A macroeconomist's take on education

The New Wealth of Nations
Surjit Bhalla
Simon and Schuster
217 pages; Rs 358

Surjit Bhalla is one of those rare breed of economists who is able to slice and dice data in myriad ways and extract uncommon insights. But this volume is less about the numbers and more about, as the author might refer to, the rarely acknowledged wealth called education. Whether it is the large but closing gap between the advanced and the not-so-advanced economies, or the low growth in wages for those with less education, or, for that matter, how India and China are fast closing the gap with the rest of the world, the volume looks at education from a macroeconomic perspective. It examines many different facets of the animal we call education, and makes the point that education is not only the most important asset, it is the asset. And as people and countries amass this new wealth, incomes will automatically rise, leading to lesser inequality. But he does not stop there; he also believes that this new education-dependent economy will leave some out, and welfare solutions like negative income tax or basic income need to be considered.

There is much this reviewer agrees with in the volume and much that he does not on the facts, factoids, deductions and leaps. That education is important is well understood. That it may very well be the single most important asset creation activity, too, has been fairly apparent for long while now. Therefore, the point that education impacts long-term macroeconomic fundamentals and society itself is simply a corollary to what is as close to a self-evident truth as is possible. Was this reviewer expecting too much?

What we have in the New Wealth of Nations is a macroeconomist’s take on education, without really delving into what characteristic of education creates wealth; why it did so in the past, and whether it will continue to do so in the future, and if so, how? Without that appreciation, the richness of the multiple dimensions of education is reduced to a few numbers.

The future will for the first time involve universal and real-time access to knowledge. Universal literacy is almost a reality already. At the same time, artificial intelligence and robots would have made many jobs redundant. In such a world what would ‘education’ be, and what would be ‘human-capital? What aspects of human capital would be a wealth?

Education till now has been largely about inculcating skills of communication, storing knowledge, and learning the discipline of analysis. But technologies will make all three traditional functions of education less valuable in the market place within the next few years. The analysis of data from the past yields flawed insights about the future in times of structural shifts. And the biggest structural shift being driven by technology is already occurring. And therefore, it is likely that education, as we know it, will have little utility and value in the future. What should education policy do at such times? The author is unable to venture into this space because, I believe, he used the wrong lens to investigate.

Another serious set of challenges are those directly caused by the stress imposed by education. Such stresses are visible in the high rates of suicides among the young, including children, and the rising cases of psychosomatic ailments among children, adolescents and the youth. Children across all economic segments and even in rural areas are spending hours of play time studying, which largely consists of memorising texts. What is happening to these young minds? Is this cost of the psyche worth the wealth we believe they will create for themselves? Can economics throw any light on this?

It may not be the macroeconomist’s objective to mull over what constitutes desirable education. Mr Bhalla delves into the importance in terms of the impact on economic fundamentals such as income and inequalities. But education cannot be treated as a black box — its character is deeply connected to its impact on incomes, wealth and well-being. For instance, it is now apparent that an average college graduate would be faced a flat lifetime income curve as was faced by his high school seniors over the last few decades. In India, already, the starting salary for average college graduates is not very different from those of average school graduates. So then, is any college education asset-creating? Or are their qualifiers?

Perhaps education in the future will be more about imagination, creativity, interaction, coordination, mutual respect, joyful work and introspection. That may help build more wealth than focusing on knowledge acquisition as we have done for the past many millennia. Or not. Either way, even an economist’s take at education needs to acknowledge and build on the changing character of education in these changing times. When that does not happen, things fall flat.

The reviewer heads Indicus Foundation

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