Sanjeev Sabhlok's blog

Thoughts on economics and liberty

Unlocking massive wealth: from our universities

The Time Has Come, The Time Is Now. Too long has the higher education sector remained bound and gagged by governments everywhere. 

The idea that higher education is different from other services (like telecom, air travel, or retail) is false. Its product is discrete and can be readily valued in the marketplace. There is therefore no reason to shelter it from the market. If anything, this sector is affected by intense government failure. True, a few areas like philosophy or ancient languages might make a case for taxpayer support but these are an exception and should be dealt with separately; in the main, universities provide a valuable service that can be readily valued by the market. 

There is also no logical reason why universities should be confined by governments to a single geographical location, particularly in this age of satellites and fibre optics. They supply a service, and like any other service-provider, they should be let loose and allowed to compete. Let the demand from students determine where they establish branches, not faceless bureaucrats in education departments. There is no reason why a university like Harvard can't replicate its quality (particularly with innovative use of IT) all over the world. And so parents would prefer to send their children to a Harvard branch in Goalpara or Barpeta, not to some incompetent government university established by the Assam Government. 

Obviously, all restraints on universities would have to be eliminated. Universities would then be regulated like other business, under Company Law – only to prevent fraud. They would be allowed to register themselves as corporations and compete freely in the global market for higher education. Wages would be freely determined, and fees as well. (How poor students should be funded has already been dealt with in BFN, and here.)

Enormous value unlocked by liberalising higher education

Governments that liberalise their university sector will unlock unprecedented wealth for the world and for themselves, by creating  world's first Multi-National Universities (MNUs), the stocks of which would be traded in the stock market. 

The best universities in the world, like Harvard, could easily find themselves valued at $100 billion or more by the market, and outcompete incompetent universities both on quality and quantity. I suspect that American wealth will increase by at least $1 trillion if it fully privatises all its universities. India could increase its wealth dramatically, likewise.  I would expect India's IITs, for instance, to be worth in the billions of dollars and to quickly branch out all over the world, including into USA (provided the IITs are fully deregulated and allowed to compete globally).

Since the West is in a deeply confused state of mind (half-socialist), therefore its citizens are  leashed by their government and prevented from performing at their potential. Therefore the possibility that the USA will seriously compete in this space can be ruled out. So the question before us is: Will India finally become free, and take on this great opportunity to increase its wealth? 

—THE END!—-

(On a slightly separate topic, I'm thinking of re-starting work on establishing an International Indian Economists Association that I had conceptualised in 1998 – work that died out because I suffered severe RSI. If you are an Indian economist, please write to me. I think Indian economists could potentially launch out on their own as a major global economics university – this ideas is pretty far out today, but time will tell. If we can make India implement the best possible policies, we could generate huge returns for the world – and ourselves).

ADDENDUM

Some relevant articles: 

Putting a case for fee deregulation by Andrew Norton.

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Look after yourself FIRST

The most basic distinction between liberalism and collectivist views is this: that these tribal or collectivist views ask people to look after others first, and then after yourself. Apparently you should take care of your nation first, or society, or the world, or the environment. But the order needs to be this: YOURSELF FIRST, then family, then society and environment, then nation, and finally, the world.

I've explained this at length in BFN and DOF. Such collectivist views have destroyed India and won't go away as long as politicians who benefit from such views exist.

Here are extracts from two comments on this blog received today, and my response to them.

VIJAY

Re: We all need to think of country first our “Bharat Mata” ..our egos , our self respect are secondary ..

My response

On egos, I agree, but I assert one basic principle: our self-respect MUST be above the nation. The nation is created FOR US, not we for the nation.

I trust Baba Ramdev’s “Swabhiman” doesn’t mean slavery for the nation, but self-respect for each of us. 

HARSH

Re: “Unlike you, Swami Ramdev considers HIS NATION has his FIRST priority.”

My response

I don’t think you anyone does their nation a favour by giving it first priority. It must always be: yourself, your family, then your nation, and finally the world.

The mystery of enlightened self-interest is at the heart of the modern society. Let me quote quickly from DOF (draft):

“At each instant, the karma yogi considers options for action for their long term consequences. Freedom of thought leads like an arrow towards moral action. The free man acts with deliberation, aware of the potential consequences of his actions, always committed to being held to account. In advancing his self-interests though responsible action, he contributes to the welfare of mankind and of all life on earth. Note that this self-interest is broad, not narrow. It is competitive self-interest, at times, but is never unethical and does not harm others nor decimate them. It creates, preserves and fosters.”

As they say in an aeroplane: put your oxygen mask FIRST before worrying about others. If someone is so ill-educated that he/she can’t get a job anywhere or contribute to society, then HOW can that person take care of others? 

When I fall seriously sick I don’t want to be taken care of by Baba Ramdev but by an experienced and qualified doctor. So also I want the best policy experts to govern India, not illiterates or semi-illiterates who, by mere virtue of chanting the greatness of India, seem to get voted to power! 

DO THE BEST FOR YOURSELF. IN DOING SO YOU DO THE BEST FOR SOCIETY.

I can't do my best for India by becoming poor but by becoming rich (ethically, of course). I can't be a hypocrite like others and fool you by asking you to take care of your country first. I know that will make me more popular, but I speak what I know is good for India. I will never distort the truth for the sake of political power. You want to worship the nation, please do so.  As for me, the nation is a creature of our convenience, our creation. It must serve our needs, else it has no intrinsic value. I would much rather make India rich than further advance India's many delusions.

In addition, I ask everyone to be a citizen, and contribute as an EQUAL with others. If others aren’t bothered (as is the case in India), then leave. 

====

A question I asked Vijay and Harsh (later!)

Do you know what it would mean to treat the nation first? You would have to give your earnings AWAY to everyone else, and only after FEEDING everyone else you could then feed yourself. That would effectively mean you starve, since you could never finish feeding others (1 billion people!) with your earnings.

Second, if you care for the nation first, then you'd not be earning anything, anyway, since everything you do would belong to others. Therefore you would be giving away your labour and expertise to others for free. In both cases you would starve.

This, by the way, is precisely what socialism requires. Hence all socialist nations starve. Your ideology is socialist. It will fail to benefit either you or India. I do not preach such bad ideologies whereby Indians must starve. I preach the TRUTH. I preach competition. I preach success. I preach greatness!! 

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Anyone listening to basic common sense?

THE BEST INDUSTRY POLICY IS TO LEAVE IT ALONE.

The West has not been damaged only by Keynesians and welfare state advocating social democrats, but by mercantalists who ply industry policy and protectionism. And by misguided environmentalism. 

The Economist magazine has pointed out (in its August 7-13 2010 issue) that the competitiveness of the West is being rapidly eroded by paternalist statists of all hues. If this reversion to statism continues unchecked the citizens of the West will lose the competitiveness that they desperately need in the global environment that is changing at a ferocious pace . India's output of goods and services is a tsunami that will hit the West (somewhat like China did). They had better prepare for it now!

Some extracts from the Economist

"Bail-outs and billions of stimulus spending, however justified at the time [a hypothesis I strongly disagree with], got government back into the habit of intervention. The case of Fannie Mae and Freddie Mac, America’s housing-finance giants, illustrates both the perils of state meddling (implicit state guarantees distorted the mortgage market with fatal consequences) and the difficulty of giving it up: having rescued the pair, the federal government lacks any plan to pull out.

"In the rich world, meanwhile, the record shows, again and again, that industrial policy doesn’t work. The hall of infamy is filled with costly failures…. India’s wildly successful software and business-process-outsourcing industries blossomed not because of help from the government, but precisely because its Licence Raj did not understand these nascent fields well enough to choke them off.

"The universal race to create green jobs is the latest example. Led by China and America, support for green tech is rapidly becoming one of the biggest industrial-policy efforts ever. Spain, blinded by visions of a solar future, subsidised the industry so lavishly that in 2008 the country accounted for two-fifths of the world’s new solar-power installations by wattage. This week it slashed its subsidies, but still has a bill of billions.

"Fortunately, there are now some powerful constraints on governments’ ability to meddle. In an age of austerity they can ill afford to lavish money on extravagant industrial projects. And the European Union’s competition rules place some limits on the ability to do special favours for particular firms.

"Straightforward steps to improve the environment for business—less red tape, more flexible labour markets, simpler tax and bankruptcy regimes—will be more effective than handouts to favoured firms or sectors. Europeans ought to be seeking to strengthen the rules of their single market rather than pushing to dilute them; a long-overdue single European patent process would be a good start. Competition will do far more for jobs than coddling.

"…the rich world has a clear choice: learn from the mistakes of the past, or else watch Leviathan Inc grow into a true monster."

The take-home lesson for India:

India lost its head with its love affair with Nehru's socialism. That period of delusion has not yet ended. India's elites have not recovered their minds which remain as confused as ever; they are still lost in a netherworld between 'socialism', 'Vedic socialism', 'swadeshi', 'Hindutva', and other self-destructive ideas.

Essentially there is NO HOPE for India but FTI, an organisation based on the advocacy of world-best policies. Let it be abundantly clear. Only freedom (classical liberalism) can save India. Join FTI, dear reader, else forget India!

No political party in India understands the basics of economics. Total economic illiterates govern India.

The lesson for India is loud and clear: Follow basic economic common sense, else one more generation of India will be lost. There is no possibility for the success of bad economic policy, just as there is no hope for an Eiffel tower built with paper.

ADDENDUM

Picking Winners, Saving Losers

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Australians don’t understand English

Australians don't understand English, or at least the Australian Electoral Commission doesn't. In particular it doesn't understand the meaning of the following simple phrase: "Seats Won".

"Seats Won": The common sense meaning

Seats won is seats won! Anyone knows that, even a toddler.

Anything else, such as seats in which a candidate is leading is supposed to be referred to as 'seats in which leading' or a 'trend'. Even the Indian Electoral Commission understands that, and has never so far confused anyone with its results.

In Australia, however, since Saturday night, ALL people that I've come across personally (about 15 of them!) have been totally confused by the words: "Seats Won". The figure reported as "seats won" keeps flipping around. One moment the  ALP is ahead, the other day Liberals are ahead! The people of Australia are totally confused about what is going on.

"Seats Won": The AEC meaning!

After confusing Australia for the last three days the AEC has now issued the following clarification on its website, about what 'seats won' means! If you now understand what 'seats won' means, good on you!

The AEC Virtual Tally Room screen "Seats Won" contains data based on the votes counted to date. It cannot reflect a conclusive result until all counting is finalised and the declaration of the poll has occurred.

In the table on the "Seats Won" screen you will find:

  • The candidate/party which won the seat at the last election
  • The candidate/party which is currently leading in the count
  • The percentage of the Two Candidate Preferred votes that have been counted so far for the Division
  • The percentage of the Two Candidate Preferred count received so far by the candidate/party leading in the count at this time.
  • When reading information on the "Seats Won" screen, please note:

During the post election day counting period, a seat will appear in the list on this page when more than 5% of the votes cast have been counted and one candidate has received more than 50.5% of the votes in the Two Candidate Preferred vote count.

A seat will also appear in this list when the result of the election in that seat has been declared.

The estimated Two Candidate Preferred count percentage of the leading candidate/party is listed in descending order

Where, following a redistribution a new division has been created or notionally a division has two sitting members, the 'Held' field will be blank

As counting progresses the candidate/party shown as 'winning' the seat may change – a seat has not been won until a candidate has received more than 50% of the formal first preference votes.

The results shown on this screen are not final. {!!!!!!!}

Ha! 

The whole thing would have been avoided by saying: "Leading" or "Trends".

The AEC needs a crash course in English from the India's Election ommission!

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