The Economic Wishing Well: Education, Part I

Written by: Nic Haussamer

The events of this past week have again brought to the fore the issue of education in South Africa. Besides the bulk of photos and video material from events on campuses and outside parliament, social media and blogs are ablaze with ideas about how to change higher education in South Africa and – as many people wish to do – make it free for all students. In this series of articles we will consider various aspects of this proposal, as well as some other considerations going forward.

The expenditure substitution myth

"If the whole world stopped spending money on the military for just 8 days, we could provide 12 years of free, quality education to every child on the planet.”

It sounds like a wonderful idea and the claim seems remarkably simple – but that is exactly the point: it is far too simple to work in reality. The only claim that could be made with any degree of certainty is the obvious one: if countries stopped military spending for some time, they would have saved some amount of money. To take the claim a step further and say that we could, instead, have X in quantity Y is a leap of faith more than it is a logical conclusion – but why is this the case? It has to do with existing production structures.

At any given time, there are fixed numbers of buildings, lecturers and other resources that serve as inputs for educational “production” – the process that takes place at tertiary institutions. It is quite possible for universities to make marginal changes in the short term, such as accepting a small percentage more students relative to the previous year, or hiring a few more academics for the purposes of a new research project or to lecture a new course. These changes are relatively easy to facilitate because lecture venues may have some marginal unused capacity and because there is some degree of labour turnover and mobility amongst academics.

However, the call for free education has a very important (and widely sought-after) implication: universal access. It is likely that a large number more South Africans would seek to enter tertiary institutions if the proposed policy was implemented: consider the fact that in 2010, there were 892 936 students in higher education, whereas the number of people aged between 20-24 in the same year was estimated to be 5 018 500[1].

If a free education policy was implemented, the existing universities would be able to accommodate some new students, but the current “production structure” for tertiary education would be insufficient to handle most of the influx. Even if the policy was phased in over time, the marginal capacity of the existing universities would likely be exhausted long before all prospective students are accommodated. New universities would almost certainly have to be built if the policy is to fulfill the stated objectives; this would require a significant upheaval in human and physical capital. Particularly when it comes to academics, the pool of resources from which universities are able to draw is limited in South Africa. Moreover, competition between universities – whether new or existing – for the best academics would likely inflate staff salaries. Thus, where academics are available, the cost of hiring them – and thus the educational project as a whole – would increase, representing a greater burden on the State and by implication, the already burdened tax base; where they are not, more would have to be cultivated – a process of considerable length and cost, and which would invariably push back the successful implementation of the free education policy.

What should be clear at this point is that money alone cannot guarantee timeous implementation – the resources required to implement such projects must already be available or in production. This applies not only to education, but to any good or service. To think otherwise is to misunderstand the role of money and the allocation of resources in an economy. Much more can be said about the problem of resources and how the implementation of free education could be hindered. The main point is that whether for education or any other expenditure (besides the settlement of debt), it is erroneous to think we can simply substitute spending on one category of expenditure for another and get instantaneous or, even with some time, the expected results.

This has said nothing about the ability of government to implement something of this scale, but government’s track record speaks for itself. In addition, nothing has been said of the validity of the claim – that the amounts spent on militaries and those required for free education balance as is suggested – nor has any consideration been given to the juxtaposition of “free” and “quality” in the South African context.

Besides considering free education itself, all of this should highlight one important thing: while internet culture and memes can be very entertaining and thought-provoking, much thereof is laden with economic ignorance. It would be wise to heed the words of the late economist Murray Rothbard:

“It is no crime to be ignorant of economics, which is, after all, a specialized discipline and one that most people consider to be a ‘dismal science.’ But it is totally irresponsible to have a loud and vociferous opinion on economic subjects while remaining in this state of ignorance.”

Nic Haussamer is a Rational Standard contributor.

[1] Note that the age band used is that supplied by StatsSA which most overlaps the ages of university students.

References:

SouthAfrica.info. 2015. Education in South Africa. Available: http://www.southafrica.info/about/education/education.htm#.Vi1M0yQWGnv [2015, October 25].

Statistics South Africa. 2010. Mid-year population estimates 2010. Available: http://www.statssa.gov.za/publications/P0302/P03022010.pdf [2015, October 25].