Tag Archives: schools

The Economics of Education: Can We Do Anything About It?


If someone told you that a child was sitting exams in subjects that would earn them collectively two thirds less income maximum than the child sitting next to them in the same class, what would your reaction be? Might you say that perhaps earned income wasn’t a fair measure for the value of education and that perhaps said child might be ‘rich’ in other ways? Perhaps you might say that the said child didn’t want a career in the subject area the child next to them did, or that they had qualities and strengths that made them excellent in a trade that just didn’t give the same financial rewards as the other child’s area of interest. Should it matter?

What if we also looked at the child’s future down the line to see their own future offspring’s opportunities. Might we see an eventual poverty gap between the family where less financially savvy choices had been made and the other family whose key earners had followed more lucrative paths? What then? C’est la vie?

What if we weren’t actually talking about just one child versus the child sitting next to them. What if we were talking about children going to school in one local authority area versus another? If you knew the future of your children would be more financially secure just by sending them to a school in a different area, would you send them there? Many would and do.

What if we weren’t talking about schools in one local authority versus another? What if we were talking about a whole country where it became known through evidence based analysis that educational attainment of children in that entire country showed lower levels of potential earned income than other countries? Would you send your child abroad? What if you couldn’t? Would you start lobbying parliament for change? Or would it not matter?

Does education that leads to eventual impoverishment and economic decline matter? Would you mind paying your taxes for that? Or should we not make comparisons about such end outcomes? Maybe we should stop comparing. Or would that make us ostriches with our heads in the sand? “But we are just different! We don’t need to be measured by those parameters!” I hear the defiant objectionist say.

What if you were able to use your high school algebra and geometry to analyse data pertaining to the economics of education that clearly showed that, for example, educational attainment and earned income were inextricably linked, and that you could make decisions based on this data to ensure that the financial futures of those impacted by those decisions would be made to be the best that they could be for generations to come? Would you have a punt and tweak things? Or would you leave things as they were, protectionist style? “As long as they are happy, that’s all that matters…”

One way you could explore the data is through microeconomics. Microeconomics focuses on the behaviour of individuals and organisations in making decisions about how resources are shared out and used, and the way those individuals and organisations interact.  Microeconomics is used to show conditions that lead to positive outcomes, and failures (failures meaning where the desired results aren’t reached). So, based on this kind of data then surely policy makers would’ve got it all right by now? Right? Wrong! Why? Because the individuals in the system aren’t all making rational decisions. Their choices are influenced by so many values that can change as quickly as their environments. Therefore, to really make the data meaningful, policy makers have to not only understand what or how individuals make choices, but also why they make them.

Microeconomics also sheds light on any monopolies, i.e. where there is a single supplier of a particular commodity (e.g. there’s only one Eton that sells Etonian education in the entire world – Eton have the monopoly on that). There’s only one, stable supplier, with no competition, and therefore there are high profits, leading to super profits over time. In educational terms, we could also compare this to Insead Business School in France, The London Business School in England, and other well-known and highly esteemed institutions globally. Their reputation has grown and the end outcomes have become so self-reinforcing over time (extremely high return on investment for those paying to be educated there) that it would take earth-shattering changes to knock them from their monopolistic peak.

Microeconomics also reveals oligopolies: where a market is dominated by a small number of sellers that create incentives for groups of similar organisations or suppliers to collude and for cartels that reduce competition. This then leads to higher prices for buyers and less market output (i.e. controlling and limiting supply to increase demand). The end result is that due to less competition there is massive profit. Any competition that does exist tends towards rapid product/service development innovation to gain market advantage through consumer driven, trending fads.  So, in the field of education you might get a global university ranking system where the highest ranked institutions become known as the ‘best’ and these collude to create a ‘rigorous’ set of ranking criteria and highly selective entrance criteria for students, making massive profits along the way. The massive profits lead to self-perpetuating greatness due to being able to attract the best staff and create the best facilities, attracting the best students and therefore delivering amazing outcomes in terms of attainment and student destinations. Those institutions lower down the ranking scale are left to compete largely via edu-fads, consumer driven trends and pricing. Poor Joe edu-consumer doesn’t stand a chance – he or she is destined to a life already clearly visible in the crystal ball of educational economics.

If you’ve got money, you go to the best places that money can buy, and you get a high return on your investment. If you don’t have money, you don’t. The poverty gap widens. It’s a feature of a market based capitalist system. The only way to solve this problem entirely is to get rid of any competition: hence socialist projects that have state controlled institutions. Maybe the United Nations could propose a global education framework that all countries have to subscribe to in order to try to bring the capitalist driven nature of market based education under control in order to reduce inequalities and close the gap.

If, as educational consumers, we were able to globally turn the tables on the suppliers and join forces as a consumer based ‘monopsony’ (where there is only one buyer in the market), maybe we would stand a chance against the global educational cartels and monopolies. But I guess those with money might not find this in their best interests. They’d probably prefer to keep the current system going where the rich get richer and the poor get poorer…