Stephen Jay Gould once said:-
I am somehow less interested in the weight and convolutions of Einstein’s brain than in the near certainty that people of equal talent have lived and died in cotton fields and sweatshops.

The criminal neglect of education, in my considered opinion, is the most important charge upon which the policy makers of India stand indicted. An entire generation of Indians have lived and died since independence—a reasonable estimate would place the number around 500 million humans—about half of whom were illiterate, not just uneducated. The lost potential is stupefyingly mind boggling. How many Ramanujans and Einsteins have they condemned to obscurity and waste, how many did not even see the insides of a school or learn to read, write, reason and do arithmetic?

The answer would break the heart of any thinking human being.

Shortages and Nehruvian socialism go hand in hand. Just take scooters, for instance. You could not just take scooters some years ago, actually, thanks to the quota permit license control raj. You had to wait for years before you could lay your hands on one. You could jump the queue if you paid with “hard currency” or paid a premium (black money) to someone who had the foresight to book one years in advance with a view to capture some of the rent that arises out of shortages.

The situation today would have been unthinkable then. Now dealers of two-wheelers practically drag you off the street, give you a cold drink, and by the time you have finished it, they have arranged financing and you roll out the door on your new bike clutching your free gift of a toaster oven. Then your choice was severely limited to four or five models; now a reasonable estimate must be a hundred different makes and models of two-wheelers.

Back to the criminal neglect of education. Not only did they—those who were in charge of Indian policy—not create an educational system that works, they are now busy figuring out a way to sabotage a system that seems to sort of work. I am talking about the recent announced policy of increasing the reservations for scheduled castes and tribes, and for other backward classes (SC/ST, OBC—as they are termed) in the institutes of higher education. My assessment is that it is madness. Whom the gods would destroy they first make mad, observed old Euripides. I worry about the upcoming destruction of the Indian educational system, which if carried out efficiently enough, effectively dooms India.

Reservation in higher education institutions for SC/ST and OBC candidates is idiotic. The better alternative is to help disadvantaged people—those who I label “sufficiently poor”—with resources so that they can afford an education. If that is done, then even the poor will have equal opportunity to be able to compete and find their place in the world. Assuring equality of opportunity is mandated but equality of outcome is not only not mandated but is an objectively silly goal to aim for.

There are disadvantaged groups and many of these groups have been historically discriminated against. An absolutely valid argument can be made that these groups need help to redress past injuries and injustices. The question is not if they have to be helped, but rather how. Are reservations in higher education the way to go? The answer is no if even after securing admission they are ill-prepared to make use of the opportunity.

Many faculty members at IITs have recounted that most quota candidates have to face an uphill struggle and many give up after a few years. It is not that the quota candidates are intrinsically inferior; fact is that they did have the disadvantage of not having had a decent schooling. The only quota candidates that actually do well are those from the upper middle class. One medical college dean revealed that as a last resort, he gets quota students who don’t make the grade to swear that they will not practice medicine and will only take on administrative jobs (and there are job quotas there, too), and only on that condition does he pass them so that they exit the system without loss of face.

Let me once again stress: the children of disadvantaged groups are not naturally incompetent. It is the lack of opportunity in the earlier stages of the educational system that handicaps them in the later stages. The playing field has to be leveled at an earlier stage of the game. The solution therefore is not reservations at the higher education level but assistance at the school level.

The question of why reservation in higher education for disadvantaged groups is irrelevant is plain if you do the arithmetic. Even if you do 100 percent reservation in the elite institutions, at most you will have something of the order of 10,000 seats. This is an insignificant number relative to the total number of students in the disadvantaged groups—which is of the order of tens of millions. Indeed, compared to the potential demand for higher education, the actual supply is laughably insignificant.

The IITs attract 3,00,000 potential students and admit around 5,000. To a first approximation, nobody gets into an IIT. The wide gap between the supply and demand is bridged by a system which has evolved into a grotesque caricature of competition. To enter one of the IITs, there is an exam called the Joint Entrance Exam (JEE). The objective of the exam is not to test whether a student is qualified to study at an IIT but rather to weed out about 98.5 percent of the candidates because the IITs are capacity constrained. This leads to enormous economic loss, and at time loss of human lives.

Let’s dwell on the JEE for a bit. Markets work, as economists are prone to declare at the drop of a hat. Given the supply constraint, the market response is an entire industry which prepares students to do well in the JEE. So there are coaching institutions which charge an arm and a leg to help a student do well in the JEE. It gets surreal when you realize that to get into one of the more successful coaching classes, you have to appear for an admissions test. So, here is the deal: you have to pass an admissions test to get into a coaching class which will prepare you for the JEE so that you can get into an IIT. What next—that there will be second- and third-order coaching classes? That is, you will have to appear for a test to enroll in a class that will help you take the admissions test to get into a coaching class which prepares you to pass the JEE.

Here is the economics of this surreal system: an IIT education is worth, say, Rs 100 lakhs. But the total private cost is only Rs 5 lakhs. So the “profit” is Rs 95 lakhs. So even if you have to pay Rs 5 lakhs to increase your chances of getting into an IIT, it makes sense. That is therefore what the market delivers: high priced coaching classes. About one hundred thousand go to coaching classes and of these about 5,000 make it to the IITs. The 95,000 who don’t make it have to lump it, and some even take the extreme route of killing themselves. Why? They realize that their parents have spent money they could not afford to send them to coaching and they failed their parents.

Let’s take stock. The supply of higher education is severely limited. The reason for this supply limitation I will go into in a bit. The demand is high. The competition for admission leads to economic waste, for starters. Then there is the even more expensive skewing of the objective of the students: they are often not spending time and resources to understand the subject or because they like it, but because they want to do better in the admissions test than their competitors. Instead of producing thinking, cooperating humans, the system forces too many to focus on a narrow objective and to develop a maniacal zeal to study for a test that is more of a test of narrowly defined skills rather than an overall test of fitness to pursue higher studies. This exercise, I am sure, damages many students’ personalities so that they become anti-social and un-cooperative. They become incapable of group cooperation in solving problems. I have met too many IIT graduates who are perfectly dreadful people to hang out with. They are self-absorbed, narrow-minded, money-grubbing uni-dimensional idiots. I should hasten to add that there are notable exceptions to this characterization, of course.

The issue of reservation in higher education is not really complex. It is rather simple if one thinks about it for a while. Einstein observed that the universe is ultimately comprehensible. Compared to that, the economic system of a nation is child’s play. Although apparently confusing, India’s failures are totally comprehensible if one bothers to look at it with some degree of care. Just investigating thoroughly only one aspect of the economy would reveal the fact that ultimately it is the combined result of a small set of conditions. I will explore to its logical conclusion just one simple fact: why is education in India so supply constrained. It will become apparent that there are systemic problems which can be addressed. Like a good detective story, the plot line is simple. The system is the way it is because it leads to gains for those who are in charge. Once we have considered the facts, the solution will be obvious.

For now, here is the hint: barriers to entry. We are the problem, can we be the solution?