Sri Lanka Public Lecture - Three Modern Mysteries of Incentives, Information and Education Outcomes

THE J.E.JAYASURIYA MEMORIAL LECTURE

SRI LANKA FOUNDATION INSTITUTE

COLOMBO

FEBRUARY 16, 2009

By

Dr. Harsha Aturupane

Senior Economist
Human Development Unit South Asia Region
The World Bank

Acknowledgements

I would like to express my gratitude to the various institutions and individuals who have contributed to this lecture. First, the J.E. Jayasuriya Memorial Foundation, for inviting me to deliver this lecture. In this context, I am especially grateful to the family of the late Prof. Jayasuriya, and to Prof. Swarna Jayaweera and Prof. Chandra Gunewardena, who were my main counterparts from the J.E. Jayasuriya Memorial Foundation. Second, the World Bank, for assisting the delivery of this lecture. I am particularly grateful to Dr. Michal Rutkowski, the Director of the Human Development Unit of the South Asia Region, Dr. (Ms.) Naoko Ishii, the Country Director for Sri Lanka, and Dr. Amit Dar, the Sector Manager for Education in the South Asia Region, for their encouragement. Finally, I would like to thank my family members, especially my mother Christabelle and my wife Jennifer, for their understanding and sacrifice of time, towards the preparation of this lecture.

Disclaimer
All views expressed in this lecture are the those of the author, and should not be attributed to the World Bank.
 
Introduction

Prof. J.E. Jayasuriya, in whose honor and memory we are meeting today, was a man of outstanding gifts of intellect and character. He laid the foundation of the academic education profession in Sri Lanka. As a university don, he had a lasting impact on his colleagues and students. He also made wide-ranging contributions to the formulation of education policy in the country during his tenure as the Chairman of the first National Education Commission, through his publications, and through his influence on generations of students, some of whom became the academics, researchers and policy makers of the succeeding generations. In addition, he improved the understanding of Asian education systems among academics and development  policy makers through his research, and also during his period of service in UNESCO

It is in the nature of time that a generation arises who knows of a giant of the past, not through personal acquaintance, but only through the prism of his publications, and  the writings and the verbal lore of his colleagues and students. I represent one of the members of that generation, for I have the misfortune of not having met or known Prof. Jayasuriya. However, I have the good fortune to have read some of his publications, especially the fascinating explorations into the past contained in “ Education Policies and Progress during British Rule in Ceylon “ and in “ Education in Ceylon: Before and After Independence. “  And, of course, I have seen the high esteem in which his former pupils hold him as an academic and as an individual.

 A few years back the Department of Education at the University of Peradeniya approached the Ministry of Education with a request to construct a building with resources from the World Bank’s Teacher Education and Teacher Deployment Project. The World Bank agreed, as the development of education is one of the key global priorities of the Bank. The University of Peradeniya has appropriately named this beautiful three-story edifice the Prof. J.E. Jayasuriya Memorial  Building.

In this lecture, delivered to celebrate the life and work of Prof. Jayasuriya, I would like to select one of the most impressive aspects of his many contributions: the forward-looking nature of his thinking on education policy. In that context, let me pose the question: what are the main constraints to the development of Sri Lanka’s education system, in the first decade of the twenty-first century ? And let me proceed to answer this question in terms of three stories which appear to be cardinal characteristics of our society and of our times.
The Curious Case of the Pessimistic Public

A great myth of our time and society is that the quality of education in Sri Lanka has fallen. This myth is paraded in the newspapers, on radio and TV, in the speeches of influential individuals and opinion makers, and in popular conversation. The myth, in fact, is not supported by evidence. Every indicator of education access, and nearly all the indicators of education quality, show positive progress over time. Enrolment rates have increased, survival and completion rates in basic and secondary education have risen, learning outcomes are improving, and a higher proportion of students are pursuing senior secondary and higher education. University graduates are more skilled and technically competent than the graduates of earlier generations, and in a wider and expanding range of subjects.

Education also continues to generate strong economic and social benefits. Men and women enjoy high returns to their investments in human capital. Education promotes social mobility, both within the work-cycles of individuals, and across and over the generations. Gender empowerment and development are facilitated by education. The health of families and of children are improved by the education attainments of their parents, especially their mothers. Households with educated workers are substantially less likely to be poor than households with uneducated workers. And all these economic and social benefits of education can be demonstrated, and indeed have been demonstrated, through scientific studies.

  The myth of declining education, it appears, is generated by several factors. First, there are unreasonably romantic views of the scope and potential of education. If only, according to this romantic view, people are properly educated, they would be virtuous and good. A further fallacy contained within this romantic view is a reference to one or two admired individuals of the past, juxtaposed against the behavior of the average, or even less-than-average, person of the present. “ There were moral giants in those days “, says this romantic fallacy, “ and today we have only moral pygmies. “

 This romantic position, unfortunately, is simply not true. Education can and does make people more cultured, more competent and more skilled. But education does not, as a whole and on the average, make people more virtuous. Schools and universities cannot play the role of the temple, the kovil, the mosque and the church. And one could plausibly argue that even the temple, the kovil, the mosque, and the church, appear to have a limited impact on the fundamental moral and ethical nature of human beings.

The comparison of a few moral giants of the past, with the average or even less-than-average person of the present, is incorrect. In every age and generation there are a few exceptionally great and good men and women. But comparing the peak of past generations with the average of our times is a logical fallacy. Either we need to compare the peak of past generations with the peak of our time, or we need to compare the average of past generations with the average of our time, or we need to compare the less-than-average of past generations with the less-than-average of our time. And on any of these comparisons, there is parity between our time and the past.
 
A second factor that contributes to the idea of a decline in the quality and standards of education is purely the herd instinct. It has become normal, in the newspapers, on radio and TV, in the speeches of influential individuals and opinion makers, and in popular conversation, to state that the quality of education has fallen. It is what everyone seems to be saying, and hence it is what everyone says! But of course, like most ideas generated and propagated through the herd instinct, it is simply not true.

A third factor, and the only piece of empirical  evidence advanced to support the notion that education quality has declined, is the widespread and growing prevalence of tuition. Ironically, though, tuition is actually the result of an education system which has improved faster than the country’s economy. More and more individuals are being educated. But the higher education and economic opportunities available for these educated individuals are not expanding that rapidly. Hence, an increasing number of individuals are competing for a limited number of opportunities. And tuition becomes an additional resource in the competition for the limited higher education and economic opportunities.

A fourth factor which contributes to the idea of a fall in the quality of education is that there has, in fact, been a decline in the relative position of the economy of the country. At the time of Independence, in 1948, Sri Lanka was one of the richest countries in Asia. Many economists at the time thought that Sri Lanka would become an economic success story and, in the due course of time, join the club of the world’s rich nations. Sadly, the country chose for many years an economic path which may have promoted a degree of equity, but sacrificed growth and performance, with the result that many nations in the developing world caught up and overtook Sri Lanka.

When a country’s relative position in the world economy declines, the interest and respect of other countries for its culture and institutions declines. We see this time after time. Intellectuals do not look at modern Greece or Rome for inspiration, in the way the world once looked at Ancient Greece and Ancient Rome. India no longer influences the world as she did in the days of the Gupta Empire and in the days of the Mogul Empire. And the culture and institutions of the United Kingdom no longer influence the world as they once did, when Queen Victoria sat on the throne of England and the sun never set on her Empire.

When the economy of a country declines the institutions of that country, including its education institutions, become less influential. Then, even if the quality of education is rising in absolute terms, the respect and influence accorded to the education system falls. For instance, in the heyday of the British Empire, the Universities of Oxford and Cambridge were pre-eminent in the world. Today, although these universities continue to produce great academic work, the center of intellectual gravity has largely shifted across the Atlantic to the universities of the modern superpower, the U.S.A. It is also significant that the rising economic powers of East Asia have begun to develop strategies to establish “ world-class “ universities of their own in the future.

This relative decline in the economic position of Sri Lanka has affected the perception of the country’s institutions, including her education system, in the eyes of the world. Once, when Sri Lanka was a relatively wealthy nation among the developing countries, it was possible for the University of Ceylon to be a respected and admired institution. Today, there are universities in Sri Lanka which produce scholarship equal to, and in some disciplines perhaps even better than, the University of Ceylon in the 1950’s, 1960’s and 1970’s. And the school system, taken as a whole and on the average, is certainly superior to the school system of the 1950’s, 1960’s and 1970’s. But the universities and schools of Sri Lanka no longer command the respect and admiration of the 1950’s and 1960’s, because the country is no longer at the forefront of even the developing nations, let alone a member of the club of developed countries.

Whatever the reasons for the perception of a declining education system, it is simply not correct. And it is important that the community of education specialists and policy makers engage with the general public to correct this delusion.

The Curious Case of the Credulous Public

 One of the charming assumptions of Sri Lankan culture is that education is closely connected with virtue and goodness. The popular rhetoric surrounding education is filled with lofty goals and noble ideals. Educating a population is seen as a meritorious act. Teaching is considered a noble profession. Principals and teachers are believed to have a lasting impact for good on their students and, hence, on the future generation of a country. Many education specialists and practitioners tend to be idealists, often in precept and sometimes in practice. And equity of access and opportunity are cherished goals in education policy circles. The over-arching framework of education policies and institutions is built on the pre-supposition that altruistic behavior is the norm, even perhaps the universal practice, within the education community.

 Unfortunately, this charming belief is not true. There are many famous figures and works in literature, such as the character of Parson Adams in Henry Fielding’s Joseph  Andrews, and Fyodor Dostoyevsky’s the Idiot, which explore the encounter between innocent individuals who imagine that people are universally benevolent and the actual world of real people.  The reality, as distinct from the rhetoric, is that the lives and behavior of human beings are complicated combinations of virtue and vice, altruism and selfishness, generosity and greed, benevolence and malevolence. Teachers, principals, education policy makers, administrators, academics and researchers are, of course, similar in character to other human beings.

 Education policy in Sri Lanka does not pay sufficient attention to this complexity of human behavior. Time after time, one reads and hears members of the general public, including some policy makers, deplore the wrong attitudes of present-day teachers, principals and education administrators, refer to a mythical past when attitudes were different, and urge attitude change as a solution to problems. But fundamental ethical and moral attitudes change very little, if at all. And consistently altruistic behavior, over the long-term, is very scarce. As a result, if a particular outcome is desired, it is usually wiser to accept individual preferences as given, and design incentives to attract individuals into behaving in such a way as to produce this outcome. Adam Smith, the father of modern political economy, enunciated this principle well in The Theory of Moral Sentiments and in the Wealth of Nations. The best known example comes from the latter book: “ It is not from the benevolence of the butcher, the brewer, or the baker, that we expect our dinner, but from their regard to their own interest “ [Adam Smith, The Wealth of Nations, Book 1, Chapter 2, p 14].

Education policy needs to pay more attention to the complexity of human behavior. Education policy formulation would be better served by accepting the strong role of personal interest in human behavior, and designing systems of incentives and information to achieve desirable policy outcomes, rather than engaging in endless exhortations to ordinary human beings to behave like saints.

Let me illustrate this cardinal principle with a concrete and practical application. Consider one of the clearest inequities in the education system: the disparity in the number of  teachers available to schools located in popular urban areas and to schools located in unpopular rural areas. The problem is simple. Teachers, who are paid the same salary and enjoy similar benefits irrespective of where they work, prefer to live in urban areas and enjoy a wide range of facilities, rather than live in rural areas which have far fewer facilities and services. The political economy context of the country allows teachers assigned to rural schools to either avoid taking up appointments in these schools, or to obtain transfers out of such schools without adequate replacements being made available, or to simply absent themselves from schools for a substantial proportion of time without any penalties.

 The problem is well-known. For many years policy makers have argued that “ the attitudes of teachers should be changed “ so that they will go and serve children in poor rural areas, and that “ the attitudes of authorities in power should be changed “ so that they do not interfere in teacher transfers and deployment. And in all those years neither the teachers nor the authorities in power have shown the slightest inclination to change their attitudes!

 If we were to be more realistic about human nature, we could adopt a new and alternative model based on the need for appropriate incentives to change human behavior. A proportion of the education budget could be allocated for the provision of an additional income to teachers who locate in unpopular rural areas to compensate them for the added inconveniences of life, and to attract them to remote schools. An additional step, of course, would be to move from the centralized teacher service to a system of school-based appointment of teachers. The provision of fiscal incentives, perhaps coupled with the decentralization of  teacher recruitment to school level, is far more likely to work than the strategy of urging teachers and authorities to change their attitudes.
 
 
An Interlude.

I began this lecture by posing the question “ what are the main constraints to the development of Sri Lanka’s education system, in the first decade of the twenty-first century ? And I have given two answers: (a) the totally unfair and incorrect belief that the education system has declined, when the education system has actually improved over the years; and (b) the absence of a sufficiently sophisticated and nuanced understanding of human nature in the popular discourse on education policy.

Let me now proceed to conclude this lecture by posing a final question: given that the relative position of Sri Lanka’s economy has declined in the world, what is the main challenge facing Sri Lanka’s education system, in the first decade of the twenty-first century ? And let me answer this question with my third and final story.

The Curious Case of the Walking Waxwork

The popular culture of the country contains a curious belief in the efficacy of the state over markets to deliver economic development. This belief has several manifestations. First, it is believed that the state is a benevolent entity which works for the good of all human beings, and at all times, with the “ good “defined by each individual according to his or her own views and preferences. Second, it is believed that markets are inherently evil, perhaps due to their association with the world of commerce and business. Third, it is believed that the state has a duty to provide employment to all those who seek jobs in the public sector, particularly if they are highly educated. This seems a particularly deep-seated belief. See, for instance, the discussion about a group of Sri Lankan people in a book written over one hundred years ago.

“ A little learning is a dangerous thing, and the hankering after Government employment a positive disgrace. A boy whose education has been carried beyond a certain point becomes conceited……..he prefers to lounge about the courts, taxing his family for his support, till he can get some minor Government post, the demand for which is now far in excess of the supply “ [Frank Modder in Twentieth Century Impressions of Ceylon, Arnold Wright (ed.) (1907), page 297]. More than a hundred years later, the “ hankering after Government employment “ appears to continue with little change!
 In the middle decades of the twentieth century there were two rival and competing hypotheses concerning the effectiveness of states and markets in generating and fostering economic development. The hypothesis of the communists and the socialists was that their preferred economic system could generate prosperity at least comparable to the market economies, and with greater equity in the distribution of goods and services. The competing hypothesis was that the market economies could generate more prosperity due to the greater freedom and scope available for individual choice, hard work, creativity and innovation, mediated and coordinated through the “ invisible hand ‘ of incentives and information.

 By the later decades of the twentieth century ample evidence had accumulated that the market system was considerably superior to socialism and communism in producing prosperity and wealth. This was seen both between countries, and within countries over time. The most spectacular success stories among countries after the Second World War were initially the pro-market economies of Japan, South Korea, Hong Kong, Singapore  and Taiwan. In addition to these countries, there was the U.S.A., the economic super-power of the twentieth century, and the market economies of Western Europe. In contrast, the communist experiment  in Eastern Europe and the Soviet Union could not replicate the economic success of the Asian Tigers and of Western Europe and North America.

 Within countries over time, nations that had followed socialism or communism and then abandoned these policies enjoyed far greater prosperity and growth after they adopted market-oriented policies. There are many countries to serve as examples: China, India, the former communist countries of Eastern Europe and Vietnam are some of the best known. Moreover, Sri Lanka has enjoyed far greater prosperity and growth when the country practiced market-friendly policies than in the periods of socialism. The debate between market economies and socialism and communism is largely over. Socialism and Communism, as economic ideologies, belong to the museums of economic history. The socialist and communist periods in the former socialist and communist countries are preserved, like waxworks, in these museums. The very few countries left either practicing socialism or communism, or trying to implement these ideologies, are either poor and isolated, like North Korea and Cuba, or have oil wealth like Libya and Venezuela.

 The economic discourse has now shifted away from the battle between the two types of economic systems. The modern discourse focuses more on the best means of maximizing the benefits of markets while also allowing  the state to intervene to raise welfare and promote distributive justice. The role of the state is mainly to improve the framework of incentives and information in the economy; expand the production and supply of goods and services which are either public goods or have externality benefits, such as health, education and environmental protection; promote greater equity through re-distribution policies which have minimal negative effect on the efficient functioning of markets; and provide effective and adequate safety nets and safety ladders for the poor.

 The greatest challenge before the education system is to improve the understanding of this reality among the next generation of Sri Lankans. The adult generation, as a whole and on the average, appears to be locked in the time warp of the socialist hypothesis of the mid-twentieth century. Can the education system, through the school curriculum, and the influence of the universities on the intellectual culture of a country, bring the children and youth into the twenty-first century ? I hope it can. If it does not, in any case the change will take place, as the younger generations of Sri Lankans are exposed to the rest of the world through travel, communications, the internet and the global media. But it would be better for the education system to lead, accelerate and shape this process, rather than passively follow it.

 The test of success, if the education system does lead and shape this process, would be the transformation of the voting population of the country to demand, not jobs in the public sector, but the creation of a sound economic environment that will produce an abundance of well-paid jobs in the private sector!

 If the education system does rise to this challenge successfully, the economy of the country will benefit. If the economy benefits, and the relative position of the country in the world economy improves, the culture and institutions of the country will elicit greater international interest and respect. This, in turn, this will benefit the education system. It will contribute, inter alia, to the creation of an intellectual environment in which the real and genuine achievements in the sphere of education can be properly and duly appreciated.