January 21, 2007

Private universities

My co-blogger's post on the BRAC University gives appropriate credit where credit's due. I share his sense of optimism about the promising things that are happening there. Particularly impressive are the specialized Institutes and various research and program development partnerships that BRAC Univ. is setting up. There is a longer-term vision of what the institution can achieve and become that's clear here that must be commended.

The mushrooming of private universities in Dhaka and increasingly, outside of Dhaka, has been a positive thing in many ways. For one, it's created a sizable job market for the smarter graduates from the public and other private universities. Teaching at private universities is also a useful source of income for chronically under-paid public university professors and even some civil servants. Private universities have also probably brought more resources and investment into the higher education sector than one would find otherwise.

It's not all positive, though. The fact that professors actually make more money teaching at private universities than at Dhaka University has had a negative impact upon the quality of teaching of many professors at Dhaka University, one hears.

But more importantly, many of the private universities are little more than fly-by-night operations. Departments and programs are opened without adequate facilities or faculties. And some of the better-known institutions have been guilty of this as well. Recall the student unrest over the Pharmacy Department at Stamford University back in the spring. Programs are marketed and sold to unsuspecting, ill-informed (and often, indigent or desperate) customers with promises of more than can be delivered. And then, there's also the problem of standards.

How exactly the excesses and problems with standards should be dealt with is not an easy question. My normal inclination is to say that the market will take care of things as the private education industry settles into an equilibrium. But a number of considerations make me less certain, including:

- The value of educational enrollment to the consumer is not just about the value of what is taught, but also about status, which may have nothing to do with the value of what is taught. This is particularly true in our cultural conditions. Answering "what do you do?" with "I am a master's student at XYZ" is deemed to be socially acceptable for a jobless 25-year old the way that saying, "I am jobless" or "I am looking for a job" does not. This is particularly true when the number of "acceptable" job opportunities are limited. This will mean that the market-driven standards will likely be lower than they would have been if status did not come into the picture.

A countervailing force to this of course will be that many institutions may have incentives (let's say pride) to avoid getting a reputation as that XYZ institution where the jobless 25-year olds enroll to pass their time. And jobless 25 year-olds themselves will want to be enrolled in institutions which do not have such reputations so that enrolling in them remains socially acceptable. This may mean that many institutions will have pockets of low and high standards.
[We see this in the educational market in the US as well, btw. Noone fails from an Ivy League school, for example - not because everyone there's a genius or works hard.]

- A degree is a fairly long investment, switching costs may be quite high, and information about institutions may be costly for prospective students to find. Particularly, think about the students from outside of Dhaka who come to the city to enroll at a program that has been sold to them with glossy brochures and bright promises. There's good reasons for the market to not work optimally.

Further, let's say that the market does work, for the sake of argument. But by the time the market settles into equilibrium, fly-by-night operators will have run away with the savings and dreams of thousands of vulnerable individuals. What do you do about and for them?

Of course, one can claim that rational individuals will take these risks into account, and the price charged by the institutions will reflect these risks. From what I have seen though, even staying with homo economicus, herd models may be more applicable for what happens on the ground. And individuals really may not be rational about such choices in the first place.

So how do we fix the problem? This is a hard one. The tendency is to think that government regulation will fix the problem. But bureaucratic solution, particularly in a country like ours, are prone to regulatory capture. More fundamentally, why do we imagine that a bureaucrat in the education ministry will be in the best position to process information about the allocation of resources and balance competing considerations and claims? A better solution may be private-public partnerships in standard-setting, but again, there are pitfalls (collusive exclusion of competitors, for example, when an industry is allowed to work on setting its own standards) that one has to watch out for. This is one area that I hope to return to over the course of the next few months, as one of my classes addresses exactly these issues.

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