This Policy, Alone

And now for the big reveal that is the answer to the post “A Policy Question” I had posed. That policy is simply this: Make the education sector absolutely free-market. I will attempt to justify why this simple policy change meets all the criteria I had listed.

A few people have responded to me privately and some have posted public comments to that post. Reader baransam1 replied “stop funding government schools.” Close but not quite, as it will become clear later. Sri suggested “currency should be pegged.” That may or may not be a positive. I don’t understand monetary policy and don’t have any confidence in macroeconomic policies. Aks rambled for a bit but in some sense came close to the policy I recommend. He wrote, “We need to free education from government.” Good job. My friend APD too reached a similar position.

Free Markets

Markets are where exchanges take place. People buy and sell goods and services. Markets that have no barriers to entry and no barriers to exit are free markets. For an economy to reach its full economic potential, it has to have free markets. And a few other bits — property rights, rule of law, the enforcement of contracts. Those bits require the state or the government to be effective and efficient.

Any good or service that is produced by the free market is produced as efficiently as the state of the technology permits it. Why this is so is a fascinating matter that I will not go into here (since I have done so on numerous occasions on this blog.)

The Good Educational Policy

The policy change is that there would be no barriers to entry or exit in the education sector. Anyone, any firm, any corporation domestic or foreign, would be able to provide any educational services at whatever terms and conditions they see fit.

This does not directly affect any existing educational institution, public or private. The government of India, and the governments of the various states in India, would continue to run whatever schools and colleges they run, and continue to serve the population that they currently serve. They would continue to extract taxpayers funds as they do now to support their educational objectives. Those do not change. The various government bureaucracies would continue to do whatever they do to existing educational institutions — granting them permissions and recognitions and certifications, and regulating and controlling them. Their jobs do not change at all.

The only change is that new entrants are free to enter the education market. They can offer degrees and diplomas and certificates on whatever subjects they wish, and on whatever terms their customers agree to. The government would not care about the quality or effectiveness of their teaching. They would not require licenses and permits and quotas. It would be a total free for all.

The government would not place any burdens on the sector — meaning they will not tax them. The entrants would of course pay for the services they use. They would pay rent for the property they use or buy the property they need. They would buy their inputs — human or otherwise — and produce whatever they wish to produce in the educational space, and incur whatever profits or losses they incur.

They get to do whatever they wish with their profits, if any. If they are foreign entities, they could fully repatriate their profits or invest their profits in the country. Any domestic entity would have parity with foreign entities in the sense that they could do the same if they wish.

This is not quantum mechanics. It’s plain and simple logic of the market. As Richard Dawkins would have put it, if he were commenting on this policy, “It works, bitches!” (He’d said that in the context of science but whatever.)

Coming Up

In the next parts of this essay, aside from defending the claim that this meets all of the stated criteria, I will also address all possible objections. I suppose by now the regular readers of this blog have realized that I am not one who randomly shoots his mouth off without prior deliberation. I have considered this from all possible angles and I am willing to defend the proposition that is implied by the title of this post — This Policy, Alone.

This alone will transform India in the short run and change India’s future in the long run.

What I want to convey is that this policy alone will change India’s development trajectory. It will put India on the path to prosperity like nothing else can. Once I have argued why, it will be totally transparently obvious to any reasonable person that this is what the government ought to do. And then I will argue precisely why this policy will be the last policy that any Indian government — including Mr Modi — will ever consider. Indian politicians would rather prefer to be shot in the head, be drawn and quartered, and drowned and buried than ever implement this policy.

In short, the chances that this policy will be adopted by any Indian government is between zilch and zero. In other words, the chances that India will ever escape poverty and misery is between zilch and zero.

{Continue on to Part 2 of this essay.}

Author: Atanu Dey

Economist.

10 thoughts on “This Policy, Alone”

  1. But we can start a petition in change.org (like the woke people do) based on your next post, if you consent. Maybe it will create some flutter. Maybe it will not.

    Also, can you please comment why the great US has not freed up its primary education? Or has it? I recently learned that most of the private schools are non-profit private schools. Why the hell they need to be non-profit?

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  2. Atanu Dey wrote:

    “””
    In short, the chances that this policy will be adopted by any Indian government is between zilch and zero. In other words, the chances that India will ever escape poverty and misery is between zilch and zero.
    “””

    Fortunately, things are not as hopeless as your pessimism proclaims. The main reason is that, in reality, people learn VERY LITTLE in school and also in university/college. Most people receive the BULK of their education outside such formal settings. Also, historically, there is little evidence that any nation has advanced/progressed merely by changing its educational policy.

    For a good critique on the position that “(formal) education is the most important thing” from a trained economist, see:

    Ha-Joon Changs’ 23 Things They Don’t Tell You about Capitalism, #17: “More education in itself is not going to make a country richer”:

    “””
    There is remarkably little evidence showing that more education leads to greater national prosperity. Much of the knowledge gained in education is actually not relevant for productivity enhancement, even though it enables people to lead a more fulfilling and independent life. Also, the view that the rise of the knowledge economy has critically increased the importance of education is misleading. To begin with, the idea of the knowledge economy itself is problematic, as knowledge has always been the main source of wealth. Moreover, with increasing de-industrialization and mechanization, the knowledge requirements may even have fallen for most jobs in the rich countries. Even when it comes to higher education, which is supposed to matter more in the knowledge economy, there is no simple relationship between it and economic growth. What really matters in the determination of national prosperity is not the educational levels of individuals but the nation’s ability to organize individuals into enterprises with high productivity.

    “””

    That last sentence is worth repeating, as it is a good summary of the critique:

    “””
    What really matters in the determination of national prosperity is not the educational levels of individuals but the nation’s ability to organize individuals into enterprises with high productivity.
    “””

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    1. Also, historically, there is little evidence that any nation has advanced/progressed merely by changing its educational policy.

      Basic literacy is an essential condition to prosperity. A person should be able to read write and do basic arithmetic, be able to take instructions and execute those instructions like a rational human being. Unfortunately vast majority of Indians do not pass this basic filter. Changing this basic nature of manpower in India alone should give a massive productivity boost. (I employ several of these people so I know first hand).

      Your instincts are right that a lot of education can happen outside of school and hence having a freer education sector would only boost that education as students wont have to waste time in useless schools.

      What really matters in the determination of national prosperity is not the educational levels of individuals but the nation’s ability to organize individuals into enterprises with high productivity.

      The trained economist is telling you that there is no correlation between paper degrees and actual productivity. You don’t have to waste time getting a Phd in Economics for that, if you have interviewed anyone you would know that already. However a basic literacy is heavily correlated with productivity and freerer education sector even more.

      An education sector where babus don’t tell you everything you can run a school for bakers and a school for nail painters. People can pursue these vocations and actually come out with some monetizable skill.

      Liked by 1 person

    2. I agree on the “summary of critique”:
      Having high levels of trade and commerce is what determines prosperity of a country to a large extent. If it was only education, Ukraine (99% educated and decent education quality) would have per capita GDP of at least $15k as opposed to the paltry $3.8k

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  3. If you really want to revolutionize education, a much better policy is NOT to insist that everyone must attend a school/university in order to get a matriculation certificate or a degree certificate.

    Instead, open the exams for every qualification to everybody. Do not require that a person must have attended a college for a fixed amount of time before he/she can sit for that exam. This will save enormous amounts of time and money for everybody.

    In short, massively encourage ‘home schooling’ and A.M.I.E style open universities.
    https://en.wikipedia.org/wiki/Institution_of_Engineers_(India)#Associate_member_(A.M.I.E.)

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  4. Great Post Atanu! I agree, fixing the education policy will usually set other problems straight too.

    But I am wondering if there is a more elemental change that could solve a society’s problems – A state should assure absolute freedom of speech and expression to its citizens.

    A lot of state failures have their roots in the state trying to muzzle the thoughts and words of its citizens. What do you think?

    Liked by 1 person

    1. A state should assure absolute freedom of speech and expression to its citizens.

      In an ideal world right to free speech/expression and association should automatically lead to a freerer education sector. After all, teachers in a room are expressing themselves, students and parents voluntarily listening and associating themselves with the school.

      India does not have free speech and India is home to largest population of imbeciles who will oppose it.

      Liked by 1 person

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