The Economics of Education
reviewed by Charles L. Skoro - 1981
Educators and economists have known for some time that learning about one's language, history, and culture and gaining a worthwhile skill can be expensive and time-consuming. They have known that the amount of time available in a day or a week or a lifetime is limited. They have known that those with more schooling and other sorts of training earn more on average. They have known that schools can be run poorly or well. But the full force of such knowledge and other equally obvious bits of information seems not to have hit the economics profession until the late 1950s and the 1960s. It was around then that one started. hearing the term "human capital" and there was talk of the "human investment revolution in economic thought"-a revolution that has had and will continue to have implications for education.1
The early work of the "revolution" was devoted largely to examining the differences in lifetime earnings among people with different amounts of formal schooling and the costs associated with those different levels of schooling. Researchers found that the earnings-costs relationship looked much like the relationship between investment costs and income experienced by those who made business investments. Further, it was found that the lifetime pattern of earnings characteristic of American workers conformed quite closely to what would be expected if individuals "invested," especially during early working life, in training on the job. Thus there arose more than a strong suspicion that schooling, on-the-job training, and, eventually, many types of human behavior (including marriage, divorce, child rearing, and even criminal activity) can be explained at least in part by economic investment and allocation theories-theories that were originally constructed to explain only business and consumer behavior.2
The common thread that linked these seemingly distant areas of individual, family, and social decision making was scarcity. However, economists no longer directed their gaze at scarcity of physical resources alone but at scarcity in general-especially scarcity of time, but also of talent, opportunity, and even of marriage partners. The school, which is granted the use of tremendous amounts of children's and adults' time and of society's other resources to accomplish the inculcation of knowledge, social and production skills, and attitudes, ends up squarely in the center of this economic analysis. It serves as a major supplier of training services, a sorting mechanism allocating students to occupational tracks, a place where unsuspected talent can be discovered (or buried). It serves, in this paradigm, as a hotbed of capitalist investment activity in which all who attend participate, whether they are workers or entrepreneurs, whether they live in a capitalist or a socialist society.
That such an analytical system arose precisely when it did is certainly more than mere coincidence. The civil rights movement and the related emphasis on social mobility along with the emergence of a large number of newly independent and rapidly changing countries craving economic growth and social and cultural change made urgent the closer study of those human factors important to development. Nor has the recent concern with the efficiency of schools escaped economists' notice. Having brought capital theory with few modifications to the study of schooling decisions, and having transported supply-and-demand theory, complete with "hog cycles" from agricultural economics, to the study of the earnings of highly schooled individuals, economists were ready with a production theory to study the provision of school services. Terms like "outputs," "inputs," and "production function" have invaded the educational literature.3
Unfortunately, while educators have been struggling to learn the elements of a new vocabulary so they will at least know for what they are being congratulated or condemned, economists have not been terribly concerned with making their work accessible to nonspecialists. Anyone without an economics background is forced to seek understanding of this comparatively new area of research in works that attempt to summarize, digest, and simplify-two examples of which are reviewed here.
Cohn's book starts its substantive work with a discussion of the place of education in the thinking of economists from the time of classical economics until the blossoming of the human capital theory and manpower planning approaches in the 1950s and 1960s (chap. 2). It continues with a. consideration of research on the private and social costs and benefits of schooling (chaps. 3-6), education and economic growth including educational planning for growth (chaps. 7 and 11), the productivity of schools (chap. 8), determinants of teachers' salaries (chap. 9), and the equity implications of various school finance mechanisms (chap. 10). There are a great many studies discussed, and each chapter concludes with a "literature guide" in which further works are cited. The book concludes with an extensive and up-to-date bibliography.
This work is clearly the best and most complete review of the literature available. The number of articles cited is truly breathtaking, and the discussions and explanations arc never less than competent and are often insightful. Such qualities make the book invaluable to someone who needs to be brought up to date quickly or who needs a good bibliography in a particular area.
The book's greatest weakness is its failure to provide adequately a context in which the array of theories and studies can be placed. Reading the book straight through is rather like being the guest of honor at a bombardment. It finds its principal value, for that reason, as a reference work rather than as a presentation of the field in a manner cohesive enough for an untutored outsider to make much sense of. The more or less modular nature in which the book is written-no chapter depending much on material presented in others-suggests that Cohn intended that it be used by people with an interest in only one or two chapters. It should serve such a person well.
The Benson book is of a somewhat different genre and recalls an earlier day and a somewhat older definition of economics of education. There was a time, before the development of human capital theory and the current emphasis on efficiency of schools, that "economics of education" meant "school finance." Work in the field tended to be descriptive and often bordered on the inspirational. Charles Benson is credited with helping to incorporate economic analysis into the study of finance and other educational questions, but his book, even in its latest edition, inserts only one foot into the new analytical world he helped create.4 Benson devotes four of his twelve chapters (9-12) specifically to descriptions of school finance methods and aid formulae and often lapses into short sermons on equity in provision of schooling in the other chapters as well. Other research topics considered include the relationship between formal schooling and economic growth (chap. 3), costs and benefits of schooling (chap. 4), problems of providing public services that are responsive to consumer wishes (chaps. 5 and 6), and efficient operation of schools (chaps. 7 and 8).
Benson writes his book for "school administrators, students of school administration, teachers, and other professional workers in education," and his targeting on this audience undoubtedly helps to explain his choice of topics.5 He is more frankly instructional than Cohn, and the book includes a substantial amount of material similar to that found in standard undergraduate economics textbooks. He is less concerned than is Cohn about covering every possible study and thus saves more space and energy for developing the context of his arguments. Lessons on economics concepts are competent and the importance of such concepts in analyzing schools and students is made clear.
Both books make an important contribution to the understanding of the schooling system as presently constituted. From a wider perspective, however, neither of these books provides much comfort for those who worry about the relationship between researchers and the people and institutions they study. In his review of an earlier version of the Cohn book, E. G. West cites a rather crusty observation by Ludwig von Mises to the effect that those who need qualifiers like "agricultural," "transport," or (by implication) "educational" along with "economist" are "not really economists at all but spokesmen or apologists for the industries in question."6 One craves a fuller recognition of the fact that schools compete with other social agencies and industries for society's resources; that an increase in school budgets or in the social or economic status of school personnel may not always be desirable; that excessive concentration of attention and resources on schools can hamper social development and the progress of education broadly conceived.