Regulating higher ed ...

Ravikiran Rao bemoans the snarky tone in my previous post on this topic, and asks me to address his point -- actually two points: (a) that 'regulations impose barriers to entry' and (b) 'they tend to penalize the honest the most.'

Without trying to offer a full blown defence of regulations, let me just state that any game involving multiple players requires rules, as well as someone to enforce them. In financial markets, for example, if a company wants to raise money by issuing debt instruments or shares, it has to obey all the rules formulated and enforced by a regulatory authority. One can't claim that this regulation is unnecessary or that it's a bad deal, without providing a better alternative.

Now, I don't need a degree in rocket science to realize that regulations are not costless; one of the costs, as Ravikiran says, is that they restrict entry. If I want to take my blog public and raise money through an IPO, I can't! While I might even agree that this is a bad outcome, I would accept it as a small price to pay for the kind of confidence and integrity markets get to enjoy because of SEBI's regulations.

Clearly, there is a huge spectrum -- from complete absence of regulations to totally brutal and draconian regulations that tie you up in knots -- to choose from, and what you choose depends on your political views.

Even for a given person with a given set of political views, the choice of regulations will depend on the kind of activity under discussion. Thus, I am happy that there is SEBI for IPOs; but I am also happy that there is no BEBI - a SEBI for blogs! One can't claim that these two cases belong to the same regulatory basket, and expect that claim to be taken seriously.

* * *

Let me now turn to higher education. There are colleges and universities on one side, and there are students (and their parents) on the other side. There is the society / government that stands to benefit from an effective system of higher education. What should be the rules of this game? Who should formulate and enforce them, and how? What are the principles that the regulator could use while choosing from among many possible (kinds of) rules?

Many possible regulatory regimes are possible, and I like the framework outlined by Satya over at his Education in India blog. He recommends separating the three functions of UGC, and farm them out to three sets of organizations; the first set -- regulators -- would formulate and enforce rules about the minimum standards that must be met by an institution to begin and continue its operations. The second set -- accreditors -- would take care of rating the institutions on all academically and financially relevant parameters. And finally, the third set -- funding agency -- will take care of providing funds according to norms such as the number of students, number of teachers, etc.

The first two functions -- regulation and accreditation -- have a parallel in the financial world: SEBI and credit rating agencies such as CRISIL. As Satya says, this model has been proved to be effective in the financial markets, and he makes a persuasive case to show that they are the right way to go for education markets as well.

Pratap Bhanu Mehta also has a series of op-eds (Part I, Part II, Part III) critiquing the model of higher education that India has chosen, and how it can get out of the rut that it finds itself in.

Finally, let me turn to one particular model of self-regulation for higher education. In this model, some of our leading institutions can come together and form an association -- a very selective club, something like the Ivy League! -- with strict entry criteria. To the extent that this club is seen as prestigious, others would want to become a member, and the club can wield its rule book (which sets forth parameters on selection of students, transparent functioning, teacher qualifications and achievement levels, research component, etc) to ask them to prove that they do indeed deserve entry.

Such a thing does not exist in India. Yet. But, I don't see why reputed private institutions -- such as BITS -- can't take the lead and create such a club.

* * *

Well, there are all kinds of ideas that people have floated, and many of them are worth considering seriously. They all take regulations as a fact of life, and then focus on weeding out the bad kind of regulations, and strengthening the good kind. There are many ways of participating in this discussion, and if one is lucky, one may even end up influencing the course of policy-making.

It's also possible to sit at one extreme end of the ideological spectrum, and insist that all regulations are bad for all activities -- blogging and higher education, for example, without giving any consideration to the substantive differences in these two enterprises (especially the costs). If Ravikiran wants to do that, fine; but then he cannot demand that his views be given some weight in a discussion about real-world regulations. What good is it to us when his argument is, simply, that all regulations are bad -- no ifs or buts?

* * *

Perhaps, I should take this opportunity to point out -- Gently. Very, very gently. -- the snark implicit in his first post, where he said "Bzzt. Already answered. Next question please," and linked to a loooong post about the undesirability of regulating blogs, with an end-note saying, effectively, "Gotcha. Now what if I say 'blogs=education'?"