Tuesday, December 06, 2005

Economics for Idiots

Till the time I passed out from my CBSE affiliated school, Economics was taught as a compulsory course for two years. But looks like in the good old days this was not the case. I am discounting the fact that either none of the policy makes of CBSE had ever studied in CBSE affiliated schools or they never took their economics class seriously, and am hoping that this is not a blunder. But the fact remains that the recent CBSE directive that requires all CBSE affiliated schools to provide free education to a single girl child and equivalent concessions to multiple girls without any provision of compensation to the schools does not make any economic sense. Moreover, it is all set to hurt most whom it was meant to help, that is single girls.

While the schools have already formed a group and filed petition seeking to quash this order, it will be interesting to note the implications of this order, if it gets implemented.

The first option that many schools are contemplating is to switch either to ICSE or some other board. I believe that only those schools will opt for it for whose students fees is a major concern and a marginal increase in fees would mean changing schools or dropping off, i.e. loss of business (as after all, establishing schools is also an example of entrepreneurship and money matters). This is because such a switch would be a blow to school's reputation and credibility.

Let us now have a look into the schools that will stay with CBSE and implement its directive. Let's first get rid of the trivial case of boys' schools that will continue to function as usual. Now let's consider the case of co-educational schools. These schools will definitely conclude that in order to retain its students, they will have to keep a higher percentage of risk-free students, namely boys. They would also have to counter the psychology of boys' parents that making them studying in co-ed school will be costlier as compared to an equivalent boys school (considering that the cost of education is proportional to the quality of the education in the absence of such economic incentives/disincentives). So the co-ed schools will have to do more than enough to tackle this problem. Hopefully for them, the plight of girls' schools will offer them a way out. This will become clear after we take a look into the economics of running a girls school.

The girl's school will unarguably be the hardest hit. It will be highly foolish to think that the schools will try to absorb the deficit owing to their already premium fee structure, as some sections of the society feel. Even a simple hand calculation shows that the cost per student will show super linear growth and for moderately high percentage of single girls, it is a rectangular hyperbola. For example if in a girl's school (urban), there are 35% equivalent single girls studying, it will translate to a 54% increase in fees that will have to be paid by the rest of the students. From a girl's parent point of view (those who will not benefit from this scheme), the economic implications would be drastic and they would be forced to admit their wards in co-ed schools, which will openly embrace them owing to their own economic considerations. The reluctance of such parents to allow their children to continue in girl's school would mean the problem of girl's school compounding as the quality schools will be flooded with admission applications from girl's parents cutting across economic spectrum.

In plain English, girl's school will have an economic disincentive to admit or to continue with single girl students. One doesn't have to be an expert in Economics to conclude that if an incentive exists, it will be exploited. Consequently girl's schools will device ways to keep off single girl child students. On the admission front they would be discriminated heavily against. The most effective way would be to introduce interview basis of selection, as the decision on the basis of written tests can always be challenged owing to the deterministic nature of written tests. Even those students already inside the school will face discrimination, enough to force them out or provide some 'defense'.

Imagine you are a father of a single girl child and are seeing your child being discriminated against. Naturally you would want to provide some protection for your child. This logically would be an undertaking that you will not claim the aforementioned benefit from the school if your child is admitted/allowed to continue in the school. Definitely this will be implied not explicitly asked for by the schools, as doing it openly would invite prosecution on the basis of discrimination. The schools will also not forget to add a little milk to the coffee so that it doesn't get too dark. The schools, of course are not idiots and don't even need an article like this to implement such decisions.

Let us now talk about the lower economic strata of society for whom this directive is originally meant to address. Most of such girls study in government schools, which will definitely not discriminate against them. But in such societies, the proportion of single girls is nominal. Even most of the single girls are so by chance as their parents get prepared to welcome another child in their family. Incidentally having another child won't affect them. If the next child were a girl, they would still get an equivalent of one girl's education fees waiver. On the other hand, if 'fortunately' it is a boy, it will not be reported to schools. Even if the school authorities find it out, which teacher or principal (whose priority is education of the masses) will cancel such waiver knowing that the parents are already burdened by the expenses of another child and an additional burden of a girl's fees may result in her dropping out. So in most of the cases, they will also remain mum. In reality, all this economics won't even reach out to the rural population for whom, an additional child means an additional working hand. Education unfortunately has a trickling down effect, not a trickling up effect. Whom does this directive propose to benefit is unclear, as it is clearly against single girl child. Boys on the other hand have nothing to loose if they keep safe distance from single girls (i.e. join boy's schools).

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