Part V: Education Policy

Present Trends in Public Secondary Education in Western Europe
Education, Credentialling, and the Labor Market in the European Community: An Agenda for Research
The Study of Education as a Pariority
'Goodbye, Mr. Chips': A Proposal for the Abolition of the Lifetime Classroom Teacher
Academia in Anarchy
Private Education
OECD Reviews of Educational Policy
Education for Development
The Utility of Country Case Studies for Educational Planning
Educational Financing and Policy Goals

Source: Harold J Noah, review of George Psacharopoulos
and Maureen Woodhall.  Education for Development:
An Analysis of Investment Choices.  New York:
Oxford University Press (for the World Bank), 1986,
in Economic Development and Cultural Change 36 (1988):
415-419.  Reprinted by permission of the World Bank.

EDUCATION FOR DEVELOPMENT

Education is big public business all over the world. Although substantial private resources are spent on education (especially on training), the private share of educational expenditures is very much smaller than the public in virtually all countries. The dominance of public funding is usually justified by reference to the large external benefits said to be generated by education. It is argued that, left to private financing, individuals and families would severely underinvest in education, from the point of view of a socially optimum level. Be that as it may, large-scale public expenditures on education are also capable of generating economic problems. For example, protected from the pressures of fee-paying clients, public school systems can (and do) continue quite happily for decades to offer curricula that have little current economic value. They can (and do) underwrite primary school structures that waste large sums of money on grade 1 entrants who will drop out of school after a year or two, well before basic literacy is attained. On each year of university education they can (and do) cheerfully spend 20, and even 30, times the money spent on a primary school place. They continue to do this in spite of the mountain of evidence that the social rate of return to higher education is often only a half or even a third of the rate of return to primary schooling. These are only some examples of the obstinately uneconomic public policies in education documented in this volume. In addition, the authors explain and illustrate the various techniques of economic analysis used by economists to diagnose the problems and form the basis for helping government agencies to mitigate or avoid them.

The book concentrates on the less industrialized nations and draws heavily on the results of research funded by the World Bank. The bank's interest in these matters springs from its increasing recognition that national economic development proceeds best when investment in physical capital is complemented by an appropriate development of the human capital stock, of which education and training form a large part. Hence, the bank has been willing to revise its earlier policy of restricting loans to programs of physical capital development. The first World Bank loan for educational development was made in 1962, and the authors note that since that date there has been commitment of "over $85 billion in about 260 projects in more than 90 countries" (p. 4).

Separate chapters are devoted to cost-benefit analysis, manpower demand and educational supply, private demand for education, computing the costs of education, estimating the efficiency of educational operations, considerations of equity, and links between education and other important human capital sectors (health, fertility, and agricultural productivity). The strength of the book lies not in any major new insights that are offered but in its provision of a comprehensive, excellently documented review of the relevant research and policy-oriented literature. The authors have produced a well-organized, authoritative volume that will serve well the needs of teachers, students, educational administrators, and policymakers. It is likely to be consulted frequently by all of these, as well as by scholars, with profit.

There are two large questions to be answered by a book with the title Education for Development. Are there important connections between investment in education and economic growth and development? And, if there are, how do they work? The authors cite evidence that education (especially in the poorer countries) contributes directly and indirectly to economic growth via higher levels of labor and capital productivity, higher incomes, improvements in health, lower fertility rates, and improvements in the "quality" of children.

In the heady days of the 1960s, economists and politicians joined in making highly optimistic forecasts of the benefits of educational expansion. Education was just one of the sectors that profited, along with international aid, the building of physical infrastructure, social services, and military expenditures, from the prevailing climate of public liberality. Just at this time, too, the concept of human capital was given theoretical and empirical content by a company of talented and prolific economists, among whom were Theodore Schultz, Gary Becker, Jacob Mincer, Mary Jean Bowman, Lee Hansen, and Burton Weisbrod in the United States and Mark Blaug and John Vaizey in England. Their work made it academically respectable to promote education as a good investment in the future earning power of today's students. In a world in which production is increasingly dominated by the impact of new technology, we have quite properly come to recognize education and training as necessary, though not sufficient, for economic advancement.

From the material presented by the authors, it becomes very clear that we have moved a long way from the fairly simplistic approaches that marked earlier thinking about the relationship between economic development and education. For one thing, the political climate for education has changed markedly. We live in a period of fiscal defensiveness, not least in the nonindustrialized economies. Just as education benefited from a previous period's liberality, it now suffers in today's tightfistedness. Even in the richer countries of the world, the cry is for a bigger and more certain return on money spent on education. The Thatcher government has brought British teachers in the maintained (i.e., state) schools to the brink of revolt, as the government continues to insist that even present levels of funding, let alone any increase, depend on the introduction of new structures and practices in the schools. Similarly, there is virtually open war between government and British universities on proposals to cut funding, reshape the pattern of higher education provision, and monitor performance. In France, the Socialist government elected with Mitterand soon beat a retreat from its initial promises of massive university growth, and the current Conservative administration of Chirac has introduced a budget for 1987's educational expenditures that is a monument of restraint. The same is true for the Federal Republic of Germany at both the federal and provincial levels, irrespective of political coloration.

In addition, in many countries governments have not been careful enough to arrange matters so that education avoids exacerbating social and economic inequalities. Urban dwellers too often are served at the expense of rural people; males study in the expensive technical branches of education more than females, thus getting more of the national resources for education spent on them, even if the overall enrollment ratios across the sexes are approximately equal; and, as in most other avenues of life, the rich enjoy a better deal than the poor. The authors cite evidence that modes of financing education, especially at the higher levels, may be perverse, with the poorer countries tending to pick up virtually all the private costs of education via outright grants to cover living expenses, travel, books, and so on, as well as charging either no tuition at all or fees set well below average costs. The result of such public generosity toward the relatively few who gain places in higher education is that private returns and social returns diverge markedly, with the latter well below the former. Demand for places in higher education expands well beyond the capacity of countries to provide it, and, as it is disproportionately the children of the well-to-do who succeed in the competition for university entrance, the student financing system ends by facilitating a politically (and even morally) undesirable transfer of tax resources from the relatively poor to the relatively rich. One of the strongest recommendations of the authors is that these systems of outright living grants and low tuition should be abandoned in favor of fuller-cost pricing and ample loan programs.

The authors are, however, properly cautious when it comes to most recommendations. The basic lesson they seem to want to convey is that there is no one recipe for successful educational investment, even if policy goals for education are clear and nonconflicting (which is rare, to say the least). Instead, the authors warn, "Because of the wide variety of benefits of educational investment and the diverse needs of different developing countries, no single formula can be applied to all countries or to all education projects" (p. 321).

Most of the economics of education proceeds on the basis of "macro"-level data and models. For example, attempts to relate forecasts of manpower requirements to educational and training supply programs, calculations of average national rates of return to different levels of schooling, and calculations of the impact and incidence of costs and benefits are all dealt with from a "macro" point of view. However, a substantial chapter of the present volume is devoted to an important "micro" aspect of the economics of education: the internal efficiency of the schools. Education consumes sizable fractions of GNP. In 1984, the figure given for the developing countries is 4.5%. Relative to the public budget, the share of education is even larger. The figure given is 16.1%, again for the developing countries. The importance of using resources for education efficiently is thus obvious -- at the same time that there are few systematic pressures on the schools to improve their efficiency. Indeed, much of the pressure appears to move the schools in the opposite direction: each teacher teaches fewer children; the children stay in school more days per year and have more years before graduation; subject matter splits into ever more refined slices of knowledge; and equipment becomes more costly. There is a lot of conflicting evidence about the relationship between higher unit costs in education and the outputs of the schools, so we are by no means certain that value for money is rising, at least in the industrialized countries.

As usual, the story is somewhat different for the poorer nations. On the one hand, it is clear from the evidence cited in the book that expenditures for books, paper, desks, and the other basic paraphernalia of schools are pitifully inadequate. The overwhelming share of the education dollar goes to pay teachers' salaries. Classrooms in which even the teacher has no textbook, let alone the children, are only too common. Such conditions argue strongly in favor of not only a reallocation of resources within the school system but also an overall increase in resources. On the other hand, the data cited show clearly that, measuring their educational "effort" by computing expenditures as a fraction of GNP, the poorer nations are making as much of an educational effort as is reasonable to expect. The dilemma posed by the combination of expenditure levels far below a minimum threshold needed for effective schooling and a level of financial effort that cannot easily be expanded from the side of public funding has presumably only one solution: broad-scale efforts to diversify sources of finance for education by incorporating even larger elements of private funding.

These are just some of the crucial questions of investment policy for education treated in this book. Equally valuable are the sections dealing with techniques of project appraisal in education. These techniques have not, in general, reached any very high level of sophistication (which is probably a good thing, given our rather weak understanding of the way in which education works), and the techniques described should be comfortably accessible to most planners and administrators in government and education.

In sum, I forecast a justifiably strong demand and long desk (as distinct from shelf) life for this admirably produced and most reasonably priced volume.