Archives: 01/2007

Market Education: Will India Lead the Way?

Much is made of the fact that some sectors of the U.S. economy face increasing competition from the developing world. India, in particular, is singled out for its proliferation of call centers and computer programmers.

But few people stop to ask how a developing country in which English is only learned as a second language has been able to become such an important international contender for skilled jobs requiring English fluency. The answer, at least in part, is that a large and increasing number of Indian children are being educated in private, fee-charging schools that must compete vigorously for the privilege of serving them. Even in some of the poorest slums and rural villages of India and Africa, majorities of students attend these schools, and are better served educationally than their peers in the government-run sector (and at a lower cost, to boot). Among other advantages – from the standpoint of meeting parental demand – the vast majority of Indian private schools teach all their lessons in English, as opposed to state schools which typically offer English instruction only as a separate course, when they offer it at all.

But despite the considerable size and rapid growth of the private education sector, there are still millions of families in developing countries who find it financially difficult or impossible to gain access to it. But what if those countries kick it up a notch?

A recent story in DNA Mumbai quotes Infosys CEO Nandan Nilekani as saying that, “There is an urgent need for the government [to] provide vouchers to parents from the economically backward section. That way they can choose to enroll their children in private schools instead of the government-run schools, which are in a pathetic state.”

Adopting a truly free market approach to education, with financial assistance to ensure universal access, would be an incredible boon to the Indian standard of living, and an excellent lesson for rich countries still languishing under the pall of calcified government school monopolies.

Attention, Legal and Political Thinkers: A New Scholarly Resource

Rediscovering Bruno Leoni

There’s a new resource from Italy’s Instituto Bruno Leoni: a scholarly web resource on the ideas and work of the great legal scholar for whom the Institute is named, “Rediscovering Bruno Leoni.” It has both Italian and English versions and includes mp3 files of some of Leoni’s lectures.

Leoni showed a deep understanding of law and its relationship to voluntary social order. His work on the evolution of law greatly influenced F. A. Hayek and other writers who outlived him. In contrast to prevailing views, he argued that law is not simply an assertion of power, as the legal positivists insist, i.e., a set of “commands of a sovereign,” but traces back to the claims made by individuals and adjudicated through a complex process of interaction. As Leoni argued in “Law as Claim of the Individual,”

The legal process always traces back in the end to individual claim. Individuals make the law, insofar as they make successful claims. They not only make previsions and predictions, but try to have these predictions succeed by their own intervention in the process. Judges, juris-consults, and, above all, legislators are just individuals who find themselves in a particular position to influence the whole process through their own intervention.

The cases we bring to court and the cases we don’t all are part of the law-making process. The role played by elected legislators is important in the creation of a legal order, but it is almost always overrated. Most of the law that governs our everyday lives resulted from relatively decentralized common law (or Roman law) processes, and not from the “commands” of sovereigns.
Additional resources on Bruno Leoni (and on many hundreds of other deep thinkers) can be found at the extensive and brilliantly organized “Online Library of Liberty.”

Other writers with a similar appreciation of law as an evolved body of rules of just conduct include Lon Fuller of Harvard Law School (especially in his classic work The Morality of Law), F. A. Hayek (notably in Law, Legislation, and Liberty, Vol. I: Rules and Order; his classic 1945 American Economic Review essay on “The Use of Knowledge in Society” is must reading for understanding complex social processes, including the evolution of law), and Randy Barnett of Georgetown University, a Cato Institute senior fellow and author of Restoring the Lost Constitution: The Presumption of Liberty and The Structure of Liberty: Justice and the Rule of Law.
So, budding law students and political scientists. Have at it!

Freedom of the Press and Venezuela

There’s a general relationship between freedom of the press and economic freedom. My research assistant prepared the graph below showing that correlation. Countries that are more economically free tend to have a freer press.

Economic Freedom and Freedom of the Press

[Click picture for larger version]

Venezuelans have been finding that out in recent years as their level of economic freedom, which has been in steady decline during the past few decades, has fallen rapidly under the government of Hugo Chávez. Venezuela now ranks 126 out of 130 countries in the Fraser Institute’s economic freedom index (in 1985 it ranked 25th out of 111 countries). When you concentrate economic power in political hands, the institutions of civil society lose their independence.

The latest casualty in Chávez’s campaign to control the media is Radio Caracas Television (RCTV), whose license the government recently announced will not be renewed. RCTV, founded in 1930, was one of only a few remaining TV stations critical of the government in a country where media outlets are practicing various degrees of self censorship. But, according to the Venezuelan communication minister, RCTV’s “irresponsible attitude hasn’t changed.” Symbolizing the government’s intolerance of dissent is a law passed last year that can land individuals for months or years in jail for expressing disrespectful words about government officials.

The model looks suspiciously similar to that of Vladimir Putin’s Russia, where television stations refrain from criticizing the Kremlin, but a few leading newspapers still do not. In both Venezuela and Russia, relatively few people read newspapers; it is the electronic media that informs the general public.

Journalist and Venezuelan-born Cato adjunct scholar Carlos Ball tells a personal anecdote about the long-term decline of freedom in Venezuela (see his op-ed in Spanish here ). In May 1987, Carlos was the editor of the Diario de Caracas, a leading newspaper. The paper belonged to the business group that owned RCTV. Then-president Jaime Lusinchi conditioned the renewal of RCTV’s license on Carlos Ball’s dismissal. Carlos was fired and the station got a 20-year license. It is that license that is expiring in May. According to Carlos, the road to political and economic centralization was set decades before Chávez declared his so-called socialism of the 21st century. The treatment of RCTV is only the most recent reminder that it is no longer accurate to refer to Venezuela as a democracy.

Semi-Tough — New Ed Report Offers Right Diagnosis, Wrong Cure

An ultra-blue-ribbon report published last month by the National Center on Education and the Economy argues that America is headed for economic disaster unless we dramatically restructure our schools. True enough.  But diagnosing a problem and solving it are two different things, and it is in the solution department that the report, titled “Tough Choices or Tough Times,” disappoints.

The study correctly observes that America must produce a more knowledgeable, flexible, and creative workforce if we are to have any hope of maintaining our current standard of living. If we don’t, an ever-increasing share of U.S. jobs will be filled by better-educated, lower-wage workers in countries such as India and China.

In explaining this economic challenge, the authors (a who’s who of political, business, academic and labor leaders) make a compelling case for free markets. They show how competition, consumer choice, and the profit motive encourage businesses to hire the best and brightest workers they can find – wherever they can find them. Free from intrusive regulation of their personnel and product design decisions, businesses seek to satisfy their customers’ demands as ably and efficiently as possible. They do not do so out of charity, or because they are told to by the state, but because it serves their own interests. This is Adam Smith’s invisible hand at work – and oh how it works.

The fact that the authors understand this process so well makes their education policy recommendations all the more disappointing and incongruous. Instead of recommending that we harness these same free market forces to transform our schools, they offer what amounts to a weak charter school reform, suffocated with regulation.

The report is a central planner’s Christmas list. Teachers would continue to be certified by the state and their (dramatically increased) salaries set by the state. They would administer to students a curriculum determined by the state, and gauge students’ success using mandatory state tests. In fact, progression through the system from secondary to higher education would be dependent on students passing government examinations.

These nanny-state recommendations are, mercifully, punctuated by the occasional dose of liberty. The authors recommend, for instance, that schools should be chosen by families instead of being assigned to students by bureaucrats. This alone, they seem to imagine, would create a vibrant educational marketplace. But consumer choice is meaningless in the absence of producer freedom. If schools cannot specialize and cater to different interests and preferences – by setting their own curricula, choosing their own tests, determining their own teacher selection criteria – then the diversity and innovation that characterize free markets cannot and will not arise. And the report’s recommendations curtail all of these freedoms.

Further inhibiting market processes, the authors would preclude the ability of their charter-like schools to set their own prices or even to charge tuition. But as any first year economics student is aware, market-determined prices are an indispensable mechanism by which consumer preferences are communicated to producers, and by which producers are encouraged to offer the particular kinds of services most in demand. Eliminate market prices and you cripple the market.

How could the contributors to this report have produced recommendations so fundamentally at odds with their own astute diagnosis of the problem? By thinking very hard, inside a very small box.

Marc Tucker, vice chairman of the commission responsible for the report, told the Post’s V. Dion Haynes that they aimed to produce “the best national public school system in the world.” If you set out to build the best horse-drawn buggy, you won’t end up inventing the automobile.                 

The authors of this report assumed that the state must be at the center of our education system much as early astronomers assumed that the Earth must be at the center of our solar system – with equally unsatisfactory results.

Unaware that the planets orbit the sun, pre-Copernican astronomers tried to reproduce their trajectories with clever, intricate, but inevitably doomed geocentric models. In a similar vein, the Center struggled unsuccessfully to reproduce market incentives within their state-centric policy environment. “Both the state and the district could create a wide range of performance incentives for the schools to improve the performance of their students,” the report suggests.

But instead of trying to simulate market incentives within a centrally planned system – a venture proven futile by the failed socialist economies of the 20th century – why not actually create a free education marketplace? With a simple program of need-based financial assistance, all families could be assured access to schools of their choice.

The National Center’s report fails to even consider this market-centric solution, however, and thereby consigns itself to the status of an historical footnote – a doomed and oddly anachronistic attempt to achieve market results through government edict.

[An edited version of this post previously appeared in the New York Daily News].



Is Bush Helping Africa?

On Sunday, December, 31, the Washington Post featured a banner headline reading “Bush Has Quietly Tripled Aid to Africa.” The article noted:

The president has tripled direct humanitarian and development aid to the world’s most impoverished continent since taking office and recently vowed to double that increased amount by 2010 — to nearly $9 billion.

The moves have surprised — and pleased — longtime supporters of assistance for Africa, who note that because Bush has received little support from African American voters, he has little obvious political incentive for his interest.

“I think the Bush administration deserves pretty high marks in terms of increasing aid to Africa,” said Steve Radelet, a senior fellow at the Center for Global Development.

Conservative press critics might be surprised at the positive tone of the article, which ran for 34 column inches, about a third of a page. But one could also wonder why the Post, in all that space, couldn’t find room for a single critical comment from a foreign aid skeptic. For decades, economists have argued that government-to-government aid bolsters dictatorial governments, increases dependency, and discourages local entrepreneurship and enterprise. People can hardly fail to note that Africa has been the largest recipient of economic aid for decades, and the continent remains poor and undeveloped. So will Bush’s huge increase in aid be more successful? The outlook isn’t good.

Post readers who want the full story might consult foreign aid critiques by pioneering development economist P. T. Bauer, former World Bank economist William Easterly, Ugandan journalist Andrew Mwenda, longtime aid practitioner Thomas Dichter, Cato’s Ian Vasquez, or four African economists, or this story from the BBC.