Gary Becker, a Chicago economist, has an opinion piece in the Business Week of Feb 16th titled What India can do to catch up with China.
Unsurprisingly, he makes the point that education is the primary requirement for India to lift itself out of grinding poverty.
To compete effectively in world markets, India needs to expand its secondary school education. It also has to vastly improve its health services. There is abundant evidence that returns on such investments in India’s human capital would be high.
Economists are deservedly known to disagree on many issues. But on one matter there is consensus: the absolute necessity of an educated population for an economy to develop. This fact has been known for ages by almost all who have ever pondered the question of economic development and growth. The puzzle therefore is to explain why education is broadly neglected in India. What is it about education that makes it a scarce good in any poor economy? I believe that there are two factors that explain this unfortunate phenomenon. First, education is a public good. And second, the socially optimal provisioning of public goods require collective action. India is particularly prone to a failure of collective action, which in turn leads to an under-provisioning of public goods, including the most fundamental of public goods — education.
It is important to distinguish between public goods and private goods. To start off, public goods are not goods that are provided by the public sector, although the public sector is often required to provide public goods. What makes a good a public good is not who provides it but rather the nature of the good itself. Public goods are best defined as goods that are not private goods. And private goods are those goods that are rival, excludable and do not have externalities in consumption. By contrast, public goods are nonrival, non-excludable, and have positive consumption externalities. These are terms that need to be defined precisely so that we can reason further why a collective action problem leads to an under-educated population. Only by fully understanding the causes of the failure can be begin to find a solution to the problem. I hope to investigate this more in the days to come.