Economics of education reform

By Dhananath Fernando

Originally appeared on The Morning

Sadly, education reform has been reduced in the public conversation to one narrow question: sex education, and what should or should not appear in the school curriculum. That debate matters, but it is not the debate we should be trapped in. While we argue about a small corner of the syllabus, the real architecture of education remains untouched.

Every economy runs on incentives. Education is no different. What students learn, how they learn, what teachers are rewarded for, what principals are promoted for, and what the system measures as ‘success’ are all incentive problems before they become curriculum problems.

On top of that, we have powerful perceptions shaping decisions. In primary and secondary education, the user and the decision-maker are not the same person. The child is the user, but the parent is the buyer. That gap changes everything.

It gets more complex in higher grades and tertiary education, but the market dimension never disappears. Education is ultimately about skills, competencies, and ethics needed for a globally competitive world, whether we like that framing or not.

If we take competitiveness seriously, what matters is not only what is taught but how it is taught, and whether the system has the governance and accountability to improve it. Monitoring performance, rewarding excellence, fixing weaknesses, and updating content are not ‘nice-to-have’ reforms. They are the minimum conditions for a modern education system. A real reform agenda has to be holistic.

But we also need to be honest about constraints. Sri Lanka is still climbing out of an economic crisis and a debt restructuring. Large-scale investments and expensive redesigns are difficult. That is precisely why reform must focus first on incentives, productivity, and institutional design, not only on spending more.

Core components

When we look at the education delivery ecosystem, there are three core components.

First, the content setters, the institutions that decide what should be taught. In Sri Lanka, that role largely sits with the National Institute of Education.

Second, the execution arm, the teachers who deliver learning in classrooms.

Third, school administration, principals, and support staff who manage teachers, students, infrastructure, and the daily operations of the system.

In Sri Lanka these three streams are often intertwined in a way that weakens all three. Many teachers want to become principals for reasons that include salary structure and career progression. But when we turn a good teacher into a principal, we may lose both a potential great principal and a great teacher, because teaching skill and school leadership are not the same skill set.

In other cases, teachers move into curriculum-setting roles on the assumption that the execution arm alone knows what is best for students. Teacher input is essential, but treating it as the only criterion is also a mistake. Content design requires multiple perspectives, including pedagogy, labour market needs, child development, and global benchmarking.

Building a better system

A better system would treat teaching as a profession you can master without needing to escape the classroom to earn more. Teachers should have a salary and career structure that rewards excellence in teaching, not only movement into administration. Principals should have a separate professional track with a distinct salary scale, and training focused on leadership, student welfare, staff management, and operational efficiency.

In a meritocracy, a great teacher should be able to earn more than an average principal. That is how you keep talent where it creates the most value.

Curriculum also needs openness and competition. In practice, we already have a version of it. At a certain point many parents choose between Edexcel, Cambridge, or the local syllabus. That choice signals something important: parents want global standards and credible pathways.

A system that is open to competition is forced to benchmark itself, update itself, and respond to outcomes. At the same time, this does not mean we abandon local identity. Subjects like history, geography, language, and culture matter. The point is not to import a foreign syllabus blindly, but to ensure our local syllabus can stand confidently alongside global standards.

There is also a productivity question we rarely ask: how well do we use the infrastructure we already have? Schools typically operate for only part of the year, and even on a school day, the infrastructure sits idle for a large share of the total time. This is expensive infrastructure, much of it built with borrowed money.

We cannot afford underutilisation. Improving the productivity of school facilities through better scheduling, shared use, community learning programmes, and structured after-hours activities is not a cosmetic reform. It is a fiscal and economic reform.

Demography makes reform even more urgent. Sri Lanka’s population is ageing and overall numbers are not growing the way they used to. Popular schools are expanding catchment areas, while many others will eventually have to reduce classrooms or rethink capacity. A system designed for a different demographic era cannot remain unchanged.

Then there is the admissions system, which urgently needs digitisation. It is difficult to clean up malpractice when processes are manual, opaque, and dependent on documents that are easy to manipulate.

Consider one common criterion: distance from residence to school. We do not have a fully reliable digital land registry to authenticate addresses and property details at scale. That gap creates space for corruption and abuse.

Education reform, in other words, is linked to broader economic reforms like digitisation, land administration reform, and better public sector data systems. If we pretend education sits in isolation, we will keep treating symptoms instead of fixing causes.

Preparing children for the real world

On the flip side, new subjects such as Entrepreneurship have been added to the curriculum with good intentions. But the reality is uncomfortable. Entrepreneurship cannot be taught only as a subject and graded like a textbook chapter. In many ways, real entrepreneurship is about challenging assumptions, taking risks, and learning through failure, which often clashes with how school systems are designed.

A stronger foundation would be economic education: helping students understand incentives, markets, trade-offs, and how the real world works. Then those who want to innovate, break patterns, and build can do so with clearer thinking and better tools.

Education reform has a strong economic angle, but we keep reducing it to the loudest cultural argument of the moment. Meanwhile, the deeper reforms on incentives, professional pathways, productivity, digitisation, and governance get delayed or quietly put on hold.

If we want a system that prepares Sri Lankan children for the world they will actually live in, we need to stop debating only the content of one chapter and start redesigning the system that delivers the whole book.