Education and development

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Education and development


Effect of education on economic development

Economics has been defined as the science of man in relation to
‘Getting money’ and ‘spending money’ activities. related to the desire


1. Anything that satisfies human desire is good. A commodity can be considered as an economic good only if it is limited and capable of being allocated. Education is thus an economic good. Education is a non-material economic commodity because it is a service.

2. Education is both a consumer’s good and a producer’s good. Education builds a society with productive capacity to meet the material and non-material needs of the population. Education makes primarily for human capital, and also for intellectual and social capital. Human resource development or human capital formation largely depends on education.

3. Education and economic development have a reciprocal relationship marked by mutual contribution. Education enlightens the masses to fight against economic and social exploitation. It also increases the productive efficiency of the individual and the group – indeed of the entire production system. Human capital formation has both quantitative and qualitative dimensions.

4. Many researchers argue that the quality of schooling is more important than the quantity. In the Indian context, educating the vast majority of the population is a difficult challenge before the government. Also, in view of globalization, the quality of education has become even more essential. To bring India on the path of economic, social, political and cultural development, concerted efforts of the government are necessary.

5. Man and the means of satisfying him. The problem is that human wants are unlimited and resources are limited. So he has to choose wisely according to the priorities. The same is true of nations. Democracy should be a welfare state.

6. The resources of the states are limited and hence they have to allocate funds according to their pre-determined policies and priorities, which they have decided democratically. Education is one of the most important areas of development that any welfare state has to focus on in order to make progress and keep pace with other developing and developed nations.

7. Education of citizens affects the economic development of a nation and reciprocally, economic policies and allocation of funds for education affect the educational progress of citizens. Let us look at the relationship between these two in detail.

What is the relation of economics to education?

1. Philosophy, Sociology and Psychology have been considered as the three pillars of education. But later, economics is no less associated with education than these three branches of knowledge. To summarize, the following are common areas of interrelationships of economics and education.

2. Economics lays down some of the major objectives of education.
3. II. Economics explains the importance of education because the economic development of the country is largely based on the development of education.

4. Education is an investment in itself financially.

5. Education reduces poverty as it creates skilled labor and creates right attitude towards work and development. It also creates awareness to lead a better life.

6. Education sets the profile of salary structure, professional values and guarantees economic security of the people.

7. Apart from the social, moral, cultural and spiritual objectives of education, the purely simple ‘bread and butter’ objective of education cannot be ignored. In fact, one of the main objectives of education is to earn a living and that too to lead a good economic life.

Economics of Education:

Education as an economic good: Two conditions have to be fulfilled for a ‘good’ to become an economic good. 1) Availability should be limited. 2) It should be subject to allocation.

There are two types of economic goods. 1) Material goods – material or tangible things. Education plays an important role in content creation

1. Property. It makes man more intelligent, more ready to change, more reliable in his normal work. 2) Intangible Goods – Services that satisfy human needs. Education is an intangible economic commodity. It satisfies a human desire. It is limited in supply and can be allocated.

2. It should be kept in mind that education develops talents and qualities. A high level of economic well-being depends on mental attitude, technical knowledge and skill. An awakened mind, right knowledge, proper skills and desirable behavior accelerate economic growth. It enhances mobility and frees forward flowing energy. Through education the creative urge of man is awakened. Direct results of education are better organizing skills and faster inventiveness. It will help in building an integrated personality and help them lead a harmonious life.

3. Education is both a producer’s good and a consumer’s good. It is a producer’s good because it is used in the process of producing other goods. Those who are educated can educate others there by producing more number of educated people. It is essential maker stuff to become a teacher, lawyer, engineer, mechanic etc. it is a consumer goods if only for one’s satisfaction

It is obtained for the satisfaction of pleasure etc.


Education as an investment:

In the olden times, education in itself was considered an unproductive and unproductive expenditure. Therefore, budgetary allocations to education were always cut by developing countries whenever there was a resource crunch. The modern view is that education is a necessary expense. It is a productive investment. The returns are in the form of useful, dynamic and efficient citizens. They contribute more to the welfare of the country. Education is an investment for national development.

HG Wells says, “Investment in education has a unique significance for any nation as the effects of under-investment in this area can never be fully recovered. becomes a race. Education has many consequences for individuals and society. For many, the educational process has some “consumption value” because humans are curious creatures, and they enjoy learning and acquiring new knowledge. Education also has considerable “investment value”. People who receive additional schooling generally earn more over their lifetime, attain higher levels of employment, and enjoy more satisfying careers. Education can
Enables people to enjoy life more, appreciate literature and culture, and become more informed and socially involved citizens.


Education is an industry:

The Gross National Income (GNI) is spent on various sectors like agriculture, industry and education for higher returns year after year.

1. Education is a growth industry and provides employment and produces essential services for the total economy as no other industry contributes to the GNP of the country. Thus it contributes substantially to the total economy of the country; And without it the economy would be very bad. It is to be noted that education does not produce material goods that satisfy human needs. All these suggest that education is an industry.

2. It is clear that education is amenable to supply-demand analysis. As students, parents and employees, and the government demand education at different prices and this demand is met by the production of education in the form of educated manpower, well-trained citizens, literate people, etc. The principle of supply and demand applies to education as well. There are associated costs involved in the supply of different types and amounts of education. All this suggests once again that education can be treated in the context of economic analysis. Education builds a society with productive capacity to meet the material and non-material needs of the population.

3. Investment in education is considered as long term investment as its returns start coming only after a certain period of time, like after the education is over and they start earning. late, due to the effect of
4. ‘Globalization’ has led to commercialization of education, especially higher and technical education. In fact, education has become a business. The main interest of various education providers is to make profit. Many terms used in business such as ‘stakeholder’ and ‘entrepreneur’ for education providers, ‘client’ or ‘client’ for students are widely used in the educational system. The fees and associated expenses have gone through the roof making it inaccessible to the marginalized and the common man. The WTO and GATT agreements have played a decisive role in turning education into a service that can be traded in countries around the world. Selling education in many European countries, the United States and Australia accounts for a large part of the GNP coming from third world countries.

5. Education should ideally act as a key factor in reducing the gap between the rich and the poor. Education provides better opportunities for better jobs. Better jobs enable a person to earn better income. Better income leads to higher standard of living as well as better savings. Better savings help in investing more in both capital goods and education. With this, they can provide quality education to their children. The cycle continues. This is the strongest justification for providing reservation to socially and economically backward people in educational institutions by the Constitution of India. Yet, due to the policy of liberalisation, privatization and globalisation, most of the population is out of the purview of education especially higher and technical education, which has put quality education out of reach of most of the middle class and lower class due to higher education . cost of education. Only the upper class who can invest in the education of their children can get quality education thereby perpetuating and widening the gap between rich and poor. Indians are said to be great planners but poor executors. Various schemes and programs have been contemplated to address this problem, but have been largely ineffective in achieving

6. Desired result. The benefits brought by globalization should not be forgotten. But it is a fact that the benefits have not reached the lowest strata, rather it has made the rich richer and the poor poorer. The situation can be saved only with proper and effective intervention by the government. This situation has been substantially improved by greater state funding of education.

Tea can be had.




Education is human capital:

Anything that generates a stream of income over time is capital. Thus, capital plays an important role in the process of economic development primarily in its power to produce or accumulate income, either immediately or in the long run. In this context, HG Johnson classified capital as follows.
i) Capital goods that provide specific services for production or consumption by the owner.
ii) Human capital (conveniently known as labour). The distinctive feature of which is that both naturally and according to legal convention, control over the use of capital is vested in the person who embodies the capital, regardless of the source of finance or investment in it.
iii) Social capital or collective capital. Because of its inherent necessity or administrative convenience, its services are not charged to individual users for production or consumption, but are paid for by taxation of the community.
iv) Intellectual capital. The inherent characteristic is that once created it is a free good, in the sense that its use by any one person does not reduce its availability to others. Education is essentially a human capital as it directly promotes the quality and potential of human beings. It also contributes to intellectualism and, at least in part, creates social capital. The quality of man matters a lot, because it is the human brain and power that make material capital its value. Economists consider human beings as a form of capital for the following reasons.
1. Creation and development of human capital demands cost.
2. Skilled human resources add to the national product.
3. Expenditure on human resource is concurrent with national wealth.

Factors affecting human capital formation are investment in formal education, better health, job training, manpower resettlement, migration etc. Chief among the factors is formal education as it enhances the economic value of human capital by increasing earning power and current. Man’s property value. Education is important because it makes a man a better producer. Education also serves as a guarantee of economic security as education determines occupational values, salary

Structure etc. It is also an established fact that the economic prosperity of the country is directly proportional to the educational development.
Knowledge capital is:

Intellectual capital, knowledge or professional competence is one of the four capitals. Capital is the key to income generation and consequently to economic growth. Capital is anything that involves a cost but generates income tension over time. Schulze says that an educated person invests a lot of himself in getting education and that investment is also in capital. Educational expenditure is, thus, not a consumption expenditure but an investment expenditure.


Education for Economic Growth and Development:

The economic development of a country is largely based on the educational development. Economic growth is synonymous with prosperity and a better life. The rapid economic growth helps the citizens of the country to enjoy a higher standard of living. It also provides better social services. Some economists believe that economic development refers to the proportion of national income that is devoted to material investment. According to this, developed countries continuously increase their capital stock through heavy investment and developing countries accumulate relatively less capital stock due to their low level of national income. Another argument is that it is not the amount of investment that is the clue to development, but rather the technical knowledge that must come from education.

Yet another group of economists believe that per capita income is an indicator of economic development. In this sense, rich oil-producing countries such as Iran, Saudi Arabia and Kuwait that have high rates can claim to have sound economies. Still some other economists are of the view that a well oriented labor force can increase the income of a country. But a labor surplus with limited capital or no equipment and working space can only stand in the way of growth. Keeping the above ideas in mind, John Vaizey redefined economic growth as the total effect of
“the growth of the labor force, the accumulation of physical capital, and an increase in the stock of knowledge and skills available in the community”.



Relationship between education and economic development:

1. Adam Smith, the philosopher-economist and Marshall, one of the most versatile contributors to the discipline of economics, long ago recognized the link between education and development. adam

2. Smith in his book ‘Enquiry into the Nature and Causes of Wealth of Nations’ has said, ‘Education also benefits the common worker indirectly. It stimulates his mental activity, it fosters in him the habit of intelligent inquiry; It makes him more intelligent, more prepared, more reliable in his usual work; It increases the time of his life in working hours; It is an important means towards the production of material wealth”. Adam Smith observed that there was a real expenditure in the acquisition of talents by means of education, which constituted and felt a certain capital in the individuals concerned; moreover, Those geniuses made their fortunes as well as part of their society.

3. Recent developments in the field provide insight

Nor is it possible to explain the economic contribution of education in terms of human capital formation through education. Schumpeter emphasized ‘nothing more than the improvement of available resources which is possible through education’ while retaining the influence of organization and innovation in the context of economic development. Karl Marx advocated education on the grounds that ‘it is a counterbalance to the inhuman consequences of the division of labour’. The potential of education for economic development was also clearly emphasized by Theodore Schultz.

4. Economic development through human resource development is very important in underdeveloped and developing countries. Herbison and Myers are of the view that the educational process is human resource development, necessary for the transformation of social and political institutions towards which people in modernizing countries strive.

5. However, it should be noted that in a given social set-up, the provision of education and economic development are interlinked in such a way that one cannot exist without the other. A decline in education will therefore affect economic growth and slow economic growth will affect the educational system and standards.

6. Economists and educationists have joined hands to attack one of the most complex problems in all social problems, that of planning the entire education system of the country as an integrated part of the economy.

7. Economists want educationists to produce engineers, doctors, teachers and other technical staff at minimum cost. Economists deal with quantitative considerations while academics deal with quality. John Vaizey states, “It must take ten people in a secondary school and a hundred people in an elementary school to produce one graduate in a given system”. What is of interest in the partnership between the economist and the educationist is that both are concerned not so much with the provision of funds for educational programs as with some reduction in cost without affecting the increase in output. Economists want teachers to come up with an innovation that can increase the productivity of schools with little or no increase in cost. It is necessary to increase the quantity and quality in education

8. Quality labour, efficient administrators, well trained teachers, educational innovation and research. But it needs more support with finance. The allocation for education is very high under the argument that there is paucity of funds and the available funds are diverted to other developmental activities. In the words of Dean Rusk, “Education is not a luxury that can be afforded after development. It is an integral part of the development process itself”.

9. Education has the power to improve quality and make human resource more productive. The USSR of 1920 is a valid example for the above statement. “It was estimated that the work of those with a primary education was about one and a half times as productive as that of uneducated workers of the same age doing the same work, and that the work of those with a secondary education was twice as productive in, whereas graduates were four times as productive”. Japan of the twentieth century is another example. It could have made very rapid economic progress, even though it had serious problems such as lack of natural resources, high density of population, and late entry into the region. The Reason; This may be due, at least in part, to its increase in public spending on education after World War II.

10. Literacy in developing countries is very low as compared to developed countries. Illiteracy is thus concomitant with underdevelopment. India could achieve only 6 percent increase in literacy during the period 1961-71. Since illiteracy is a common feature of underdeveloped countries and is common among lower income groups, it acts as a deterrent.
11. R in economic development. It has been found that illiterate people are neither motivated to make full use of the facilities created for economic development in agriculture, family welfare programs and adoption of new technology in rural areas or efficient use of credit to increase production Nor are they eligible.

12. A positive attitude towards practical work and physical work means a lot in economic development. There is always the danger of a situation in which education entitles one to be white-handed, to avoid practical work, and to enjoy the fruits of intellectual pursuits. Education plays a major role in effecting changes in the behavior and habits of the people.

13. Economic development is really meaningful when people participate in the production process on a large scale. The real challenge of development is to provide full employment. The small scale sector is emblematic of the fact that our economy is characterized by production by the masses rather than by the means of production.
14. Reward of Education:

15. An important distinction can be made between the private and social returns of education. Private returns refer to the benefits received by an individual who receives additional schooling. These include economic benefits such as higher lifetime earnings, lower levels of unemployment, and greater job satisfaction. They may also include outcomes such as better health and longevity. Social return refers to the positive (or possibly negative) consequences that accrue to individuals other than the individual or family.

who decide how much schooling to receive. So they are benefits (possibly also costs) that are not taken into account by the decision maker. If such “external benefits” are substantial, they may result in significantly less investment in education in the absence of government intervention.

16. Many observers have suggested that schooling has substantial social benefits, and have advocated for government involvement in the funding and provision of education on this basis. Indeed, when discussing education policy, many classical economists deviated from their usual

17. Status of laissez faire policy on the proper role of the government. For example, in The Wealth of Nations, Adam Smith states: “The State derives no notable advantage from the education of the common people. If they are instructed … are less liable to the delusions of enthusiasm and superstition, Milton Friedman’s position on the role of government in schooling, which is among ignorant nations, is a more contemporary example of this point: “A stable and democratic society is impossible without the widespread acceptance of some common values and without a minimum degree of literacy.” and knowledge on the part of most citizens. Education contributes to both. As a result, a child’s education benefits not only the child or his or her parents but also other members of society. My Child’s Education Contributes to the welfare of other people by promoting a stable and democratic society.” (Friedman, 1955).







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