Is free stuff bad for development?

Thanks to Guy Grossman for forwarding this piece from Uganda’s New Vision, lamenting the detrimental effects of free education:

THE day Government started paying tuition for all school going children, was the say parents ‘declared’ a holiday from taking care about their children’s education. What a shame.

Almost all school management committee became dull. Government stood at a distance and barked, but did not care to bite. Years down the road, the rot seems to be perforating its way through free education’s foundation in the country.

A decade down the road, Government is gradually realising that the parents stealthily put so much weight on its back, and this is gradually eating down the country’s quality of education.

As I ‘ve written about before, I’ve heard much the same thing from various head teachers in Kenya, absolutely lamenting the detrimental effects of free primary education (FPE)! The simple argument is that when parents don’t have to pay, they feel no stake in the school, no obligation to participate in management, and they simply delegate education to government. And because poor people in poor areas are not paying any kind of direct income tax, given low or non-existent incomes, they are not engaged in any type of fiscal contract. It’s pretty painful to think that in trying to provide universal primary education (and beyond) in these East African countries that the plan itself might actually be causing harm to the quality of learning.

Of course, so far, the evidence concerning the negative effects of FPE on parent involvement is only anecdotal. It certainly stands to reason that what’s really going on is that the parents who previously were most active in schools are deciding that the quality of education is too low, and they are opting to send their children to private schools instead. And in turn, a new crop of parents, who would not have sent their children to school unless it was absolutely free, have emerged. So what’s changed is not the attitudes or behaviors of parents, but simply the population of parents associated with the newly free primary schools. Indeed, a paper by Bold et al (2010) at the Centre for the Study of African Economics finds that FPE has resulted in the selection of weaker children into public schools, which in turn may be correlated with parental attitudes and behaviors.

All of this raises the question of the implications of free stuff in poor settings. In particular, from a development standpoint, how can citizens be encouraged to “consume” or take advantage of goods and services that are privately and publicly welfare-enhancing? How do governments, donors, local leaders, humanitarians get citizens to take advantage of disease prevention strategies and educational opportunities when convinced that the status quo is leading to severe under-consumption?

One of the most interesting and counter-intuitive ideas that I encountered when I first started doing research on HIV/AIDS several years ago was the idea of “socially marketed condoms.” The idea was that if you just give away condoms they will seem worthless, and no one will want or use them. But if you charge a little, and provide a bit of value added marketing, they are going to value it more, increasing both demand and usage. This was the argument of the international NGO, Population Services International (PSI) and many others, and the notion was accepted on faith by many, including me.

But as various scholars and analysts have pointed out, including Banerjee & Duflo in their book on Poor Economics (I admit, I hadn’t really read it until this summer, and it’s breathtakingly good), it turns out that the free condom argument probably wasn’t correct, or at the very least, was overly simplistic. Whether it’s bednets (Rwanda is about to distribute 6 million for free), home water purification, or condoms, several pretty careful studies show that usage is often not affected by subsidies, even to free.

Education is a trickier good to consider in this context. For the examples above, presumably the quality of the good is the same – of course if the free bednet has holes in it, we would expect that a quality net for a price would be preferable. And this is relatively easy to establish. When it comes to education, parents who opt for private school presumably are choosing a better quality school.

But the argument being made by the Ugandan writer and the various Kenyan head teachers it not about sunk costs inducing commitment to usage. It is really more about what causes parent citizens to perceive a sense of responsibility to make institutions successful. In this sense, payment serves as a symbolic indication of responsibility and ownership. I could certainly be convinced that there are other useful commitment mechanisms apart from payment, perhaps ritualistic ones, and maybe these ought to be considered to address some of the perceived costs of free.