A Comprehensive Guide to The Economics of Education

 

What is the economics of education?

The eco is a social science, that is to say relating to the behavior of men as they are social beings included in a society.

Some economists are interested in personal interest (maximum pleasure by limiting efforts): utilitarian current.

We can define the eco of education:

By its object: substantial definition "economy" (restricted meaning)

It is relatively difficult for education to be part of the substantive definition. It is not easily a commodity, but today we are talking about the education market.

When education is related to training, it touches on the field of economics.

A. SMITH, The Wealth of Nations, 1796: “children must go to school to be well trained for the working population”.

By his method: economy is what emerges from economic reasoning. "Economic tuition" (broad sense)

Economics as a social science is different from management. It looks a bit like sociology because it researches what happened before (science of understanding).

Economics is a science of public action.

In eco, we reason at the global level.

Part 1: The contribution of education and training to economic and social development: a macro social point of view.

 

Chapter 1: Controversies over the relationship between education and economics.

We are interested in this relationship from the 60 '. Some authors will show that education is good for the economy. In the 70's, it is the beginning of the controversy on this subject. In the 90's, we find authors who say that education is good and favorable to new technologies.

Eco is a deductive science. We make assumptions but we do not verify them on reality (too complex).

I- Theoretical elements, in particular the theory of human capital.

Gary BECKER, Human capital, 1964.

I. The theory of human capital.

Human capital is an expenditure that one makes for oneself, to improve one's own productivity (or capacity to produce).

There are expenses that exist to improve ourselves: to heal, to train, to educate our children, to finance a trip to work elsewhere… These are expenses in human capital.

For Becker, it's not an expense but an investment in human capital. This supposes having more lasting effects.

He will try to show that it is profitable. It is necessary to compare the expenses made for its training and the benefits which one draws from it.

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This table shows that there is an interdependence between the acts: it is the opportunity cost.

Becker calculated the income supplement within 60 minutes according to the number of years of study:

Simple formula: r = dR / dC = increase in income / investment in human capital.

→ the rate of return to primary education is greater than the rate of return to secondary education.

Becker wants to demonstrate that people have an interest in spending on their own education; he wants to show that they serve themselves, as well as to the community (since they increase their productivity). This is the theory of the "invisible hand" (SMITH) (liberal theory)

Documents 1, 2, 3: private return to education.

21.9%: if an individual who has a CEP invests 100, he will have a return of 21.9% with a BEPC (gain 121.9%)

In the 70's, women earn a better living than men if they have had a short education. Question of social origin: a self-employed child will not have the same job as a workman's child (if only in relation to the contacts they have): the peasant has no relationship with lawyers to help her son practice law.

Becker puts forward the concept of social return which is a social increase over an increase in costs:

dR / dC = gains / costs = increase in income / increase in costs

For private return: gains: increase in income

                                          costs: schooling, registrations, transport, loss of earnings

For social return: gains: private gains + taxes

                                           costs: private cost + public cost

The Social Return Is Very Likely to Be Higher Than the Private Return.

In education, for each sector, the social return is higher than the private return, because more costs.

I.2- The limits of human capital.

I.2.1. Uncertainties in the relationship between training expenditure and earnings.

Productivity: VA / working time (production / unit of time).

→ training expenditure = I = increase in human capital → this productivity → increase in wages.

 

 

Teaching → learning → productive skills → remuneration

Uncertainty zones: A, B, C.

A: Does the training expenditure result in apprenticeship? The expense does not necessarily lead to access to education.

Didactic uncertainty: not all learn.

The expense therefore does not necessarily increase productivity.

B: Having received training does not necessarily lead to a job, so no increase in productivity. There are no productive skills if there is no job.

C: concerns the relationship between productive skills and earnings. On average, higher productivity, then more salary. But there are conditions:

The way the company is managed: on a human and technological level

Sales capacity problem: to remunerate its employees, the company must sell well, keep up with the competition. It must work well for people's productivity to be well valued, but it also depends on the market.

These areas of uncertainty show the limits of the BECKER model.

It is to consider education as a commodity. The demand is not a real demand because school is compulsory.

This commercial metaphor only has meaning for professional purposes. The closer we get to the professional purpose, the closer we get to choice, the more the market metaphor takes on its meaning.

For continuing vocational training, the metaphor is becoming more and more accurate so that one wonders who should pay: the public (State)? Or the private (business, private individuals)?

Note: it depends: the public for an unemployed person, the company to provide training for its employees. Workers can also participate in their training: take leave to train (law of May 2004).

BECKER: If the training only benefits the employer, it is he who pays (general training). If the training also benefits the person, then it is he who pays (specific training).

Becker is a neoclassical theorist, that is, he has a favorable aspiration to the market economy tuition. He is a micro economist, that is to say, he starts from the unit and goes to the whole. He believes that society is equal to the sum of the parts. It differs from macro economists who start from society and go to the individual.

 Social Performance and Externalists.