Budget Reform in Mexican Higher Education: Peril and Promise

A dominant theme of Mexican higher education in the 90´s and in the 21st century has been financial distress. Higher education faces problems throughout the world: universities are underfunded, rising worries about quality; student support is inadequate; the proportion of students from disadvantaged backgrounds is lamentably small (Barr, 2005). Also, the financing of universities in many countries is regressive since the money comes from general taxation but the major beneficiaries come from better-off backgrounds (Barr, 2005). Higher education finance is therefore salient to an extent that it is timidly addressed in many developing countries, because of its politically sensitive nature.

Around the world, a cause of higher education´s austerity is the increasing scarcity of public revenue (Johnstone, 1998), a function, in turn, of competition from several other societal needs. In political terms, tax funding leads to under-resourcing because higher education will always lose out to competing and politically more popular claims (Barr, 2003).

Within this context, a number of developed and developing countries have undertaken significant transformations of the financing of their tertiary educational systems. In most nations, the goals of such reforms have been: (1) to implement budgeting process based on performance indicators, and (2) to generate additional sources of revenue.

In the past eight years, the Mexican federal government has made important efforts to increase the national spending for public higher education institutions. In 2000, Congress enacted a law that requires the State to invest at least one per cent of the GDP in public higher education -currently federal investment reaches the 0.68 per cent of the GDP. Particularly, in the past three years Mexican Congress has increased the funding for higher education institutions by almost 15 per cent, amounting 4.5 billion dollars more, in comparison to 2006.

However, these fiscal efforts have not yet been accompanied by a deep financing reform in higher education. Still, year to year, the presidents and directors of higher education institutions go to Congress to lobby for extra resources. Every year, they argue, the very existence of their universities is in jeopardy if budget resources do not increase. In some cases this is true, but in some others such claim is just a political maneuver. At the end of the day, we cannot blame university leaders for this behavior; they are just reacting to the incentives in place.

The perverse incentive system is as follows: the Mexican Department of Finance prepares and presents a budget that is underestimated, knowing that public universities are going to ask for more. Aware of this, universities prepare their lobbying strategy well in advance during the year, distracting themselves from other central academic issues. The end result is usually a budget very close to the one originally planned by the Department of Finance, but after a fierce political battle, where many people get hurt -politically speaking of course.

Unfortunately, this perverse system of incentives only delays the deep reform that our higher education budget process urgently needs. There have been many interesting proposals on the table in the past few years, in order to correct the situation. Perhaps the most relevant is the implementation of multi-year budgets, designed for some special academic and research projects. This mechanism is already in use in some OECD countries, as well as in Brazil.

Negotiations will be hard in order to implement such a policy, however, it is worth it. Multi-year budgets can provide public higher education institutions with a very scarce resource in Mexico: financial certainty for long term planning.

The bad news is that any attempt to reform the higher education budget process that does not include a series of reforms within the higher education institutions is incomplete. The federal budget process needs to change, yes; but we also need to improve the way public universities generate their own sources of revenue. So far, only roughly 15% of resources for public higher education come from private sources, compared to countries such as Chile (84%), Korea (75%), and the United States (65%).

In short, if we really want to develop a world-class higher education system in Mexico, we cannot solely rely on fiscal revenue. As observed by Barr (2003), around the world higher education will always lose to other more pressing social needs in the competition for fiscal revenues. Hence, attempting to develop a system of great universities solely based on public revenue is building on shaky grounds.

References

Barr, N. (2005). Financing higher education. Finance and Development, 42(2). Retrieved from http://www.imf.org/external/pubs/ft/fandd/2005/06/barr.htm

Barr, N. (2003). Financing higher education: Comparing the options. United Kingdom: London School of Economics and Political Science.

Johstone, B. (1998). The financing and management of higher education: A status report on worldwide reforms. Washington D.C.: The World Bank.

  

GDP fetishism in education

An economist´s simplest answer to questions about the well-being of people is the gross domestic product, or GDP, per person of each country. However, as we might suspect, GDP-based statistics do not reveal the whole story about how satisfied people really are with their living standards. According to the Report by the Commission on the Measurement of Economic Performance and Social Progress, in recent years economists and statisticians have been looking at alternative measures of well-being, even "happiness", a notion that it was seemed absurd to quantify. Thus, the tendency is to pursue new techniques that produce more qualitative data on the issue at hand, being this national well-being, education, or health.

Higher education policy in Mexico, especially at the Legislative level, is still fixated with traditional GDP-based statistics. The debate usually revolves around the issue of how far -or how close- are we from the goal of investing one percent of GDP in higher education (currently we invest 0.67 percent). I argue that if we want to rapidly advance on the improvement of quality, relevance and equity in tertiary education, we must pay much more attention to other, more qualitative, policy measures.

Instead of solely focusing on measures such as the percentage of GDP invested and/or the expenditure per student in higher education, we must rely on "soft" measures as well, such as student learning outcomes, teacher-student interactions, and even student satisfaction at a given institution. This would give a clearer picture of how different universities compare to one another, and will reveal the extent of the impact of public money invested on the desired educational goals. The Commission´s Report gives interesting insights of the implications of such soft measures.

The myth of the 8 per cent revisited

On a recent trip to Paris, for the UNESCO´s World Conference on Higher Education 2009, I talked to diverse UNESCO´s higher education experts on the topic of the mythical 8 per cent. To my surprise, I learned that the organization has in fact recommended a fixed percentage of the GDP as educational investment, however, it is not the 8 per cent. During the World Forum on Education that took place in Dakar in 2000, UNESCO recommended developing countries to gradually reach 6% of GDP as investment in education, in order to universalize basic education. Mexico has already universalized basic education, therefore, this recommendation should not apply to our country. Plus, Mexico already invests in education more than 6% of GDP -including private investment. Hence, I insist that our education policy priorities should move away from reaching mythical investment percentages.

The myth of the 8 percent

In Mexico, most policy and political debates on the topic of education financing refers to the mythical figure of 8 % of GDP, as the optimal government investment in this sector. Discussions in the House of Representatives, the Ministry of Education, the National Association of Universities (ANUIES), and even in the academia, all refer to the "UNESCO´s recommendation" to achieve this level of investment.

This "optimal percentage" even became part of the Federal Law of Education in 2000, when a reform to the article 25 stated that "the amount that the State invests in education can not be less than eight percent of GDP". Having permeated the national policy debate, I started an inquiry on the actual origins of this supposedly recommendation from an international organization. I started reviewing the justification of the bill that introduced this reform back in 2000; the Report of the Committee on Education argued that the notion came from a Conference of Latin American education ministers, which took place in Mexico City back in 1979, and was hosted by UNESCO. At the end of that Conference, a document called the Declaration of Mexico was presented and signed by all the present ministers. This document states, among other policy proposals, that member countries should gradually increase the level of public investment until "reaching the 7 or 8 percent of the GDP, with the goal of overcoming the educational problems of the region".

Theoretically, there is no rational for proposing the investment of 7 or 8 % of GDP in education, instead of 6 or 9 %, for instance. The Declaration does not explain nor justify this notion with hard data or a model. Giving that this recommendation -not advocated by UNESCO itself but by the education ministers present at that Conference- lacks policy rigor and was given 30 years ago with a different educational, political and economic context, I argue that it is completely outdated and arbitrary. This notion has distorted the policy debate because we should not be focusing on achieving an arbitrary investment goal, but on pursuing structural reforms to increase the quality of educational institutions -whatever investment it takes.

According to the OECD report, Education at a Glance 2008, Mexico has shown rises in its investment in education, not just in absolute terms, where increases were observed in most countries over recent years, but also relative to national income: over the period 1995-2005, spending on educational institutions in Mexico increased from 5.6% to 6.5% of GDP (including private investment), a level that is above the OECD average of 5.8%. Mexico is one of the three countries with the largest increases in educational expenditure as a percentage of GDP over this 10-year period.

The OECD, in this same document estimates that at the current levels of investment , if used more efficiently, countries could improve their academic performance by 22 percent, measured by the PISA exam. This implies that Mexico would obtain 500 points on the exam (Level 3), instead of the current 410 points (Level 2).

In conclusion, diverse studies on educational policy have demonstrated that it is not enough to just pour more money in education. Therefore, our main goal should not be the achievement of a magic investment percentage, but to improve our results on academic performance evaluations; if this goal can be achieved by investing 8 % of the GDP, or more, then we should do it; however, the empirical evidence does not support such a claim.

The end of capitalism and other intellectual confusions

Are we witnessing the end of "capitalism"? The current global crisis has brought together the ancient and traditional coalition of anti-capitalists around the world, they all keep calling for the "end of free markets", and the preeminence of government intervention. Interestingly, in his recent article for the New York Review of Books, Amartya Sen gives some worth-reading insights about the invisible hand and the welfare state, and their main advocates of course.

Adam Smith was wrong and Keynes was right! Discussions on the current crisis and the future of capitalism are usually full of conceptual confusions; for instance, some economists and political scientists are all of a sudden disciples of John Maynard Keynes, calling for government intervention in order to promote growth. Some of them even cite Keynes when advocating for policies to fight poverty and to promote equality. However, if we read Keynes carefully, he actually never advocated nor wrote about government policies to help the poor; surprisingly for some, it was Adam Smith who wrote about the "welfare state", his overwhelming concern about the fate of the poor and the disadvantaged are strikingly prominent. Smith recognized that "the most immediate failure of the market mechanism lies in the things that the market leaves undone". Smith's economic analysis went well beyond leaving everything to the invisible hand of the market mechanism. He was a defender of the role of the state in providing public services, such as education, and in poverty relief.

Carefully re-reading the classics may be a good way to avoid the conceptual confusion of our times -and to engage in more informed and relevant policy discussions; it is also necessary in order to give true credit -or criticism- to the works of Adam Smith, John M. Keynes, Arthur Cecil Pigou, and others.

The rationality of not voting in Mexico

According to the document The Electoral Process 2009, published by the Center of Social and Public Opinion Studies of the Mexican House of Representatives, 7 out of 10 voters will not go to the polls on July 5th. The practical explanations for such behavior are diverse. For instance, some potential voters argue that the next elections are not trustworthy; some believe that after the election a political conflict will arise; others argue that the economic crisis has disenfranchised so many people that going to the polls is a waste of time; still others believe that there is deep crisis of representation in Mexico. Surely the true answer lies somewhere in a combination of the above factors.

Economists have long argued that voter ignorance is a predictable response to the fact that one vote does not matter to the ultimate election outcome. Why spend time getting information about the issues if my vote cannot alter the outcome? A vote has so small a probability of changing the electoral outcome that a realistic egoist pays no attention to politics, he chooses to be rationally ignorant. This type of ignorance means voters going to the polls without valuable information about the different choices they have, thus voting for the choices they naively believe to be better. In the face of this rational ignorance, the issue is then to explain the decision- making process of a non voter.

As in the specific case of Mexican politics, international pundits often blame citizens´apathy on the elections´exceptionally insipid candidates. According to economist Bryan Caplan, "deeper thinkers, who notice that apathy persists year after year, blame voters´ ignorance on lack of democracy itself". Robert Kuttner spells out one version of the story: "The essence of political democracy has eroded, as voting and face to face politics give way to campaign-finance plutocracy... there is a direct connection between the domination of politics by special interest money, paid attack ads, strategies driven by polling and focus groups -and the desertion of citizens."

Such aspects outlined above may well be the cause of the anticipated apathy of Mexican voters this year. There is a general perception in the population that parties and candidates have failed in fulfilling campaign promises in the past; there is also a bitter war between the ruling party (PAN) and the main opposition party (PRI), the former accusing the later of having negotiated with drug cartels in the past, and the later accusing the former of not having experience and wisdom to govern; plus, the leftist party (PRD) is engaged in an internal war over the control of the party and the public funding. To these ingredients we have to add a deep economic crisis -a contraction of 7 percent of the GDP in the first three months of 2009, plus the effects of the epidemic emergency due to the Influenza virus that caused a further .5 percent contraction of the GDP. Within this context, unfortunately not a single party or candidate seem to have clear and straightforward proposals to solve the most pressing problems.

Using the theoretical framework developed by George Akerlof and Robert Shiller in their Animal Spirits book, one can argue that the reason people go to the polls at all is not policy or economic rationality but rather the irrational impulse of confidence. According to the authors, confidence -implying behavior that goes beyond a rational approach to decision-making- plays a mayor role in macroeconomics. I argue that the very same impacts of confidence can be applied in voting behavior. At the level of the macroeconomy, in the aggregate, confidence comes and goes. Sometimes it is justified, sometimes it is not.

In terms of confidence and voting behavior Mexico is in a political recession. The lack of trust in the political system is creating a lack-of-confidence multiplier. I mean, people will not vote because they know so many people that have decided not to do so. The difference between an economic and a political recession is that in the former we have developed many policy tools to overcome the problem, such as Keynesian counter-cyclical measures based on public expending. However, in the later case it is not clear how our country will restore the confidence in the political institutions, or more important, how long will it take to rebuild the lost trust. A general notion in social psychology is that when trust is lost, it is highly difficult to restore. The historically high percentage of voting apathy projected for this election is perhaps sending the message that the political system is on the verge of collapse; perhaps our country needs shock therapy in the redesign of our political institutions.

Influenza A-H1N1 in Mexico, back to normality?

On May 4th, the Mexican government announced the lift of the measures it took last Thursday to contain the spread of the AH1N1, the virus that has disrupted the world, especially Mexico City, and that has brought painful memories of the Spanish Flu of 1918 (50m-100m people died from the flu that year). Starting on May 6th, restaurants, bars and other places in which people gather will be re-open in Mexico. This measure seems to be adequate since the number of people infected and the mortality rate have significantly diminished since May 1^st, and since the economic costs of the ban have been enormous. The Mexican Treasury Minister estimates an additional contraction of .5% of the GDP due to the epidemic emergency; only in Mexico City the economic lost in the past few days is estimated in around 1 billion (USD).

In the midst of this emergency, what seems odd and to some extent irresponsible is the government announcement that all secondary and tertiary school students will be back in the classroom on May 7^th, and that all nursery and elementary school children will return on May 11^th. This measure can only reflect two scenarios; a) the government overreacted to and exaggerated the Influenza emergency, and is accepting a false alarm, or b) the government is acting irresponsibly by sending back more than 30m students to crowded classrooms and to some thousand elementary schools that have no drainage, water and soap. According to a study conducted by the National Agency for the Evaluation of Education (INEE) in 2007, 50 per cent of all elementary schools (around 50 thousand) have serious problems of maintenance and general infrastructure, including lack of basic materials for keeping hygiene.

In the event of an epidemic, schools are perhaps the places in which contagion is more common and can grow exponentially, that is precisely why on April 23, schools were the first places that Mexican government closed in order to contain the potential pandemic. The World Health Organization (WHO) has released statistical data that reveals that most of the cases of contagion from A- H1N1 around the world are in young people, especially people in their 20´s. In the scenario that Mexican authorities did not overreact to and exaggerate the Influenza treat, this information from the WHO should be enough to have authorities rethink the decision of opening all schools within a week.

The education system is strategic for any nation and should be their first priority, however, the long term nature of schooling allows for the system to catch up rapidly in the event of the interruption of classes. Therefore, keeping schools, or at least classrooms closed for a couple of more weeks should not seriously disrupt the academic calendar, especially in secondary schools and universities, were the majority of students have access to academic material online and can study at home.

One additional problem is that of absenteeism. After a national emergency situation declared by government, it will not be easy to convince families and students that schools are now safe places (only two weeks after the imminent pandemic). Hence, the education authorities face a dilemma, are they going to punish the students that decide not to attend? If they do so, they are punishing people that still believe there is an emergency situation, following the government´s advice of the last two weeks. If they do not punish those who are absent, what is the incentive for those that took the risk to attend school?

In short, lifting the ban on general economic activity in Mexico is a necessary measure due to an elemental cost-benefit analysis. Since the incidence of infection has clearly diminished and nobody has died from Influenza A-H1N1 in the past five days in Mexico City, and taking into account the enormous impact that the disease has already caused in the present and future economic activity, it is only rational to start producing again –with all the precautions and special hygiene measures.

However, in the case of schools and universities, given that such places are natural arenas for disease contagion, it is not understandable that government lifts the suspension of classes within a week. The only reason that this measure may in fact be the correct one, is that the epidemic was overstated and exaggerated in the first place.

David Brooks on the process of becoming a genius

David Brooks, in his today OpEd from the NYTimes challenges the notion that genius is a given trait, something people are born with. He claims, with reason, that great talent is not a magic spark. In fact, according to scientific evidence DNA is not enough to be a genius, it´s the practice, stupid!

Genius: The Modern View

By DAVID BROOKS

Some people live in romantic ages. They tend to believe that genius is the product of a divine spark. They believe that there have been, throughout the ages, certain paragons of greatness — Dante, Mozart, Einstein — whose talents far exceeded normal comprehension, who had an other-worldly access to transcendent truth, and who are best approached with reverential awe.

We, of course, live in a scientific age, and modern research pierces hocus-pocus. In the view that is now dominant, even Mozart’s early abilities were not the product of some innate spiritual gift. His early compositions were nothing special. They were pastiches of other people’s work. Mozart was a good musician at an early age, but he would not stand out among today’s top child-performers.

What Mozart had, we now believe, was the same thing Tiger Woods had — the ability to focus for long periods of time and a father intent on improving his skills. Mozart played a lot of piano at a very young age, so he got his 10,000 hours of practice in early and then he built from there.

The latest research suggests a more prosaic, democratic, even puritanical view of the world. The key factor separating geniuses from the merely accomplished is not a divine spark. It’s not I.Q., a generally bad predictor of success, even in realms like chess. Instead, it’s deliberate practice. Top performers spend more hours (many more hours) rigorously practicing their craft.

The recent research has been conducted by people like K. Anders Ericsson, the late Benjamin Bloom and others. It’s been summarized in two enjoyable new books: “The Talent Code” by Daniel Coyle; and “Talent Is Overrated” by Geoff Colvin.

If you wanted to picture how a typical genius might develop, you’d take a girl who possessed a slightly above average verbal ability. It wouldn’t have to be a big talent, just enough so that she might gain some sense of distinction. Then you would want her to meet, say, a novelist, who coincidentally shared some similar biographical traits. Maybe the writer was from the same town, had the same ethnic background, or, shared the same birthday — anything to create a sense of affinity.

This contact would give the girl a vision of her future self. It would, Coyle emphasizes, give her a glimpse of an enchanted circle she might someday join. It would also help if one of her parents died when she was 12, infusing her with a profound sense of insecurity and fueling a desperate need for success.

Armed with this ambition, she would read novels and literary biographies without end. This would give her a core knowledge of her field. She’d be able to chunk Victorian novelists into one group, Magical Realists in another group and Renaissance poets into another. This ability to place information into patterns, or chunks, vastly improves memory skills. She’d be able to see new writing in deeper ways and quickly perceive its inner workings.

Then she would practice writing. Her practice would be slow, painstaking and error-focused. According to Colvin, Ben Franklin would take essays from The Spectator magazine and translate them into verse. Then he’d translate his verse back into prose and examine, sentence by sentence, where his essay was inferior to The Spectator’s original.

Coyle describes a tennis academy in Russia where they enact rallies without a ball. The aim is to focus meticulously on technique. (Try to slow down your golf swing so it takes 90 seconds to finish. See how many errors you detect.)

By practicing in this way, performers delay the automatizing process. The mind wants to turn deliberate, newly learned skills into unconscious, automatically performed skills. But the mind is sloppy and will settle for good enough. By practicing slowly, by breaking skills down into tiny parts and repeating, the strenuous student forces the brain to internalize a better pattern of performance.

Then our young writer would find a mentor who would provide a constant stream of feedback, viewing her performance from the outside, correcting the smallest errors, pushing her to take on tougher challenges. By now she is redoing problems — how do I get characters into a room — dozens and dozens of times. She is ingraining habits of thought she can call upon in order to understand or solve future problems.

The primary trait she possesses is not some mysterious genius. It’s the ability to develop a deliberate, strenuous and boring practice routine.

Coyle and Colvin describe dozens of experiments fleshing out this process. This research takes some of the magic out of great achievement. But it underlines a fact that is often neglected. Public discussion is smitten by genetics and what we’re “hard-wired” to do. And it’s true that genes place a leash on our capacities. But the brain is also phenomenally plastic. We construct ourselves through behavior. As Coyle observes, it’s not who you are, it’s what you do.

The Economist on the "Bologna process"

See the article from The Economist on the so far success of the Bologna process of university reform in the EU. We should draw some lessons for higher education reform in Mexico, with a different set of premises and regional conditions, of course.

Bolognese sauce

Apr 23rd 2009

A birthplace of higher education tries to become its future too

WHEN European education ministers met in Bologna in 1999 and promised within a decade to forge a common market for universities, it seemed mere Euro-rhetoric. Big obstacles stopped students nipping abroad for a term, or getting degrees recognised. Many countries offered no degree below Masters level. Some examined course modules separately, others all in one go. Under the Erasmus programme many students travelled to other European countries for between a term and a year—but they often found their universities reluctant to give them credit for it.

Yet on April 28th no fewer than 46 European education ministers—from the European Union and 19 other countries, including Russia and Turkey—will gather in another ancient university city, Leuven, to declare the “Bologna process” a triumph. A “European credit-transfer system” is on its way; next year will bring a “European higher education area”. There will be a standardised “diploma supplement” giving details of what students have learnt. And three-year Bachelors degrees followed by two-year Masters are now the general rule, with few exceptions.

“The big surprise was that the Bologna process worked at all,” says Jean-Marc Rapp, president of the European University Association. Bologna is neither an inter-governmental treaty nor an EU law. He credits the eastern European countries that joined Bologna in 1999 for some of the success. Their governments were itching to reform communist-era universities and delighted to have a template for it—and their students were wild to travel.

Another reason why some governments embraced Bologna was to give cover for reforms they wanted anyway. Shorter, more work-related degrees appealed to the Germans, keen to stop students hanging on for years at taxpayers’ expense. In France, changes to university financing have been called “Bologna”. In Spain “Bologna” is the excuse for introducing fees for Masters degrees.

Many students now anathematise “Bologna” as a capitalist plot. They plan protests in Leuven; already, students have taken to the streets in France, Italy, Spain and Greece. The resemblance to the Anglo-American system, plus Bologna’s emphasis on graduate employability, are big grievances. Some academics fret that the secret aim is to privatise universities. Bologna’s endorsement of more autonomy could lead (horrors!) to more freedom for universities in hiring, promotion and pay.

Europe is littered with historic universities (Bologna is the oldest, founded in 1088). But the paucity of European institutions and the ubiquity of American ones at the top of international league tables are a constant reminder of the gap between glorious past and mediocre present. For believers, Bologna shows the way to a future that will be glorious once more.

Yet this vision of self-governing universities, footloose students and job-ready graduates omits one big reason for European universities’ decline: money. In America, the gap between what governments pay and what universities need is made up privately, mainly by tuition fees. In most of Europe students pay nothing. Even in England, tuition fees are capped by the government at low levels.

Europe’s universities have seen funding per student fall behind wage inflation by 1-2% a year over three decades. America devotes far more of its GDP to higher education (see chart). Bruegel, a Brussels-based think-tank, finds that universities carrying out top-class research and leading league tables have both more autonomy and more money. If Europe delivers only one of these, it may not be enough.