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TECH TALK: Doing Education Right: Freeing Education

May 10th, 2007 · No Comments

By Atanu Dey

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 todays 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 dont 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. Indias 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.

Write to atanudey at gmail.com if you have questions or comments.


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