Mapping the Economics of Education

E conomics addresses a central social dilemma, how to allocate a scarcity of resources to a multiplicity of competing ends. Whatever the available resources of a society, there are always greater demands on those resources than can be satisfied. Education competes for resources with such other social priorities as health, transportation, defense, criminal justice, and private consumption. Economic analysis attempts to determine how to allocate resources to different economic and social activities to maximize social well-being. Using various economic criteria and analytic tools, it is possible to suggest the optimal size of the educational sector as well as the means for financing it. But, after resources are committed to education, questions remain about how they can most productively be used. Some allocations of resources within education are likely to produce greater results in terms of student achievement and other educational outcomes than their alternatives. Different types of education, such as vocational versus academic schooling, or different academic majors, have different impacts on both the costs of education and educational results. And, different approaches to the provision of education and to determining where resources are used can also affect the productivity of resource use. Economically efficient use of resources within the educational sector requires that they be allocated to maximize educational outcomes. Even small losses in efficiency can waste billions of dollars in an educational sector that is spending almost $300 billion a year, not to mention the waste of student time and the other human costs. Of all the disciplines that are represented in the educational research community, economics may be the least familiar to educational researchers generally. Few educational researchers have been exposed to the tools of economic analysis in their own training, and economists rarely prepare their research reports or articles for a nontechnical audience. The result is that economic research on education is often viewed as exotic, arcane, and outside of the mainstream of what is normally viewed as educational research. Of course, to economists, the economic analysis of education is a central necessity for good educational decisionmaking. Much educational research and policy is premised on assumptions about effectiveness or efficiency in resource use, but does not draw specifically upon economic analysis. That is, the economic problem is central, but the economic analysis is missing. It is a case of economics of education without economics. For example, virtually all of the recent calls for national educational reform predicate their arguments on the urgent need for the U.S. to be economically competitive with other nations. Yet, these reports neither provide careful economic analysis of how the reforms are related to economic productivity and competitiveness, nor do they draw upon the extensive research base connecting educational investments to economic productivity (Becker, 1964; Dean, 1984; Welch, 1970). The extensive quest for ways to improve schools' effectiveness is a second example of educational research in which economic analysis is crucial—but often missing. It is generally acknowledged among researchers and policy makers that school resources can be used more effectively to raise student achievement and other educational outcomes. A vast educational research enterprise has arisen to study teacher and school effectiveness and to compare potential interventions. But, without information on the costs of alternatives, it is not possible to estimate if these interventions will use resources more efficiently or less efficiently. Merely knowing that one potentially has a larger effect size than some alternative is not equivalent to having information on efficient resource use or a comparison of costs. We need to know both effects of alternatives to improve educational efficiency and their costs (Levin, 1983). This is a problem at the heart of the economics of education. School choice is a third example of a policy and research area that has economics content. Recent proposals for tuition tax credits, educational vouchers, and school choice have an indispensable, but neglected basis, in concepts that economists have studied for decades. In the private sector, economics is devoted to examining markets and market choice. These mechanisms underlie claims about the benefits of educational vouchers and tuition tax credits. In the public sector, economics is devoted to issues of public choice among alternatives (Hirschman, 1970), the mechanism that also underlies school choice approaches. But much of the research on the various aspects of school choice is completely devoid of economic analysis. If there is a major role for economics in educational research, why has it not been more prominent? There are several answers. Relatively few economists are found on the faculties of schools of education relative to the numbers of psychologists, sociologists, anthropologists, and ethnographers, and other representatives of the disciplines. A high proportion of the economists with interests in education work in economics departments and so are isolated from other educational researchers. Moreover, much of the literature on economics of education research is spread across economics journals, with only a very small propor-