Atanu Dey writes a good article on the need to liberalize Indian education at The Indian Economy Blog.
Although I do advocate liberalization but my thought is that it should be done only under the right circumstances under a favourable environment which shall enable an open market to nurture and thrive.
Mr. Dey writes:
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.
In case of the current education status of our country, a majority of the population is not literate (by literate I am referring to have completed atleast 10 years of formal school education). In such a scenario, you have a significant population that is not aware of the dealings of the business world. This population cannot differentiate between what is good and what is not in the open market primarily because they do not have the ability to seek information and process it.
The government has to chip-in to ensure that these people, who are illiterate by definition of the word, are not taken for a ride by the fly-by-night “educational” institutions that will enter the market when it is opened up.
The analogy used by Mr. Dey is not quite appropriate for two reasons:
a) A bakery can be judged good or bad based on a decision making ability that does not require formal education – An illiterate man and a scholar can equally conclude which is a good bakery and which is not. That ability to decide does not require any expertise. However, in case of a school, the common man does not have the ability to decide its worth. A common man does not have the means of obtaining knowledge about various schools and then coming to a conclusion.
b) Switching costs are not high in case of a bakery. A buyer can easily buy something from another bakery down the street. In case of education, this is difficult. You make significant investment of time, effort and money to get your kid to a school. One cannot afford to have all that go waste when the supposed school shuts shop.
Hence, liberalization of education in India is definitely not an attractive idea, atleast for the near future. We first need to have our major chunk of people educated. Empower them so that they can take decisions. Only way this can be done and should be done is for the government to provide the support to people by ensuring that only credible educational institutions put up their flags in the country. I accept that the government is not doing a great job on this front – but that is a separate implementation issue. The solution to that lies in better governance and not in liberalizing the market.
When you look at it, it is like a tight circle – Government control is not needed and markets need to be opened up. But to open up the markets you need the government to have educated the people concerned. For this you need government control.
One suggestion that could be considered is the liberalization of the higher education sector – Graduate and Post graduate program providing institutions should be allowed to compete in an open market. There is an implicit assumption that students reaching a graduate or post-graduate level have the acumen and knowledge to decide on which institutions to opt for.
The government ofcourse should have a legal recourse well-defined for the students to ensure that they do not lose out on any front in case any shoddy educational institution drives away with the moolah.
I agree that the government should not be in the business of running schools – but at this moment in time, we do not have a choice. Right now, we need the government to regulate our schools. Atleast for some time in the near future.