Books are essential to children’s learning.  Without books, the promise of Education for All will be only half met, as the learning side of the access-learning equation will be compromised.  Furthermore, charging for books is inequitable, especially if merchants are making a profit on the re-sale of books, as it creates an income transfer from the poor to the not-so-poor, for a service that would be (or should be) available anyway.

For that reason, it is distressing to hear stories such as Illegal Sale of School Books Continues (All Africa.com, March 11, 2011), which documents sales of books that are supposed to be free. If parents resort to buying expensive smuggled copies of otherwise “free for distribution” textbooks, then one of the very pillars of education for all (free access to school materials) is being endangered. This needs to be properly understood and investigated.

However, we need to be careful about analyzing the ultimate cause and therefore the ultimate remedy for these sorts of problems. A little market thinking might help. An analogy with scalpers is also helpful.  Scalpers are people who buy tickets for a concert at the official price, and then try to re-sell them at a higher price.

How can this analogy help?  Well, basically, if you think about it for a bit, you realize that scalpers can only get away with this if there is a scarcity, or if they can induce a scarcity.  If the government is giving a free concert, in a hall that can hold 1000 people, but only 900 people would go, even for free, it is unlikely that scalpers could get free tickets and then sell them for something, if there are lots of scalpers.  If they are getting the tickets for nothing, and they are competing with each other to sell, then they’ll outcompete each other and will be forced to give the tickets away for nothing.  If there is a scarcity, though, even the final consumers will turn into scalpers or potential scalpers.  If I got a ticket for free, and someone comes along who wants to see the concert more than I, I will be very tempted to sell him my ticket, and I’ll be able to, because there is a scarcity.  Same with the books.  If there are plenty of books, relative to the kids’ needs, and if the merchants compete with each other, they won’t have much market.  The only way they can make money is if at some stage they can withhold books from the market, to induce a scarcity and increase the price.  But that requires that at some point in the supply chain there is a single supplier (it could be a single regional supplier) that is charging a price.  That is, at some point in the supply chain between the government and the merchants there has to be some sort of chokepoint, or a monopolistic supplier, even if they are only regional chokepoints.  And it is likely that that chokepoint has to have a government official involved, if you go sufficiently far up the supply chain, because otherwise is it is too difficult to monopolize the situation.

Also, note that if there is a real scarcity to begin with, then potentially many parents will be scalpers.  Those who get books but care less about their children’s education than others do, or are desperately poor, might be tempted to sell their books.  In that sense, a real scarcity (that is, one not induced by a monopoly, but one produced by the fact the government supplies too little) creates opportunity for illegal sales. But the fact that illegal sales are possible also tempts those with a choke-hold to create artificial scarcities.

Thus, complaining about unscrupulous merchants and calling for social audit at the “retail” level, so that the government can go after the merchants,  is probably not enough. Governments have a responsibility to do two things, in addition to getting citizens to be wary of unscrupulous merchants and/or report them.  First, governments need to make sure there is plenty of supply, which will greatly reduce the incentive to be a “book scalper.”  That is, make sure that there are as many books (or even a bit more) as would be desired at the free price; “flood the market” so as to spoil the market for the scalpers, is how some government officials put it.  Second, governments need to examine their own processes to make sure that no officials are diverting books towards merchants at the wholesale level (even regionally), so as to create artificial scarcities.

There are many, many other angles to this story that one could blog about if there is interest.