Scope of Economics of Education

Scope of Economics of Education is wide and dynamic. The subject matters of Economics of Education are drawn from both the Economics and Education disciplines. Basically the study of economics of education includes private and social rate of returns to education, human capital formation, relation between education and economic development, educational cost and benefits, educational planning, efficiency of education, cost effectiveness of education, education and equity etc. These are the essential areas to be included in economics of education. 

According to Hanson the subject matter of economics of education falls into seven categories as follows- 

• Human capital formation.

 • Education’s contribution to economic growth.

 • Impact of education on earning.

 • Historical analysis of economics of education.

 • Relationship between education and earning.

 • Programme budgeting and financing of education

. • Efficiency and equality of education as opportunity. 

Considering the above categories, we can further elaborate the scope of economics of education under the following points. 

1• Educational Cost: Educational cost is the major area of study of economics of education. The quality of education is highly influenced by the cost incurred on a particular level of education. Babalola in his definition refers to educational cost as a measure of what a student, an institution or the government has to give up in order educating an individual or a group of individuals. Educational cost is the monetary as well as non monetary values used up in the process of educating an individual or a group of individual. The subject matter of economics of education is incomplete without proper discussion of educational cost and its taxonomy. 

2. Funding pattern of Education:-The financing pattern of different levels of education is another major area of study of economics of education. The balance growth of education is highly dependent on the healthy educational finance. Economics of education suggests the effective ways of financing education. 

3• Educational Planning: Educational Planning refers to the application of rational, systematic analysis to the process of educational development with aim of making education more effective and efficient in responding to the needs and goals of its students and society. It is a system based exercise directed towards achieving certain physical targets and objectives set by a society within certain time frame in education sector. Educational planning is an important subject matter of economics of education. the details of educational planning is studied in economics of education extensively. 

4• Human capital formation: Another vital area of economics of education is the Human capital formation and its theoretical approach. Human capital refers to the stock of productive skills and technical knowledge embodied in human beings (labour) through education and training. It is regarded as the knowledge, expertise and productive capacities that a person acquired through educational training and which enable him/her function effectively and efficiently in the society. It includes the knowledge, skills, competences, and attributes embodied in individuals that facilitated the creation of social welfare. 

5• Investment in Education: Investment in education is another important subject matter of economics of education. The investment theory in education posits that government or individuals should invest in educational projects with greater utility or highest rate of returns. Theoretical framework of Investment in education has occupied an important place in economics of education.

 6• Cost benefit analysis (CBA) of Education: This is another concerned area of economics of education. CBA emphasizes a systematic comparison of the magnitude of the cost and benefits of some forms of educational investment in order to determine the economic profitability of such investment. It provides a rational model for investment decision making in education by relating the profitability of investment in one sector of the education enterprise to the other, or between various levels and types of education, such as vocational, professional, technical or general education. This content occupies an important place in economics of education as it guides the investment decisions in right direction. 

7• Rate of return in education: Returns to investment in education are the benefits derived by educational consumers as a result of their investments in education. The return of education can be of two types. These are private rate of return and social rate of return. By private rate of return we mean those benefits accrued to individuals at the end of schooling as a result of investment in education. The benefits derived by the government or society for an educational investment project is referred as social rate of return. Researchers have been conducted large number of research on rate of return of different levels of education, which ultimately enhances the scope of Economics of education.

 8• Efficiencies in education and signaling theories: Another concerned subject matter of economics of education is efficiencies of education and the impact of signaling theories. Efficiency in education generally refers to the capacity of an educational system to turn its products (students) out with minimum wastage. In other words, it refers to the ability of an educational system to achieve the desired output with a minimum application of inputs or resources. Efficiency in education can be internal and external. 

9• Relationship of education and economic development: Economics of education also discusses about the relationship between educational achievement an economic development. There is a direct relation between these two elements. Economic development can only be achieved with higher educational achievement, and in the reverse way, educational development is not possible without economic enhancement. In this way both economic development and education and complementary to each other.

 10• Demand and supply of education: The growth of education is highly influenced by the demand and supply factor of education. The demand for education is a function of price, utility and the ability of government and people to pay for it. On the other hand supply of education refers to the function of the fiscal strength of the government and private educational investors as well as the utility of education to the society. So, the balance between demand and supply of education is needed for balanced growth of education. 

11• Education and labour market: The linkage between education sector and industry is a major concern area of economics of education. Economics of education studies how education can create efficient and skill-full human resources to increase the productivity of labour force. Education has to be designed in such a way, as it cater the demand of labour market. 

12• Management of educational finance: Economics of education has to give a focus on the ways of managing educational finance at government as well as institution level. It should develop efficient and effective procedure of managing finance in educational institutions. 

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