Making a better World: an economic view

Last week, our former colleague, Dianne Hofenk defended her PhD-thesis at the Open University. The thesis is titled “Making a Better World” and is a research into the contribution of a special carrier towards the greening of urban distribution. Large carriers deliver goods towards the borders of the city, where smaller distributors collect these goods, combine the parties in efficient batches and deliver the goods in the city, causing the pollution to decrease and give less congestion of the roads.

Besides several complex tests on factors which influence the participation of carriers, retailers and consumers, Dr Hofenk asked the question what determines the “ Willingness to pay more” of consumers for goods which have less impact on the environment? She stated that this was an especially relevant question as it influenced the sustainability of the business model, as policy makers had stated that they were prepared to subsidize the starting costs, but that the initiative has to be self-sufficient in time. The following discussion was on how the local distributors should be financed, through an increase of prices (by the costumers) or by transferring the profits of the carriers (more efficiency) and retailers (time saving) towards the distributors.

This seemed me an intriguing question, as from the point of view of welfare economics, there appears a straightforward role for the government. The government can maximize collective welfare if the negative effect of the taxes, necessary to subsidize this initiative is below the negative effects of the congestion and the pollution. Ideally, the government should divide the tax burden over both the three stakeholders, in ratio to the perceived weight or decreased costs.

However, an anonymous reviewer made a similar remark reviewing a piece on business models, sustainability and OER. In his opinion, the task of the government in providing education, and so also Open Educational Resources, is so clearly defined. It is therefore not done to ask the question how OER-initiatives can become self-providing, or less dependent on subsidizers. As stated above, the welfare economic view is that the government should redistribute income within society as long as the positive effects of more education outweigh the costs of more education.

Open Educational Resources are assumed to have a positive influence on the national level of education and so on economic growth, as on the quality and efficiency of education as a sector. Subsidizing OER is increasing social welfare as long as the added costs of this subsidy (including disturbance costs) are lower than the added benefits of more education.

However, more and more politicians see education as an individual choice; involving a trade off between individual costs and individual benefits. The student makes a choice of when, where and what he or she will study; financing this study by himself. The choice is assumed to be a rational one, based on the earnings after finishing the study versus the costs of financing it, using the family capital, bank loans or state loans (see the UK and the Netherlands). Rationality does require full information and the absence of (monetary) restrictions. Individuals have to make an estimation of the length of the study, the possibility of work after the study, income and future changes.

In this view are state subsidies for OER-courses unadvisable. Individuals will benefit of the offered courses (increase in income), but do not pay for them (Open ER). OER-systems should be self sustainable.

So it becomes more important to show how and where OER will have positive effects on quality and accessibility of education, on economic growth and on social cohesion. The individual approach to education is flawed and underestimates the positive contribution of free education by ignoring the national effects. Only by providing corroboration to this proposition, the state can be convinced to provide a continuous financial support to OER.

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