An economy is made of people. People created all the necessities for the economy to function properly. You may think "Wait a minute, what about endowments from our mother earth such as water, fertile soil, trees, etc?" Shouldn't those be considered non-human factors of production? Certainly yes. Nonetheless, no matter how you look at it, we are the ones to make the ultimate decisions about how those resources should be utilized. Thus, I have come to a conclusion that developing an economy, developing a country, in essence, begins with education or re-education of its people.
Why education? People approach this question differently, but there is a simple economic way of answering such question. You see, an economy is people in disguise. The economy, just like a car, is not going to steer itself, we are the ones to do it. You might think that market economy is all about the invisible hand playing with the uncontrollable force of demand and supply, but that is simply untrue. What is invisible hand? What is the market force? Aren't they all made up of millions of human interactions? of millions of transactions?
"The invisible hand doing its job"
To me, the only difference between central planning and free market economy is none other than the source of control. In central planning economy, the top few or the government is the king who exercises top-down approach to make decisions from above in order to direct economic activities at the front line. Free market is just doing the opposite by concentrating economic power in the hands of the majority, of the people at the front line, to let them (the ones with expertise in their respective fields) decide what best for them and where resources should be allocated to achieve the optimal outcomes. This or that, the bottom line is the whole economy, the whole nation is strongly connected to its people. The people are the ones who drive the economy forward, not some invisible spooky hand.
This is much related to the last few paragraphs of our previous article as we discussed about education as a primary means among several others to be employed to achieve a sustainable rate of increasing human well-being. I did promise that I will elaborate the point I made to show you what my ideal academic world really is as I went as far as to recommend deficit spending (spending>income ==> spend borrowed money). I am doing just that right now.
However, before getting to that point, we have to ask ourselves this question: why should we go through all the troubles, even as to suggest running a deficit to ensure effective education?
Because education is strongly tied to the effectiveness of labour. In economics, at its very core, there is something called "production function". Production function simply tells you how much an economy can product given the inputs used. In its most basic form, the production function is:
Y = A*F(K,L)
where Y is the total amount of output produced; A is technology (it is a bit more complicated than that, but for simplicity, let's regard A as technology); K is capital (factories, machinery, equipment, etc); L is labour (anyone old enough to work legally);
The so-called production function at its much less complex form
So output is A times the function of K and L. In other words, the amount of goods and services an economy produced depends on how much of labour and capital it uses to produce the output and by how much technology can further improve the productivity of those labour and capital.
There has been a finding which states that the return to the factors of production is alpha=0.25 and beta=0.75 for capital and labour respectively. This means that a unit of labour contributes to 0.75 or 75% of the total output while capital only accounts for 25%.
However, I cannot vouch for this particular finding. Though it is far from perfect, it is what I have learnt, and I think it is good, at least, to know. It pounds in the basic foundation of economics, if nothing much.
Labour is crucial to the growth of developing nations. So, by educating people, we are improving the effectiveness, the quality of labour allowing more production and faster growth, even with the same amount of capital. Plus, note that as a country develops, it also starts to either create or import capital and technology (in case of import, it allows the country to leapfrog in terms of technology), and thus, it is super important to have enough qualified labour that is able to employ the new capital and technology. Since, logically speaking, the additional output produced by an additional unit of labour is supposedly large in the developing nation assuming stable political state and enabling physical and soft infrastructures, labour quality is an essential factor to further push the beneficial effect to its best form. Moreover, since importing also entails cultural, political and philosophical influences, it is a must that the recipients are well-educated enough to analyze, filter negative elements and assimilate positive ones into their own society.
Investing in education is thus indispensable, and it all comes down the questions below.
How can we elevate the effectiveness and impact of education? How can we reshape education to ensure a well-educated population in the direction that can help many of the poor countries' economies to take off?
And to answer these questions, we have to first define, not education, but our ways of defining education because this is where it matters the most. Why? Because in this world, there are those who define stuff, and those who learn from the definitions readily made for them by the former. Since the latter makes up the majority of the population, the world is thus shaped by the force of the practitioners. Why? Because the pioneers who have molded the way this world operates, the pioneers who who contributed to the foundation of human thinking and those who keep stacking more blocks on the top are only a tiny percentage of the population, and some of those are not even in this world anymore. The ones left in charge are those influenced by either traditional mindsets or contemporary ones which somewhat are also influenced and shaped by the orthodox.
For this reason, since the olden days, education is mostly regarded as what provided by the academic world, which is a world of its own. The batch of knowledge most people refer to is delivered in the form of formal and compulsory education. The academic realm is mostly associated with formal education, whether provided by private or public institutions, charged or free of charge. Note that, I did not only use the word "education" but "formal education". Why is that?
A typical classroom setting found across the globe. I was there, not literally...
You see, the reason I used the term "formal education" is because when we talk about education or someone educated, we, most of the time, expect them to see if they are holding their Bachelor's, Master's or doctoral degrees. We tend to think of education as something so linear, something acquired by entering and spending years in school. For young people with little work experience, when they seek jobs, their potential employers will most likely ask them for their level of "formal education" and only then will they seek other qualifying indicators such as volunteering experiences.
Is there an economic explanation to this common and customary practice of ours? It all comes down to cost, either pecuniary or non-pecuniary, or both.
You see, when two parties come together to make a deal, they are looking for something out of one another. The prospective employees look for jobs that pay as much as possible considering the capacity they possess, and their potential employers are looking to select only candidates with the right set of skills they need so their expense on labour to be cost-effective. Each of these two groups are looking to fulfill their own self-interests, but what really slows down the process is the asymmetric information. Firms cannot ascertain the level of skills applicants have with just the applicants babbling about how great they are and how they want to help improve the entire world. Employers need a solid proof of the applicants' capacity, and the only way to do that is through papers stamped, sighed, sealed, and delivered from certified capacity building institutions (i.e. school...). These papers you accumulate after years of cramming for exams and still survive will give your potential employers a much less costly method of screening applicants to see the green light and the red light.
So, for the sake of economic efficiency, whether you like it or not, formal education is a must. ++++++++++++++++++++++
However, this mindset is also where we need to fix the most.
Formal education is a requisite in building the fundamental knowledge of a wide range of subjects from science to art and anything in-between. The academic realm will demand basic knowledge gained from compulsory formal education before it can allow anyone to pursue higher education. It is only a common sense for both private and public sectors to be actively looking to recruit youthful individuals with high level of formal education into their organizations.
Just giving you a heads up, I am not arguing against formal education. I, to be honest, strongly support it.
However, this is where it all goes a bit off track for the developing world. What we are doing now is adapting ourselves to the formal education system adopted in the global north instead of adapting and adjusting education to fit with the current needs and conditions of ours, of the global south.
II. The Challenges
Since the developing world lacks in so many aspects, this educational practice leads to a major problem, the mismatch between reality surrounding the recipients of education and the theories or the information taught. In each developing country, how big the gap is can be determined by looking into the richness of knowledge in comparison to the lacking or the availability of tools or materials to demonstrate and solidify the knowledge or theories taught to students. This recurring trend is a motivation killer. I, myself, have experienced it. This is worsened by the fact that most educators are not able to explain and demonstrate the practicality, the purpose of the subjects being taught. There is little or no activity to increase students' understanding of particular scientific theories, and thus, they are not able to conceptualize the ideas being conveyed to them. Learning then becomes a chore as students see no purposes of learning beyond certain levels or the milestones that they can reach each time a certain level of education is achieved. The academic world then becomes boring. Many students have become no better than parrots who only memorize but cannot figure out the underlying concept, the intuitions, the rationale of what they have been studying on and on for so many years. Tedious and lack of appeal, conventional education has transformed students to be just like soldiers who lack morale to fight for their and their countries' future. You might think your brothers or sisters, nieces or nephews, etc, seem to be doing just fine. Have you ever tried asking them what they think about, say, calculus, or to be specific, derivative and integral? Have you tried asking them about their opinions related to physics subjects like two-dimensional motion or Newton's law of conservation of energy? I encourage you to spend a few minutes asking any students you know about what they think they could do with those subjects, whether or not they truly and intuitively understand what they are studying. I have already anticipated what the answers will be like. This renders education less effective.
Who to blame? The answer can be both "No one" and "everyone"...
The continuation to this article will be written later, hopefully soon. To be continued to "Part 2"!