Tuesday, November 22, 2005

A Missed Opportunity to Experiment and Improve State Provision

Sushila Ramaswamy writing in The Statesman ("the first completely customisable news site on the web" in India), 22 November, on “Quota Questions: the overriding importance of merit emphasized in court verdict” concludes the piece with:

“The private sector has a small identifiable role under state regulations. The overwhelming majority of students would continue to study in state aided institutions. The private sector can only supplement the state in higher education but cannot replace it or become an alternative. This fact is even acknowledged by the father of laissez faire economics, Adam Smith. However, the private institutions should be allowed to function with minimum of state interference and elimination of quotas.”


The details are complicated and state sponsored intervention by the regulatory bodies involves committees of retired judges and accountants ‘of repute’ deciding on the appropriate fees for private educational colleges, on proper quotas for students from poorer families and on selection on merit by students passing state entrance examinations.

By restricting the role of private colleges to be a ‘supplement’ to state provision, this automatically builds into education providers from the state a guarantee that they need not worry about competition and, thereby, they need not be too active in raising their own standards or innovating. Whereas the threat from a really efficient and educationally sound private college system could replace their over-staffed, subsidised and lethargic state colleges, and would work to keep them actively pursuing excellence.

An opportunity missed I suspect, but that is India; a regulation-rampant society forgoing opportunities to shake-up its subsidised state sector, instead of opening up the education sector to new initiatives and the possibility of subsidy switching.

I know of no acknowledgement by Adam Smith (who was not the ‘father of laissez faire economics’!) that private education could not replace or become an alternative to state education. The 18th century situation was quite different. The state was hardly involved in education; colleges were funded by bequests and endowments, plus what the staff could earn in student fees. It was the late 19th century that introduced state funding on a major scale. I suspect that Smith have preferred a voucher system to state monopolies.

Smith’s attitude to public funding was to advocate it where no private individual or group of individuals could raise the necessary capital and earn profits on the scale required (“Wealth of Nations”, Book V). The management of such projects once erected was left open to whichever was best (comparative experimentation?) and the most honest. The initial, continuing or final proportions of state or private management were left open. Smith did not acknowledge a state majority as inevitable or permanent except in the cases of the Mint and the Post Office.

Looking at India from the outside, I think they should test which works better by experimenting – the country and the population is large enough for valid testing. Meanwhile, they should leave misconceptions about Adam Smith out of their deliberations.


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