The Economics of Education

1. The Economics of Education

2. Education: An Important Industry • Education is an investment in human capital. • Education is the conduit that the public sector uses to supply the human capital to the private sector this is needed to sustain its prominence in the world. • Educational achievement and economic success are clearly linked. • Education produces only intangibles in the form of nonmaterial goods or services that are valuable but difficult to measure.

3. Resource Allocation • Resource allocations to education are a responsibility of government at al levels. • The scope of services provided is determined by the value of those services as compared to the value of other services at the same cost, but the point of diminishing returns for investments in education has yet to be reached. • Historically, education has been the largest public function and the country’s biggest business. The expansion of educational services and the increasing cost of education has had a beneficial effect on the nation’s economy. • Funding will continue to be a serious challenge.

4. Resource Allocation • Economists and politicians value education. • The individual benefits from an investment in an organization. • Society as a whole benefits when goods and services are produced for all. • Educations need insight to relate to various philosophies when seeking financial supports for schools.

5. Resource Allocation • Education is an important stimulator of economic growth. • Educations sponsorship and financing is a public sector responsibility. Services should be provided equitably, but it cannot be provided with equality to all.

6. Economic Benefits • Those who have a college education generally earn twice as much as high school dropouts. Much of today’s wealth is tied to technology, and technology is advanced through education. Generally, the more education a person attains, the better job he or she will have.

7. Noneconomic Benefits • Perpetuating our form of government • Moral values • Ethical values • Learn to appreciate and patronize the arts • Preserves a nation’s culture and people’s sense of identity

8. External Benefits • Education does not follow the exclusion principle. Everyone benefits form education. • The problem of financing education is different from that of marketing most other goods and services. • The existence of externalities and the nonexistence of the exclusion principle changed the method of financing education from the benefit principle to the ability principle.

9. Cost-Quality Relationships in Education • The “goals” of education vary from place to place. There is no way to measure all of the changes that are products of formal education. • The cost-quality relation is a matter of the efficiency with which the schools reach their objectives with the smallest outlay of money. • Although the relationship between cost and quality in education is high, there is a difference of opinion among researchers in defining and measuring quality in education.