Economics Of Education: Concept Need And Importance

Economics Of Education

What is Economics?

Economics is a social science that studies how society chooses to allocate its scarce resources, which have alternative uses, to provide goods and services for present and future consumption.

Economics as a social science subject concerns itself with making choices and finding alternatives. It studies how society decides what, how and for whom to produce goods and services.

Concept of Economics of Education

  • Economics of Education as an area of study cannot be said to be a separate field of inquiry that is totally different from the ordinary economics.
  • Economics of Education is the application of Economic principles, concepts, and lawsto the process of Education.
  •  Economics of education studies human behaviour (in terms of human decisions), action and reaction about schooling. It further looks into how human behaviour affects economic development.
  • Economics of education is one of the branches of ordinary economics, though, it is the study of how educational managers make official or approved choices from scarce available resources which is meant for the realisation of the best possible educational outcomes.
  • Economics of Education employs the use of some elementary concepts commonly used in labour economics, public sector economics, welfare economics, growth theory and development economics.
  • World known classical economists like Adam Smith, Alfred Marshall, John Stuart Mill had discussed education and development extensively, advocating for public investment in education. So, by the 1950s, economists gave attention to issues such as the relationship between education and economic growth; relationship between education and income distribution and also the financing of education.

Definitions of Economics of Education

The economics of education is a rapidly growing and evolving field that applies a diverse array of economic theories, models and quantitative methodologies to understand, analyse and improve the performance of education systems.

Oxford Bibliograpy

Education economics or the economics of education is the study of economic issues relating to education, including the demand for education, the financing and provision of education and the comparative efficiency of various educational programs and policies.


Need of Economics of Education

1) Villagers to not send their children to primary schools despite the provision of free primary education. Failure of compulsory primary education programme is largely due to the lack of proper responses from these people. This is because people know that opportunity cost of primary education is higher than that of other activities. For the same reason of high opportunity cost of primary education the dropout rate of children of poor farmers is found to be higher.

2) High opportunity cost of education is one of the factors preventing from the full use of the concessions under prospective discriminatory measures in education, so far the scheduled caste and scheduled tribe people are concerned.

3) Since the various concessions and benefits of increasing education expenditure have been accruing to the richer than to the poorer people and since richer people are politically more influential, larger expenditures on education are made on higher education. Education expenditure are a more definite and a subtler form of benefiting a particular group in the society, without causing any open resentment be others. It is for this reason that expenditure on higher education in our country has been increasing much faster than expenditure on school education. This is so because higher education by and large benefits the richer and upper income more than the poor and low income group people. It is for the same reason expenditure on education in urban areas has been rising than in rural areas.

4) Expenditure of larger economics benefits from surer that employment and larger earnings – from education is the main reason for greater rush of students to professional colleges.

5) Since general school education is preferred for admission in colleges and since employment and earnings are less attractive for technical schooling there is overcrowding in general schools that in technical schools.

Importance of Economics of Education

As economics deals with planning, financing and appropriate utilization of resources and basic education is the fundamental right to all in India; it becomes very essential to equate the available resources. Majority of economists and educationists of our country are now prepared to accept the need and importance of the subject for the following specific reasons :

1. Health and productivity: The low productivity of many workers in various countries is directly attributable to their poor physical state. This in turn depends to a considerable extent on the type of education that the workers receive.

2. Rising Cost: The proportion of national income spent on education has increased in the recent years.

3. Shortage of Skills: It is a common belief that a shortage of skills holds back economic growth. An effective education plan must be based on the needs of skill manpower of all sorts. An unplanned system of education results in unemployed persons 107 and deprives the nation of their contributions to the growth of national income. Thus the specialized role of manpower forecasting brings the economics of education into prominence.

4. Technological Transformation: The basis of the technological transformation of the world economy can be found in the accumulation of knowledge.

5. Demand of Scarce Resources: Education can be made cheap in the developing countries in the sense that there is a superabundance of manpower which can be harnessed very conveniently. Education thus makes limited demands on the scarcest resources of the country. The under developed countries are short of physical and sometimes of natural resources. This implies that the use of abundant supply of manpower and its endowment with skills is likely to be one of the major objectives of any programme, planning, financing through the understanding of economics of education.

6. Secondary Industries: As individuals becomes richer the proportion of their income devoted to food and other basic necessities drop. The amount they spent on health, education etc. rises.

7. Extra ordinarily high monetary cost of education: Education in the developing countries is most prominently poorly administered, lacking in planning and coordination. And one of the most striking features of education reform in the poor countries has been their extra – ordinarily high monetary cost.

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