Economic Factors Affecting the Financing of Education. National Educational Finance Project ...

381 Pages·2007·7.99 MB·English

DOCUMENT RESUME
ED 052 514
EA 003 537
80
Johns, Roe L., Ed.; knd Others
AUTHOR
Economic Factors Affecting the Financing of
TITLE
Education. National Educational Finance Project,
Volume 2.
National Educational 7Lnance Project, Gainsvi1le,
INSTITUTION
Fla.
SPONS AGENCY
Office of Education (DHEW) , Washington, D.C.
PUB DATE
70
NOTE
380p.
EDRS PRICE
EDRS Price MF-$0.65 HC- $13-16
DESCRIPTORS
*Economic Factors, Educational Demand, *Educational
Economics, *Educational Finance, Education Vouchers,
Expenditures, Federal Aid, *Financial Policy,
*Financial Services, Financial Support, Management,
Poverty Programs, Programing, Public Policy, Social
Factors, State Aid, Systems Analysis, Tax Support
IDENTIFIEFS
Elementary Secondary Education Act Title V, ESEA
Title V
ABSTRACT
Eleven articles on various aspects of educational
finance comprise this document, volume two of the NEFF, series. Volume
one of this series deals with educational needs, volume three with
educational planning and finance, and volume four with the impact of
educational finance programs. In general, the material in this volume
treats education as a product--subject to the constraints of supply
Find demand. Each article explores a factor or sets of factors
considered influential in determining the nature and types of future
educational services. Discussed are (1) the relative roles of public
and private financial support,
(2) the influence of the economy on
education,
(3) the influence of the social milieu on education,
(4)
the investment nature of education, (5) the limits of taxation
financing, and (6) the impact of educational objectives on
educational development. Related documents are ED 036 007, EA 003
536, EA003 538, and EA 003 673. Funds for this research were provided
by an ESEA Title V grant.
(RA)
Economic Factors
Affecting
of
The Financing
Education
Edited
by
Stollar
Johns - Goffman - Alexander -
U.S. DEPARTMENT OF HEALTH.
EDUCATION & WELFARE
OFFICE OF EDUCATION
REPRO-
THIS DOCUMENT HAS
DUCED EXACTLY AS REt.tIVED FROM
THE PERSON OR ORGANIZATION ORIG-
INATING IT. POINTS OF VIEW OR OPIN-
IONS STATED DO NOT NECESSARILY
REPRESENT OFFICIAL OFFICE OF EDU-
CATION POSITION OR POLICY.
Economic Factors Affecting
The Financing of Education
Edited by
111
CJ
ROE L. JOHNS, Project Director and
Lrt
Professor
Educational Administration
University of Florida.
IRVING J. GOVi'MAN, Chairman
Departraent of Economics
University of Florida
KERN ALEXANDER, Associate Project
Director and Professor
Educational Administration
University of Florida
DEWEY H. STOLLAR, Professor
Educational Administration.
University of Tennessee
1970
National Educational Finance Project
1212 S.W. 5th Avenue
Gainesville, Florida 32601
2
TABLE OF CONTENTS
CHAPTER 1
Page
FACTORS AFFECTING THE FUTURE DEMAND FOR EDUCATION
Kenneth E. Bouldiug
Professor of Economics
University of Colorado .
1
CHAPTER 2
THE HUMAN CAPITAL APPROACH TO EDUCATION
Theodore W. Schultz
Professor of Economics
Tie University of Chicago
29
.
CHAPTER 3
THE SOCIAL AND ECONOMIC EXTERNALITIES OF EDUCATION
J. Ronnie Davis
Associate Professor of Economics
Iowa State University
59
.
CHAPTER 4
EDUCATION AND ECONOMIC GROWTH
Mary Jean Bowman
Professor of Economics and
Education
The University of Chicago .
83
.
CHAPTER 5
ECONOMIC ANALYSIS OF INSTITUTIONAL ALTERNATIVES
FOR PROVIDING EDUCATION
(Public, Private Sector)
Charles S. Benson
Economist and Professor of
Education
University of California,
Berkeley
121
iii
CHAPTER 6
THE EFFECT OF DIFFERENT LEVELS OF EXPENDITURE ON
EDUCATIONAL OUTPUT
Henry M. Levin
Economist and Associate
Prof essor of Education and
Affiliated Faculty,
Department of Economics
Stanford University
173
. . . .
CHAPTER 7
THE EFFECT OF EDUCATIONAL SPENDING ON POVERTY
REDUCTION
Thomas I. Ribich
Associate Professor of Economics
University of North Carolina at
Chapel Hill
207
CHAPTER 8
FEDERAL, STATE, AND LOCAL RESPONSIBILITY FOR
FINANCING EDUCATION
Harvey E. Bremer
Professor of Economics
The University of Michigan .
235
.
CHAPTER 9
TAXPAYER CONSTRAINTS ON FINANCING EDUCATION
James M. Buchanan
Professor of Economics
Virginia Polytechnic Institute
265
.
CHAPTER 10
ALTERNATIVE TAX SOURCES FOR EDUCATION
John F. Due
Professor of Economics
University of Illinois
291
.
.
.
iv
CHAPTER 11
ANALYSIS IN A PPB SETTING
Selma Mushkin
Professor of Economics
Georgetown University
and
William Pollak
Ecoromist
The Urban Institute
329
NATIONAL EDUCATIONAL FINANCE PROJECT
Roe L. Johns, Project Director
Kern Alexander, Associate Director
Floyd Christian, Commissioner of Education
Florida, Administering State
PROJECT COMMITTEE
J. Alan Thomas
Edgar Morphet
University of California
University of Chicago
Berkeley
James A. Kelly
Erick Lin dman
Columbia University
U.C.L.A.
William Mc Lure
University of Illinois
ADVISORY COMMITTEE
James E. Gibbs
Jean Flanigan
National Educational
U. S. Office of Education
Association
Henry Cone
Will Myers
Education Commission of the Advisory Commission on
States Intergovernmental Relations
PROGRAM ADMINISTRATORS
U. S. Office of Education
Harry L. Phillips
James E. Gibbs
David Phillips
Financed by Funds Provided Under the
Elementary and Secondary Education Act
of 1965 (Public Law 89-10, Title V, Sec.
505) and Sponsoring States.
vii
6
Preface
What will really be important in determining education
output in the 1970's? That is the question which this collection
of papers has attempted to explore. The process necessitated an
its
examination of the total economic nature of education
industrial structure and organization, its techniques of produc-
tion, and its eventual products. Further, it called for an investi-
gation, imaginatively presented by Kenneth Boulding in Chapter
1, into the determinants of the effective demand for education
in the years ahead, a question which required some speculation
over the "needs" and desires, as well as the willingness of the
community to bear the costs.
Though not unique, education does exhibit enough special
characteristics to warrant special analysis. Theodore Schultz
recognized this more than a decade ago when he first began
focusing attention upon the investment character of education.
With the advent of the human capital concept, researchers
have steadily applied to this resource many tools of analysis
formerly restricted to physical capital. Perhaps most im-
portant, the human capital concept introduces a time dimen-
sion into the analysis and directs one toward an examination of
the lifetime flow of income (or output) resulting from educa-
tion. Such an approach provided the basis for regarding educa-
tion as an investment with all the usual qualities of such an
economic concept. Rate of return analysis, impact on produc-
tivity and incomes of particular groups, and effects on the na-
tion's economic growth are some of the measures which result
fre-a the widespread adoption of this idea so closely linked
Professor Schultz. The papers included here by Professor
.ss,i
7
Schultz himself, as well as those of Thomas Ribich, Mary Jean
Bowman, Selma Mushkin and Wil1h.m Pollak, and Henry Levin,
more or less depend upon the nonconsumption characteristics
of educational output.
But, however important it is to recognize the investment
quality, it is just as vital to note that education is not just
another investment good. Unlike most others, it provides bene-
fits in the short and long runs to varying numbers of individuals
over and beyond the income and other advantages enjoyed by
the student himself. What economists refer to as "externalities"
or spillovers, described by J. Ronnie Davis in Chapter 3, are
responsible for much of the "economic" problem associated with
the provision of this commodity and also eventually with the
fiscal question. Because there are important effects upon the
nonstudenthis family, community, and societyof varying
quantities and types of education offered the student, these other
beneficiaries muot be given due consideration in the process of
allocating resources to this industry. But the market simply
cannot take these externalities into consideration and so some
nonmarket institutional arrangements must be introduced, as
indeed has been the case. In order to carry out the need for a
collective decision as contrasted with the typical private deci-
sion, governments have become actively involved in decision-
making in education, mainly as primary producers via the public
school system. However, there has been much consideration
given to various alternative institutional arrangements where
the private sector is more involved in the actual delivery of the
output. C. S. Benson discusses these alternatives extensively
in Chapter 5 as do Mushkin and Pollack in Chapter 11, and, to
some extent, Levin in Chapter 6.
But in the final analysis, whatever the production arrange-
ment used, there is still the ultimate question of financing this
output. Unless this is simply left completely to the private
sector, thereby ignoring all those economic and social manifests.-
tions which make education somewhat different from most other
goods and services, we will have tt rely some upon the public
purse- But whose purse? What level of government should
provide the funds and on what basis should those funds be col-
lected? Harvey Brazer in Chapter 8 and John Due in Chapter
10, respond to these questions. But what they suggest to be
equitable and efficient must be tempered to reflect political
reality. In Chapter 9 James Buchanan presents an extremely
provocative essay on the current attitude of taxpayers, and
focuses especially on the factors which may have had much to
do with shaping these attitudes in the years ahead.
This volume does not present a simple solution to the prob-
lems of financing education. Economists, and especially those
dealing v,ith normative questions, are too independent and
individualistic and creative to permit any simple generalization.
The differences observed in this volume bear this out clearly.
Yet in one sense it is only because these differences are so
clearly in evidence here that the volume may be received as
an
important contribution. The controversies in public finance in
general and in educational finance in particular are real and
crucial. To move forward in this field we will have to resolve
them, but to do so we will first have to recognize them.
Irving J. Goffman