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Asymmetry information, decision making : Education in India

After visiting several community schools in India, I research about the rational choices concerning the school and how do the parents decide to put their kids at school.

“If you are a peasant farmer and have never been to school, your ability to choose on the basis of information is very limited. Given the asymmetry of information, you’ll never be able to get there,” Amartya Sen said.

Yet the poor in India appear to disagree with Mr. Sen. Parents are increasingly choosing to send their children to low-cost private schools, where students often outperform their peers who attend free public schools.
Surveys suggest that poor Indian parents spend up to 13% of their income on education, well above the national average of 8%. Nowadays, Indian people understand that education is really important for the future of their children, the mentality is changing, even on the poor part of the city on the slums, several actions are promoting to improve the attendance of kids on the school and try to change the mentality about this, time after time. But how do parents who are often illiterate and have little formal education themselves make informed decisions about the merits of schools?
Mr. Sen’s claim rests on two assumptions: that poor parents are incapable of choosing good schools by themselves; and that markets will not help parents identify a good school from a bad one. Evidence suggests neither assumption is true.

First, the theory that peasants cannot select the best schools is inconsistent with the evidence that they tend to transfer children from failing government schools to better-performing private schools. It is true that poor parents choose schools by considering “simple” things, like whether the medium of instruction is English or the visible state of the building. Yet there is no evidence that such decision-making process favors bad schools. Also the decision to put the kids on the bad school like the public one is considering 2 times because they know that education first is really important and see the impact when the kids go to school.
Mr. Sen’s second assumption is that asymmetrical information* makes it impossible for parents to decide which schools are best. The basic idea is that if sellers (low-cost schools) know the quality of a good (education) and buyers (poor parents) have no way of discerning quality, then buyers will either be ripped off or refrain from buying altogether.
In addition, the reality that parents can choose schools creates a market incentive for entrepreneurs to provide better information—in the same way that the market incentivizes the publisher of Consumer Reports to provide other product reviews. Organizations in Hyderabad, southern India, have begun rating low-cost schools so that poor parents can make better choices.
Mr. Sen said, “We need nothing short of a revolution, not an armed revolution, but a revolution in thinking.” The poor are on a mass exodus from government schools to private schools, and the bottom line is that the kids are performing better. When we talk about private schools they include the community schools. The parents can see the effects about school on the children and change the decision about which schools choose. It may not be a revolution in thinking but it is most definitely a revolution in doing.

*Asymmetric Information: Asymmetric information means that one party has more or better information than the other when making decisions and transactions. The imperfect information causes an imbalance of power.

Sandra Berthelot

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Author: studentnovasbe

Master student in Nova Sbe

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