Friday, July 31, 2009

The road to Ludhiana from Kolkata= road to Uttar Pradesh from Tamil Nadu!

It is amazing to see how schools and colleges and universities are not teaching a simple truth, that at least in economics that every resource has an alternative use in some or other way which is the basics of market economy. Time and again our ideas giants have reminded us that the market alone can allocate these scare resources into alternative uses efficiently.

Years after I learned these facts from none other than Sowell’s beautiful book The Basic Economics.

Just see what other giant L. E Read said that the “aim of teaching is to evoke thinkers, not followers. The mark of a teacher’s success is to have his students surpass him”.

By this time you must have reached the conclusion why millions of our younger people become followers rather than thinkers? Even we had thinkers without attending schools.

I never heard any single teacher from Indian education system as of now who stood for the Mr Read's words. Yet, I read somewhere that the IIPM Delhi teaches Dr. Sowells Basic Economics book in their MBA classes!

Rajesh Chakrabarti in an article published in the financial express writes:

  • in economics, the questions never change. So when, back in the 1980s, the Peruvian economist Hernando De Soto subtitled his book The mystery of capital with the query Why capitalism triumphs in the west and fails everywhere else, he was asking a question development economists have wrestled with for decades. The broad answer, institutions, was not new either—indeed Douglas North would soon win a Nobel Prize for having said so. Nevertheless there was something starkly different this time around. De Soto showed— by actually starting a business!—that an entrepreneur in Peru needs 289 days to register a business, and almost seven years to get the permit to build. It’s just plain torture to start and run a formal, law-abiding, tax-paying business in most developing countries. Little wonder the system does not work.

Samuel Paul & Kala Seetharam Sridhar from Public Affairs Centre, Bangalore writes:

  • In a recent study we have completed, we find that India’s southern states have performed distinctly better than their northern counterparts. Taking the example of Tamil Nadu from the south and Uttar Pradesh from the north, we found a marked upward shift in per capita income and reduction in poverty which TN experienced when compared with that of UP since the mid-1980s. This is true even though a comparison on the poverty rate showed that during the 1970s until about 1985, TN was actually about the same as, or perhaps worse than, UP as far as the extent of poverty was concerned! Judged by per capita income, we found TN was always ahead of UP by a modest margin, but TN had moved far ahead of UP by 2005 (50% higher in 1960-61 vs 128% higher in 2005-06).
  • In order to examine the efficiency of resource use, we examined expenditures on sectors (such as roads and primary education) which are inputs, and their outcomes such as the change in road length in TN and UP. Outcomes manifest themselves only with a lag after the initial expenditure/investment has been made. Hence, based on the data available, in the case of roads, we used the 1980-85 period for examining expenditure and with a 5-year lag, used the period 1985-90 for observing the outcome, i.e., road length. We found that TN spent a total of Rs 92,483 during 1980-85 for creating every additional kilometre (km) of road during 1985-90, whereas UP spent 3.5 times more than that of TN, Rs 328,788 over 1980-85 to create an additional km of road during 1985-90.
  • We take another example from the social sector (primary education) to demonstrate the relative efficiency of resource use in the case of the two states. Two surveys done by the Public Report on Basic Education in India (PROBE) team in the Hindi-speaking states (in 1996 and 2006), showed that despite the fact that schooling infrastructure had expanded rapidly, classroom activity levels had not improved during the decade. For instance, there was an impressive increase in the number of primary schools between 1996 and 2006, with one out of every four government schools being set up during this decade. Further, the proportion of schools in UP with at least two pucca rooms went up from 26% in 1996 to 84% in 2006.
  • Next, in 1996, free uniforms and textbooks were provided respectively only in 10% and less than half of schools, which increased to more than half of the schools and nearly 99% of schools in 2006. Let us compare this to outcomes. In rural north India, in 1996, about half of the time, there was no teaching going on in primary schools. However, despite all the increases in resources and inputs during 1996-2006 reported above, a resurvey conducted in 2006 found that nothing had changed with respect to educational outcomes — half of the government schools still had no teaching activity when the investigators arrived.

What kind efficiency is there in our states economy you can find?

PS: I did many review studies on doing business in Indian cities but my feelings are nothing, yet a terrible!

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