Thursday, May 29, 2008

The Challenge of University Reform

Alex Tabarrok reflects on the implications for the rest of the world of the rapid expansion of higher education in China. Unlike so many commentators, he stresses the welfare-enhancing aspects of Chinese progress rather than the competitive challenge. Still, China's ability to build a system of higher education virtually ex nihilo (from 1 million entering students in 1996 to 5 million ten years later) does cast a harsh light on France's failure to improve its performance over a comparable time span. The NBER working paper cited in the post (gated access) is full of interesting information. For instance, Chinese universities "generate significant support by engaging in commercial activities." "From 2001, private funding (tuition and fee payment) covers more than 50% of total educational expenditures." Chinese students commit extraordinary amounts of time to college preparation: "40% of junior middle school students work more than 12 hours a day, 7 days a week." Mechanisms are in place to enhance access to higher education for poorer students, although there are admitted "implementation difficulties." And there is much more. All in all, a fascinating document.

Valérie Pécresse should read it. The reform plan she has just announced will initially concentrate new funding on six universities: Bordeaux, Grenoble, Lyon, Montpellier, Strasbourg et Toulouse. It's a start, and clearly in a country like France, the immediate goal has to be qualitative improvement, not quantitative expansion. What is distinctive about the Chinese plan, though, is the central position the universities occupy in the government's vision of the country's future. The Chinese already foresee the day when cheap labor will no longer be enough to sustain growth and are planning accordingly.

The Vanished War

Some interesting thoughts from John Quiggin and Edward Lengel on the absence of World War I memory in American public discourse and why this might have something to do with differences in American and European attitudes toward war and the military.


François Hollande has headed the Socialist Party for 11 years. Now that he is about to leave the job, he has delivered himself of a list of 10 questions that the party needs to answer if it is to clarify where it stands on the pressing issues of the day. But it was because these very same questions have divided the party throughout the period of his leadership, and because he saw his mission as maintaining some semblance of unity at the cost of coherence, that so little was accomplished toward resolving the differences, which were simply allowed to fester. A more skillful party leader would have recognized the need for hard choices long ago--by 2002 at the latest.

Nasty, Brutish, and Short

Europeans are outstripping Americans, it seems.

The Way the World Works

When I wrote about Auchan the other day, a commenter pointed out a post on another blog critical of the article in Le Monde that I cited. I didn't respond at the time, because I thought the post on the other blog was too mistaken to warrant comment, and I didn't want to be impolite. But now the blog comment has been taken up by Marianne, and it seems worth taking a moment to refute the error.

Samuel, the author of the article, thinks that Auchan earns "fabulous profits" by obliging its customers to pay cash while enjoying, as a result of its market power, a grace period of 90 days before it is required to pay its suppliers. Auchan allegedly invests the cash for 90 days to reap the windfall. Alas, Samuel has forgotten that the cash taken in this quarter goes to pay suppliers from the previous quarter, so the only excess available for investment is, as in any commercial transaction, the margin between cost and selling price. (Samuel also forgets that few customers pay cash nowadays. By his logic, the consumer who pays with a credit card could become fabulously wealthy by investing the money he charges to his card each month at Auchan in a 1-month CD, then selling the CD at the end of the month to pay off his credit card debt. I don't recommend this as a get-rich-quick strategy unless you're getting an awfully good teaser rate on your credit card and know a bank desperate enough to pay some serious interest on a 30-day CD.)

It's not unusual to find fundamental misunderstandings of this sort in the media. The recent flurry of proposals in both the US and France to cut gasoline taxes is another case in point. Paul Krugman and Greg Mankiw have written about this in recent weeks, and today Noblabla and Petitsuix take up the issue in response to Sarkozy's populist proposal earlier this week.