0:33 Intro. [Recording date: December 18, 2014.] Russ: If all goes as planned, this episode will be the last one of 2014, the 453rd episode in EconTalk's history. All of our previous episodes are available in our archive and can be downloaded at iTunes as well. I'll soon be announcing the opportunity to vote for your favorite episodes of 2014; you'll be able to do that online. So, listen in, and follow me on Twitter, @EconTalker, or watch our Facebook page.

1:06 Russ: My guest today is James Tooley, Professor of Education at Newcastle U. He is the author of The Beautiful Tree: A Personal Journey Into How the World's Poorest People Are Educating Themselves. James, welcome to EconTalk. Guest: Thank you for having me. Russ: So, this is an extraordinary book. I really enjoyed reading it. It's a great personal story of how you came to discover private schooling in very poor countries, and it has a lot of economics sprinkled throughout, along with the excitement of the detective mission, the discovery process you were on. Let's start with telling us how you discovered private schools for the poor. How did this come to pass? Because a lot of people believed, and I'm sure still believe, that they don't exist--that they're impossible. So, how did you stumble on them? Guest: Yes. So, I was in Hyderabad in South Central India. I was there doing consultancy work for the International Finance Corporation, the private arm of the World Bank. I was looking at elite private education, private education for the middle classes and the rich, because I'd become an expert in private education--that was my area of research. I was dissatisfied with this because for whatever reason, I was drawn to serving the poor. That's what I felt my life should be about. And here I was looking at private education for the rich. So, on a day off from my consultancy, I wandered down into the slums of the Old City; and sure enough--I had a hunch about what I might find, and I found a private school. A school, charging in those days what would be the equivalent of $1 U.S. dollar per month, serving a hundred children. I met these people; and then I wandered down another alleyway and found another school. And soon I was in contact with a federation of 500 of these low-cost private schools in these poor, largely Muslim areas of the old city of Hyderabad. It was an amazing finding for me, because suddenly the two parts of my life came together. I could work concerning the poor, low income families and I could be exploring private education, too. But more than that, this seemed very exciting. Poor people were using private schools. Why? Why has no one told me about this? What's going on here. And so I began a really exciting time in my life. Russ: And they were paying when there was--was there a public school that was free of charge that they could go to if they wanted? Guest: Yes. Now, in India, not only are there public schools--they're called government schools--that are free of charge; they typically provide free lunch, free uniforms. So there's not even many, or not excessive overhead charges, as well. But these poor parents--and those schools are there: in poor areas they are everywhere. These public schools. So, why were poor parents making this decision? Well, I spoke to some poor parents on that very first visit, and I've been reinforced many times since. A typical phrase could be, 'In the public schools our children are abandoned. The teachers don't turn up, or if they do turn up, they don't teach; or they don't particularly teach very enthusiastically and with much commitment. The children are typically left to their own devices.' On my very first visit, I went to see one of these public schools; and there were 130 kids seated on the floor of a classroom, mosquitoes everywhere, bright-eyed, keen young children wanting to learn but their teachers weren't there. They were all pushed together in this one classroom. And that really made me realize there's something exciting going on here; there's something worth exploring further, something that the world needs to know about, the private sector alternative. Russ: And you found this over and over and over again in poor countries. I'd like you to just give us a quick overview of some of the places that you discovered this phenomenon happening. Despite the fact that, in every case, it seems, knowledgeable experts told you they didn't exist, because poor people couldn't afford them, and no one would ever choose to do that. And they literally don't exist, so you are wasting your time. And yet, you found them. Where did you find them? Guest: Yeah. It was extraordinary as you say. And this is still the case today; when I go to new countries people say these private schools don't exist, in our country private schools are for the rich or the middle classes. So, I went on a journey funded by the John Templeton Foundation who had trust in what I was saying, that they might exist; and we found them in Ghana, in Kenya, Nigeria, Zimbabwe, Somalia--Somaliland--then across several parts of India, just-Muslim Hyderabad. And then even in rural China, in the remote mountains, where perhaps the most extraordinary local private schools were up in these remote mountains, because the public schools are too far away. In that case, the public schools are not so bad; they are just too far away. So that was my first sort of foray, and that's what's described in The Beautiful Tree. And since then I've been looking in perhaps even more difficult places--Sierra Leone, Liberia, very much in the news now of course with the Ebola virus--very much in my writeup[?] because of huge numbers of low-cost private schools in the slums and poor areas. South Sudan even to Northern Nigeria.

6:55 Russ: Now, of course you can't generalize perfectly. But it seemed to me there was a fairly similar pattern in the personalities and vision of the people who were running these schools. They're entrepreneurs; they're making money, which is hard to imagine, but they are making money. There are certain patterns of both the entrepreneur running the school and the teachers. What are some things they have in common? Of course, all these are very disparate countries. Guest: Yeah. And you are right to remark on that, because it was quite remarkable that wherever you went into poor countries, whether they were in South Asia or across in sub-Saharan Africa, there were tremendous similarities between the entrepreneurs and the teachers. So, the entrepreneurs--three sorts, really. One would be a mother who maybe starts a, has what to do with her own children, so she brings together a streetful of young children for a kindergarten; and then the parents say, 'Well, why can't you stay on? It's not so different in Grade 1. Why can't they stay with you?' And so a school starts from the bottom up. Another one might be a young man who starts what could be called a cramming class, a tutorial class to help you with your exams when you are older; and the children say, 'Well, I learned more with you than I do at school. Why don't I come to you all the time?' And so a school starts from Class 10 and goes downwards. But now, increasingly, people are seeing the success of these private schools in their communities. So, someone, perhaps a slightly more educated person within a community, but not even necessarily that, but someone who sees a potential for a school, maybe can raise an initial little bit of capital or has a building, a bit of land, an entrepreneur just seeing the success of other schools might start a school now. These schools are there. They make money, as you say, but not a lot; I mean, they are very small surpluses, but nonetheless they do make a profit, typically. And the teachers--this is very interesting--are from the community themselves. Very important. Study after study by the World Bank and other international agencies points to one of the problems in the public schools, the government schools, that teachers have 'social distance', they call it, from the children. They might despise the children from the poor areas: They think they are dirty, smelly, they swear a lot, you know. They might despise them, look down upon them. But the teachers from the local communities in the private schools [?] recognize the children as themselves, and they work hard to ensure that those children learn. Russ: One of the most poignant--it's a very moving book. One of the most poignant parts of it to me is some of the condescension from either the aid community or the officials in the country who either don't believe that the schools exist; or if they do exist, they think they are horrible. And one of the reasons they are horrible is because the typical school--and I'm going to ask you to describe it--say, for example, doesn't have a toilet. And the kids say, 'But our houses don't have toilets. That's no big deal.' And to them, from the world they are in, this is normal. For the bureaucrat who has never stepped into their neighborhood--and you describe, unfortunately how challenging it is physically to step into those neighborhoods, because there's raw sewage in the street; it's a very depressing, sad way of life for us who have so much more. But for the kids who are there, that's what they are used to, and they don't expect their school to be luxurious. The fact that it has problems physically is not a big issue. And yet, over and over again in your book you talk about how people dismiss these private schools because physically they are not very attractive. And they ignore the intellectual, psychological things--the learning that's going on. It's incredibly sad. Guest: And you've described the slums and these poor communities. I mean, some of the villages can be very attractive in some ways. But the slums are vibrant places. You don't get depressed, necessarily, going into them. But they are very poor, and as you say, raw sewage is the least of your worries as you step into these areas. And then you see where people live, and the houses are pretty inadequate, the homes, the shacks and so on. And the schools are typically slightly better than where the homes are. And of course it's desirable if a school is even better; but, you know, what I've been taught to realize by these experiences in these poor areas is that it's better--you've got to look at what's possible in these areas, and increments can be better than any alternative. And that's good. That's something to be valued. Whereas, outside, you say, 'Oh, these poor private schools--the buildings aren't good enough; they are not beautiful.' We've got to say they're not good enough; we'll invest in expensive public schools but we can only afford one or two, we can only afford a few; they've got to be outside the slums and they've got to have properly trained and paid teachers. And soon you've got a model where no one really cares for the children in these schools, in the public schools. It's organic, it's an organic model in the slums themselves. And it works. This is the absolute key. You've probably come on to that. So let me leave that to you. Just this despising issue, this despising issue. One of the stories that happened to me recently: I'll never forget. I was in a fishing village in a poor part of Gujarat, on the Pakistan border but on the Indian side. And I was talking to the villagers--the fishermen and the fish-mongers about the inadequate public school in their midst. You know, they thought it was terrible: their children weren't learning anything; the teachers were exhibiting all that social distance coming from outside and not caring for the children. And one of the fathers was so angry about his daughter not learning anything that he went to complain, to the government school. And the teachers saw him coming, heard him. You can see him through their eyes. They saw a dirty, smelly, illiterate fisherman. They called the police. And they had him arrested. And he had to suffer through the Indian legal system--because he'd gone to say, 'It's not good enough. You're not turning up, or you're turning up late for my daughter's class. She's not learning anything.' Now, that's a story that's just horrific about what goes on in the public schools; but nonetheless it's not a bad-news story because entrepreneurs in those communities themselves are setting up these private schools. And they are doing better.

13:58 Russ: So, one of the reactions that you get from development "experts" or from government officials is that, well, these schools can't be helping the poor because they are for-profit. What's your response to that? 'They are not for the poor. The public schools are for the poor. Because they are not making a profit. But the private schools are for-profits, so they are not for the poor.' Guest: Yeah. And it's--some of the private schools might be non-profit. Might be run by churches and mosques and [?]. But certainly many of them are for profit: they are run by proprietors and that's what brings them an income. I'd say two things to those people. First of all, we've done a lot of calculations now to show the affordability of these low-cost private schools. We've got a very neat way of doing it. What we do is take a family on the poverty line or even below the poverty line and show that many of these low-cost private schools are affordable to them, even if they are sending all their children to them, as long as they are not spending more than 10% of their family income. So they are affordable. That's the first thing. Secondly, many of these private schools also offer scholarships, discounts for large families, for very poor people. So they have flexibility, themselves, flexibility about payment terms, flexibility about whether you've got to wear a uniform or not, if you are too poor. And then the third thing is, if they make a profit, what does that mean? What that means in practice is that the entrepreneur keeps keenly aware of what the teachers are doing. Are they turning up? If they are not, then obviously his profit is going to suffer. So he makes sure his teachers are there. Are the children learning? Are the children doing their homework? Are the children doing the assessments? If they are not, the parents will realize that and seek out better schools where these things are happening. They will take their children elsewhere. So, all these things--profit, what does it mean? Well, it's not a dirty word. It means accountability. It means checking up on teachers, making sure they turn up. It means accountability to parents, making sure the children are learning. So, I say to people who say profits are a bad thing, I say, 'Forget it. It's not a dirty word.' It means high standards are kept; high standards are ensured. Because it keeps people on their toes. Russ: Your training is not in economics. Is that correct? Guest: I was a mathematician and philosopher, as an undergraduate. And then I dabbled in economics and political economy and so on. But yeah, I wouldn't call myself an economist, no. Russ: Because what I love about the book--and it just screams out; you don't write about this explicitly: it screams from the pages--which is that the parents of these kids know a lot more economics than the bureaucrats and the economists who are supposedly trying to help them. Because they constantly say, 'Well, of course I'll go to the private school, because they make sure the teachers show up. Because if they don't, I'm not going to send my kid there.' It's kind of straightforward. And yet, it doesn't seem to carry much weight with the people who "supposedly know more." One of the saddest, most powerful chapters of book is called 'Poor Ignoramuses,' where you talk about the attitudes of some of the bureaucrats and experts toward these parents, who are desperately eager, as all parents are, to see their kids thrive. And are finding a way to make that happen; and yet the outside world can't seem to imagine it. Guest: Yes. The 'Poor Ignoramus' chapter, as you say: I focus in on some officials, particularly in Lagos, Nigeria, who had never been to these slums before. This is the first thing. They were very blasé about it; they pretended they knew them; but they'd never been there. Even to the schools on the outskirts. So we went to the public schools on the outskirts, and we asked about the children from the slums, and there was just so patronizing, the response from these officials. You know, really lacking in any concern that these children might have a desire to learn, their parents might be desiring to learn. And totally dismissive. And yet, inside the slums, at the private schools there's eagerness to learn. There's tremendous things going on. So, you know, as you say--oh, but we are talking about parents--parents understanding economics. Yes, I think I even mentioned that in one place, where the parents and entrepreneurs having more understanding of economics than others. I think I could safely say that I learnt a lot of my understanding about the virtues of markets, competition, incentives--I learnt a lot of this stuff not through reading Hayek or Friedman, but from talking to parents and entrepreneurs about what they were doing. And they were saying stuff that spelled out all these virtues of competition: how the market worked, how the market dealt with problems of sloppy teachers, the occasional bad apple entrepreneur. All this stuff, I learnt by talking to the people in these poor communities themselves. It's been an extraordinary learning experience. Russ: The thing that jumps out from your description in the way the parents talk are what I often think of as the essence of the profit-and-loss motive system, which is feedback loops. You've got these built-in regulators that are not coming from the top down but from the bottom up: that if people do a bad job, they stop sending their kids to that school. And the key to that, of course, and this is, as you point out over and over again, hard to believe, but, there's a lot of choice for these parents. There's a lot of schools. That's number 1. Number 2, bad teachers get fired in these private schools. And in the public schools, they never get fired. They don't show up; they show up drunk; they show up drunk and they don't teach; they show up drunk and they read the newspaper; they show up drunk and they fall asleep. It doesn't matter. It seemed like--is it literally impossible to fire them? And yet in the private schools, they're just--they're fired. Guest: Yeah. That's a really, really key difference. It's not saying that entrepreneurs also understand a particular situation of a teacher and won't sort of understand, well, okay you were late [?] yesterday, but that was a particular reason; we'll forgive you. It's not an instant, hard--it's not so hard that it's painful in that way. But if a teacher for no reason or is consistently late or doesn't turn up, in a private school, they're out. And it's crystal clear--everyone understands that. I had an interview--again, this was in Ghana in a fishing village--we followed a father, his name was Joseph, out on the fishing boats into the amazing waters, the Atlantic there, getting up at 3 in the morning, going out on the boats. But he said it absolutely, he spelled it out absolutely clearly: he understood, with his own fishing boat--he had a fishing boat of his own--that if one of his colleagues didn't turn up, yeah, he would be fired. Absolutely. He saw the same thing in the private schools: why did he send his daughter to the private school? Because if the teacher didn't turn up, they would be fired. Whereas in the public schools--in the public schools the teachers are so heavily unionized, they don't--it is almost impossible to fire a teacher there. At best you might be able to move a teacher somewhere else, and make it, him or her, someone else's problem. I've spoken to a lot of public school head teachers, principals, and you know--some people read my book and think I'm condemning public school teachers. No, no. I'm not condemning them, individually. I'm condemning the system. You met some really good souls in these public schools, who say, 'Only 3 of my teachers come to school regularly, out of 9 or 10. I can't do anything about it. I didn't have any role in selecting these teachers. I can't do anything about getting rid of them. And I just have to accept what I'm given. Of course, you or she[?] becomes disheartened and so acquiesces in that problem. It's a very interesting idea. It makes you, it raises the question, why on earth is something as important as education, why do we think it should have anything to do with a unionized public sector at all?

23:13 Russ: Well, we'll come back and talk about that and some of the general lessons in a minute. But, to give the critics their due, one of the things they point out--the critics of the private school alternatives--is that the teachers in these schools are often poorly educated themselves. They are not certified in any way. Whereas in the government schools, they are more likely to be certified; they are more likely to have college degrees; and so on. And of course you can argue about that all day long. You actually tried to find out whether these kids were learning anything. I want you to talk about, just as a quick point: you had many, many helpers in this project, obviously. You had many researchers who fanned out. The first thing you did, which was an incredible achievement, was you just got a census of how many kids are in these schools. But before we talk about the testing, why don't you talk a little bit about how you achieved the census of just counting and what you found out from those censuses. Guest: Yeah. So, there's an issue, which as I told you about going to Hyderabad, which was, it seemed--there were so many children in these private schools. But I wanted to get some firm numbers. So, typically I would link with a local university or NGO, Non-Government Organization, and select a team leader, who would then select 30-50 researchers. We would train them in gaining access to schools, in going hunting[?] schools, in never giving up in areas. And then we would send them into all the poor areas that were in our census area. And then would just go in and find these schools; and we would check up on them. We would follow. We would do random checks, and have supervised doing this. And it was a thoroughly rewarding experience. The extraordinary thing we found out--well, first of all, we found out how easy it is for some people, some of the researchers, just to have that mentality: 'These schools can't really exist; I'm not going to look too hard.' Anyway, since we got over that problem and sent people back saying, 'We know there's a school in that community; you go and find it', they'd go. The headline figure was it's always the majority of school children, when we were doing these school surveys--the majority of school children were in these local, private schools. And that majority could be anywhere from 65% to 75%. So, very significant numbers. This was in the urban areas. In the rural areas we looked at it was typically around 30%. So, this is not some minority pursuit. Russ: You're saying it's not a novelty item. It's not like, 'Wow, they found a school! There's a school where kids are paying!' Guest: Yes. People dismissed it in the first place, saying, 'Oh, you might have found 1 or 2 little private schools in the slums of Hyderabad, but it's only in Hyderabad, only 1 or 2 schools.' No, no, absolutely not. It's a majority of children who are doing this. And it's a majority doing it--we do further studies. So, Liberia. Liberia has been in the news very much in America recently because of this tragedy of Ebola. We went to the poorest slums. So, West Point [in Monrovia--Econlib Ed.] is one you've probably seen on the TV, where the government quarantined the whole slum because of Ebola. In those slums, 71% of the children go to private schools. Seventy-one percent. Only 8% of them are going to government schools, and 21% are out of school. So it's an extraordinary success story in terms of numbers. This is going, clearly poor parents are voting with their feet and expressing that preference for private education. But how well are they doing? So, we've tested about 35,000 children, now, in these different communities around the world. Tested them in mathematics, English, and usually one other subject. And then we've controlled, scientifically, we've controlled for all the relevant background variables--family background, socioeconomic--you know, wealth--education of the mother, proxy measures for wealth like do they own a TV or a radio, so on and so forth, all these things. And we've been able to show quite categorically that the children in the private schools outperform those in the government schools, after controlling for all those effects. So it's not just that there are brighter, slightly wealthier children in the private schools. No. We control for that. And these children, they do better in the government schools. So that's the answer to the critics. You started this thing by saying, 'The critics say that in the private schools the teachers are not trained. The teachers are poorly qualified. Whereas in the government schools they are well-trained, they are well-qualified.' The answer to that is: Well, they don't manage the achievement. They don't manage to push that qualification, that certification, into real achievement for the children. The private school teachers, however poorly trained they are, they do. And that's why these private schools are so successful.

28:38 Russ: So, two responses to that. One is: it's nice to control for whatever you were able to get information about, but there are a lot of things that are hard to control for, that are unobservable, such as drive, passion, commitment, stamina, love. Those don't answer easily onto a form, and so there's probably differences that choose to send their kids to private schools. And moreover, given the horrific numbers of attendance and downtime, where nothing is happening in the public schools, based on your stories--of course, you may have your own biases; you probably do; we all do; and it's not surprising to me that it appears that the private schools do better. The question would be, from the critics, I think would be: Okay, so they do better. And they do a lot better, in your numbers. But again, I'm not so surprised, if your stories are accurate. I'm not surprised because there's so little true education, it sounds like, going on in the public schools, it's a very low bar to clear. So the question then would be, since so much of public policy unfortunately is about the perfect: So, what should we be striving for? The critics of your world view, or my world view, say things like, 'Well, perhaps in the slums of India, the private schools are doing better than the public schools; but they are not doing very well. And we should still be trying--we just have to make the public schools better. We have to give them more money. They need better teachers.' We hear this story over and over again in the United States. It's not just a problem in poor countries. It's: 'Okay, so we're not doing very well, but we just need to do better.' And of course my view, and it sounds like probably your view, is: 'Well, better is unlikely in the current world of human nature, where incentives aren't in place. And I'd rather count on these feedback loops of profit, and a private system, I think, will do better no matter what.' But, the next question would be: Okay, say you do better; but how well do they do? When you say they do 'better', what kind of achievement is possible for these kids in these ramshackle schools, with no books perhaps, limited physical facilities? So, they are better than the public schools. But how good are they? Can they read and write? Can they do math? What kind of test did you administer? Okay, so it showed the private is better than the public. How good is it? Guest: Yeah. I think these are very good points. And this really comes down to the nitty-gritty of it all. So, we were testing in terms of reading and writing and basic numeracy and more advanced mathematics. And the children were doing better than the government schools, but you could still say they are not doing good enough. One answer to that is to say--I mean, first of all, compared to what? So, compared to the government schools, this is the best option. And if you are a poor parent, you've got to look at your available options: what are we striving for? Or we can think about what we are striving for, but if you are a poor parent, you've got to think about what's available now. And these are definitely the best options. Affordable and they make your child more literate and more numerate. And therefore more likely to get a job or go on to further education. So, that's it. But the second thing you can say: From outside, we're striving for betterness. We want the children in Liberia or Ghana or India to be doing better than this. So, you've got to look at: Where is it possible to improve what's going on? And most people say, 'Well, we'll put all our efforts into improving the public system. We'll throw money at it. We'll throw trainers and consultants and all the rest of it. And we'll try and improve that.' But unfortunately there is no incentive to improve in the public system. We've talked about the level of the school, the head teacher, the principal doesn't employ the teachers, doesn't have any say in his [?] and can't control them. And all the way through, there's no incentives for improvements to come down to the school level and really hit the children. In the private sector, however, the incentives are all at least pointing in the right direction. There is competition--quite extraordinary. You can go down one alleyway in a slum and see six or seven of these private schools. If one of them is doing better than others, because it's found a good way of teaching reading--might be using phonics or some good way of teaching reading--parents will soon cotton on to that. That school will get more kids. That school will get slightly more profit. And then the other schools will say, 'Oh, well, you know, he's clearly doing good there and his school is improving the learning in reading. Let's copy his method. Let's learn. Let's go and see what he's doing, and we'll do it ourselves.' So, competition will bring about those improvements. And then from outside, you know, I'm acutely aware--I don't like this idea of being an outsider going in and saying 'We know what to do. Follow us.' But I'm very sensitive--and I've mentioned this in The Beautiful Tree--people came to me and said, 'We know we can do better. Can you help us?' So, I've been doing a bit of this, trying to, in two ways, trying to form associations of these local private schools, and then bring in teacher training. Bring in different ideas on improving literacy and numeracy. And then seeing how we can help the schools together, and then set the incentives from there to improve. I've also done this thing of creating, or co-creating, a couple of chains of these private schools, where the idea there is if we bring schools together, we can afford to invest in teacher training, curriculum development, assessment, in a way that an individual, standalone school cannot. So the point is--the critics--we can probably concede to the critics that these schools are not good enough. They are better than the alternative, the government schools; they are not good enough. But where is the incentive going? Where are the incentives best? They are best in the private schools. And that system can improve in a way that government schools cannot improve and will not improve. Russ: Well, I want to challenge that. But before I do--can you give us some flavor of the actual test that you administered? Let's say on math. Is there any easy way for us to understand what level of competence here that you were trying to assess? Guest: We adapt to things like the [?], the GMADE [Group Mathematics Assessment and Diagnostic Evaluation], and tests that we used, we've looked at some of the TIMSS [Trends in International Mathematics and Science Study] questions--these are international assessments. But I'm not going to be able to tell you off the top of my head how these children were doing compared to international norms and so on. I'm afraid I haven't got that information in my head. Russ: That would be an interesting thing to look at. Guest: Yeah. But you know, we can say, I think with some confidence, that these children are not performing as well as they would do, say, in Korea or Finland. Russ: Yeah.

36:25 Russ: So, let me go back to your other point, though, which is this issue of where's the most potential for improvement. So, my first impulse is to agree with you. But let me push back and give you a different scenario. When I look at the failures of the U.S. public school system, one of the things that jumps out at me--and the parallel in the United States, it's not as prominent as it used to be, would be that in American cities for decades there were Catholic schools that catered to poor children. And when the Catholics left the city, the schools stayed. And they continued to educate, typically non-Catholic children who could afford very little in tuition; but they paid. And one of the things--I went and interviewed a long time ago, the head of the Catholic school system--this is not an EconTalk interview, but a different kind--in St. Louis, and one of the things she said was, 'Most of our children are on scholarship. But everybody pays something. Because we think it's really important that the parents have skin in the game.' That's not the expression she used, but that's the way I like to think about it. And it seems to me that one of the problems with the American school system is we give it away. It's of course not literally free: the parents pay indirectly, through other means. But there's no out-of-pocket cost whether you send your kid to school or not. And I think that's a terrible, terrible mistake. So, one of the challenges of bringing more resources to bear to these private schools is, you might ruin those feedback loops. Once your organization or a different NGO is open to the possibility that you can help these schools, suddenly the focus turns away from the students, unfortunately, and towards you. What are your thoughts on that? Obviously--you give some great examples in the book of how very small amounts of money could have made big differences. And even a loan--forget giving money away. But it seems to me that giving money away is part of the problem; and it's not clear that that's going to make things better. Guest: No, I do agree with you. And it's a real dilemma. But you can do things, I think, that can go with the grain of those incentives. But absolutely. First of all, you've got to totally accept that the reason why these schools are better, why is that counterintuitive[?]? It's the feedback loop, as you put it that's so important and it's the fact that people have skin in the game. They are paying. That's why they keep an eye on [?] and if you break that link, that's very dangerous. So, I know sometimes people, and there's some projects I know in developing countries now where outside agencies with lots of money create voucher programs. But they don't even give the parents the vouchers. They bring in the money straight; they count the children and give the money straight to the school. That link is broken. My guess is very quickly--it might take some time but very quickly those schools will deteriorate. They've broken that link. But what I was talking about was slightly different. I was saying: We want to improve quality; and let's see how we can help and improve quality. Well, one way is to help the schools form associations which the schools will pay to join, but we might be able to subsidize that and then help them develop what different [?] of curriculum assessment, teacher training, and so on which can improve quality. But everyone's still paying, but we're subsidizing it from outside a little bit. Now, there's dangers in that. But I--they are not as pronounced as just breaking the link altogether. So, there's still dangers; but I think there's a way of us bringing some of the expertise and understanding from outside sources without breaking that link. Now, loans, giving loans, is the absolute easiest way of doing that. And that's what I've been encouraging. I encouraged it in the The Beautiful Tree; I've started a few projects; as soon as the The Beautiful Tree launched and people have got into this space. So in India there's the Indian School Finance Co. being created. In Africa you've got Edify, which is working--just doing that is saying, Okay, schools, your greatest need is capital to improve, to build toilets, to improve that roof, to invest in computers or better facilities, to attract market share; you'll attract market shares to [?] pay back to the loan, so we'll just give you loans. And that actually is the purest way of helping these schools, because it doesn't break any of those links we've been talking about. I absolutely agree with you. It's a real problem. It sounds too hard-headed sometimes to say you can't go and interfere. But you can't go and interfere--the market is a very fragile flower. You can't interfere with that mechanism. Russ: Yeah. You know, my motto as an economist is the physician's motto: First, do no harm. And I think the biggest harm we've done to the poor people of the world--some of it, of course, well-intentioned, but we've said, well, what they really need is schooling; and since[?] free, free is good because more people will do it; the key to the future to ending poverty in the poorest parts of the world is free education. And that sounds great. But I think--your book really has two lessons. One is the power of individuals to take charge of their own lives. The other is the dangers of trying to help people in ways that aren't helpful even if they are well-intentioned.

42:36 Russ: So, we'll come to some general policy issues in a minute. Before we do, I want to push back on one point you made and get your reaction, which is: You said that if there's a school that's doing a better job teaching reading, it'll attract more parents and then the other schools will try to find out what's working and that'll help encourage them to improve. A lot of people would argue, well--and they argue this all the time in the United States about all kinds of things, it's not just about the parents of the poor--they say, well, parents can't assess this. This requires an expert. Because parents--I assume many of these parents are illiterate. They themselves did not go to school. In the rural areas they are peasant farmers, as you point out; in some of these other areas they are fishermen. They are running very small businesses that don't require reading and writing and math. So they are not--a lot of people would say they can't judge whether these schools are any good, and they don't have--they are going to be taken advantage of. What is your response to that? Guest: Yes. Well, they can judge. And it's far too convenient for the experts like me to say only the experts can judge. So, poor illiterate parents who can't speak English can judge whether a school is teaching English by listening to the children talk. You can get a sense. These children are on the street; these children are clearly conversing better in this language I don't understand: you can see that happening. Whereas, 'my kid who is going to the other school is not doing very well; this school is clearly better.' Or, you can see how they write. You can't understand what they are writing, you can get a sense if they are doing it with confidence and with ease and so on. So there are simple proxy measures like that you can check. You can make sure if the teacher is checking the exercises in the book. You can make sure the teacher is setting homework and the children have their homework [?] up. You can make sure there's frequent assessments and follow up from those assessments. So, all these things, parents do, even if they are illiterate, even if they can't even speak English; English is a language that's going on in the school; they can see what's going on there. So, there are ways of doing it. And then of course you can see, finally, how well children do from that school; you can see immediately whether they are well behaved. There's more to schooling and education than just grades and exams. You want children to be well behaved, to be disciplined, to be respectful, to have character. You can assess those things quite well. And you can assess all these things in the round: you can see, okay, this school, yes, the kids are coming out of here; they seem to be better at reading, writing, they seem to be better at conversing in English, they seem better behaved, they go on to better jobs or higher education more frequently. You can assess all these things informally. And the community can assess. It's not just one person has to assess: the community builds up knowledge. The beauty of--and parents have told me this. It's not just 'I have to know this. I've got my aunt, my sister, my brother, my uncle; they all send their children to different schools.' There's a community knowledge here about which schools are better. But you know, finally, you can say: if the critics are right and parents can't assess, then that's another way in which outsiders, or entrepreneurs, can help. You can create ratings systems for these schools. You can create ways of showing which schools are objectively better. And that's something that entrepreneurs actually are doing now in these communities themselves. In these countries themselves. In India there are several rating systems, including the for local[?] private schools, which can publicize how well schools are doing. So, the information problem, yeah, it's there. But there are informal ways around it, and there can be formal ways, too. And it's quite insulting I think to poor parents, and it overemphasizes that primary--elementary education is not rocket sciences. Russ: Again, I think the bar is so low in the public schools that they know when their kids don't learn anything. They know when their kids tell them that they are sitting with a hundred kids on the floor, that that's probably not a good system, in the public school. And as you point out, the class sizes are dramatically smaller and the teachers are more likely to be there. So there are pretty blunt measures of quality that you can get it. Guest: Yeah. They are blunt measures. And one's saying you can be more sophisticated than that with these informal methods. You can do the things I've just described. So, they are blunt. But what's the alternative? You want to look for what the real alternative is. And the alternative is--what? It's this government system that is not receptive at all to improvement. That's another way--in talking about the ratings and different formal methods of seeing which schools are better, there's something that the federations can also do. So, there are ways of intervening to help these schools improve without impacting the important link, the feedback loops between parents and schools.

48:20 Russ: So, in that answer, you mentioned something that I want to come to, which is, I think a big challenge, and if you are not looking at it, I hope you or someone else will, which is: What's happening to these kids when they grow up? This phenomenon of private schooling is old enough now--I don't know how old. You can talk about when these schools started. Some of them are old enough that they have graduates. And of course what we really care about isn't schooling per se--it's nice, I like education. What we really care about is what happens to these children with these skills that they acquire in these private schools, relative to the public school alternative. Are they able to use them at all? And of course one of the challenges in these economies is that sometimes it doesn't matter whether you have education or not: there just aren't any interesting or any kind of opportunities to apply yourself. So I'm wondering how much mobility there is. I don't care so much about money per se, although money is important. But how much mobility is there for these kids who are say, the children of a subsistence farmer or a subsistence fisherman? Do they just stay in their village? Do they just stay in that slum and become an educated person doing these things? Or are they able to use those skills in ways that make their lives more meaningful? Guest: Yeah. So, here we have done--we've started some longitudinal studies. But we haven't got any results yet. So, this is what they call longitudinal studies, when we follow children over time. So, we haven't got any data. So, I'll just have to give you some impressions here. Just on the study side of it, it's quite hard tracking some of these children, particularly when you are trying to compare children--actually, again, it's not just us who are finding this. The private schools are better at keeping track of where their children go, after school. The government schools are hopeless; they don't see it as their responsibility. And other research has shown that. But it's hard to do. But the impression is--and there's a logical argument: if you are better at mathematics and English and numeracy and literacy and many jobs require these basics, the basic cognitive skills, then you are likely to be able to do better in work and in further education. So there is a logical argument that these schools are likely to do better. And then anecdotally, we do see many--I mean, there's a lot of mobility out of these slums and poor areas now, because of that statistic I've told you, that 70% of children in these slums are going to private schools--a lot of that mobility is going to be because of those private schools. But these are all impressions. We don't know the answer to this. And you are absolutely right: this is some research that has to be done. It's important research; it takes time. But it would be a very important piece of evidence to show where these children are going on to. But you're right about the countries themselves. So, India's different--India's now a middle income country overall: there's many poor people within it. So there are opportunities there. There are industries; there are service industries in particular, there's software, the call centers, and so on, recruiting children, the retail industry recruiting children from the sort of backgrounds we are talking about. You go to somewhere like Sierra Leone or Liberia--it's much harder there to see the sort of jobs that are desirable. And yeah, there it might be--some of the skills that are typically there in schools might not be the most useful for that environment. Russ: Yeah. I mean, that's the hard part. Guest: So in some of the work that we're doing in Sierra Leone, for instance, where we're developing some sort of entrepreneurship program to help children within the schools, to run their school businesses better or create more opportunities that way. And that sort of thing, [?] the schools are interested in following. But yeah--nothing I've said--I'm very upbeat in The Beautiful Tree and I'm very upbeat generally about what I know out here, but no one's saying it's perfect. No one is saying it can't be dramatically improved and be made much better--be made much more appropriate to the market conditions of work, and so on. But again, I come back to [?] it can be improved because the market incentives are there to allow those improvements to filter through. If a school is clearly much more successful at getting children into employment, even into self-employment, than another one, that will filter through into the market signals and competition will ensure that school does better; and therefore the other schools fight to catch up with it. Russ: It isn't obvious that these private schools should teach what the public schools are teaching. It isn't obvious that they should teach what we teach our children. Guest: There is a big problem. And that's a sort of area--I would still say it's a remaining problem. You're absolutely right. If you are a private school entrepreneur setting out in this market without any other constraints, you might be very open to exploring what do the children really need, where are they going, and so on. Unfortunately, in all the countries that I'm working in, there is a national curriculum, and national end-of-school testing. In the national, in India, certain statewide testing. And that, unfortunately, well the schools have to follow that. And the parents soon, because it's the only show in town, the parents want you to get that national certificate. So, schools are constrained by that. Now, because they are private schools, you find them being innovative around the edges. So, for example, typically in national curriculum you don't really have to teach in the early years of elementary school--probably you can leave it until grades 5 or 6--and the private schools concentrate heavily in the early years on mathematics and English. Or mathematics and language. Those are the two subjects that they concentrate on; and they tend to avoid doing the 6, 7, 8, 9 subjects of the national curriculum [?] until later on. But nonetheless in the end they have to follow it. This is an ambition of mine, to try and break that stranglehold, by exploring with schools in different countries whether we can create our own curriculum and assessment system for the local private schools which will satisfy parents in the market and allow us to break away from the national curricula. That's an ambition I've got remaining. Russ: It's a big challenge, obviously, in development--is the country poor because the people have low skills? And the answer is, of course, that's part of the problem. But is it obviously that giving different skills to those people, which is what we're talking about, is going to make them less poor, if the fundamental governance and incentives of the overall economy are so messed up and so corrupt that there's no room for those people to apply those skills? We don't really understand in economics those interactions. I wish we did.

56:16 Russ: Let me ask a slightly uncomfortable question, which is the following. So, I love your book--of course I would. I'm a free market guy and I love competition and I love feedback loops and I romanticize them in my own peculiar way. And your book is a delightful and inspiring example of how market forces exist even when you might not think that they would; and that they do a pretty good job. And yet people push back against that interpretation, and they say, 'Well,'--and I'm sure some of my listeners are--'Well, you are prejudiced. You are biased in favor of free markets. This is really not the way to make the world a better place. The real way to make the world a better place is to create the best kind of schools, not relying on the financial wellbeing of the parents. What we have to do is get massive amounts of money devoted to making these public schools better.' And we talked about this earlier. But this is--I'm revisiting it. So, this theme runs through your book, that there are these people who, not just don't agree with what you found; they hate it. They find it offensive. They think you are dangerous. So, my preference for the United States, and it sounds like it's probably your preference for Nigeria and Liberia and elsewhere, is: just get the government out of this business. I understand there's some theoretical arguments for public schooling. But in practice it works very, very poorly. Except, it works pretty well, by the way, in American rich neighborhoods. Rich neighborhoods have good public schools in America. But who cares? They are going to get good schooling anyway. It doesn't excite me at all. I want good schooling for all people, and it seems to me the way to get there is to get government out of it. So, people would say, 'Well, you are biased.' What I want to raise--and of course I am! But that still doesn't mean it's wrong. But I want to raise an unattractive possibility for your critics. And you encounter them much more than I do. You meet them in conferences; you meet them in government offices of the department of education at such and such a state or country. Is it possible that they are biased, too, in a way that--of course, if our view is right, they have nothing to do? They have to step back and let this flower blossom. And they'll be unimportant. Do you have any feeling--you want to say anything about that possible influence on their thinking? I'm not suggesting there's anything malevolent about it. But I think there is a natural bias that economists have--some economists have--toward top-down solutions. Because they get to run it, and change it. Guest: Yeah. No, I think that there's a [?] lot in this. As you say, economists, policy makers, those in the ministries of education around the world, the departments of education. Yeah. If what I'm saying--but more importantly, what the parents are saying--what poor parents are saying, is right, then they are out of a job. And that's bound to affect the way you think about the world, isn't it? But I don't think we have to bring bad motives here. I think people just, you know, they are used to thinking about these top-down initiatives to improve education. It's not working in these countries. Billions, trillions of dollars have been thrown at education, public education, in the countries we are talking about it. In aid. And if anything it's got worse. One indicator is the growing size, the burgeoning size of the private education market. What I tell people--and I think I even invented this phrase--that what you are seeing in these countries is, what I call it, 'privatization by the people for the people.' Privatization of education, a new Gettysburg Address. Privatization of education by the people, for the people. It's a grassroots privatization. No top-down policy maker has said, Okay, let's privatize education. Top down policymakers are still doing their normal thing. The people themselves have said, 'We will privatize education ourselves. We're not happy with the government schools. We want to do it ourselves.' And you've got this de facto or[?] grassroots privatization. It's a very unusual feature. It doesn't really feature in any policy textbooks as far as I know. And yet it's happening all over. One good thing that's happening because of it--you talked about corruption and so on. If you can lessen the size of the government in any way, then you lower the opportunities for corruption. And so if you are privatizing education then you are removing a large part of the budget, as it were, and power from government--already you are doing something to lower the possibility of corruption. Russ: Yeah; I have to say, the point you are making about the emergent aspect of these schools, that they weren't some policy initiative for a special program--they just emerged in response to the bad public schools. It makes me feel better about American public schools because I don't think there are a lot of private schools for poor people in America. So maybe the government schools are not so bad. I don't think they are very good, but at least they are not so horrible. Guest: There is something in that. But the other thing is, there's no welfare dependency in these poor areas. If you don't get off your butt and do something, then, you know, you are dead. Russ: Starved to death. Yeah.