Determinants of Social Demand for Education

Certain levels of education like the secondary school and graduate level are considered as having productive value and are attributed with money measures through salary/emolument/wages derivable by the employment market. The salary paid need not be strictly an appropriate money measure of educational levels.

There are other considerations such as the unemployment rates among the  educated, substitutability of labour, discriminatory wage policies, relative marketability of products etc. Keeping aside these reservations, it is noted that expenditure on secondary and higher education is a form of investment. If it is made by private agencies, trusts and corporations it will be private investment. If it is made by the state, it is public investment. There are many institutions of education both at secondary  and higher levels which are initially set up through private enterprise but later brought under state patronage. Such institutions are referred to as private aided institutions in contrast to private unaided or self financing institutions.

Both private aided institutions and the government institutions fall under the umbrella of state subsidies. Several issues arise in regard to the state subsidisation of higher education. Can the expenditure by the state be considered as an investment avenue or a subsidy? If it is an investment then what considerations should weigh uppermost in the state’s calculus on expenditures for higher education? What is the role of the state vis a vis the private enterprise in investments in higher education? Is the state guided by purely economic considerations or by political economy in such investments? How can the state’s participation be optimally maintained in the context of overall objectives of a nation-building effort? Answer to these kinds of questions merit consideration in the context of public investment in education. Prof Richard A. Musgrave identifies three principles which guide public investments in education.

They are:

1. Equity,
2. Economies of Scale and
3. Externalities.