No proof required! Education as wealth: Who is on 1st?

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Updated: April 21, 2018 3:59:29 AM

the World Bank is guilty of the “not so scholarly” traditions of Western scholars to ignore scholarship from elsewhere, even when it is right under their nose

Credit Suisse, oxfam, education as wealth, The Changing Wealth of Nations 2018, world bank, wealth inequality, TNWN, Raghuram RajaStarting November 2017, the book has been the subject of discussion on Indian TV, and many reviews of the book have appeared in print, including some by leading foreign experts on education, e.g., Lant Pritchett of Harvard University. (PTI)

In a recent article titled “The wealth of nations”, Business Standard, April 12, 2018, Shankar Acharya, one of India’s most respected columnists, applauds the research into the new wealth of nations and notes that two recent studies have focused on national wealth broadly defined, i.e., wealth which includes estimates of human capital wealth, as opposed to just financial wealth as popularised by Credit Suisse and Oxfam. Acharya mentions two studies as new in the genre of wealth estimations—first, “Surjit Bhalla’s thoroughly engaging and provocative The New Wealth of Nations”—hereafter, TNWN (published in November 2017).

Acharya goes on to add that “more recently, in January 2018, the World Bank published its The Changing Wealth of Nations 2018 (hereafter, CWN) the bank’s third (and most comprehensive) attempt at estimating national wealth accounts in a series dating back to 2006” (emphasis added, p.73). In TNWN, I state that “investment in education is well-recognised as the major or primary investment for most families in the world.

This investment is in an asset, and one that yields a constant flow of income, i.e., acquisition of education is acquisition of wealth. Yet, given this importance, and given the constant outpourings of despair in the media about severe wealth inequality in the world, there are not many studies which estimate the wealth contained in educational attainment. Indeed, there isn’t a single study that provides estimates of education wealth for different countries and different years. [emphasis added in the last sentence].

Later on, pg. 78, I state: “A preliminary estimate of the wealth distribution contained in education is the primary purpose of this chapter.” In CWN, the World Bank authors claim, and state, that they are “the first” to publish estimates of education wealth. Just in the foreword, they state “For the first time, explicit estimates of human capital, which is the largest component of global wealth, are provided.”

Is it possible that the World Bank authors of CWN were clueless about TNWN? Not that it matters, but I do know many of the staff at the World Bank, and was a staff member, in Washington DC, for 14 years (1978-1992). TNWN was published by Simon & Schuster, was formally reviewed (and blurbed) by three distinguished and well-known world economists—Montek Ahluwalia, Raghuram Rajan, and Martin Wolf. It has been in discussion and circulation phase since July 2017.

Starting November 2017, the book has been the subject of discussion on Indian TV, and many reviews of the book have appeared in print, including some by leading foreign experts on education, e.g., Lant Pritchett of Harvard University. There are a large number of similarities in my work, and that of the World Bank. The number of countries covered is large; I cover 108 countries based on the publicly available Barro-Lee data on educational attainment; the World Bank bases their estimate on the basis of not publicly available household survey data for 143 countries, 1995-2014. I provide estimates of education wealth for the world for the period 1870 to present, and forecasts up to year 2030.

My estimate of the share of education wealth in total wealth is 56%; the World Bank share is 64%. I believe that their estimates of the share of human capital are too high; they can easily believe that mine are too low. But that is where the debate should be, and the World Bank had a great opportunity to start the debate; but for reasons of false pride, they apparently chose the “me first” route.

Given that my book was published well before the World Bank study, it stands to reason that the WB should have done two things—refer to my work, and suggest why their work is more accurate and/or significantly different than mine. At a minimum, the World Bank should have acknowledged, at least in the foreword, that a recent study has been published [and that they are not the first!]. But the World Bank didn’t do anything of the sort. What is that line from Julius Caesar? “Upon what meat doth this our World Bank feed, that it has grown so great? Age, thou art shamed!”

One additional point. I worked on the World Bank 1991 report, The Challenge of Development. The internet was barely available, and the team had an army of research assistants to comb through the literature so that we were aware of the prevailing research, learn from it, and give credit where credit was due. Apparently not so with the arrogant and ostrich-like World Bank of 2018.

The dictionary definition of plagiarism is: “the practice of taking someone else’s work or ideas and passing them off as one’s own.” I had an idea, expressed publicly over the years, that the wealth estimates were flawed because they did not include the important contribution of wealth embodied in education. In a January 23 article titled “Tax data and Piketty inequality”, The Financial Express, I said—by CS here, I refer to the Credit Suisse report on financial wealth—“First things first.

Wealth, as defined by the CS report, is the `value of financial assets plus non-financial assets (principally housing) owned by individuals less their debts’. Given that human capital is a major wealth asset for most individuals in the world … this is a rather glaring omission. It is likely that if education was included as wealth (why not?), the results will not be as drastic, and therefore less ‘saleable’ as the ‘rich are getting richer, poor are getting poorer’ polemical CS and Oxfam conclusions”.

Let us be clear as to what is “new” about the idea of education wealth. It has been known for centuries that wealth is the discounted flow of income. It has been known, at least since Becker’s pioneering work in the early 1960s, that education yields an extra flow of income and therefore human capital is wealth. There is published work (and cited in my book) of human capital wealth and its relationship to total factor productivity, e.g., RE-Manuelli-and-A-Seshadri’s “Human capital and the Wealth of Nations”, American Economic Review 2014.

What is marginal, and new, in The New Wealth of Nations is an estimate of world education wealth comparable to the estimate of world financial wealth a la Credit Suisse. The World Bank claims in their report (and if it does it once, it does it 11 times!) that it is the first to provide explicit estimates of human capital, which is the largest component of global wealth (p. 51).

As I have shown here, this claim by the WB is patently false. Just a Google-check, by one from its army of research assistants, would have told the scholars at the World Bank, the authors, and the institution, that their estimate wasn’t the first (not by at least two months). What does the behaviour of the World Bank, and its authors, reveal? What we can be sure of is that the WB practiced the art (and sin) of deliberate ignorance. It continued the “not so scholarly” traditions of Western scholars to ignore scholarship from elsewhere even when it is right under their nose.

It also shows that there is extreme arrogance in WB’s boldness of making false claims, i.e., its study is the first such work, repeated ad nauseam. This arrogance may stem from the knowledge that it finances research by other scholars who. it believes, may be too reticent to call WB’s bluff (lie).
The above three facts we can be sure of—deliberate ignorance, false claims, and arrogance. Does it add up to plagiarism in the case of my book? The stealing of an idea is plagiarism—but I have left a question mark, so the reader can decide for herself.

Author is Senior India Analyst at Observatory Group, a New York-based macro-policy advisory group, and part-time member of the PM’s Economic Advisory Council

Views are personal Twitter: @surjitbhalla

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