Education as consumption
Over at Econlog, Bill Dickens is trying to convince Bryan Caplan that signaling does not explain the majority of the value of higher education. Two of his reasons why education is productive are that is has a value as a consumption good, and as consumption capital:
2. Education is consumption good. This should be self explanatory. At the margin school may be work, but infra-marginally at least some (if not most) people actually enjoy the reading, the lectures, the homework, etc.
3. Education is not just investment in work capital; it’s also an investment in consumption capital and social capital. I feel much more at home in the world due to the fact I understand certain cultural references… The shared culture produced by the education experience expands our common language with a lot of meaning, and that produces huge network externalities. Knowing history does help me do my job, but it is much more important that it allows me to make analogies that will be understood by acquaintances.
For the first thing this is a terribly regressive subsidy, primarily benefiting people with above average ability and wealth. Second, if the goal is to increase “social capital” for consumption purposes this is probably the least efficient way to do it. The money would be better spent subsidizing high-minded TV shows that make audiences more literate and cultures, or providing grants for creating and broadcasting informative documentaries or books that are catered towards people who normally wouldn’t watch them or read them. You would almost certainly generate more consumption capital and welfare by providing free subscriptions to the New Yorker ($40) for 175 households than a year in college ($7,020) for one person, and it would cost the exact same.
I’m not defending the signaling theory, Bill Dickens’ theory, or any other theory of education as a matter of fact. But proponents of more education investment should not look to Dickens’ criticisms of the signaling theory education, because even if he is right education is still way over subsidized.
Education: consumption good or an investment good?
My seventh grade English teacher was a hippie whose spirit forever remained in the 60s. He had us listen to vinyl records in the classroom and write analytical essays about the songs of Simon and Garfunkel. Despite being a part of our nation’s educational institution, he often ranted and raved against it. He challenged us to think beyond our roles as students chugging along in the massive factory called school.
Why are you here at school? Are you here because you have to be here or because you want to be here?
Why do you strive for good grades? Do you care to learn? Or is it so you can get into a good college, so that you can get a good job, and then work for The Man?
Why not learn for the sake of learning?
I’m not sure that I understood why my teacher felt so impassioned against The Man, but the idea of learning for its own sake struck a chord with me. Learning in all of its forms was fun. It enriched my mind. It was an endless source of happiness, because there was always more to learn. I was exposed to a myriad of subjects in school that I would have never otherwise encountered. All these topics were beautiful and fascinating. Now certainly, school does not have the monopoly on education. Just by interacting with others, I learned about human nature. Just by looking out the window, I learned about changing seasons. Both in and out of school, I was learning something all the time.
As I have described it, education is consumption good. Now, what do I mean by that?
I love to learn just for the sake of learning. I love the act of learning, in and of itself. The knowledge doesn’t have to be useful. Many students often bother their math teachers with, “Why do I have to know trigonometry? When am I ever going to use this again?” For me, I’m sure to forget what I learn, so the usefulness of what I learn isn’t relevant to my enjoyment of learning. And even though what I learn may never be useful, I still love to learn. I enjoy the intense focus, the mental exercises, and the challenges. I love the feeling of confidence and pride when I master a new skill. There is nothing in the world like discovering a new way of seeing the world, that lightbulb moment, when all of your thoughts come together towards a simple and elegant conclusion.
This is how education is a consumption good for me. I get positive units of happiness just by the consumption of education.
But for many in the world, education is not thought of as a consumption good, it is often considered an investment good. Policy makers ask, “What are the returns to a four year degree? Is it worthwhile for the federal government to subsidize the interest on student loans?” Recent college graduates ask, “What are the returns to a master’s degree? Is it worth it?” When people ask the question, “Is it worth it?”, they are trying to figure out whether plopping down some $100,000 and years of their life will yield a greater monetary reward. How much more do you make with a Master’s degree? Some argue in favor of graduate school, while others argue against it. But when they take their stances, they all view education as an investment good, and investment good alone.
When people think of investment goods, they usually think of stocks and bonds. You buy stocks and bonds not because you actually get any happiness from buying it, but you anticipate getting all of that money back plus a 10% return next year. The same is true for education. Those with a four-year bachelor’s degree earn on average $20,000 more annually than those with only a high school degree. Over the course of a lifetime, that adds up to quite a lot of additional money, making the college investment worthwhile.
It’s useful to ask yourself whether or not you think of education as a consumption good or investment good, especially if you are grappling with the decision of whether or not to take on additional schooling.
For me, education is a consumption good. Even without a return on the money and time invested, I would have pursued my graduate studies. And I think this is largely true for most of people who pursue Ph.D.’s. Certainly, not all. But most. You have to be somewhat crazy to pursue a Ph.D. You have to love it for its own sake, because the return is not high. Those with professional degrees earn more than those with doctorates.
To figure out whether or not you view education as a consumption good or an investment good, ask yourself the following questions:
· Do you learn for the sake of learning? Or do you learn, so that you can produce something from what you learned?
· Does it matter to you whether what you learn is useful in the future?
· Do you expect to earn substantially more as a result of another degree?
· Is there a particular job or occupation you strive towards and education is just a means to your end?
· Do you hope that education will open more doors for you?
· What do you want to get out of more education? Are you hoping to earn more money? Get a better paying job? Earn the respect of your parents? Or just explore the views of this world?
I’d bet for most people education is a little bit of both types of goods. But if education is mainly a consumption good for you, then I’d say, go ahead and pursue that next degree. Don’t worry yourself about whether or not you get a return on your investment, because maybe it’s not really an investment anyways.
Education as a profitable investment
EDUCATION is one of the most important factors which contribute to poverty alleviation. Education plays an overarching role and makes a huge impact on all aspects of life. It is a profitable investment on human and economic development.
While the literacy rate has improved, Pakistan’s indicators on this front continue to rank at the bottom of global rankings.
Within the region, only Bangladesh has a worse record on both indicators, spending by the public sector as well as the literacy rate.
Investment in education is, by and large, considered vital in Pakistan and it is an important factor in promoting peace. One in every 10 of the world’s primary school going age children who do not attend school, lives in Pakistan. It makes Pakistan one of the top two countries in the world with largest number of children who do not go to school.
Only 23 per cent of Pakistan’s youth are enrolled in secondary school. With half of the country’s population under the age of 17, this pitiable state of education is a noteworthy economic and security liability. Increasing education is likely to diminish Pakistan’s risk of conflict as cross-country estimates show that increasing educational attainment is strongly correlated with conflict risk decline.
There is a dire need to stimulate countrywide dialogue on the need to priorities educational investment and progress.
Pakistan, like other developing countries, is littered with school buildings waiting for teachers to be posted and students to attend. In fact, much focus has been placed on inputs such as school buildings and far too little on the improvement of the teaching methods and learning process.
Education reform must, therefore, be a higher priority for all stakeholders interested in a more nonviolent and stable
Pakistan. Debate within the country on education reform should not be left only to education policymakers and experts.
There must be a dialogue about how to better the security. The price of ignoring Pakistan’s educational challenges is simply too great in a country where half the population is under 17.
MUNIB-UR-REHMAN
Lahore
Over at Econlog, Bill Dickens is trying to convince Bryan Caplan that signaling does not explain the majority of the value of higher education. Two of his reasons why education is productive are that is has a value as a consumption good, and as consumption capital:
2. Education is consumption good. This should be self explanatory. At the margin school may be work, but infra-marginally at least some (if not most) people actually enjoy the reading, the lectures, the homework, etc.
3. Education is not just investment in work capital; it’s also an investment in consumption capital and social capital. I feel much more at home in the world due to the fact I understand certain cultural references… The shared culture produced by the education experience expands our common language with a lot of meaning, and that produces huge network externalities. Knowing history does help me do my job, but it is much more important that it allows me to make analogies that will be understood by acquaintances.
For the first thing this is a terribly regressive subsidy, primarily benefiting people with above average ability and wealth. Second, if the goal is to increase “social capital” for consumption purposes this is probably the least efficient way to do it. The money would be better spent subsidizing high-minded TV shows that make audiences more literate and cultures, or providing grants for creating and broadcasting informative documentaries or books that are catered towards people who normally wouldn’t watch them or read them. You would almost certainly generate more consumption capital and welfare by providing free subscriptions to the New Yorker ($40) for 175 households than a year in college ($7,020) for one person, and it would cost the exact same.
I’m not defending the signaling theory, Bill Dickens’ theory, or any other theory of education as a matter of fact. But proponents of more education investment should not look to Dickens’ criticisms of the signaling theory education, because even if he is right education is still way over subsidized.
Education: consumption good or an investment good?
My seventh grade English teacher was a hippie whose spirit forever remained in the 60s. He had us listen to vinyl records in the classroom and write analytical essays about the songs of Simon and Garfunkel. Despite being a part of our nation’s educational institution, he often ranted and raved against it. He challenged us to think beyond our roles as students chugging along in the massive factory called school.
Why are you here at school? Are you here because you have to be here or because you want to be here?
Why do you strive for good grades? Do you care to learn? Or is it so you can get into a good college, so that you can get a good job, and then work for The Man?
Why not learn for the sake of learning?
I’m not sure that I understood why my teacher felt so impassioned against The Man, but the idea of learning for its own sake struck a chord with me. Learning in all of its forms was fun. It enriched my mind. It was an endless source of happiness, because there was always more to learn. I was exposed to a myriad of subjects in school that I would have never otherwise encountered. All these topics were beautiful and fascinating. Now certainly, school does not have the monopoly on education. Just by interacting with others, I learned about human nature. Just by looking out the window, I learned about changing seasons. Both in and out of school, I was learning something all the time.
As I have described it, education is consumption good. Now, what do I mean by that?
I love to learn just for the sake of learning. I love the act of learning, in and of itself. The knowledge doesn’t have to be useful. Many students often bother their math teachers with, “Why do I have to know trigonometry? When am I ever going to use this again?” For me, I’m sure to forget what I learn, so the usefulness of what I learn isn’t relevant to my enjoyment of learning. And even though what I learn may never be useful, I still love to learn. I enjoy the intense focus, the mental exercises, and the challenges. I love the feeling of confidence and pride when I master a new skill. There is nothing in the world like discovering a new way of seeing the world, that lightbulb moment, when all of your thoughts come together towards a simple and elegant conclusion.
This is how education is a consumption good for me. I get positive units of happiness just by the consumption of education.
But for many in the world, education is not thought of as a consumption good, it is often considered an investment good. Policy makers ask, “What are the returns to a four year degree? Is it worthwhile for the federal government to subsidize the interest on student loans?” Recent college graduates ask, “What are the returns to a master’s degree? Is it worth it?” When people ask the question, “Is it worth it?”, they are trying to figure out whether plopping down some $100,000 and years of their life will yield a greater monetary reward. How much more do you make with a Master’s degree? Some argue in favor of graduate school, while others argue against it. But when they take their stances, they all view education as an investment good, and investment good alone.
When people think of investment goods, they usually think of stocks and bonds. You buy stocks and bonds not because you actually get any happiness from buying it, but you anticipate getting all of that money back plus a 10% return next year. The same is true for education. Those with a four-year bachelor’s degree earn on average $20,000 more annually than those with only a high school degree. Over the course of a lifetime, that adds up to quite a lot of additional money, making the college investment worthwhile.
It’s useful to ask yourself whether or not you think of education as a consumption good or investment good, especially if you are grappling with the decision of whether or not to take on additional schooling.
For me, education is a consumption good. Even without a return on the money and time invested, I would have pursued my graduate studies. And I think this is largely true for most of people who pursue Ph.D.’s. Certainly, not all. But most. You have to be somewhat crazy to pursue a Ph.D. You have to love it for its own sake, because the return is not high. Those with professional degrees earn more than those with doctorates.
To figure out whether or not you view education as a consumption good or an investment good, ask yourself the following questions:
· Do you learn for the sake of learning? Or do you learn, so that you can produce something from what you learned?
· Does it matter to you whether what you learn is useful in the future?
· Do you expect to earn substantially more as a result of another degree?
· Is there a particular job or occupation you strive towards and education is just a means to your end?
· Do you hope that education will open more doors for you?
· What do you want to get out of more education? Are you hoping to earn more money? Get a better paying job? Earn the respect of your parents? Or just explore the views of this world?
I’d bet for most people education is a little bit of both types of goods. But if education is mainly a consumption good for you, then I’d say, go ahead and pursue that next degree. Don’t worry yourself about whether or not you get a return on your investment, because maybe it’s not really an investment anyways.
Education as a profitable investment
EDUCATION is one of the most important factors which contribute to poverty alleviation. Education plays an overarching role and makes a huge impact on all aspects of life. It is a profitable investment on human and economic development.
While the literacy rate has improved, Pakistan’s indicators on this front continue to rank at the bottom of global rankings.
Within the region, only Bangladesh has a worse record on both indicators, spending by the public sector as well as the literacy rate.
Investment in education is, by and large, considered vital in Pakistan and it is an important factor in promoting peace. One in every 10 of the world’s primary school going age children who do not attend school, lives in Pakistan. It makes Pakistan one of the top two countries in the world with largest number of children who do not go to school.
Only 23 per cent of Pakistan’s youth are enrolled in secondary school. With half of the country’s population under the age of 17, this pitiable state of education is a noteworthy economic and security liability. Increasing education is likely to diminish Pakistan’s risk of conflict as cross-country estimates show that increasing educational attainment is strongly correlated with conflict risk decline.
There is a dire need to stimulate countrywide dialogue on the need to priorities educational investment and progress.
Pakistan, like other developing countries, is littered with school buildings waiting for teachers to be posted and students to attend. In fact, much focus has been placed on inputs such as school buildings and far too little on the improvement of the teaching methods and learning process.
Education reform must, therefore, be a higher priority for all stakeholders interested in a more nonviolent and stable
Pakistan. Debate within the country on education reform should not be left only to education policymakers and experts.
There must be a dialogue about how to better the security. The price of ignoring Pakistan’s educational challenges is simply too great in a country where half the population is under 17.
MUNIB-UR-REHMAN
Lahore
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