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Symposium 2015

Solution for Promoting Innovation to Achieve Inclusive Growth

The Challenge

“Inclusive Growth” refers to sustained economic growth while at the same time improving equal access to opportunities among (groups of) individuals and reducing income disparities (ADB 2011). It ...

“Inclusive Growth” refers to sustained economic growth while at the same time improving equal access to opportunities among (groups of) individuals and reducing income disparities (ADB 2011). It aims to provide different groups of a society with equal opportunities to participate in economic development processes, thus enhancing the living standards and promoting mobility across different social groups. A key driver of future development in the world is “innovation”.

More Private-Public Cooperation for All Levels of Education

Public education, from primary to tertiary, started in the 19th century. There are many reasons for this. Every person has a right be educated and have access to education. A person is disadvantaged if he or she is unable to read or write, or lacks basic knowledge such as mathematics (arithmetic), geography or sciences. A society can make better use of new knowledge and information for innovation-supported better lives if people are able to read and process information. Likewise, firms benefit from better educated and trained workers.

Given there is so much benefit to gain for the society as a whole and for each citizen, it is easy to justify using public resources, i.e., taxes to finance education. Benefits are not only pecuniary, but also from externalities resulting in better democratic society from broader civic education, for example. These properties make education a public policy issue. However, politics may not allocate resources in a way that is socially optimal to support long-term inclusive social development. This is particularly difficult when benefactors of education, the young, are not adequately represented in the political system which makes the funding decision. Additionally, changing the curriculum may be difficult when a large proportion of decision-makers have sunk their human capital in outdated knowledge. University education and research is, for example, slow to adapt to changing market and/or societal needs when professors were educated 30 years ago and may not have time (or need) to keep up with frontier research and education methods.

I propose that we institutionalize public-private cooperation in public education. Please note I am not proposing that we get rid of public education. Education should be provided by the state and be accessible to everyone. But it does not need to be only funded by taxes. The private sector can be involved both in funding and curriculum development, innovative learning and research. This is already common in private universities. I propose we extend this to all levels of education. The proportion of private to public should differ according to the level and type of education. The private sector may be more strongly involved in the education levels (e.g., colleges and universities) where students are closer to the labor market. The involvement of the private sector in codeveloping the curriculum of colleges may, for example, help develop qualifications and skills which are in line with the market demand. Governments may give firms tax allowance for each dollar invested in joint education programs with public investors to encourage private sectors’ engagement in education.

Pupils and students benefit from better funded higher quality education. Firms can allocate funds directly to education and research. Society benefits from workers with better skills and knowledge and greater advances in science and technology.

This solution reduces transaction cost of taxing and allocating the revenue. The transmission of information from society to education will be faster and more efficient (less noise of bias). The justification for private involvement is not for better funding or greater efficiency by being for profit. Private partnership is necessary for better information to shape education. The type of knowledge or skills a society needs can be transmitted directly from the society to educational institutions.

Better representation of younger generation in an aging society
Demographic change, particularly, the aging voter population, makes it politically difficult to implement public policies with a long-run view and to invest in future generations. In Japan, the median age of voters is 55. The majority of voters will be over 60 in 15 years. Total government expenditure for pensions (the part not covered by premiums), is 6 billion yen, while total spending for science, technology and innovation is 500 million yen, less than 10%. Science and technology is investment in the future. Would it not make sense to reduce pensions by 10% and double science and technology budget to invest in the future? The reduction should not be across the board, but progressive like income tax, thus leaving the most impoverished unaffected by the reduction. Returns from the investment will mean better pensions in the future. In Japan, the current pension payment will bankrupt the system soon.

I propose giving all citizens the right to participate in the political system. Specifically, give all citizens a vote and have parents vote on behalf of minors. Taking care of elderly and educating the young used to be an intergenerational resource allocation implemented by households or at most a village. After the introduction of pension systems (social security) and public education, intergenerational resource allocation became public policy. However not all generations (and all generations are effected by public resource allocation) are represented in the political system. They should be.

Please note that I am not proposing giving extra votes so it does not violate the principle of one person one vote. Parents vote on their children’s behalf. How do we know parents will really act on behalf of the children? We know this by the same way we know we can entrust children’s welfare, for instance with view to the type of education or medical help they should get, to their parents. Having more children might give voters with children an advantage. Children will have some representation.

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