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Privatised education vs. Mobile Telephony

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Proponents of the free market and private profit driven schools and universities often cite mobile telephony as an example of how markets cost effectively produce high quality service. While the success of private enterprise is undeniably true for mobile telephony, I am a bit sceptical about how well it will translate to a market of privatised education.

My first doubt emerges after considering the components required to service these two markets. Mobile telephony is extremely automated. When someone makes a call or sends a text message, the next human contact in that transaction will probably be the recipient. Everything in between is done by computers/electronics, with no qualms about working 24/7, no need of pay or vacations and who can be replaced, with no serious financial or legal consequences, in 5 minutes if things go wrong. Education on the other hand, relies primarily on smart, driven human beings to perform the role of good teachers. While technology is making inroads, the primary drivers are still humans who are disproportionately responsible (compared to technology) for the success or failure of the system. Juxtaposed with computers, humans are poor workers. They have to be paid, become less productive with long hours, tend to be on the lookout for better career options, demand vacations etc. Consequently it is more expensive and risky to hire and retain them and no amount of privatisation of education will be able to match the success of mobile telephony in lowering costs while maintaining standards.

A second doubt arises from what economists call the price elasticity of demand (PED) which is simply the change in demand of a particular product/service per unit change in its price. Many factors affect PED but a crucial one is the availability of substitutes. In this light, as long as schools remain tied to physical infrastucture, a school building for instance, mobile telephony will always have a higher PED than education. Being in direct competition with other communication methods such as fixed line telephony, instant messaging and email, mobile companies are aware that if prices go up beyond a certain threshold, customers can and will shift to other communication technologies without batting an eyelid. It would take extraordinary cartel building skills to raise prices of ALL forms of communication and hence this will probably never happen.

On the other hand, it is extremely difficult to switch schools. The children attending school will not like to leave old friends behind. The new school may not have the sports/music facilities the child enjoys using. It may be inconvenient to travel to. The school timings may not match work schedules very well. Parents may find part of the curriculum distasteful. The ties to physical infrastructure and the presence of human relationships result in a significantly lower PED for schools and parents may be willing to put up with higher prices/poor service just to avoid these complications. The inability or lack of desire to change will mean that the market will never be as efficient as that for mobile telephony.

The barrier to entry for education is also significantly higher than mobile telephony, again due its physical nature. A “good” school needs a building, maybe some sports fields, possibly computers and science labs. Some music and arts facilities will be nice. “Good” teachers have to be found and recruited. Mobile operators may have to bid for air spectrum and put up some mobile towers and control centres, which is the only physical infrastructure. In today’s world, where the trend is towards separate infrastructure management and service provision, mobile operators may be able to lease air spectrum and physical assets from an infrastructure provider, while schools cannot really share classrooms very efficiently. It is therefore much easier for a new mobile operator to enter an inefficient market than it is for a new school to do so. Obviously this results in a more efficient mobile telephony market.

While I think the example of mobile telephony to promote the virtues of a free market in education is unsuitable, it is hard to debate that a shift to privately run, profit driven schools will not lead to an improvement in standards compared to schools under government control with tightly prescribed rules. Profit driven schools will accomplish what most profit driven frameworks do; high inequality with an average level better than the idealistic scenarios. It would be good to have schools run as charities or non profit organisations, so that they can maintain comparatively lower running costs and maybe allocate more funds for deserving and needy students. Tight government control with rules trickling down from some education minister to a classroom hundreds of miles away does not inspire confidence at all.


Written by clueso

March 19, 2011 at 1:14 am

Posted in Uncategorized

Tagged with ,

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