel through which they can have access to content that the CPU can process. Alternative analogy: good thinking skills is like have a good operating system. And good learning skills is like having a great set of applications.

It was all very cut and dried, literally. It was all cut up and lacked a coherent structure. And the material was as dry as the pages of the prescribed books. You did not have a coherent story which connected all the bits that you had to learn. Learning took place occassionally but much of the material was so much baggage which was discarded once the examinations were over. On top of that, it was ass-backwards: the teacher gave out answers first, and then asked questions. The expected response was the answers given out earlier. Thus, the student had little to do with the questions as well as the answers.

The universe in which we live is not cut and dried, however. First, it is not cut-up at all. Every bit of the world is connected to every other bit of the world through links that are both material and conceptual. Education, for it to be meaningful, has to help us comprehend this connected world. For operational convenience, we had to compartmentalize the study of the universe into various areas and then devote separate text books to them. But the underlying reality that that we study is connected and inseparable into neat little disciplines.

The universe is also not dry. It is absolutely sopping wet with all sorts of marvelous juicy things that can supply to the natural thirst for knowledge that everyone has (but which the traditional teaching-centric educational system eventually kills in most of us).

Fortunately, we are no longer compelled to continue with this dysfunctional teacher-centric education system. Given advances in ICT, we can easily move to a learning-centric model of education.

So what is a learning-centric model? First, the active agent in this is the student. The student asks the questions and the student answers the questions. The questions come first, and then the answers, which in turn lead on to more questions, and so on. The motivation is therefore in-built. Second, while the destination could be set externally (you have to master this amount of material), the path that the student takes to get there and at which pace is entirely unique for every student.

Thus the learning-centric model recognizes these two basic truths: that the universe is connected, and that every student is unique. The model makes available to the student a very rich, deep, and connected set of content which the student navigates through a process which can only be called discovery. Although the basic material is accessible to students is common, the path that a specific student takes is unique to the student. Conceptually, the content is a fully-connected network which can be traversed in a potentially infinite set of ways. One can start from any one of a very large set of nodes, and then move from one node to another till entire structure has been visited. I will go into the details of operationalizing such a model later but for now allow me to illustrate it.

On the way to school, the student sees a beautiful rainbow painted by a passing rain shower. Upon arriving at the school, he looks up “rainbow” in the online School-in-a-Box (SiaB). The system responds with an image and some text explaining what a rainbow is. That explanation refers to a small set of concepts, from internal reflection of light to the physics of optics to refractive index of various media to rain to the hydrological cycle to weather to monsoons, and so on. The student can then choose to move on to the nature of light and watch a little video of how light passing through a prism separates the various frequencies. Or, related to rain, the student could hear a poem by Tagore read by a gifted actor, and read a critique of the poem and thus move through the content at a pace that suits him and as his spirit moves him. Starting at the rainbow, the student could end up learning a number of physics modules, or metereological modules, or a few literature modules. From time to time, the student could take “challenge” tests, which examine the understanding of the
student, following the browsing.

One can easily recognize the basic framework as that of a hyperlinked rich content the sort that you will find in, say, a Wikipedia. There are important distinctions, though. First, the content in an SiaB is not just a reference tool, but fundamentally geared for learning basic material. Second, there are tools for testing of the concepts and for tracking progress. Third, the content is very carefully delimited so that a student does not get lost in too much material.

In the next bit, I will go into more details of how the learning-centric model can be implemented using the School-in-a-Box idea, what the economics of this model is, and what changes are required to implement the model are.

Then there is lo-tech. How to cultivate a field and grow something is low technology. Or how to make a good meal using basic ingredients. Or how to make a glazed pot. All of which requires knowledge and often is the result of knowledge passed on and accumulated over centuries. So when we think of technology, it is good to remember that it means more than just digital technology.

Even within hi-tech, I like to categorize them into

1. Advanced and immature
2. Advanced and mature
3. Intermediate
4. Primary

Silicon based very high density chip technology is advanced and mature while nanotechnology is advanced but immature. Rocket science is intermediate technology, while car manufacturing is primary technology.

What distinguishes hi-tech from lo-tech is that hi-tech requires what I call deep back-ends for manufacture and use. Without the back end infrastructure, you cannot even use hi-technology, leave alone manufacture it. This fact we neglect to our own peril and examples of unsuccessful transplanting of high technology into areas without the back-end support are legion.

As time goes by, human knowledge increases and consequently the amount of stuff with embodied knowledge also increases. All this new-fangled stuff expands what we economists call the production possibilities frontier or PPF. That is, using the same amount of labor and capital (land and machines), we can produce more stuff. In other words, we get to the same place more efficiently by a different method. Let me repeat that: we use technology not for the heck of it but to accomplish some goal. Better technology allows us to accomplish the same goal more efficiently. That immediately implies that we have to do things differently using newer technology than what we used to do
before.

For instance, the goal is to live in a comfortably cool house in a hot climate. Given available technology, one builds a house with very very thick walls and very very high ceilings so that the insides remain cool. Then one day, electricity comes into the area and using electric fans is an option. So it is an easy choice: keep the house and stick some electric fans to make it more comfortable. Then one day, air-conditioners become available. That is a more disruptive technology. If you just stick in air-conditioners into the existing structure, you are going to be inefficient. Now the house does not need those huge thick walls and high ceilings. Low ceilings and thinner walls will do quite well and so you can even build more rooms on the same amount of land. You have therefore expanded your production possibilities frontier by using technology. But you have to change the structure entirely to get the benefits of the new technology.

The punch line is this: disruptive technology increase the production possibilities frontier, and to obtain the gains from that technology, you may have to replace the older structure with one that is more consonant with the new technology.

We have to keep in mind that the structure (the house) was there for a specific purpose (a comfortable living space) and the structure was dictated by the available technology. When the technology changed, the purpose was invariant but the stucture must be changed if one wishes to make full use of the new technology. Basically, keep the baby and dump the bathwater, as they say. Better still, if new “dry-clean baby” technology becomes available, you can get rid of the wash-basin as well.

Last time I started talking about re-inventing education in a world where IT has advanced beyond recognition compared to what it used to be when the present structure for delivering education was created. Time is now upon us to think about using that ICT in the service of education. My contention is that the old structure is in dire need of replacing if we want to — indeed we have to — expand the production possibilites frontier for producing education. I argue in this series that we have to move away from teacher-centric education to a learning-centric education. I will defend the position that we have to tear down the existing structure and build from the ground up. Merely tacking on ICT tools to the present structure will not do because while our purpose remains the same, the rules have changed.

{To be continued.}

He that will not apply new remedies must expect new evils for time is the greatest innovator.

Sir Francis Bacon (1561-1626)

Last week I presented a paper on ICT and education at a conference in Bhopal organized by the All India Society for Electronics and Computer Technology. In the paper I explored the opportunity the current state of the art of information technologies (IT) provides for re-inventing education.

I have been looking for a compact definition of education. I don’t want just a dictionary definition. I want to understand what education is at its most generalized and fundamental level. I have spent the major part of my life in educational institutions in India and abroad and it appears that the rest of my existence is going to be even more inextricably bound with education. Of course, I will continue my education till the day that I shuffle off this mortal coil. But I have a sneaking suspicion that I will also be professionally involved with the education of others.

Thus both for personal and professional reasons, I have to understand what education is. One way to approach it would to have an instrumental definition which explores what education allows a person to be and to do. Education enables a person to increase his capacity to draw from the store of accumulated human knowledge, which in turn allows him a more comprehensive understanding of his own self and of the world around him.

The activity of education is the sole preserve of intelligent self-aware entities. Lower animals are generally incapable of learning from the experiences of others. Some higher primates and intelligent animals such as dolphins, elephants, domesticated animals and some birds display some capacity to learn. But they don’t have a store of accumulated knowledge that they can tap into.

The invariant core purpose of education then appears to be that it allows us to use, and subsequently, build upon the accumulated knowledge. We have to learn at least some part of the existing knowledge, use some part of that to function more efficiently in the world, and then add to that store of knowledge.

Since the dawn of civilization, the store of knowledge has steadily increased. The rate of increase has now accelerated and the stock of knowledge is growing exponentially. This has some major implications for education because unless one has a good handle on the existing stock of knowledge, one cannot meaningfully use it nor add to it.

Education today faces a challenge. Part of that challenge arises due to its past successes. I call it the “supply-side” part: the stock is too huge already and the flow seems to be exponentially increasing. There is a complementary “demand-side” challenge: there are immense numbers of people who need to be educated. The combined effect of two increases the cost of education. In this short series I will explore the use of ICT in meeting the challenge.

There was a time when the supply-side problem was non-existent. About 2,000 years ago, an individual lifetime was more than sufficient for a person to learn all that was essentially known about the world. One could potentially know all that was known in the sciences, the arts, politics, medicine, and philosophy. On the demand side, the number of people that needed to be educated was also manageably small. Now no one can even imagine knowing more than a vanishingly small fraction of one narrow field of human knowledge. The best one can do today is learn the basics of a small set of general subjects such as a few sciences, some social sciences, some basic mathematics, and a little bit of biological sciences. Then one has to specialize into being an accountant or an engineer or a plumber or a programmer.

The present education system was developed during a time when both the supply- and demand-side problems were non-existent. Therefore it is not surprising that it is unable to confront the new realities. Futhermore, the present model matured when the powerful tools of information and communications technologies (ICT) did not exist. I argue that because there are new problems, the education system has to be reworked so that it can successfully confront the new realities. I further argue that the advent of ICT tools force us to radically rethink how the structure of our educational institutions.

It will become very clear that the old structure that was built to satisfy the core objective of education is no longer up to the challenges it faces. There is a core invariant aim of education. The invariance is relative to the structure we have built around it. It is time to tear down that structure and build a new structure. My contention is that the new structure has to incorporate within it the use of ICT tools. It is my aim to show that merely plugging in the new technology into the existing structure will not work. Finally, I will propose a mechanism which will make education more efficient and effective even in the presense of the twin challenges. That mechanism will be designed to use the powerful tools of ICT.

You never change something by fighting the existing reality. To change something, build a new model that makes the existing model obsolete.

Buckminster Fuller

We know that low costs translate into low prices. How does one reduce costs? If there are economies of scale in production, then centralizing the production is the obvious answer. A pertinent example is that of electric power production. Each consumer could have a generator at home. But it is much cheaper if a centralized facility generated the power at a much lower cost per unit due to scale economies and distributed the power to the consumers on an as-needed basis. There is one tradeoff here which involves the cost of distribution.

How large should a centralized power station be depends on the distribution costs and on the scale economies. Distribution costs depends on the density of consumers and on the distribution technology. That tradeoff therefore implies that in a large city (very high consumer density) a large centralized power plant is required. But for a large number of consumers spread over a very large area, the distribution costs may overwhelm the production economies of scale, such as would be the case in rural areas. So smaller plants with smaller distribution networks will be more effective in rural areas. In the limiting case, each consumer will have to have their own generators.

Computing as a utility depends on scale economies and on the distribution costs as well. And the distribution costs depend on the technology of distribution and on the consumer density. Consumer density is critical because the distribution costs are significant today because broadband is expensive.

Consumers who are most able to use computing services but cannot afford to go the route of having PCs number in the tens of millions in India. For instance, there are small and medium businesses (SMBs), and educational institutions such as schools and colleges. Because they are “consumer clusters”, computing as a utility is very appropriate for them.

Here is a thumbnail description of a utility computing platform. The central server forms the core where you have a very wide range of software applications, plus a massive collection of rich content (audio, video, text, and graphics) and storage. The server is accessed over a local area network (LAN) using access devices that are inexpensive and easy to manage. The access devices are sometimes refered to as “thin clients” — a device that hangs off the LAN and is connected to a display, keyboard, and a mouse. The TCs do not have local storage. Centralizing the production of computing services on the server has numerous advantages, most notably that of taking the management of the hardware/software resources required for the user services out of the hands of the users.

There is hardly anyone who has ever used a connected PC and not been frustrated by problems such as viruses, spam, spyware, the need to frequently upgrade hardware and software, and so on. Users have come to expect that these problems are a necessary part of using computers. It need not be so. It is a bit of a mystery why people put up with the bother and inconvenience of using computers. Imagine if you had to open up the hood every few days and tinker around the car’s innards trying to fix some problem or the other. You would quickly dump that sort of car for something that works without you getting your hands dirty.

If using computing services were to become more like the telecommunications services model, then more people would be able to use them. You sign up for the service, and you pay every month for your usage. You let the firm supplying you the service to fix things if things break.

Utility computing is the future. For more on the topic, see Rajesh Jain’s Emergic Blog.

You may ask, how is utility computing relevant to India’s development. I will tell you. The future of India depends on education. India will not develop unless we can educate the hundreds of millions that need it. Resources are limited and one of the best ways of leveraging limited resources is to use information and communications technology (ICT) tools. Schools and colleges which cannot afford the PC-centric solution need utility computing services.

My day job for the last few months has been to figure out a solution to the challenge of delivering education. I think that I have a set of answers that I would go into later.

I had proposed that for every person who is certified to have attained a certain level of literacy and numeracy (essentially, a primary education), the government should give them around $100. Here is the reasoning why this payment is necessary and why India will not attain 100 percent literacy without a payment of some sort.

Primary education has significant positive externalities. That is, the benefits of primary education are not limited to the person who is educated but extends to society as a whole. In other words, there are not just private benefits, but there are social benefits as well. In activities that have both private and social benefits, free markets may not be able to provide the socially optimal result. In the case of primary education, less than the socially optimal amount will be provided.

Here is a contrived numerical example. Suppose the private benefits of a primary education is $200 and the social benefits are an additional $200 computed over a relevant period. Furthermore, suppose the cost of providing primary education to a person is $250. Clearly, the total benefits of the education ($400) exceeds the cost ($250). Let’s call this difference of $150 social surplus. Therefore it is socially beneficial to have a person educated. But will a person have an incentive to get primary education if he is asked to pay the full price (which is equal to the $250 cost)? No, because the cost exceeds the private benefit of $200. Thus society loses $150 for every person who is unwilling or unable to get primary education because the benefits $400 never arise and the avoided cost is only $250. What should society do? It should pay a person part of that social surplus so that the total private benefit exceeds the private cost of education.

Time for a bit of a digression.

I have been pondering a question lately: what is a good compact concise definition of a “rich person”? I think I have it. A rich person is one who is not credit constrained. Pretty good, isn’t it? See I am not credit constrained. Most things that I wish to have, I can either pay cash for or have the means to get a loan. Similarly, Bill Gates is not credit constrained. This definition makes the important point that it is not the money that one has that makes one rich, but rather the ability of a person to have access to money on credit that makes the person rich. Donald Trump may have been broke at one time during his career but he was not poor because he could borrow billions of dollars.

Time for a digression within a digression. Sort of like a subroutine calling another subroutine. Nested loops, if youprefer. Or a story within a story within a story, like the Panchatantra.

Our present age is called the information age. What exactly is information? A good compact definition was what I was looking for. Hal Varian, dean of the School of Information Management and Systems of UC Berkeley, has one. Information is anything that is potentially digitizable. The operative word of course is potentially.

End of nested digression. Back to the original digression about how I define a rich person. Contrarywise, a poor person is one who is not a rich person. End of digression.

The Constitution of India set the goal of guaranteeing primary education to all children and to do so within 10 years. That was in 1950. A lot of water has passed underneath the bridge since that deadline passed and yet India has the highest number of illiterates in the world. No one appears to be bothered by the failure of the state to deliver what it had promised half a century ago. Aside from mouthing tired shibboleths and high campaign rhetoric, nothing gets done. The political will appears to be non-existent. Public funds are squandered in absolutely mindless endeavors. The fact is that unless resources are committed to solving the problem of illiteracy, India will continue to be an illiterate country no matter how pretty a speech one makes about India becoming a major economic powerhouse.

End of rant.

Now back to the specifics of my proposal. Why do I propose that people be paid for getting their children educated? Because poor people (as defined above, people who are credit constrained) don’t have the luxury of investing in the future. Their more immediate concerns occupy them fully. If you ask a poor person to send his children to school — even free school — the person is going to do a bit of rational calculation. If his children can earn half a dollar a day working at some menial job, the opportunity cost of going to school is going to be half a dollar a day. That is not a trivial sum to a person who is at or below subsistence level. Irrespective of how great it is for a person to be educated, there is no incentive for a person to send their children to school if that means their immediate income gets substantially reduced.

The hundreds of millions of illiterate people in India come from very very poor families. These families have to be helped to make the choice of sending their children to school. I have proposed a mere $100 per person. If that amounts to $30 billion, then that is what it amounts to. You cannot argue with arithmetic. If the country is unwilling to spend that money, there is no way the goal of having a literate population can be achieved. That is a fact of life and cannot be changed even if the President of the country makes very impassioned speeches about how India will be a super power in 2020.

{To be continued. Thanks for the comments and I promise to address the concerns raised in future posts.}

Folk wisdom is a marvelous thing. In our case, let’s apply the “you cut, I choose” bit of folk wisdom to address Ravikiran’s concern.

If we had to ensure fairness in the division of a piece of cake in a two-person division, the person cutting the cake should not be the person who gets to decide who gets which piece. “You cut, I choose” ensures that the cake-cutter will take care to not cut unevenly. This mechanism guarantees that both parties will be happy with the outcome. (It is a trivial exercise to design a multi-party cake cutting algorithm, which is left as an exercise for the interested reader.)

The application of this fundamental principle in our case is a no-brainer. Let’s identify the two parties: (1) the government which is funding the primary education, and (2) the private sector “New Deal School” which is providing the training. Assume that both parties agree on what constitutes a fair test of successful training. Have a neutral body administer the test. As I already proposed, let the Education Regulatory Authority of India conduct the test and certify whether the training is successful or not.

The specific details of how to reduce collusion and cheating can be worked out without taxing the brain too much. Scores of examples exist around the world of impartial tests. I have, like millions of others, appeared for many such tests. Take for instance, GRE and TOEFL. The testing agency, ETS, has an incentive to make the system incorruptible.

Essentially, we just have to ensure that the school delivering training cannot be the one certifying whether it has been successful in the training.

{Continued in Part 5.}

{Recently discovered Tim Worstall’s “It’s all obvious or trivial except …” and was delighted to do so since he was a fellow resident of the sci.econ usenet group a couple of years ago. The title itself delights me. It is one of my basic beliefs that most matters yeild to common sense after only a bit of pondering. It is all obvious or trivial but you have to invest in a bit of sound reasoning. My goal is to reduce the essential problems of development to answers that are obvious and even trivial.}

I am a firm believer in the use of technology for development, including information and communications technologies (ICT). There is an urgent need for economic growth and development and unless we use the best possible tools available anywhere in the world, we are unlikely to solve the problems which confront us. But I am dismayed at the lack of understanding which accompanies the “ICT for Development” bandwagon. In the past I have waged a solitary war against the myths, misconceptions, misunderstandings, and misapprehensions rampant among those who mindlessly advocate the use of computers for every conceivable problem. These people loudly bemoan the so-called digital divide which in in my considered opinion is a bunch of hooey.

It is not the digital divide that is preventing the poor from benefiting from ICT. It is the fact that they are poor that is preventing them from benefitting from ICT. Not just benefitting from the use of ICT, the poor also are not benefitting from the advances in medical technology, in cosmetic surgery, in plasma tv technology, ad nauseum. It is not the digital divide, stupid, it is an income divide, it is a wealth divide, it is an opportunity divide.

If the poor had money, they would not be poor, and like all non-poor, would be able to buy all sorts of stuff — including, but not limited to — digital gizmos. They would buy education, clothes, food, houses, cell phones, cd players, dvd players, plasma tvs, and computers. There would not be a digital divide. It bears repeating: the digital divide is not the cause of poverty nor is it the cause of the persistence of poverty. The digital divide is a result — an effect, a consequence — of poverty.

The point is that everybody loves a digital divide because there is money to be made. You don’t see newpapers carrying articles in breathless prose decrying the literacy divide. You don’t get invited to scores of conferences on the primary education divide. No, siree. There is no money in there.

I cannot resist a personal aside here. Similar to about few billion other literate people in the history of the universe , I was on the other side of the digital divide. Digital to me, when I was growing up, meant things to do with fingers. Being an Indian, I had digital food — I ate with my fingers. Despite that astonishing handicap, I did manage to become somewhat literate. I did not know of the exitence of digital devices till I went to graduate school. End of aside.

It is my position that to develop, we have to use ICT domestically instead of merely building ICT tools for developed countries to use. I keep repeating the word tool because that is what it is. ICT is a means, not an end. Which means that we need to first figure out what we want to get done and only then seek the tools required for the job. If you go and first purchase an expensive hammer, you are out of luck if what you really need done is make a cup of tea.

I believe that we have a goal: stop being a backward overpopulated pathetically poor country. That goal requires we solve a whole bunch of inter-related problems, which ranges from the problem of mindless corrupt bureaucracy to immoral politicians to brainless communists to unemployment to illiteracy … ad nauseum. The problem of 350 million illiterate people is one which has complex backward and forward linkages. So solving that is crucial and needs to be done without any more waste of time. But it does not appear to be on anyone’s radar screen.

With that preamble, I am now ready to continue with where I left off the last time on my modest proposal to make India 100 percent literate.

So here’s the basic outline of my argument today. We have 350 million or so illiterate people who need to be made literate in as short a time as possible. That is a very very large number. If I had a dollar for every illiterate person in India, I would be fabulously rich. Heck, I would not mind having just a penny for every illiterate person in India — I would have $3.5 million to my name. See what I mean: the number of illiterates in India boggles the mind.

Given that, now I propose that we spend around $200 per capita, a modest amount, to make them literate. Defining what exactly I mean by “literacy” I will defer for now. For now, a quick definition would be someone who has had the equivalent of a primary school education. The government has to be the source of the funding but it must not be the agency to deliver the education considering that after about an estimated $100 billion, it has not delivered basic education to hundreds of millions of Indians. The private sector will undertake the task if the political will exists to provide funds for the job.

Pardon me if I repeat myself, but this is too important a job to be left to the public sector bureaucrats. The private sector, given the right incentives, will deliver because firms driven by the profit motive do astonishing things. Of course, oversight and regulation is essential for socially-optimal outcomes in market places. Around the world countless examples exist of institutions that oversee and regulate the private sector. In our case, the appropriate regulatory body needs to be constituted. We could have something like an Education Regulatory Authority of India — (ERAI).

As I proposed, allow $100 per as tuition fees that any private firm can get from government for every student they graduate. ERAI conducts standardized tests that certify whether the job has been done or not. Recall that for about 300 million, the total tuition revenues to private sector firms is about $30 billion. Let’s keep in mind that that is a truck-load of money on the aggregate but only $100 per student. So the profit-driven private sector firms will have to use it judiciously. Only those firms which can deliver the goods at the lowest costs will be able to survive. So what will they do?

My contention is that the private sector will find the most innovative method to do the job. What that means, in this day and age, is simply the use of ICT in some way, shape, or form. I do not know what it will be but I will bet my bottom dollar that ICT tools will be used to solve the problem. The firms will scour the world and figure out how to educate the masses at the least cost.

Remember a very large proportion of illiterates are in rural India. Given that ICT will have to be used, the private sector will bring ICT into the rural areas to make it easier for themselves. This is the punchline of this part of the argument: once you have defined the task, the means will be found to do the task. I argue that the means in this case is ICT, and so ICT will reach the rural areas. This is the “horse before the cart” strategy instead of the “cart before the horse” strategy that the government follows. The government follows the latter strategy with sickening regularity. First, they go and buy a few thousand PCs and put them in villages with no infrastructure — not even power. And then they wonder why after spending all that money, nothing appears to change.

Now we can talk about the side-effects or externalities that I had hinted at earlier. The funding of primary education at the appropriate level will induce the private sector to use ICT. In turn, this will induce a demand for more domestic use of ICT and therefore to more employment in the domestic ICT sector. This will grow the sector and it is a well-established fact that a large domestic market leads to efficiency gains that translate into comparative advantage. For India to truly become an IT superpower, we need to use IT intensively in areas where IT is appropriate. I submit that educating India’s 350 million illiterates is the most pressing task and that IT tools will make it possible.

{Continued in Part 4.}

Let us put the $60 billion in perspective. India currently spend around1 percent of GDP in public primary education. That is about $6 billion. Assuming that on average $3 billion current dollars have been spent for the last 50 years, the total public expenditure on primary education has been around $150 billion. If after spending that humongous amount, we are still a largely illiterate country, a major rethinking is required.

Primary education is a fundamental prerequisite for any economy’s development. One doesn’t have the luxury of futzing around with it. You cannot do it in half measures. If you try to economize on resources for primary education, you are dooming yourself to a long impoverished future. You have to spend what it takes to deliver primary education to every citizen in the shortest possible time. If you don’t, the problem doesn’t get solved and only increases in magnitude the more you postpone addressing the problem aggressively.

The children of literate people end up being literate. Given the absense of very fortuitous circumstances, the children of illiterate poor people end up being illiterate. So if we take my big bang approach to fixing illiteracy today, we would have to spend on making 350 million literate today and we would solve the problem of illiteracy for perpetuity. Otherwise, if we just solve the problem for only 100 million of them, the 200 million illiterates would produce anonther 400 million in 20 years and you would have the problem of having 500 million illiterates in 20 years. You would be constantly falling behind. And the problem will be even more insurmountable then because you would be on the average poorer precisely because you have wasted precious human resources by having such a large illiterate population all these years.

Basic logic seems to have been a rare quality in the policy makers who were in charge of India’s destiny since its independence. Then there were about 200 million illiterates in the country. Now there are 350 million. After over half a century of independent existence, we have increased the absolute numbers of illiterates in India and after spending an estimated $150 billion.

{My arguments in this series do not depend critically on the exact numbers. So whether India spent $150 billion or only $100 billion over the last 50 odd years is not important. What is important is the order of magnitude of the numbers, not their exact values.}

Another way of thinking about this issue is this. Around 1950, India had about 200 million illiterates. Suppose India had taken a big bang approach and instead of spending $1 billion that year, it had allocated $10 billion each year for 3 years on primary education and make India completely literate. Then the total cost to the public would have been $30 billion and it would have solved the problem once and for all. On top of that, having a literate population from 1953 onwards, it would have developed more rapidly (if the country had not screwed up in other ways), and it would have had a lower population (population of developed nations grow less rapidly), and the aggregate wealth of the country would have been higher, and hundreds of millions of fewer people would have led mean, brutish, nasty, desperate and short lives. And we would not be having this discussion. We could have spent the time reading poetry or playing online games.

But that was not to be. The idiots that ruled India, and their progeny who rule India currently, have inflicted upon us a nation which has the highest number of illiterate people in the world.

Enough of bitching and moaning. The task at hand is to fix the problem once and for all. We have to put the required resources and we have to use those resources intelligently. The job cannot but be financed publicly but the public sector is not the right agency to undertake the job of actual execution. The private sector is the appropriate agency, and as I will argue later, it can do the job for the least cost. I will also detail out the immense side-effects (to use a computer science term) and positive externalities (to use an economics term) of implementing my modest proposal.

Throwing money at problems, it has been correctly pointed out, is not always the best way to solve a problem. But in some cases, you have to throw sufficient amounts of money and aim it very precisely to solve some problems. I believe that if we don’t solve this one, the country which is now terminally ill is doomed to a slow and painful death. Now is not the time to futz around with the same old socialistic policies. They brought us to this sorry state of affairs. We cannot afford to continue to go down this path any more.

{Continued in Part 3.}

First, the government of India must credibly commit to paying every literate and numerate person Rs 5,000 (about US$100). Second, ensure that every person who wants to learn basic literacy and numeracy can do so without having to pay a single penny. Third, provide testing centers around the country (especially in rural areas) where a person can be certified to have achieved basic literacy and numeracy. Finally, sit back and let the free market grind out the outcome which is total literacy within three years.

The details of this proposal follow from elementary logic and basic common sense. First, the cost-benefit analysis. There is long term cost of having about 300 million illiterate citizens. Each year, a literate person must be at least 10 percent more productive than an illiterate person. Assuming a per capita annual product of the illiterate population to be $200 (which is about half the annual per capita GDP of India), a 10 percent increase in productivity would be an increase of $20 per year per capita. Over a working life of about 40 years, that is an $800 increase in productivity per capita. Assume that the average working life of the 300 million illiterates of India is a conservative 20 years. Then the increase in additional product due to the additional 300 million literates is a conservative $120 billion (300 million times $20 times 20 years) in net present value terms.

I am using very conservative estimates of the benefits to make the case that the cost of doing so is a very small compared to the benefits. Assume very liberal costs of delivering basic literacy, say, $100 per capita. I will argue elsewhere that this is a very liberal estimate. Add to it $100, the incentive amount paid to the person upon passing a standardized test, and you have a total cost of $200 per capita. For the total population, it is amounts to $60 billion. This is half the aggregate social benefit estimated above.

Now one may ask, how will the government, which is totally inept as evidenced by the fact that 300 million Indians are illiterate despite lofty goals of making education univerally available and has not been able to make a dent even after over 57 years of spending huge amounts, be able to do this? The answer is simple: the government must not be in the business of providing the means and method of primary education. The only job of the government should be to finance the education. Let the private sector do the actual provisioning of education.

Here is where mechanism design (thanks, Prof Richard Gilbert) comes in. Recall that anyone who passes a standardized test of basic literacy and numeracy (the exact level of literacy and numeracy I will outline later) gets to take home $100. There is another part to it: a person can be associated with a “New Deal School” (NDS) and when the person passes the test, the NDS of record gets $100.

So what exactly is a “NDS”? That is where the private sector comes in. Suppose that a private firm figures out that to make a person literate and numerate it costs $40. So it would have an incentive to recruit students and teach them as efficiently as it can. It could even happen that this firm will not only not charge tuition but indeed may go out and solicit students with upfront gifts. They may well spend $20 a student to entice them to enroll and learn because the cost to the firm will be $60 ($40 for the actual teaching and $20 as bribe to the student to enroll), and the firm will make $40 profit per student that graduates.

Here is the sweetest part of all. The fundamentals of a market economy will ensure that competition will develop among various NDSs. Firms will compete for students and they will end up competing on price: the firm that pays the most in bribes to students — that is, the firm which is the most efficient in delivering the needed education — will get more students. In the end, purely due to the logic of markets, the students will capture whatever is left over after costs from the $100 incentive to NDSs.

The mechanism I have outlined achieves one primary function: it ensures that the cost of providing the education is minimized through competition in the market, and it assures that firms do not make super-normal profits, and that the benefits of the competition in the market accrue to the students.

If one starts to explore the proposal, one is astonished by the richness and depth of this (even if I say so myself.) Consider the effect on the overall economy. Over a period of three years, about $60 billion worth of public spending takes place. Spending for some is income for some others. In this case, the income goes to the poorer sections of the population. They in turn can buy food, thus helping out the government distribute food to those who need it. When food gets sold, farmers benefit. Most of the money will end up in rural areas where it will be spent on various things, including manufactures. In short, the multiplier effect of this spending will be enormous.

It can be shown that the US benefitted fabulously from the construction of the interstate highway system. It was an infrastructure project the cost of which is miniscule compared to the benefits that it delivered. For India, the most important infrastructure project is the one that will build its human capital base.

{Continued in Modest Proposal Part 2.}

Economists are deservedly known to disagree on many issues. But on one matter there is consensus: the absolute necessity of an educated population for an economy to develop. This fact has been known for ages by almost all who have ever pondered the question of economic development and growth.

and wrote –

Being a new student to this, the above question is exactly what I had posed last week. I am still to get the linkage between education and economic growth. In my own attempt to discover the linkage, I have come across some interesting views which I would like to share with the group, and gain a better understanding from your viewpoints.

He first referred to a study in Arizona and quoted from it –

Three distinct regressions find no consistent, statistically significant impact of higher-education appropriations on states’ economic growth. Indeed, a stronger relationship is found when the models are reversed, suggesting that a better case can be made that growth drives spending, rather than spending driving growth.

and concluded that “this basically is directly opposite to the premise that education leads to better economic development.”

My claim is that basic education (not higher education) is a necessary (not sufficient) condition for economic development (not growth). I can well imagine that spending on higher education beyond a certain amount under specific circumstances may not be found to be statistically correlated with economic growth. If an economy is already very rich and economically developed, it may be close to its potential economic growth rate and therefore any extra spending on higher education will not have any significant effect on the growth rate.

Let me use an analogy. Imagine you have a tub. If it is already full, you cannot increase the level of water in it by pouring more water. So the percentage change in the “growth” of the water level is zero. But if you start off with a nearly empty tub, even a modest amount of water added will result in a significant percentage change in the water level.

The important point is that mature systems do not grow by increasing those factors that are only important during the immature stage of the system. If the population of a country does not have primary education, then resources directed to primary education will change the system more significantly than if resources were directed to higher education in an already well-educated economy.

The second relationship mentioned in the excerpt above is totally consistent with common sense — that growth drives spending. Growth implies more investable resources and that in turn means higher education gets more funding. The direction of causation is easy to explain.

It is an empirical truth that economic development drives spending on activities that increase the stock of public goods such as education (both basic as well as higher education), infrastructure, etc. It is also true that increase in the stock of public good drives economic development. There is an inherent circularity in such matters which are commonly labeled vicious circles or virtuous circles, as the case might be. How to move from a vicious circle to a virtuous circle is the challenge. Poor countries, like poor people, are unable to invest in public goods such as education and thus are doomed to be eternally trapped in the vicious cycle of low growth also known as a development trap. Unless they have the ability to borrow. If they can borrow and use the credit efficiently to create public goods, they can lift themselves out of the trap.

My prescription for India is simple: invest in education and borrow massively if need be to do so. The money will be well-spent.
I have a modest proposal which will transform India into a fully literate country within three short years and the benefit of doing so will far outweigh the cost. Tomorrow I will present the proposal.

The disruption wrought by microbes have repeatedly changed the course of human history. It was probably pestilence as much as any other single factor that accounted for the European conquest of the Western Hemisphere in teh sixteenth century…

On the other hand, the Black Death may have fueled the burst of human creativity known as the Renaissance. At the time plague struck, medieval society had fallen into economic stasis, caused in large part by the “Malthusian deadlock” of dense population. The plague broke that deadlock by decimating the population, liberating land for diverse uses, creating the need for laborsaving devices, and unleashing the ingenuity of Renaissance society. The catastrophe of pestilence “gave to Europeans the chance to rebuild their society along much different lines … It assured that the Middle Ages would be the middle, not the final, phase in Western development. …

Even our success in besting microbes can bring untoward consequences. Chief among these is a distrubance of population balance. For example, elimination of malaria from Mauritius led to a doubling of the population within a decade, even though the birthrate remained constant. Stated more broadly, relief from pestilence is a major factor in the population explosion that has threatened human welfare and for which no satisfactory remedy has yet been established. For the moment, the global epidemic of AIDS may provide a macabre counterbalance: the population of Africa faces decimation; and still emerging, but vast and largely unchartered epidemics of the disease are threatening India and China. [Emphasis mine.]

For now I will pass on without any further comment on the population problem, and move on to the other big concern of mine: education. Again from Michael Bishop from the chapter Paradoxical Strife:

… our nation has allowed the means of primary and secondary education to deteriorate. In doing so, we have incurred great risk, described seventy years ago by the philosopher Alfred North Whitehead:

The art of education is never easy. To surmount its difficulties, especially those of elementary education, is a task worthy of the highest genius … [But] when one considers … the importance of this question of the education of a nation’s young, the broken lives, the defeated hopes, the national failures, which result from the frivolous inertia with which it is treated, it is difficult to restrain within oneself a savage rage. In the conditions of modern life the rule is absolute, … [a country] that does not value trained intelligence is doomed.”

We have not heeded Whitehead’s warning and it has retained all its original prescience. Our elementary and secondary teachers are reglected, disrespected, inadequately compensated, and improperly prepared. Many of our children attempt to study in the midst of physical squalor and personal decay. We can expect little improvement in how our youth learn until we have changed all of that. The change will require great resolve: we have allowed the deterioration to run very deep.

What is true for the US, holds with even greater force for India when it comes to primary and secondary education. When are the so-called leaders of this nation ever going to wake up to the fact that India is today what it is because it has “not valued trained intelligence”?

Let’s discuss education. India has the largest collection of illiterates and semi-literates in the whole universe. India is also very poor and therefore cannot afford the luxury of going the traditional route as regards education. The tradition route of having fancy classrooms and well-paid teachers is beyond the reach of the majority. What is the way out, then?

Here is a comment by Bob Wyman which he left recently at Rajesh Jain’s Emergic weblog:

You wrote:”1. Education: Education is perhaps the most important investment that people can make in their future.”

India is *NOT* taking advantage of some very cheap and simple ways to spread education throughout the country. The most glaring example is that there is virtually no “educational television” available in India — even though TV has a surprisingly high penetration in India. For “schools without teachers”, one solution might simply be to install TV sets, hire “teaching assistants” and have the India’s *best* teachers broadcast from a central site. The teaching assistants would then keep order in the classroom, issue standardized tests, etc. This is, of course, not the ideal way to teach. However, it is much better than doing nothing. We have gained, in many countries, a tremendous amount of experience in teaching without teachers. Television, Radio, etc. have all been successfully used provide “distance learning” to students in the Australian outback, the Alaskan wilderness or some of the more remote parts of Africa. The fact that there aren’t enough teachers shouldn’t prevent teaching from happening — it should only change the method for deliverying the teaching. In fact, if one takes seriously the suggestion that only India’s best teachers should be used in educational TV, it is even possible that students “forced” to learn over TV would be better taught than some who had their own teachers.

Rajesh and I have proposed pretty much the same idea in a separate paper which was presented at a conference in Sydney last July. The idea was to create first-class content and then distribute it using the most cost-effective ICT tools, and have the “last mile” delivery done at the village level.

Bob added a very important bit that I am ashamed to say that I had not thought about. I am ashamed because I should have thought of that considering a number of things. I have spent over 20 years in the US, many of which were in university campuses. I am confident that as much as I learnt in universities, I leant a great deal from the excellent public radio and television in the US. I am more than familiar with the content available in radio and TV there — I swear by it. The most logical thing would have been for me to propose that we beg, buy, borrow or steal some of that content and translate it appropriately for educating our people in India. But it was Bob who wrote another comment on Rajesh’s blog and said:

You wrote: “The challenge lies in the creation of content.” NO!, NO!, NO!

Educational Content development is notorious for consuming vast quantities of money and producing little. To get started, with a reasonable budget, you MUST accept that you can not reach everyone on day one. Do first what CAN be done. So, exploit the vast quantities of recorded content (TV, Radio, etc) that exists in English in the US, England, Canada, Australia, etc. Billions of dollars worth of content has been produced by schools, non-profits, and governments and much of it is easily and cheaply obtained. Use this content first to establish the concept and the network and to convince people of the value of the idea. Only after you have exploited this material to its fullest extent should you get involved in the exceptionally expensive process of developing new, original content. While English language content may not be ideal and may not reach the full breadth of students desired, English is the second language in India and there are a vast number of students who would be! nefit from content in English.

With English language content, you could create a real “educational TV” network for India for little more than the cost of a tape recorder in one of the cable-TV head-end offices and someone to change tapes every half-hour or so. The real challenge would be the politics of getting a channel assigned and dealing with those who insist on coverage of vedic astrology… Nonetheless, the cost of such an effort can be kept to such a low level that it should be embarrasing to anyone to oppose it. Start small and then grow. Use English first and expand over time only as your budget allows.

Thank you, Bob, for that excellent recommendation.

I have had the misfortune of seeing what is on Indian TV. There is standard Indian stuff — song and dance and movies (with more song and dance.) Then there is Indian news and some other stuff such as sports. Then there are the imports. Among imports there is news (BBC, CNN, etc) and then there is good stuff such as Discovery and nature channels. Then we have the average American crappy sitcoms such as Friends (although I confess that I really really like Will & Grace, especially the character, Karen in it). But for real disgusting stuff, you have American wrestling. If we have the spare bandwidth for Wrestle Mania, I cannot fathom why we can’t have a 24-hour educational channel.

Like they say on TV, more to come. I will continue this one tomorrow.

India is a land of opportunities. By that I mean, that we have so much to accomplish, so much to get done, so much has been neglected for so long, that everywhere we look, we find things that need to be done. There is a veritable surfeit of opportunities and one has a hard time figuring out where to begin. The whole set of opportunities is overwhelming. More so because we have severe resource limitations. So much to do, and so little to do it with. Consequently, one has to prioritize the tasks. To my mind, one issue wins hands down when it comes to priority. It is education.

Education is the linchpin which holds the entire economic machinery together. It is so fundamental and basic that without an educated population, there is no conceivable way for an economy to prosper. Show me any economy that has ever done well, and I will show you that at its foundation is an educated population. I grant you that for short periods of time due to special circumstances, an economy may flourish without an educated workforce, such as an economy buoyed by a natural resource such as oil. But it is a hollow sort of an economy and cannot survive in the long run.

I will spare you the volumes that one can say about the benefits of education in the abstract. For now, let me concentrate on India’s development. We have things to get done, as I mentioned before. A short list would include a high-productivity agricultural sector, a robust manufacturing sector, modern infrastructure in terms of power, telecommunications, good roads, water, … The list goes on. All the components of that list would be what I call the ‘hardware’ necessary for economic development. But they are not sufficient until one includes the ’software’ as well. The software is an educated workforce and without this software, all the hardware is of little use.

No one really doubts the benefits of education. It has to be done, for sure. But is there any compelling reason for us to put education at the top of the list, give it the highest priority, and sequence our national interests so that education gets first dibs on our limited resources? Yes, there is. Education has the highest return on investment and it has very strong forward and backward linkages to the rest of the economy.

Let’s see the effect of $10 billion spent on education. Much of that money will be spent on wages, especially wages to teachers. Wages are then spent on goods and services. Teachers will buy food and manufactures and services with their wages. Every sector of the economy will be affected by the infusion of money in the education sector. This is the multiplier effect of spending on education, and they are due to the backward linkages that education has with the rest of the economy. The forward linkages are those that are produced by the output of the educational sector. An educated workforce is more productive in all sectors. Educated farmers would be better able to figure out what to produce, how to produce, and how to best sell their production. So also, educated manufacturing workers will be more efficient because they will be better able to follow complex instructions. The list, as the saying goes, goes on.

If I were the dictator of India, say like Jawaharlal Nehru was, I would take at least 50% of our foreign reserves and use it to fund education. In 20 years, I would ensure that India was positioned to be a shining economy. This sort of spending will have immediate effects of course from the backward linkages. For instance, we have a large number of educated unemployed. They are not necessarily going to be great teachers. But they are educated enough to be able to help deliver the content required for education. As for content, create world class content and use the state of the art ICT tools to distribute the content. Use FM radios, TV, and even computers to distribute content. This will give a boost to the ICT sector. All the sectors that provide inputs for education will benefit from the backward linkages that are inherent in education.

Unfortunately, I am not the dictator of India. So we are at the mercy of the policy makers who presently hold the reins. Are they enlightened enough? Can they be enlightened? Is there a way of pounding some sense in their skulls at the very least? I don’t know. What do you think?

Today’s Times of India editorial calls it a senseless subsidy. {In the original draft, I had expressed my opinion of the Supreme Court in blunt language. A friend called up to say that in India one is liable to be thrown in jail for doing so since it a non-bailable offense. It seems that one cannot freely express one’s opinion of the President of India and the judges of the Supreme Court. I don’t know for sure but this must be the legacy of the British — royalty being above criticism. Be that as it may, I am removing the honest criticism from here and publishing it elsewhere where one can freely express one’s opinion.}

India is poor by choice. The policy of subsidizing higher education and neglecting primary education is one such policy choice that has condemned India to being a poor third-world irrelevant nation which has the highest number of impoverished illiterates in the universe.

We are poor by choice. We don’t need adverse external shocks to keep us illiterate and poor; India’s leaders and its courts will do the job of keeping India a chronically ailing over-populated collective of starving illiterates without any help from abroad.

The importance of primary education cannot be overstated — ever. No amount of India Shining campaigns can paper over the fact that India is doomed unless it focuses on primary education. I have been writing about the shocking neglect of primary education and the regressive subsidy of higher education for years. (See Who Paid for my Education? for instance.) It is not rocket science. A moment’s reflection is all that it takes for one to realize the importance of primary education. Allow me to quote from Venkatesh Hariharan in a recent exchange at the India-gii mailing list:

… How can India be shining when we have [an education] minister who doesn’t care a damn for the pathetic lack of a primary education? The man is, instead, taking a sledgehammer and applying it diligently to what are the crown jewels of India–the IITs and IIMs. Our current success is IT is just a “flash in the pan,” whatever NASSCOM may say. We happened to be in the right place at the right time when the IT and BPO booms happened but to sustain it we need more than luck. In the knowledge economy, our lack of a primary education system is a serious handicap.

Many years ago, I met with MIT’s noted economist, Lester Thurow and he said that India’s lack of a primary education system was one of its biggest handicaps. I recently met him again for an extended interview that appeared in MIT’s Technology Review. Here are some excerpts from the interview:

1. In the knowledge economy, Thurow says, countries that wish to stay ahead must pay great attention to education. “Ask yourselves this question–30 or 50 years from now what job will an illiterate do? By that time you will have robots to do what an illiterate does now.”
2. “When we talk about the knowledge economy, we are not talking about just information technology or programming,” says Thurow. “Every job will have a big knowledge component. For example, in a modern steel mill, a worker is more likely to sit behind a computer screen than lift anything physically. When we are talking about knowledge workers, we are talking about any job that has a knowledge component.” Fewer and fewer jobs fall outside of that description, he says. Countries that aim to progress in the global economy therefore have to ensure that everybody becomes literate as fast as possible.
3. According to Thurow, the lack of widespread, basic education is one of the reasons that India has problems competing with China. “The worst educated province in China is better than the best educated province in India. Indian universities are better than Chinese universities but more people are in Chinese grade schools than are in Indian grade schools. This will hurt India and you cannot allow this to continue in the long-run. You have a top-down strategy versus the bottom-up strategy that China has. You better have a strategy that gets everybody educated,” he says.He praised China’s approach of getting everybody educated up to the third grade, then to the sixth grade, tenth grade, twelfth grade and so on. Globalization strategies have to carry the masses with it or they would not succeed. A knowledge based economy is not one where only the elite get educated, he says.

Our education system, our national IT strategies are all deeply elitist. As a country, we need to broadbase our education system and leverage IT for the dispersion of knowledge. Instead, what we have are crumbling schools, absent (and often underpaid) teachers, and students who will emerge completely unprepared for the kowledge economy. And what we have is a thin elite layer that is happily using IT as a milch cow that showers dollars and pays scant attention to how it can be deployed for our country’s benefit. India shining? Not unless you are smoking pot!

When one ponders the factors that account for India’s backwardness, one is struck by how significant is the role of luck. It is sheer bad luck that India got saddled with mostly self-serving ignorant power-hungry narrow-minded short-sighted bunch of leaders and policy makers. How long it will be before the billion plus people of India find within them enlightened leaders is hard to tell. If ever there was a time for good leadership to emerge, now it is.

[I have written earlier on Pricing Management Education in this blog which looks at the arithmetic of subsidizing IIM education.]

Unsurprisingly, he makes the point that education is the primary requirement for India to lift itself out of grinding poverty.

To compete effectively in world markets, India needs to expand its secondary school education. It also has to vastly improve its health services. There is abundant evidence that returns on such investments in India’s human capital would be high.

Economists are deservedly known to disagree on many issues. But on one matter there is consensus: the absolute necessity of an educated population for an economy to develop. This fact has been known for ages by almost all who have ever pondered the question of economic development and growth. The puzzle therefore is to explain why education is broadly neglected in India. What is it about education that makes it a scarce good in any poor economy? I believe that there are two factors that explain this unfortunate phenomenon. First, education is a public good. And second, the socially optimal provisioning of public goods require collective action. India is particularly prone to a failure of collective action, which in turn leads to an under-provisioning of public goods, including the most fundamental of public goods — education.

It is important to distinguish between public goods and private goods. To start off, public goods are not goods that are provided by the public sector, although the public sector is often required to provide public goods. What makes a good a public good is not who provides it but rather the nature of the good itself. Public goods are best defined as goods that are not private goods. And private goods are those goods that are rival, excludable and do not have externalities in consumption. By contrast, public goods are nonrival, non-excludable, and have positive consumption externalities. These are terms that need to be defined precisely so that we can reason further why a collective action problem leads to an under-educated population. Only by fully understanding the causes of the failure can be begin to find a solution to the problem. I hope to investigate this more in the days to come.

The proposal that I put forth is this. For this exercise, I will assume specific numbers for costs, prices, net present value of the future stream of income, etc. The actual values will be different but will not affect the outcome of the argument.

First determine the full cost of an IIM education. Assume it is Rs 10 lakhs. That figure must serve as the floor for the pricing of an IIM education. Then determine the net present value of the increase in the future stream of income arising from an IIM degree. Assume that it is Rs 25 lakhs. That figure must serve as the ceiling for the pricing of an IIM education. Now set the price somewhere between the two, say, Rs 18 lakhs.

So for every IIM graduate, the net ‘profit’ is Rs 8 lakhs. Every year the IIMs graduate about 10,000. Aggregate net profit will then be Rs 80,000 lakhs or Rs 800 crores (approximately $170 million). That is a large sum of money which can be used in various ways. One way to use it would be to fund primary education. Assume that it costs $170 to provide primary education per year per child. That means we can educate one million children from doing something that we already do but don’t capture even part of the value created.

Alternatively, $170 million a year could be used to fund the creation of futher IIMs. After all, we have no dearth of applicants. Something of the order of 130,000 students compete for about 12,000 seats.

However, the question would then be: how are students going to be able to afford Rs 15 lakhs for an IIM education? Simple. Give every candidate a loan for the entire amount. Make the loan repayable in the next 7 years, say. Every year the student pays off 10% of the loan.

What does this scheme achieve? Primarily, it avoids economic waste. If the increase in the future stream of incomes were not sufficient to cover the full cost of the education, then clearly this education should not be delivered. Secondly, if the full cost is recoverable, this scheme further captures some of net benefits and channels it to primary education — which itself has multiplier effects. Channeling it to primary education in effect increases the pool of talent from which future IIM graduates can be drawn.

We need to think through the funding and pricing of higher education. Leaving it to bureaucrats who have little understanding of the larger issues is not very smart.

Now for the bad news. Here is insanity #1: Deficit financing.

The IIMs used to get block grants from the central government. The biggest of the IIMs received around Rs 20 crores annually which went towards their expenses of about Rs 50 crores. Whatever was not spent was saved for future growth. Now in the new system, whatever an IIM saves will be deducted from future grants.

Anyone with even half a brain can immediately see that this bring perverse incentives into play. Will the institute work as hard at raising funding from external sources knowing that at the end, its hard work would not leave it any better off financially?

Trouble is that the IIMs are sitting on large savings, with IIM Ahmedabad topping the list at Rs 112 crores. The HRD wants none of the IIMs to have more than Rs 25 crores and to hand over the rest to the government.

Insanity #2: Reduction in fees.

The HRD is pushing for a reduction in fees to about Rs 15,000 from the current Rs 100,000 or so for a 2-year course. This is so insane that I don’t know where to begin dissecting it. It goes against all rational analysis. First, is the demand for an IIM education so low that the price has to be reduced? Not so, because already 130,000 candidates apply for the 12,000 seats.

Next, is the cost of an IIM education so low that the prices have to be aligned downwards from Rs 100,000 to Rs 15,000? I am sure that even at Rs 100,000 the price is below cost and hence the education is already being subsidized. Reducing the fees will definitely require an increase in the subsidy. Besides that, to keep costs down, quality of education will also suffer. And finally, it will lead to tremendous deadweight losses due to the distortions introduced by the subsidy.

So I have pointed out the problem with the HRD’s policy. Now I am obliged to give a sane solution to the whole mess. Here are my recommendations.

Recommendation #1: Have a common admissions test for all management schools in the country and make it revenue neutral.

Also, the fees for the test should be adjusted to be revenue neutral. For instance, currently the fee is Rs 1000. With about 130,000 examinees, the revenue is Rs 130 billion. After costs of administering the test of Rs 2 crores, there is a surplus of Rs 11 crores. This is currently divided among the IIMs. This scheme is regressive in that those who do not get selected (about 118,000 test takers) subsidize those who do get selected (about 12,000). This is blatantly unfair.

Recommendation #2: Increase fees to be more aligned to the fees for comparable schools around the world and provide student loans to all students who require it to pay for their IIM education. Tomorrow I will elaborate on why I am recommending this. Please stay tuned.

I went back to my newspaper. On the op-ed page of the Business Standard of 18th November was Prof Kirit Parikh’s opinion: Needed — Indian institutes of social sciences. “We need to set up institutes of social sciences on the same high standards as the IITs,” said the sub-title. The piece started off with the observation that the returns to R&D are very high in areas of science and technology. Admitting the excellent results of insitutions such as the IITs, CSIR, ICAR, etc., he noted that the number of researchers per million population was not very impressive for India compared to other countries. In the mid-1990s, he reported, India had 150, Japan 4,900, Singapore 2,300, Korea 2,200, Mongolia 900, and China 450. Very interesting.

Then he went on to write:

We have had strong political support for science and technology. A strong case can be made for government support for research, for basic research, for crop variety research, for birth control or for environmental research, for defence or research related to critical so-called dual-use products and research in special areas that require the concerted efforts of many institutions. …

… We need social science research to promote good governance. Economic and political research can help identify policy options and alternatives. It can also assess the costs and benefits of alternatives that help in selection of policies… social science research is as important for development as scientific and technological research…”

With due respect to Prof Parikh, I would have to disagree. Mind you, I am not disagreeing with him on the importance of research. I am questioning the wisdom of spending resources on research when we have not yet neither learnt nor used what is already available for free in any well-stocked library.

Let me use an analogy. Suppose I have a very large stock of very nutritious basic food sitting at home unused. Suppose my family is starving. Further suppose that I am broke. And now suppose I decide to go out and spend money on buying expensive food which will be delivered in a few months to feed my family with. Would you call me stupid or what?

The stock of knowledge that is available for almost free is stupendous. We have yet to apply even a little bit of that in our policy making. We don’t teach those fundamentals to our kids. They grow up to be intellectually uni-dimensional morons who cannot have an innovative idea in their heads. And then we propose that more research be done at more ivory tower institutions spending scarce resources that have a very high opportunity cost.

Coming back to that teenager: he will probably be able to rattle off the value of the electrical charge of an electron from memory. Or tell you the chemical structure of a sugar molecule. But he would not be able to solve a simple problem involving some degree of problem solving abilities. He probably has not the faintest clue about how markets work or how people interact. Imagine going easy on the structure of the atom bit, and giving him a bit of understanding of the prisoner’s dilemma. Knowing the structure of an atom is important, but it should not be more than an afternoon’s work at best to get that across. However, understanding what the prisoner’s dilemma is and then considering the implications of that would take a lot of time and would teach very valuable skills to the student.

Why this dismal state of affairs? Because the teachers themselves are clueless uni-dimensional card-board cutouts. They are as capable of entertaining an original thought as I am capable of holding a tune. It does not surprise me in the least that the Indian educational system is a sad mockery of an institution that forms the bedrock of any sustainable society.

Is there a way out? I think there is. What we have to do is to actually create the curriculum ourselves. Then we have to get the content (create or aggregate already available content). After that, we have to use tools that are fortunately available from information and communications technologies to deliver the content. And I have a sneaky feeling that all this can be done profitably.

George Bernard Shaw had once remarked that when he wants to read a good book, he writes one. I think our desire to have a well-educated society must motivate us to educate our society well.

If you are planning for a year, sow rice; if you are planning for a decade, plant trees; if you are planning for a lifetime, educate people.

In the context of development, I think the last bit should be “if you are planning for a nation, educate people.” Especially, primary education. For among all the factors that are necessary for economic development, none is so basic as primary education for a nation. Primary education is the essential basic public good engredient without which there is no known receipe for development.

Everything else, all institutions required for development — from markets to democratic government to legal systems to law enforcement — require an educated populace for their functioning. In the absence of widespread literacy, a nation has little hope of achieving anything at all. Education is not just an instrumental good (for achieving development) but it is also a final good, an end in itself for it allows humans to be more fully human.

It is India’s misfortune that its leaders have neglected that fundamental truth. So we have the largest number of illiterate people of any nation in the world. Literacy, though distinct from education, is closely related to it. Without a literate citizenry, the so-called freedom of the press is an absurd notion. Without an educated population, our so-called democracy is a mockery of the ideal.

To explain the dismal state of the Indian economy, one would be well advised to look closely how the Indian government addresses the question of education. To understand why the government takes the position it does regarding education, one would have to look at the history of India. I would like to present the bare outline of my argument about the Indian education system, why it is elitist, and what that implies for the development of the economy.

First the history. India used to be a very rich nation a few hundred years ago relative to the other nations. That is why India got plundered repeatedly. The latest to arrive were the Europeans and finally, the last to establish their colony were the British. Their goal was to extract the wealth and do so efficiently. They were not in India for India’s development, and understandably so. Why bother with development of brown-skinned heathens?

The British therefore were interested in extractive systems, not developmental systems. Development requires universal primary education. During the course of the British Raj, the level of literacy dropped. From a largely literate and educated population, India became largely illiterate.

However, the British were few in number and a vanishingly small number of them were in India. So they had to delegate the massive task of administering this vast land with the primary purpose of extracting wealth. That delegation required an efficient bureaucratic machine that would control every aspect of the Indian economy from the top down. That bureaucracy would have to prohibit the natives from ever being economically free. By design, the machinery was meant to make the natives dependent upon it for favors. That is the genesis of the administrative bureaucratic machine that India got from the British.

The bureaucracy was in effect a straitjacket that held the Indian population immobile while the British plundered the land. But since the British were few in number, they needed to have surrogates to run the bureaucracy. They therefore trained a very very small number of natives and created an elite core that worked the bureaucracy for the benefit of their pay-masters, the British.

Thus you had a divide — that yet persists, and how. But I am getting ahead of myself. The divide was a literacy and education divide. An elite few were educated so that they could run the machinery and the rest were deliberately kept uneducated so that the country could be more effectively and efficiently exploited.

The extraction party went on for a while. The land yielded its wealth but nothing is inexhaustible. The land was becoming barren. It was getting harder to extract wealth, as the country slid into poverty. For the first half of the twentieth century, the GDP of India grew at a negative rate. Every year from 1900 to about 1950, the economy actually contracted.

Not just that, colonialism was going fast out of fashion. So the British decided to leave. They could read the writing on the wall, and they were not dumb. samajhdar ko ishara kafi hota hai. They left the building on August 15th, 1947 and on their way out handed over the keys to the Congress Party. The Congress were delighted. They decided that the British were really nice folks. They missed the British. So they said Nehru is close enough.

The important point is this. The British left the building but the building continued to be exactly what it was and the inhabitants of that building continued to be exactly the same as when the British were there. The bureaucratic machinery, the command-control-extractive bureaucracy persisted just as before. It was an institution that the Congress — the faux British — were only too eager to take control of. The directive to the bureaucracy was the same: Don’t allow the filthy natives any freedom to do anything without getting permission for every little thing.

Every little freedom that we are denied in India, just look a little closely. It is the dead hand of some Britisher reaching through the Indian bureaucracy to prevent you from doing something or the other. I was in a two-bit town in Bihar visiting a little shrine where the Buddha supposedly died. I was told that I could not take a photo graph of the crumbling little temple. Totally mind-boggingly astonishing.

Want to listen to the radio? Sure, go ahead, the government will provide you the programming. It will tell you what you should hear. It will tell you which books you can read (if you are among the chosen few who can read, that is.) The free press? Means precious little for the larger proportion of the country that is illiterate.

Every avenue of production — the government will have control. From power to railways to steel mills to telephones to grain silos. And of course education. But that last bit (and I am coming to the point that I had started off to make) has an interesting twist: education only for the elite. Educate the elite alone so that the unwashed masses will be more easily controlled. The masses will continue to vote for the corrupt political parties only if they don’t have access to information. Control their access to information and you have control over their destiny.

It is the information divide that was instituted by the British and it persist under the able stewardship of the subsequent government (largely the Congress) though the efficient bureaucratic machinery that control every aspect of the Indian economy. (Liberalization is a recent phenomenon and that is another story.)

If we were to posit that the objective of the educational system in India is for the elite alone so that they can control the rest of the country, a number of features of the system can be easily explained. For instance, the emphasis on higher education (IITs, etc) and the neglect of primary education.

The middle class and upper classes spend their own money to give their children fine primary and secondary educations. Then these children out-compete the children of the poor people and enter institutions of higher learning where they study at the expense of the toiling masses. Higher education (until recently) was largely free.

And then there is the so-called brain drain. I say so-called because it is a total misunderstanding of the fact. India is not deficient in brains. Even if 200 million brains were to magically vanish from India, we would still have more number of brains than the combined brains in the US and Western Europe. What India lacks is resources for education. And when 10,000 educated doctors, engineers, scientist, teachers, etc, leave, they represent a resource drain. That is a capital drain that India can ill afford. It is embodied capital which required resources to produce.

Economists measure cost of doing something as the opportunity cost : what is the cost of foregoing the best alternative use of the resources employed. Say, you could spend Rs 10 lakhs of public money to educate one engineer at an IIT. Suppose the best alternate use of that money was providing education up to the secondary level to 100 rural children. The opportunity cost of educating one IIT engineer is then 100 rural children’s secondary level education. What are the effects of this?

I believe that over all effect of educating an IIT engineer at the cost of 100 rural children is bad. I will defend that claim in the next few articles. I will address questions such as IIT engineers who go abroad repatriate dollars and technology and other such pitiful objections. I must hasten to add that I am not advocating abolishing higher education; that would be the last thing on my mind. I am arguing that public funds must not be used for higher education at the cost of neglect of primary education.