The data aren’t the problem. Nor is the model. The problem is that you used the term ‘revenue’ in a very very sloppy and imprecise manner and then proceeded to fluff up your analysis with academic-sounding phrases from an economics textbook. You used ‘benefits’ and ‘revenue’ synonymously when they are conceptually distinct and then went off the deep end about ‘maximizing profit’ or ‘breaking even’. Please try to understand that you misused a very basic elementary concept in your analysis.

“I believe that EDB plans for the global schoolhouse are in place because they have calculated it to their satisfaction, and my other arguments in the comments above also stand.”

Whatever calculations they have made must have been based on the assumption of attracting full fee-paying students, something which you do NOT take into account.

“Even if I am convinced that need-based subsidies to foreign students are not beneficial, then it will not be part of my proposal, of which it constitutes a mere one paragraph, an afterthought at best and central neither to my proposed lift of foreign enrollment quotas nor the proposal as a whole, which are independent of it.”

A justification for your proposal to do away with preferential subsidies to our local universities is that, in your own words, ‘distorting the education market with preferential subsidies is harmful to our Global Schoolhouse strategy and our economy’.

There is no relationship between subsidizing locals students and the Global Schoolhouse strategy because the latter is a strategy targeting international full fee-paying students while the former is an issue of equity between local students who study locally and those who go to other universities. These two issues are not directly related. There is no reason to believe that offering local students subsidies to study overseas will affect Singapore’s ability to capture part of the international student market. Our flagship universities obviously play an insignificant part in this Global Schoolhouse strategy since they don’t even have a substantial full fee-paying international student population.

As I had stated clearly, the model I described is a back of envelope calculation in lieu of aggregated EDB projections, which I tried to find for you but are likely to be proprietary. I will concede your points on the model, because I know it is a oversimplification based on limited data anyway and wasn’t meant to be comprehensive. But problems with my own model should not be construed to end the debate there – I believe that EDB plans for the global schoolhouse are in place because they have calculated it to their satisfaction, and my other arguments in the comments above also stand. Even if I am convinced that need-based subsidies to foreign students are not beneficial, then it will not be part of my proposal, of which it constitutes a mere one paragraph, an afterthought at best and central neither to my proposed lift of foreign enrollment quotas nor the proposal as a whole, which are independent of it. And if you indeed feel so strongly about tuition grant subsidies to foreign students, then you may be much in agreement with the rest of my proposal.

Since all your questions start where you didn’t understand the paragraph I referenced, I will break it down for you. The subsidy amount is variable because it varies according to financial need criteria relative to other recipients and budget allocation. Based on these variables, between 2 hypothetically identical candidates (that is what ceteris paribus means) who attend universities that charge different tuition fees (whether local or overseas), the dollar amount of the subsidy would be the same. I hope this explanation is clearer to you and addresses your concerns on equity between citizens who choose to study locally or overseas.

If you still doesn’t get it, let me give a very simple example which illustrates the flawed ‘cost-benefit analysis’ Pin-Quan Ng gave in post 32.

Suppose I pay $1000 in taxes and the government uses that $1000 to subsidize an international student who then uses that $1000 to buy a computer from me. That’s a $1000 injection into the economy. Am I the taxpayer off now that I have paid the $1000 in tax? Of course not. I’m poorer by one computer than if I had not paid any taxes at all in the first place!

Both articles discuss the education industry in general – there is nothing specific on how Singapore benefits from having an increased subsidized international undergraduate population in our public universities.

“While I could not find a quantitative assessment of the aggregate benefits of the global schoolhouse on their website – I suppose that is proprietary information – I extrapolate from their projections of UNSW Asia (http://www.edb.gov.sg/edb/sg/en_uk/index/news_room/news/2004/university_of_new.html), which was initially projected to cater to 15,000 primarily foreign students, 10% of the projected target of 150,000 for the global schoolhouse in total. UNSW Asia was projected to inject $500mn per annum, so by assuming a proportional increase, the global schoolhouse would in aggregate inject $5bn per annum.”

No. The EDB article doesn’t say that UNSW Singapore will inject $500m per annum. It says ‘UNSW Singapore is expected to contribute at least S$500 million per annum in direct spending to the local economy’. Anything can contribute $500 million in direct spending so long as someone comes with the $500 million. Any fool can spend $500 million dollars.

Besides, you are talking about tertiary education which is relatively more expensive. Not all 150,000 students will be university students.

“Granted, UNSW Asia didn’t go as planned, perhaps because of preferential subsidies to the flagships – it was meant to have full-fee paying students. Therefore, let us subtract from the projection the cost of subsidies, in a hypothetical world where students at UNSW Asia (and the rest of the global schoolhouse) did have access to means-tested subsidies, and therefore met the projection.

In the cost-benefit analysis, the point where total costs and benefits are equal (i.e. the ‘exit the market’ point) is when subsidies cost $5bn, and this is the maximum amount we would spend.”

No. The exit point is when the returns on the marginal spending on something else (healthcare, free university education, public infrastructure, defence, etc) exceeds the returns on the marginal spending on subsidizing international students.

If you don’t see why you are wrong, imagine this: The tourism industry in Singapore brings in $12.4 billion a year and tourist arrival numbers are 9.7 million. So, each tourist brings injects about $1,200 into the Singapore economy. Applying the reasoning behind your ‘cost-benefit analysis’, if we want to double our tourist arrivals and their injections into the local economy, we should hand out a dozen hundred dollar bills to each tourist arriving at Changi.

It’s a question of allocation of resources. Why should the Singapore government spend $5 billion on subsidizing foreign students when it can use that same sum of money to build infrastructure (roads, land, etc), improve public healthcare, improve education, invest, offer tax rebates, support SME’s, subsidize public transport, offer $1,200 cash to each tourist, etc? Spending $5 billion on any other needs also injects $5 billion into the economy.

“But our goal is not to break even but to optimize profit (i.e. where marginal revenue equals marginal cost), minimizing the subsidy while retaining demand for enrollment. To calculate this I would need the price elasticities for foreign students, but that’s beyond my capacity.”

There are other things which are clearly beyond your capacity. Like understanding what constitutes revenue or cost in your explanation of the case for subsidizing foreign students.

“I apologize in advance for any errors or bad assumptions, except those drawn from EDB projections. This is a back-of-envelope case-interview type of model.”

Please don’t apologize to me; apologize to the professor who taught you economics.

Isn’t it contradictory to say the subsidy is a “variable sum” and then imagine it to be the “same dollar amount”? So which are you suggesting? Variable or fixed? I must admit that it is difficult to read your thoughts carefully when it is inconsistent or unclear which position you are advocating.

“If local supply increases, that is great too, however I also point out the distortions caused by preferential subsidies to particular universities. Even if these preferential subsidies are increased (by increasing the number of those preferentially subsidized ie more public universities), the market is still distorted. Perhaps it may be better to let the market decide.”

How is this relevant to the issue of whether the subsidy is variable or fixed? Whichever way the market decides, the issue remains the same. Fixed or variable?

“I have no idea where you get this idea from because I certainly do not object to competition. Please refer to my original article’s penultimate paragraph for a clear statement of my position.”

Double-speak again. You do not object to competition but at the same time advocate subsidies for students going overseas. Effectively, it increases the supply (local + overseas) of affordable education indefinitely, thereby lessening the competitive pressure. This is true regardless of whether there are more or less foreign students.

“Note that the entire point of the article is to argue that this arrangement is unfair to citizens. This is an equity argument.”

Is it equitable for all Singaporean students to get the same fixed amount or variable amount?

“I believe the disincentives to citizens towards working harder in school due to equal access to tuition subsidies are insignificant, and even if they were significant, we would subsidize education anyway as a public good.”

You mention “equal access”. It’s ambiguous. Does it mean equal opportunity to apply but not necessarily equal amounts disbursed? In any case, I did not disagree that “we would subsidize education anyway as a public good.”

I have tried my best to understand what you are driving at, but with the inconsistency and ambiguity running through your answers, it is futile to pursue further clarification. It’s like beating around the bush with the PAP.

“Well, in that case, just fix the number of local students who are eligible for university/polytechnic subsidies. For example, if we had 20,000 subsidized students with 5,000 of them being international and the rest locals, then if you stop funding the 5,000 internationals, then you save a whole lot of money. There is no loss of efficiency because the 15,000 locals must have been as competitive as the nonlocals in the first place to secure their places before the subsidies were cut.”

The relevant comparison is not the other admitted locals but the next-best ones who were not admitted, because they are the ones who were displaced by foreign students.

Consider 2 populations of applicants. The 1st population includes foreign and local applicants. This is larger than the 2nd population which is only local applicants. The value of individual applicants will differ, but in aggregate each population will approximate a bell curve. Assume that the selection process admits a top number (equal to number of places available) of applicants regardless of nationality. The average value of the top number is more likely to be higher in the larger population than the smaller population, simply by virtue of being a larger population.

“Show me a website, a link, a journal, a paper, anything. You keep asserting that there are such benefits in Singapore’s context and they are cumulative. What are those benefits?”

I refer you to a brief EDB website search: George Yeo (http://www.edb.gov.sg/edb/sg/en_uk/index/news_room/news/2003/singapore_the_global.html) and Teo Chee Hean (http://www.edb.gov.sg/edb/sg/en_uk/index/news_room/publications/singapore_investment3/singapore_investment4/0.html) both qualitatively discuss the benefits of foreign students and global schoolhouse project.

While I could not find a quantitative assessment of the aggregate benefits of the global schoolhouse on their website – I suppose that is proprietary information – I extrapolate from their projections of UNSW Asia (http://www.edb.gov.sg/edb/sg/en_uk/index/news_room/news/2004/university_of_new.html), which was initially projected to cater to 15,000 primarily foreign students, 10% of the projected target of 150,000 for the global schoolhouse in total. UNSW Asia was projected to inject $500mn per annum, so by assuming a proportional increase, the global schoolhouse would in aggregate inject $5bn per annum.

Granted, UNSW Asia didn’t go as planned, perhaps because of preferential subsidies to the flagships – it was meant to have full-fee paying students. Therefore, let us subtract from the projection the cost of subsidies, in a hypothetical world where students at UNSW Asia (and the rest of the global schoolhouse) did have access to means-tested subsidies, and therefore met the projection.

In the cost-benefit analysis, the point where total costs and benefits are equal (i.e. the ‘exit the market’ point) is when subsidies cost $5bn, and this is the maximum amount we would spend. Any more and it would be a net loss. I consider the exit point first because it’s easier to quantify (we will move to optimizing profit later). Means-tested subsidies will vary according to need, but an approximation of the maximum average subsidy per foreign student is: $5bn divided by 150,000 gives $33,333.33, ~60% of full annual tuition at NUS FASS, an attractive amount. The actual total cost is likely to be less than this since it is means-tested and not all foreign students will qualify to get the maximum amount. If we consider multiplier effects from the injection and non-monetary benefits (as discussed by Teo in link above), then the benefits are even greater. Therefore, it seems that we can offer a pretty generous subsidy to needy foreign students to attract them, while still breaking even. But our goal is not to break even but to optimize profit (i.e. where marginal revenue equals marginal cost), minimizing the subsidy while retaining demand for enrollment. To calculate this I would need the price elasticities for foreign students, but that’s beyond my capacity.

I apologize in advance for any errors or bad assumptions, except those drawn from EDB projections. This is a back-of-envelope case-interview type of model.

“You on the other hand, have not answered my very first question, that is, whether the subsidy proposed is in percentage or dollar terms. The former implies that some will get more than others in dollar terms whereas the latter means everyone gets the same amount.”

I have answered this question twice in previous comments. I repeat the relevant section here:

When I argue that means-testing means the subsidy amount is based on need, then it is neither a fixed percentage or a dollar amount but a variable sum that depends on an individual’s family size, income and assets, as well as budgetary constraints for that year and the relative needs of other recipients. If your concern is about differential costs of tuition, then what I imagine is that the subsidy amount for two individuals who attend universities that charge different tuition prices, ceteris paribus holding financial need constant, is the same dollar amount, which provides an incentive for students to spend wisely.

“I repeat, I have also supported the idea of a 4th university to meet demand instead of sending students overseas.”

I did not dismiss the proposal to start a 4th university. I refer you to my first and second paragraph of the article, with particular attention to the operative “necessary but insufficient”. If your contention is that it is in fact sufficient, my response was in the same comment as above, which I repeat here:

If local supply increases, that is great too, however I also point out the distortions caused by preferential subsidies to particular universities. Even if these preferential subsidies are increased (by increasing the number of those preferentially subsidized ie more public universities), the market is still distorted. Perhaps it may be better to let the market decide.

“Why do you object to competition for students, when you have advocated that local universities be subject to it? If it forces local universities to buck up, it will do the same for our students.”

I have no idea where you get this idea from because I certainly do not object to competition. Please refer to my original article’s penultimate paragraph for a clear statement of my position.

If you believe that extending tuition subsidies to all citizens wherever they enroll is ‘anticompetitive’, in the sense that citizens need not compete as much for places at the flagship universities to obtain the subsidies they deserve, then you are right. However, I am unconcerned about this – Note that the entire point of the article is to argue that this arrangement is unfair to citizens. This is an equity argument.

If you think “aha that is contradictory!” then I suggest you make the mental distinction between which area of competition is more important and how different the disincentives are. I believe the disincentives to citizens towards working harder in school due to equal access to tuition subsidies are insignificant, and even if they were significant, we would subsidize education anyway as a public good. I believe the disincentives to universities towards improving the quality of education due to preferential subsidies are significant, as they have been significant in every organization and in every industry that has ever received preferential subsidies.

Since when I have said our students are not entitled to equal access to tuition subsidies? I repeat, I have suggested a fixed dollar sum subsidy for all Singaporeans students, whether local or overseas. But, those who choose to go overseas should not expect to get MORE than what the locals are getting. That, to me is as equal as it can get.

You on the other hand, have not answered my very first question, that is, whether the subsidy proposed is in percentage or dollar terms. The former implies that some will get more than others in dollar terms whereas the latter means everyone gets the same amount.

I repeat, I have also supported the idea of a 4th university to meet demand instead of sending students overseas. If, with increased supply, people still cannot make it, we do not need statistics to tell us that they are either below the standard, unmotivated or simply bent on going overseas without even trying to compete. Are you suggesting that we subsidize these individuals too? Not me, I’d rather the money be spent on the needy in the streets. That is money more well spend.

Why do you object to competition for students, when you have advocated that local universities be subject to it? If it forces local universities to buck up, it will do the same for our students.

How is Singapore going to survive in the long term if our future generations cannot handle competition but expect to be rescued and given what they think is their entitlement?

No quibbles about that.

“From this assumption, if subsidies to foreign students are eliminated, the number of foreign students at the local flagships will decrease, and their places taken up by citizens who will be subsidized. Thus, from an expenditure perspective, this is budget-neutral and takes up the same amount of taxpayer money. Although this would redistribute back towards citizens, my proposal in the article above to extend subsidies to citizens wherever they enroll would mean that net redistribution is zero. Remember that this is a package of policies.”

Well, the net distribution is zero because you have contrived to keep the total number of subsidized places to be a constant in your proposal. There’s no real necessity to do so, is there? Remember, you are trying to introduce competition for our flagship universities so that they will be forced to upgrade their educational services. If you fix the number of subsidized places in our local universities, then revenue to our local universities won’t be affected by the quality of their educational services, won’t it? You will be back to square one.

“Therefore from an expenditure or redistribution perspective one should be indifferent to whether or not foreign students are subsidized. Indeed, from an efficiency perspective, efficiency has been lost if subsidies to foreign students are eliminated.”

Well, in that case, just fix the number of local students who are eligible for university/polytechnic subsidies. For example, if we had 20,000 subsidized students with 5,000 of them being international and the rest locals, then if you stop funding the 5,000 internationals, then you save a whole lot of money. There is no loss of efficiency because the 15,000 locals must have been as competitive as the nonlocals in the first place to secure their places before the subsidies were cut.

I’m making up the numbers out of thin air but they are for illustrative purposes. We could possibly have the case of 5,000 locals and 15,000 nonlocals but I trust your algebraic intuition to see what I am getting at.

“By decreasing the pool of applicants, the average value of each enrolled student is reduced and our universities are that much less competitive.”

Well, all you have to do is to fix the number of places for locals. Then, there cannot be a reduction in terms of average value per student.

Also, if our universities feel that having more international students has an improving effect on their competitiveness, then they should come up with their own funds to subsidize the enrollment of international students. The very fact that international students have to be subsidized distorts their true value-addition to our universities’ competitiveness.

Secondly, the competitiveness of a modern research university is largely dependent on their research. Subsidizing international undergraduate students do not help in this.

“Now I argue that there is an up-side when the benefits from foreign students are factored in. I shall not list these benefits here because others have done so elsewhere.”

Show me a website, a link, a journal, a paper, anything. You keep asserting that there are such benefits in Singapore’s context and they are cumulative. What are those benefits?

“I keep telling you that the benefits are cumulative, which means that they are not mutually exclusive to the ones accrued from increases in foreign labour. It is not an either-or proposition or a zero-sum game.”

I never said that these economic benefits from international students are exclusive to the ones accrued from increases in foreign labour. I assert that former are substitutable by those from the latter.

I begin with the assumption that most foreign students are attracted to Singapore flagship universities by the large subsidies available. I believe this to be a safe assumption given the experience of UNSW Asia – similar fee structure but no subsidies. Whether the assumption holds may depend on whether the education at UNSW Asia is fully comparable to NUS/NTU/SMU, but I think it is safe to assume that foreign students are extremely price sensitive when it comes to commoditized education (as opposed to say, educational signaling).

From this assumption, if subsidies to foreign students are eliminated, the number of foreign students at the local flagships will decrease, and their places taken up by citizens who will be subsidized. Thus, from an expenditure perspective, this is budget-neutral and takes up the same amount of taxpayer money. Although this would redistribute back towards citizens, my proposal in the article above to extend subsidies to citizens wherever they enroll would mean that net redistribution is zero. Remember that this is a package of policies.

Therefore from an expenditure or redistribution perspective one should be indifferent to whether or not foreign students are subsidized. Indeed, from an efficiency perspective, efficiency has been lost if subsidies to foreign students are eliminated. By decreasing the pool of applicants, the average value of each enrolled student is reduced and our universities are that much less competitive.

Now I argue that there is an up-side when the benefits from foreign students are factored in. I shall not list these benefits here because others have done so elsewhere. But you insist that the benefits from foreign students must be specific to them. I keep telling you that the benefits are cumulative, which means that they are not mutually exclusive to the ones accrued from increases in foreign labour. It is not an either-or proposition or a zero-sum game.

You may have your own personal opinion on what you are entitled to as a taxpaying citizen, however noble it may be, but it might be a bit of a stretch to impose that opinion on the rest of the taxpayers who, I believe, are not only justly entitled to equal access to tuition subsidies, and do actually feel entitled to them as well, if the controversy on foreign enrollment are representative of public sentiment.

“I may be an “outlier”, but I do know of many others in the same situation as I was and did much better to become scholars and prominent personalities. I have to emphasize that academic achievement is not only about opportunities but more than that. Determination, perseverance, hardwork etc. play a very important role in education, even more so than textbooks and grades. And honestly, having been to China and experienced the environment in which their students are being taught, and witnessing their eagerness to learn, I seriously think our students have taken their blessings for granted.”

Perhaps your circles may not be representative of the population as a whole. Individuals tend to associate among their like, and your anecdotal perception of the number of poor kids doing well may be higher than normal. My assertion is based on data.

Furthermore, certainly academic achievement is multicausal but my argument for equal access to subsidies for citizens is based on justice, not consequences. Where consequences are concerned, I refer you to my arguments for lifting quotas on foreign enrollment as an incentive towards determination, perseverance, and hard work. It is after all the competitive environment in China that has motivated its students, and perhaps we may bring that environment here with more of them here.

Sir, if you believe that I am uncritical of meritocracy, I suggest you take a moment to read my article more carefully for what it actually says, and not what you wish to believe it says. In particular, you should read more carefully my argument for progressive means-testing. Perhaps that might be a sufficient answer to your comment.

“I don’t understand that distinction because I don’t know what economic benefits – short or long term – can be obtained from subsidizing foreign labour”

should read

“I don’t understand that distinction because I don’t know what economic benefits – short or long term – can be obtained from subsidizing foreign students”.

I don’t understand that distinction because I don’t know what economic benefits – short or long term – can be obtained from subsidizing foreign labour. Perhaps, you could be more clinical and list out these benefits. These must be benefits that cannot be otherwise obtained by just simply increasing the supply of foreign labour or allow freer movement of people into Singapore.

Of course there is an economic case for subsidizing foreign students even if we increase the supply of foreign labor.

That’s contingent on the existence of significant short/long-term benefits to subsidizing foreign students.

“There is an optimal point to be reached and we are far from that point. Granted, the costs to taxpayers are immediate and the benefits accrue over time, so there is an intertemporal discounting that should be done.”

Optimal with respect to what and how did you reach the conclusion that we are ‘far from that point’?

“You also seem to think this is some kind of radical new idea. It is not. We have blanket subsidized foreign students for the duration of the Tuition Grant program.”

Actually, I know the Tuition Grant Scheme well.

“I argue that this is unfair to taxpayers who don’t get the same benefit.”

OK. Then we abolish the Tuition Grant Scheme for foreign students. That makes everything fairer.

I am not being sarcastic here.

Now I move from an equity perspective to an efficiency one, where it makes sense to invest in people who might not otherwise have even considered being a part of Singapore.

That would depend on what kind of benefits Singapore gets from investing in these people.