Vipassana is a 2500-year old Buddhist meditation practice that claims its lineage to the Buddha himself. Various institutions carry on the tradition of teaching Vipassana and one such is led by Shri S.N.Goenka. Goenkaji, as he is known by his students, has his headquarters in Igatpuri, a small town near Nashik in Maharashtra, India. I came across Vipassana about 15 years ago in California through some American friends who are his students.
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 transfers are a very common mechanism in human society, especially within the institution we call a family. It works this way: You take from your parents and later as a parent you give to your children in turn. In a sense, we act as temporary custodians of what we receive from our parents. The least we can do is to see that we don’t pass on to our children less than what we 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 those institution. I am talking of educational institutions.
How would an IGT-based education system work? Want to go to college? 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 college 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 discuss 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 for those who need it, provide 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.