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  • Aryan Luniya

The economics of education

Updated: Apr 23, 2021


Education has slowly become the essence of humanity, the core of life, and above all, a necessity.


Doubtless at it seems, you clearly wouldn’t have been where you are if you weren’t afforded an education.


Over the past few decades, children have flocked into the schools, but schools seem to have delivered very little: teachers and students are often absent, and learning levels are, to say the least, below par. Why is this happening? Is it a supply issue, where the government needs to provide children with better schools, better textbooks, better teachers, and better facilities? Or is it demand, where parents would lobby for quality education if and only if there were real benefits? There seems to be a problem with both. Parents expect both too much and too little from the schools: government jobs for those who graduate from secondary school and nothing for the rest. Teachers seem focused on teaching a small elite and undervalue the regular students. These expectations affect behaviour and generate real-world waste, which- to explain in economic terms- takes us into distant dimensions from the optimum utilization of our resources.


Parents of children from underprivileged backgrounds, quite alarmingly, believe that educating their children is a risk that is not worth taking. Clearly, education is not like the volatile stock market; and needless to say, even if it is, education is the only sure-fire share that guarantees lofty returns! The core of the parents’ view is that education is just another form of investment. The obvious problem with this, of course,  is that parents do the investing, not the children.


Governments must make it financially worthwhile for parents to send their children to school. This is the idea behind the new tool of choice in education policy: the conditional cash transfer, which aims to reduce poverty by making welfare programs conditional upon the receivers’ actions. The government only transfers money to people who meet certain criteria.



The curious history of conditional cash transfers suggests that its effects on attendance were overwhelming, but surprisingly, it was the same as unconditional cash transfers. These findings point to one conclusion: parents did not need to be forced to give their children education- they needed help financially.


Adding another dimension to why schools have fizzled out is the teacher absenteeism rate where up to 50% of the teachers in rural areas fail to make it to class at the given time- you certainly do not need a Ph.D. in mathematics to figure out that’s 1 in every 2!


A first factor in creating the right conditions is to focus on basic skills and a commitment to the idea that every child can master them as long as the child, and the teacher, expends enough effort on it- one possibility is to make the boundaries between grades more fluid so children can spend more and less time on subjects without additional stigma. The result will only show when both parties cooperate.


A push on the right lever can make a huge difference, but it is often difficult to know where that lever is. After all, it is clear that no single lever will solve every problem.

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