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Surplus, cost, and economic loss - the critical areas
|What lies beneath the tip of the iceberg (graph | graph4 (sound investment) | index)|
What happens when industry, government, and the general public are no longer willing to pay even the private sector premium for high-level language competence? The answer is all too obvious, they settle for low-level competence at zero cost, and complain to the government about its failure to provide Hong Kong students with a proper education. Graphically this point is reached to the right of Qh. As high-level competence is no longer profitable nor afordable beyond this point, low-level competence becomes a free substitute for high. Unfortunately, what may be a zero-cost substitute for those who would prefer high-level competence is an increasingly costly quasi-public good for government to supply. If one could imagine a demand curve for low-level competence lying beneath the demand curve for high-level competence, the net social loss from the oversupply of inferior talent becomes obvious. The following points can be made:
Thus, with decreasing marginal return and rising marginal cost the more freely obtained low-level competent individuals employed, the greater becomes the level of social loss. Mathematically, this relationship is described as follows
Although increasing demand and lower cost provision of low-level talent could improve the situation, neither is likely to occur.
Just as a decrease in demand has a pernicious effect on the relationship Aagh - Ahlm, so too does it behave detrimentally with respect to Amnq - Aqrs. Though some (see EARTH's Critique of SCOLAR's English Language Review - Negative Points) may argue that the need for high-level competence will increase over time, current levels are already high in excess.
Moreover, the cost of providing all of Hong Kong citizens with low-level competence is not likely to improve. If anything it will rise, as there is already so much waste, and badly needed talent will seek higher added-value activities elsewhere. As can be seen in the table above an increase in the cost of providing low-level competence has a net negative effect.
Moreover, the situation with regard to the employment of low-level talent and the net social loss obtained from its employment does not change even when firms are required to pay the full-cost of high-level competence.
Although moving from point Qh to Qe does improve the overall stiuation, it does nothing to improve the social loss that results from the employment of excess low-level talent -- Aqrs remains. At point Qe the total loss from the provision of excess high- and low-level competence is measured by the addtion of Ahlm and Aqrs. At Qe only the social waste associated with high-level talent is removed. The social loss from excess low-level competence remains.
It should also be pointed out again that the social gain obtained from the employment of low-level competent individuals to the right of either Qh or Qe is likely less than that obtained from the employment of the same number of high-level competent individuals.Thus, the areas circumscribed by Amos and Ahks exaggerate the social gain from employing low-level comptetent individuals as a freely acquired substitute for those with high-level competence.
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