28/06/2021
Time for students in China to rejoice! It was reported that China has planned to crackdown the private tutoring industry, which include trial bands on vacation tutoring and restrictions on advertising. This move was an attempt by the Chinese government to ease pressure on school children and boost the country's birth rate by lowering family living costs.
How can we view this issue in the economic sense? Well, under the Chinese government, tuition lessons would be seen as a negative externality of consumption. Negative externalities are a form of market failure which is characterised by external costs borne by third parties when a good is consumed. In the market for private tuition, external third-party costs include higher stress on students who do not attend tuition lessons, and an increase in pressure for parents to get their children to join tuition lessons, which can be costly and worsen the relationship between parent and child. These third-party costs involve non-consumers, and are unaccounted for by the decision maker and unpriced in the market. Therefore, in view of the negative external costs present, the Chinese government has decided to clamp down on tuition.
The measures would reduce the consumption of private tuition in the country, down to the point where it is closer to the socially optimal level, and where the deadweight loss from consuming private tuition would be lower.
What are your thoughts on these measures? Do you envy the students in China, or would this lead to unanticipated consequences such as an increased pressure placed on children to do even better?
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