-

Dr..K.
Senior
Okuda
Supervisor

N. Robinson
"'Br.
Examining Cornmit t e e
 (ii)

ABSTRACT

The necessity f o r careful planning, of t h e educational system

t o meet d%ture req.ciiremaxts of manpower demands i n L~ll

derdeveloped and devel-

oped countries i s self-evident. The f a i l u r e of present market forces t o in-

d i c a t e t h e necessary l e v e l s of ifivestment i n education f o r f u t u r e growth and

development of an economy, a r i s e s primarily out of t h e l a r g e t i n e l a g bebdezn

educational inputs and educational outputs. Consequently many techniques

have been developed f o r estimating t h e desired s t r u c t u r e of education a t some

f u t u r e time and o.irer time i n an economy.

. .
The treatment of education a s a form of investment i n hurilan

beings, has l e e t o considerable research i n t o t h e c a p i t a l formatLon inherent

i n increasing l e v e l s of ec?uca.i;ion, and t h e development of t h e human c a p i t a l

approach which attempts t o derive an optimum l e v e l of investment i n e3ucation

thus t o ensure a continued and sustained growth i n an economy's G.N.P, per

capita. Yet other techxiques involve estimating t h e r o l e t h a t education

plays i n economic growth through increasing q u a l i t y and thus t h e productivity

of t h e labour force ( t h e residual approach). ILbe use of i n t e r n a t i o n a l and

intertemporal compariso& of selected e d ~ c a t i o n a lindices has been used t o de-

r i v e desired l e v e l s of education f o r developing c o m t r i e s and, represeats an-

other attempt t o f i n d objective c r i t e r i a f o r t h e e f f i c i e n t a l l o c a t i o n of

educationzl investment. Manpower forecasting ( t h e manpower approach) and t h e

econometric agproach both attempt t o p r e d i c t t h e l e v e l s of education t h a t w i l l

be required a t future dates, and a r e r a t h e r more objective than t'le e s s e n t i a l l y

subjective natnre of tine t h r e e previous approaches mentioned. Tney a r e both

primarily cancermd wit3 t h e i n t e r m 1 s t r u c t u r e of the educational s y s t a as

it develops over time.

 (iii)

A l l t h e approaches mentioned a r e underlain by numerous sub-

j e c t i v e value judgements a s t o t h e desired natwWeof an eduzational system.

They a r e f o r t h e most p a r t narrowly economic i n t h e i r conception, and view

t h e purpose of education a s being primarily sources of manpwder f o r t h e

growiw demands of an economy. I l P l i s dces not however d e t r a c t from t h e i r con-

siderable importance i n helping t o plan t h e complex educationai systems of

t h e f u t u r e i n underdeveloped countries.
 Introdu-ction..........~...................................... 1

The Human Capital Approach...................... ...........

.')
6
The Residual Approach.. .................................... 18
Interna-bional and Ixterte-f~qoralComparisons of
Selected Educational ~ndices........................... 23
.
..........
,

Manparer Forecasting or "The Manpower Approach". , 29

The kkononetric Approach.. ................................. 38

conclusion ...... o.........m......O...OO..........o.......o 44
References .......... .a
O
.
~.~
..
~o
...
o.~
... 47
 INTRODUCTION

In t h i s essay I s h a l l *mainly be concerned with t h e various

a ttemgts t o e s t a b l i s h econokc c r i t e r i a f o r estimating optimum l e v e l s of

expenditure on education i n both developed and underdeveloped c o u n t r i e s .

That t h e optimum l e v e l of expenditure cannot, and indeed should not, be

determined s o l e l y on t h e b a s i s of economic considerations alone, i s i n -

t u i t i v e l y obvious. However t h i s does not, i n any sense i n v a l i d a t e t h e

e f f o r t s t h a t have been made 'in t h e p a s t t o a r r i v e 'at some measure o r c r i -

t e r i a based on economic a n a l y s i s , s i n c e the problem involved i s essen-

t i a l l y one of resource all-ocation. Recognition of t h e growing need f o r

some degree of planning of t h e f u t u r e educational requirements o f both

developed and underdeveloped c o u n t r i e s i s based on t h e growing r e a l i z a t i o n

t h a t t h e market mechanism has f a i l e d t o a l l o c a t e scarce resources o-ptim-

a l l y j-n t h e p a s t and t h a t present market forces a r e unable t o a l l o c a t e

resources ~ p t i m a l l yt o education f a c i l i t i e s i n t h e futures I!uch of t h e

j u s t i f i c s t i o n f o r planning of educational expenditure i s based on t h e

f a c t t h a t t h e r e i s a long g e s t a t i o n per'od involved i n t h e educational

process, i n t h e sense t h a t inputs i n t o education now, r e s u l t i n outputs

r

of graduates from higher l e v e l education a t a period eighteen o r more

years i n the future. 'Ibis i s based on t h e assumption t h a t i f t h e r e a r e

t h r e e b a s i c cycles i n t h e education process, i .e. primary, secondary., and

higher education, and each cycle l a s t s on t h e whole s i x y e a r s , then an av-

erage perscn w i l l take eighteen y e a r s t o complete h i s education. Thus it

i s u n l i k e l y t h a t present market f o r c e s w i l l r e f l e c t t h e requirements f o r

c e r t a i n types of educated manpower a t t h i s f u t u r e date.

Naturally t o justif'y i n t e r f e r e n c e with t h e narket a l l o c a -

t i v e mechanism, it must be demorist~atedt h a t educational planning, which

assumes imperfect functioning of the present and future market mechacism,

i s more e f f i c i e n t o r t h a t i n t e r f e r e n c e can i n some way improve tKe market

mechanism. The f a c t t h a t acute absolute shortages of c e r t a i n t-ypes of

manpower e x i s t and p e r s i s t i n many underdeveloped and developed courltries,

, m a y be taken a s evidence t h a t market forces a r e unable t o eliminate such

shortages. I n India f o r . example t h e r e i s a high unemployment r a t e among

c e r t a i n types of Arts graduates, along with an acute shortage of high

l e v e l t e c h n i c a l manpower. For those unc?erdevelopecl: countries i n t e r e s t e d

i n a ~ c e l e r a ~ t i nt g
h e i r r a t e of growth, t h e major f a c t o r preventing t h i s i s

not so much a shortage of c a p i t a l , but i n many cases, a serious manpower

"bottleneck", especially of s t r a t e g i c high l e v e l manpower. Consequently,

i f an underdeveloped country i s planning t o achieve a c e r t a i n t a r g e t i n -

come l e v e l i n t h e f u t u r e , it must a l s o take i n t o consideration t h e man-

power requirements t o reach t h i s income t a r g e t . Thus before any r e a l a s -

sessment can be made of t h e value of educational planning t o underdevelopeZ

countries, one should analy se t h e contribution t h a t education might play

i n determing t h e l e v e l of development o r the r a t e of economic growth of

these countries. Without such an a n a l y s i s it would be impossible t o ans-

wer such questions with any degree of precision.

The nature of the approach t o educational planning w i l l

depend on t h e aims of planning policy and t h e l e v e l s of decision-making.

An i n t e g r a t e d s o c i a l and economic planning policy could have t h e dual aims

of ( 1 ) maximization of present welfare within t h e l i m i t s of ava,- a b l e re-

sources, and ( 2 ) maximization of f'uture growth. I n the sense t h a t educa-

t i o n i s o f t e n considered a s investment, then present coriswrrption may have

t o be s a c r i f i c e d f o r f u t u r e growth (investment), and t h e two p o l i q i e s may

be cofitradictory. Yet i n another sense education has been considered a s

consumption, and thus t h e dxal p o l i c i e s a r e not contra.dictory.

Decision-making can occur a t t h e micro o r t h e macro l e v e l ;

t h e micro decisions being concerned with t h e i n t e r n a l s t r u c t u r e of educa-

t i o n , and t h e macro decisions concerned with t h e s i z e of t o t a l spending on

education i n r e l a t i o n t o aggregate n a t i o n a l resources. A 1 1 of t h e approaches

considered i n t h i s paper combine elements of t h e macro and micro, but

r a t h e r more of t h e former. L i t t l e a t t e n t i o n i s p a i d i n t h i s esszy t o such

problems a s t h e need f o r r o l l i n g adjustment of planning p o l i c i e s over

time (sequential planning), o r t o t h e problems of balanced expansicn ver-

sus unbalanced expansion of t h e educational system. Furtherinore, t h e

iraportant question of q u a l i t y versus q u a n t i t y , o r general versus s p e c i f i c

education i n r e l a t i o n t o t h e r a t e of e x ~ a n s i o nof educational e q e n d i t u r e s

i s not f u l l y considered. A complete examination of a l l t h e many aspects

of educational planning i s impossible i n a r e s t r i c t e d essay of t h i s nature.

Educational planning s t r a t e g i e s i n t h e p a s t have been based

on four major approaches attempting t o e s t a b l i s h t h e r e l a t i o n s h i p between

education, economic development, and economic growth. They a r e b r i e f l y :

The Human C a p i t a l Approach. This i s based on t h e s i m p l i s t i c a s s m p t i o n

t h a t educational expenditures can be t r e a t e d a s investment i n human cap-

ital, and consequently a process of human c a p i t a l formation. If t h i s 5s

so, then it should be p o s s i b l e t o compare t h e r a t e of human c a p i t a l form-

a t i o n over time with t h a t f o r p w s i c a l c a p i t a l and t h e r a t e s of r e t u r n t o

 -4-
I

educational expenditures with t h a t of other types of expenditures, and

thus a r r i v e a t some "objective" c r i t e r i a f o r o v e r a l l and marginal invest-

ment decisions f o r educational expenditures a s opposed t o other forms of

expenditures.

The Residual Approach. Attempts t o measure the contribution of c a p i t a l

and labor inputs t o t h e growth of G.N.P. per c a p i t a l over time, using a

simple l i n e a r homogenous production function, and other r e s t r i c t i v e

assumptions, has resKLted i n a l a r g e "unexplained" r e s i d u a l f a c t o r t h a t

has a l s o i n some way contributed t o t h e growth. of output. Although much

of t h i s r e s i d u a l has been a t t r i b u t e d t o technical progress embodied i n

c a p i t a l and labor (due t o improvd q u a l i t y of the labor force as a r e s u l t

.
of b e t t e r education and improved h e a l t h , e t c ), t h e exact contribution

t h a t expenditures on education has made t o t h e o v e r a l l increase i s by no

means c l e a r , but it i s assunled t o have p l q e d a l a r g e p a r t . I f it could

be a s c e r t a i n e d t h e n c r i t e r i a could be established f o r the amowt of expen-

d i t u r e on education i n the f u t u r e f o r a c e r t a i n desired growth r a t e .

I n t e r n a t i o n a l , Intertemporal, and Interindustry Comparisons of Certain Ed-

ucational and Other Indices. The r a t i o n a l e behind t h i s approach i s bssed

on h i s t o r i c a l evidence suggesting t h a t s t a b l e relationships csn be obserfed

between educational expenditures, labor force educational l e v e l s , e n r o l l -

ment r a t i o s , e t c . t o G.N.P. p e r c a p i t a i n the nox developed ccuntries,

and t h a t underdeveloped countries should t r y t o e s t a b l i s h similar r a t i o s ,

with implications f o r resource a l l o c a t i o n .

Manpower Forecasting o r t h e Manpmer Approach. Basically t h i s approach

invol-ves forecasting demand o r requirements f o r various l e v e l s of manpower

i n r e l a t i o n t o a given s t r u c t u r e of industry a t some future date. These

 - 5 -
. . I

requirements a r e then transla.ted i n t o educational requirements a t t h a t

f'uture d a t e , and then i n t u r n r e l a t e d t o t h e present educational s t r u c -

ture. I f shortages o r surpluses of c e r t a i n types of manpower a r e predic-

t e d t o develop over time, then t h e educational system i s adapted such a s

t o eliminate them. This may involve a l a r g e increase i n educational ex-

penditures and student inflows i n t h e iminediate p e r i o d t o meet t h e s e

f'uture technological requirements, and thus resource a l l o c a t i o n problems

are b o k d t o arise.

The Econometric Approach. The recent development of educational planning

models, mainly of t h e input-output and l i n e a r programming v a r i e t y , a r e

designed t o a i d educational p o l i c y m k e r e i n t h e i r decision making. These

models a r e s i m i l a r both conceptually and roethodologically t o t h e previous

approaches mentioned, and t h e a s s u q t i o n s underlying them a r e b a s i c a l l y

t h e same. I n t h i s sense they may be regarcled a s an amalgam of these var-

ious approaches, and a s such incorporate mcst of t h e advantages and disad-

vantages of them a l s o . I n t h i s essay t h e l i r 5 t a t i o n s of t h e approach

i s discussed only i n r e l a t i o n t o t h e Correa-Tinbergen model. For t h e

purposes of t h i s essay t h e l i m i t a t i o n s of such o p t i d z i n g models using a

l i n e a r programming approach a r e not discussed.

 - 6 -
I. TXE HUMAN CAPITAL APPROACH
,

in t h e human c a p i t a l approach, expenditures on education

a r e considered i n much t h e same way a s investment i s considered i n cap-

i t a l models of economic growth, i n t h a t it i s a process of human c a p i t a l

1
formation. Thus answers t o questions involving resource a l l o c a t i o n , s o

t h e p r o t a g o n i s t s of t h i s view maintain, a r e almost i d e n t i c a l with and t h e

methods of s o l u t i o n s i m i l a r t o , those o p e r s t i n g i n t h e general f i e l d of

investment c r i t e r i a . The search f o r such c r i t e r i a i n t h e sphere of edu-

c a t i o n a l planning h a s been c e n t e r e d around attempts t o f i n d t h e c a p i t a l

v a l u e of t h e education i n v e s t e d i n educated persons, and a l s o t o f i n d

t h e p r i v a t e and s o c i a l r a t e s of r e t u r n t o v a r i o u s types o f education. If

t h e s e f i g u r e s can be e s t a b l i s h e d , then a measure of t h e o v e r a l l and mar-

g i n a l s o c i a l c o n t r i 5 u t i o n of education t o economic and s o c i a l development

can b e a s c e r t a i n e d .

Before proceeding f u r t h e r i t would be a s w e l l t o a s k what

a r e t h e major a r e a s of choice with r e g a r d t o educational planning. Briefly

they a r e : how t o r e l a t e educational systems t o o v e r a l l development needs

(economic and s o c i a l ) ; what i s t h e l e v e l of investment t o be made i n ed-

ucation; what i s t h e optiinwn r e l a t i o n between t h e d i f f e r e n t l e v e l s and

s e c t o r s of t h e educational system ( t h e education "mix"); how t h e produc-

t i v i t y of education systems can be improved; what a r e t h e r e t u r n s on i n -

vestment i n educa.tion; and how can education b e s t be financed?

There a r e a number of ways i n which expenditures on human

c a p i t a l formation v i a education a r e s i m i l a r t o o u t l a y s on p h y s i c a l c a p i t a l .

F i r s t l y , i t involves t h e use of goods and s e r v i c e s which could be used i n

 I

o t h e r ways. Se e resulting capit e l d s r e turns t ndi-

v i d u a l i n t h e form of income streams or non-pecuniary psychic income r e -

t u r n s over f u t u r e years. A s with physical c a p i t a l , i n which new technol-

ogy has been embodied, human c a p i t a l d i r e c t l y a f f e c t s t h e methods and

e f f i c i e n c y of production. Also, human c a p i t a l , l i k e physical c a p i t a l ,

can be m d e obsolete by changes i n technology over time, hence t h e need

2
i n developed countries f o r extensive r e t r a i n i n g schemes.

However i n many respects human c a p i t a l i s d i s s i m i l a r t o

physical c a p i t a l . F i r s t l y , a s Eckaus has argued, the process of human

c a p i t a l formation not only develops labor s k i l l s but uses them a s well,

t h e r e f o r e it improves the q u d i t y and quantity of t a l e n t . This t a l e n t

can be used i n t h e production of consumer goods, both physical and human

c a p i t a l , but a l s o i n invention ; a n d innovation along s c i e n t i f i c , t e c h n i c a l ,

o r administrative l i n e s . Furthermore, human c a p i t a l i s more ' f l e x i b l e than

physical c a p i t a l , and t h e decision a s t o whether it should be used r e s t s

with t h e individual person, which i s not t h e case with physical c a p i t a l .

Even more s i g n i f i c a n t , i n terms of a n a l y t i c a l Ctistinctions, i s the. fact

t h a t t h e product of educational outlays c a r r i e s with it j o i n t f e a t u r e s of

consumption and investment. The same could be argued f o r physical c a p i t a l

outlays, but the difference i s s u f f i c i e n t l y l a r g e i n terms of r e l a t i v e

components t o warrant, f o r a n a l y t i c a l purposes, a d i s t i n c t i o n j.n kind.

Musgrave, f'urther d i f f e r e n t i a t e s the educational product i n t o t h r e e com-

ponents, namely, consumption (i.e. enjoyment of the f u l l e r l i f e permitted

by education), d i r e c t investment (with t h e gains accruing "internally" t o

t h e individual i n the form of increased earnicgs), and a l s o investment i n

t h e functioning of t h e economic an& s o c i a l system a t l a r g e . These l a t -

t e r gains accrue "externally", not only t o those i n whom t h e educational

i n p u t i s invested, but a l s o t o o t h e r members of t h e community. In the

context of economic cievelopment e f f o r t s , t h e s e e x t e r n a l i t i e s , so some

authors have argued, may be a very s i g n i f i c a n t component. Developing

t h e argument f'urther, one can d i s t i n g u i s h i n t h e consumption com~onent,

two sub-components , namely current consumption (possibl3; t h e d e l t g h t s of

a t t e n d i n g school, o r t h e pleasure derived from absorbing new i d e a s and

a s s o c i a t i n g with ~ e o p l eof s i m i l a r i n t e r e s t s ) and f i ~ t u r econsumption ( t h e

a b i l i t y t o appreciate l i f e more fully l a t e r one). Since t h e l a t t e r e l e -

ment i s much t h e l a r g e r , th2 conswllption component i s s u f f i c i e n t * im-

p o r t a n t t o consider education a s a durable consumer good, "and hence i n -

vestment". The e s s e n t i a l difference, so Musgrave would argue, " i s not

between t h e consumption and investment aspects of educatfonal output,

but between education investment which generates imputed income ( t h e f u l -

l e r l i f e l a t e r on) and education investment 'which generates increased

r t h e educated person. 1,
f a c t o r earnings t o t h e l a b o r supplied b
j 6

The problem a r i s e s of' what weight should be given t o t h e

two components i n t h e development context, and how i s t h i s t o be r e f l e c t e d

i n t h e p a t t e r n of t h e education programme? Recent w r i t e r s have pointed

t o t h e extension of secondary education a s being t h e primary goal of ed-

ucation p o l i c y i n countries with a low l e v e l of educational c a p i t a l stock,

with t h e extension of elementary and t e c h n i c a l t r a i n i n g a t a more advanced

stage. While t h i s p r i o r i t y i s derived from t h e p r o j e c t e d needs f o r var-

i o u s types of s k i l l and t r a i n i n g , it a l s o suggests t h a t t h e imputed-income

 I

component of t h e educational mix tends t o be of a p r t i c u i a r l y g r e a t im-

portance a t t h e e a r l y stages of development. Thus not only must t h e over-

a l l l e v e l of educational expenditure be distinguished between i t s consum-

. p t i o n and investment conponents, but a l s o t h e d i f f e r e n t l e v e l s of edu-

c a t i o n and d i f f e r e n t types of education should similarly be disaggregated

i n terms of these two components. One such method i s suggested by Wilk-

inson, i n t h a t :

... a l l educational outlays on secondary schooling and bnyond

a r e investment and t h a t p r i m r y schooling i s consumption. 8

Hovever, a s t h e author notes:

... it would be incorrect t o t r e a t a l l those with o n b primary

education a s representing no investment (since) t h i s method i g -
nores t h a t f o r a person t o absorb secondary education and above,
he must have had primary schooling.

This q u a l i f i c a t i o n has not been noted by some p r a c t i t i o n e r s i n t h e f i e l d

of educational planning. 9, 10

A , f u r t h e r d i s t i n c t i o n can be drawn between physical and

human c a p i t a l formation, t h a t , i n some cases, has an important bezrring

on t h e search f o r investment c r i t e r i a f o r educational planning purposes.

This i s t h a t t h e "gestation period" f o r educational "projects", i n terms

of t h e time between inputs i n t o t h e system and r e s u l t a n t outputs, a r e

s u b s t a n t i a l l y longer than those f o r many other c a p i t a l p r o j e c t s . Periods

o f ' t e n t o twenty years o r more may be involved f o r t h e formal education

process alone, and considerably more when on-the- job t r a i n i n g i s included.

This introduces a c o n s t r a i n t i n investment planning and demands a corres-

ponding longer planning horizon which i n t u r n p o i n t s t o t h e need f o r
,
p u b l i c p o l i c y gyidance seen i n t h e context of a long term development

perspective. A s i m i l a r c o n s i d e r a t i o n r e l a t e s t o t h e r e l a t i v e l y long use-

ful l i f e of t h e education a s s e t . Consideration of r e t u r n s over, s q , a

t h i r t y y e a r p e r i o d l e n d s g r e a t importance t o t h e discount f a c t o r i n a s s e s s -

i n g t h e r e l a t i v e p r o d u c t i v i t y of investment i n education. Since t h e

u s e m l i f e of competing p r o j e c t s tends t o be s h o r t e r , except i n t h e

c a s e of p h y s i c a l s o c i a l overhead c a p i t a l , t h e r e l a t i v e case f o r i n v e s t -

ment i n education i s low s f t h e a p p r o p r i a t e r a t e of discount i s high.

Thus t h e s e l e c t i o n of t h e a p p r o p r i a t e r a t e of discount i s of paramount

importance i n a s s e s s i n g t h e proper share f o r education i n t h e t o t a l expen-

d i t u r e of a government. Since t h e r e i s no developed c a p i t a l m r k e t s i n

underdevelcped c o u n t r i e s t o provide a c l e a r i n d i c a t i o n of t h e a p p r o p r i a t e

r a t e f o r educational investment, i t s determination becomes l a r g e l y a niat-

t e r of p u b l i c p o l i c y . Since t h e time horizon of t h e gove?:nment I s t r a d -

i t i o n a l l y longer than t h a t f o r p r i v a t e indiviCuals they a r e l i k e l y t o

overvalue t h e p r e s e n t value of edu.cation when compared with an i n d i v i d u a l ' s

assessment.

For t h e above and o t h e r reasons t h a t w i l l be developed a s

-the essay proceeds t h e various attempts t o measure t h e c a p i t a l value of

t r a i n e d and educated persons can be viewed with considerable scepticism

a s a b a s i s f o r a s s e s s i n g t h e "optimum" investment i n education both now

and f o r f u t u r e p e r i o d s , especiallg- f o r underdeveloped c o u n t r i e s . Indeed

much of t h e work done using t h i s approach h a s been based on U.S. data, a

s u f f i c i e n t rea,son alone f o r doubting i t s relevance f o r developing c o u n t r i e s .

T.W. S c h ~ l l t z has analyzed. the r e l a t i o n s h i p between expenditures on ed-

ucation and physical c a p i t a l formation i n t h e U.S. f o r t h e period 1900 -

1956, measured i n constant d o l l a r s . By adding together the possible

earned income foregone by those enrolled i n schools, colleges, and uni-

.
v e r s i t i e s (i e . t h e "opportunity cost" of education) and the expenditures

f o r formal education of a l l types (with allowance f o r depreciatioii), he

c a l c u l a t e d a f i g u r e f o r the t o t a l annual investment i n education i n t h e

U.S. by decades from 1900 - 1956. For high school education t h i s "invest-

ment" i n education increased 135 times from $81 million t o $10,344 mil-

lion i n 1956; and f o r college\ education and university education com-

bined from $90 million t o $9,903 million i n 1956, a l l expressed i n 1956
figures. The t o t a l stock of "educational c a p i t a l " i n t h e labour force

of t h e U.S. rose from $63 b i l l i o n i n 1900 t o $535 b i l l i o n i n 1957, a r i s e

from 22% t o 42% of G.N.P. such aggregate f i g u r e s provide l i t k l e b a s i s

f o r estimating how much expenditure t h e r e should be on education, even

when t h e d i f f e r e n t t.ypes and l e v e l s of education a r e Included i n t h e f i g -

ures. An pnderdeveloped country t r y i n g t o decide the optimum l e v e l of ec?-

ucation f o r a given growth' r a t e , wduld presumably have t o deduct t h e con-

sumption ccmjonent of t h e educational c a 9 i t a l stock t o obtain a meaningrul

I1
r l e c f thumb" measure of the r e a l r e l a t i o n s h i p between educational i n -

vestment and economic growth.

Even a f t e r t h e investment component of the expenditures has

been successf1iily i s o l a t e d , t h e r e l a t i o n s h i p between t h e increase i n i n -

come p e r c a p i t a and increase i n educational expenditure cannot be assumed

t o have any causal significance. The calculation of Schultz of an "income

 - 12 -

e l a s t i c i t y 1 ' of demand f o r education'of 3.5 over t h e p e r i o d , and t h e de-

duction t h a t education considered a s "investment" may be regarded a s 3.5

times more a t t r a c t i v e than investment i n p h y s i c a l c a p i t a l , with obvious

i m p l i c a t i o n s f o r resource a l l o c a t i o n , a r e t h e r e f o r e spurious.

An approach suggested by Wilkinson, whereby a l l education-

a l o u t l a y s a r e considered a s investment, i n t h e sense t h a t it c o n t r i b u t e s

e i t h e r directly o r indirectly t o the Jndividualls actual o r potential

productivity , may be mcre u s e f u l . This method t h e r e f o r e provides a

maximum c a p i t a l v a l u e , from which consumption items may be d e d x t e d . Even

Wilkinson expresses considerable doubt however over t h i s approach, b u t

maintains t h a t :

... t h e r e i s no reason t o deprive ourselves of t h e usefulness

of a t l e a s t crude estimates of t h e value of human c a p i t a l such
a s t h i s approach provides.

Three methods have been used t o measure t h e c a p i t a l v a l u e

of t h e education i n v e s t e d i n i n d i v i d u a l s . The f i r s t and simplest of t h e s e

i s t o c a l c u l a t e t h e y e a r s of schooling represented by t h e populace, and i s

only a very crude aggregate measure,, and t h u s of l i t t l e use f o r education-

a l planning purposes. The second involves computing t h e production of

replacement c o s t s of educated persons. The major problem p r e s e n t e d by

such c a l c u l a t i o n s i s t h e amount of t h e c o s t s t o be represented by oppor-

t u n i t y c o s t s of education ( i . e . income foregone), and o t h e r c o s t s . It i s

not proposed t o d e a l a t l e n g t h with t h e many suggestions p u t forward by

v a r i o u s authors on t h e problem of c o s t s . However it i s a s w e l l t o note

t h a t what c s s t s a r e included Ln t h e c a l c u l a t i o n s w i l l a f f e c t t h e r a t i o of
b e n e f i t s t o c o s t s trem usly i n underdeveloped c o u n t r i e s . l3 Recent

discussions of t h e economics of education emphasize, t h a t t h i s c o s t not

only includes t e a c h e r ' s s a l a r i e s , buildings and o t h e r equipment, but a l s o

t h e opportunity c o s t of l o s t income on the p a r t of t h e student. Depen-

ding on t h e s t r u c t u r e of t h e developing country, t h i s l a t t e r component

may $e of varying s i g n i f i c a n c e . Where t h e r e i s a generai iabour sur-

p l u s , o r very high open o r disguised unemployment, t h e opportunity c o s t

i n terms o f income foregone may be very l o v , and i n some cases almost

zero. . On t h e o t h e r hand other components of education c o s t ( t e a c h e r ' s

s a l a r i e s i n p a r t i c u l a r ) may be r e l a t i v e l y high i n underdeveloped coun-

t r i e s , due t o t h e acute shortage of domestic teachers o r t o a policy,

e s p e c i a l l y i n many African c o u n t r i e s of importing European teachers a t

high s a l a r i e s . The problem thus a x i s e s whether t h e possibly e r t i f i c a l l y

high s a l a r i e s of school teachers i n underdeveloped c o w t r i e s a r e t o be

included i n a guide f o r f u t u r e investment decisions on t h e b a s i s of pre-

s e n t c o s t - b e n e f i t r a t i o s , when t h e danger e x l s t s that, t h e elements of

p r e s e n t c o s t s a r e a t only a t r a n s i t o r y l e v e l .

The t h i r d method of cal-culating t h e c a p i t a l value of human

beings involves estimating t h e discounted values of peoples' f u t u r e earn-

i n g s , t o derive present value estimates of educational expenditures. The

work of Weisbrod, Renshaw , and Becker , can be consulted f o r t h e ramifi-

c a t i o n s of t h i s approach. 14

The estimation of p r i v a t e r a t e s of r e t u r n , and present

value of education, based on ' f u t u r e expected incoae streams, s u f f e r s from

a number of pethodological l i m i t a t i o n s . Among t h e most s e r i o u s l i m i t a -

 - 14 -
,
t i o n s i s t h e assumption of p e r f e c t competition i n t h e l a b o r market, which

ma.y h o l d f o r t h e United S t a t e s l a b o r markets f o r c e r t a i n types o f - s k i l l s ,

b u t i s highly doubtful f o r most s k i l l s . The existence of monopoly elem-

e n t s , such a s r e s t r i c t i v e entry, may d i s t o r t t h e p a t t e r n of income

streams t o such an extent t h a t t h e marginal productivity theory of wages

i s s e r i o u s l y questioned. To deduce investment c r i t e r i a f o r t h e promotion

of econonic growth on t h e b a s i s of an assumed causal r e l a t i o n s h i p between

incomes and p r o d u c t i v i t y , may consequently be very misleading. Some

economists have argued t h a t by comparing t h e n e t r e t u r n s on d i f f e r e n t

occupations we should be a b l e t o determine how e f f i c i e n t l y resources a r e

being a l l o c a t e d among such occupations. The b a s i s f o r t h i s argument i s

that :

. . ..i f r a t e s of r e t u r n t o educational investment and to. teacher

.investment f a l l below a l t e r n a t i v e r a t e s of r e t u r n , ,then from an
economic q o i n t of view c l e a r l y economic resoures a r e being misal-
ocated. 5

The normal c a l c u l a t i o n of p r i v a t e r a t e s of r e t u r n a l s o neglects t h e pos-

s i b l e p r i v a t e non-pecuniary c o s t s of o r r e t u r n s t o education. Possible r e -

t u r n s may include t h e option of obtaining a d d i t i o n a l education which

should be included along with t h e advantages of a wider choice of jobs

and t h e r e l a t e d p a t t e r n s of income, l i v i n g , l e i s u r e , and s e c u r i t y .

The a p p l i c a t i o n of i n t e r n a l r a t e s of r e t u r n f o r sub-

optimizing problems i n educational planning m a y however be more u s e f u l ,

i n t h a t i t may be p o s s i b l e t o evaluate t h e payoff on investments i n two

o r more d i f f e r e n t kinds of educational programmes. It may be p o s s i b l e t o

construct present value comparisons of two educational processes i n

terms of net earning streams, a s an a i d t o general cost-benefit a ~ a l y s i s .

16 f o r example, uses i n t e r n a l r a t e s of r e t u r n comparisons of on-
Becker,

the-job versus formal education. The a p p l i c a t i o n of t h i s approach f c r

planning purposes may be of value i n t h a t a government might t r y t o choose

t h a t policy regarding education which maximizes t h e r a t e of r e t u r n o r p r e

s e n t value. Assuming away f o r t h e moment t h e choice of t h e appropriate

discount r a t e , one could t r y t o compare various s t r a t e g i e s f o r terminal

l e v e l s of education i n terms of present value,'where buget c o n s t r a f i t s

a r e important. l7 For a more r e l i a b l e b a s i s f o r educational planning t h e

use of p r i v a t e r a t e s of r e t u r n and present value i s dubious, since they

do not r e f l e c t t h e s o c i a l r a t e s of r e t u r n . It i s generally agreed t h a t

f o r planning education, p r i v a t e r a t e s of r e t u r n a r e l e s s accurate than

s o c i a l r a t e s of r e t u r n , a s used i n a general cost-benefit approach.

Although t h e r e i s considerzble disagreenent. a s t o what

should be included i n t h e s o c i a l c o s t s and s o c i a l r e t u r n s t o education,

it has s t i l l not prevented i t s use i n educational planning and c o s t - b e n e f i t

analysis. Some e c o n o d s t s argue t h a t t h e e x t e r n a l s o c i a l r e t u r n s t o ed-

ucation a r e very small indeed, o r so i n a c c e s s i b l e t o q u a n t i f i c a t i o n a s

t o be almost u s e l e s s f o r educational planning. Among these s c e p t i c s i s

,
Wi-lkinson who w r i t e s :

Using any of these techniques, increasing i n t e n s i t y of education

f o r t h e populace could be j u s t i f i e d up t o almost any amount of
education. The d i f f i c u l t y i s t h a t snch techniques a r e not use-
: f u l i n any rigorous fashion. There i s no sat.isfactory way of
assigning monetary valuss t o iJcems which a r e large-ly subjective
 by nature. .Nor i s t h e r e any way of determining what portion of
educational spending i s investment .... Educational expendi-
t u r e s a r e increasing i n most countries; t h e popular demand i s
f o r more education f o r everyone. Consequently t h e r e i s undoubt-
edly a d e s i r e when c a l c u l a t i n g ( s o c i a l ) r a t e s of r e t u r n on ed-
ucation t o obtain r a t e s which i n d i c a t e t h e s e expenditures a r e
j u s t i f i e d . Where t h e r a t e so obtained a r e lower than required t o
support t h e s e outlays on purely pecuniary grounds, and economic
grounds, t h e r e i s a temptation t o f a l l back on t h e non-pecuniary
and c u l t u r a l benefits-in orckr t o t i p t h e s c a l e s i n t h e o t h e r
direction .... I n s h o r t we can use s o c i a l r a t e s of r e t u r n an-
a l y s i s t o prove anything we want t o .... Ariy technique of an-
a l y s i s which can be t w i s t e d ... t o j u s t i o whatever a c t i o n one
wishes t o take should be suspect. I n general then, we must con-
clhde t h a t f u r t h e r research along t h e l i n e s of s o c i a l r a t e s of
r e t u r n a s a ethod of e f f i c i e n t l y a l l o c a t i n g resources appears -an-
warrented. 18
The c a l c u l a t i o n of e x t e r n a l r e t u r n s t o education i n un-

derdeveloped c o u n t r i e s has been j u s t i f i e d by many authors on t h e grounds

t h a t t h e ext'ernal r e t u r n s c o n s t i t u t e a s u b s t a n t i a l p a r t of t h e t o t a l gain,

an6 thus should not be neglected f o r educational planning purposes.

Perhaps t h e most important aspect of t h e e x t e r n a l b e n e f i t s oI" education

l i e s i n t h e change i n t h e s o c i a l and c u l t u r a l climate, incident t o t h e

change i n t h e development horizon. As has been pointed out many times,

such a change may be an e s s e n t i a l condition f o r econonic growth i n under-

developed c o u n t r i e s . A t t h e same time, t h i s b e n e f i t r e s u l t i s not an

automatic consequence of education a t l a r g e , but only of t h e proper type,

q u a l i t y and q u a n t i t y of education. Supply of educated perscns who can-

not be absorbed i n t o appropriate p o s i t i o n s may r e a d i l y become an external

disecononly and source of i n s t a b i l i t y i n underdeveloped c o u n t r i e s . The

r i s i n g unemplayment l e v e l s of r e l a t i v e l y highly educated a r t s graduates

i n Inilia, i s witness t o t h i s f a c t ; but whether growing f r u s t r a t i o n of

t h e educated populace i s conducive t o o r a hinderance t o economic growth

 I

i n t h e long run i s a matter of opinion.

For more general c r i t i c i s m s and t h e l i m t t a t i o n s of t h e use

of p r i v a t e and s o c i a l r a t e s of r e t u r n i n obtaining u s e f u l investment

, c r i t e r i a f o r educational planning, and general discussion of t h e use of

c o s t - b e n e f i t a n a l y s i s i n education, t h e reader should t u r n t o o t h e r sour-

19, 20, 21
ces. An i n t e r e s t i n g example of t h e use of r a t e s of r e t u r n

comparisons between human and p h y s i c a l c a p i t a l i s t h e work of A.C. Har-

berger i n I n d i a . He found t h a t d e s p i t e a "conscious" b i a s i n g upward of

t h e measures of t h e r a t e s of r e t u r n t o education, t h e "best" estimates

r e s u l t i n g from t h e computations suggest t h a t t h e economic r a t e of r e t u r n

t o investment i n physical c a p i t a l i s higher (and may be s u b s t a n t i a l l y

h i g h e r ) than t h e economic r a t e of r e t u r n t o investment i n secondary and

higher education. It i s ~ n o t e w o r t h yt h a t Harberger's estimates excluded

s o c i a l e x t e r n a l r e t u r n s t o education.
 11. THE RESIDUAL APPi?OACH

One of t h e ,major d i s c o v e r i e s of r e c e n t y e a r s has been t h e

l a r g e p a r t of n a t i o n a l income growth i n t h e i n d u s t r i a l i z e d c o u n t r i e s t h a t

cannot b e explained by i n c r e a s e s i n q u a n t i t y o r l a b o r and p h y s i c a l c a p i t a l

inputs. Attempts by various authors t o measure the c o n t r i b u t i o n of

c a p i t a l and l a b o r i n p u t s t o t h e o v e r a l l i n c r e a s e i n G.N;P. p e r c a p i t a

u s i n g t h e CobS-Douglas production function, has r e s u l t e d i n t h e crea-

t i o n of a l a r g e " r e s i d u a l f ' element i a c a l c u l a t i o n s . The "residual" of

unexplained growth has been given m a n y l a b e l s , t h e most a c c u r a t e of

which i s undoubtedly t h e "measure of our i g n ~ r a n c e "

22
.
To a t t r i b u t e

a l l of t h i s . t o education i s e n t i r e l y unjustiffied. However t h e magnitude

o f t h e r e s i d u a l h a s s t i m u l a t e d e f f o r t s t o examine some of i t s components,

and notably among t'nem schooling, o r educat.ion.

The pioneering modern aggregate production function study

was J a n Tinbergen's essay e n t i t l e d "Theory and Measurement of F a c t o r s i n

23
Economic Growth" w r i t t e n i n 1942. Tinbergen concluded t h a t an un-

s p e c i f i e d t r e n d v a r i a 3 l e o r "efficikncy i n c r e a s e f f accounted f o r 19%of t h e

'75% growth i n n a t i o n a l income i n England from 1870 t o 1914, and f o r 27%
of t h e 56% growth i n t h e U n i t e d ' S t a t e s , 44% of t h e 44% i n Germany, and
58% of t h e 16%growth i n France f o r t h e same period. 24

Aukrust., w r i t i n g i n 1959, 25 t r i e d t o show t h a t "the

humail f a c t o r " (organization, p r o f e s s i o n a l s k i l l s , and technological

p r o g ~ * e s swas
) a t lea.st ES i m p r t a n t t o t h e r a t e of economic growth a s

t h e vohme of p h y s i c a l c a p i t a l . He found t h a t t h e "organization f a c t o r "

accounted f o r 1.81%p e r axnun of a t o t a l growth r a t e of 3.39% p e r annum

 ,
i n Norway from 1948 t o 1955. Among t h e p o l i c y conclusions of h i s study
was t h a t i n s t e a d o f t r y i n g t o i n c r e a s e t h e r a t e of progress by keeping

t h e l e v e l of investment high:

... we ought t o reconsider our p l a n s and p o l i c i e s , and look

i n t o t h e p o s s i b i l i t i e s of achieving g r e a t e r gains by i n c r e s -
i n g our e f f o r t s i n t h e f i e l d s of research and education. 2%:

27
Kendrick, attempted t o disaggregate t h e v a r i o u s com-

ponents of t h e r e s i d u a l o r "other forces" c o n t r i b u t i n g t o t h e growth of

t h e U.S. econow f o r t h e p e r i o d 1899 - 1953, (such a s technological

change, economies of s c a l e , b e t t e r management, h e a l t h improvements, ed-

u c a t i o n , and e t c .) and concluded t h a t from 1899 - 1953 they accounted

f o r more than h a l f of t h e r a t e o f growth of :National Product. Other

a u t h o r s have a s c r i b e d , using s i m i l a r methods t o those of Kendrick, an

even l a r g e r share of t h e i n c r e a s e i n G.N.P. t o t h e r e s i d u a l . 28

Denison, 29 t r i e d t o i s o l a t e the specific contribution

t h a t education has made t o i n c r e a s e d f a c t o r p r o d u c t i v i t y over time, and

t h e e f f e c t of improved q u a l i t y of l a b o u r i n t h e U.S. from 1909 - 1957.

H e e s t i m a t e s t h a t over -ihe p e r i o d 1909 - 1929, 12% of t h e grovth r a t e i n

t h e U.S. could be a s c r i b e d t o education, and 23% f o r t h e p e r i o d 1929 -

1956, i n terms of growth i n T o t a l Real National Income. The f i g u r e s f o r

growth of Real National Income p e r person employed a r e h i g h e r , r e s p e c t i v e l y

2% and 42% f o r t h e two p e r i o d s a s c r i b e d t o t h e education i n p u t .

Denison i n d i c a t e s a number of ways i n which a d d i t i o n a l
education c o n t r i b u t e s t o p r o d u c t i v i t y through r a i s i n g t h e q u a l i t y of t h e

labour f o r c e .
 I

A d d i t i o n a l education makes i n d i v i d u a l s more receptive t o

new i d e a s and more aware of b e t t e r ways o f doing t h i n g s .

Within a given occupation, a b e t t e r educated person i s

l i k e l y , with many exceptions but on t h e average, t o do a
job b e t t e r than a l e s s educated one. Not only does he 60
t h e same t h i n g s b e t t e r , f a s t e r , o r with l e s s supervision,
but he does more things-tasks t h a t w i l l otherwise be
done a t a higher occupation l e v e l .

Additional education widens t h e range of' choice open t o

i n d i v i d u a l s i n t h e choice of occupation and t h e i r appre-
c i a t i o n of a l t e r n a t i v e s , enabling them t o grasp chances
f o r economic advancement i n p o s i t i o n s where t h e i r marg-
i n a l producLivity i s l a r g e r and t o f i n d d i f f e r e n t employ-
ment when t h e demand f o r a s p e c i a l i z e d s k i l l achieved
through experience o r narrow vocational t r a i n l n g disap-
p e a r s . It i s usually t h e l e a s t edmatedwho f a r e worst
i n t h e process of economic change.

The a v a i l a b i l i t y of b e t t e r educated labour has l e d t o

changes i n t h e whole organization of production a s among
occupational groups i n order t o take advantage of labour
supply of higher q u a l i t y . Without an upgrading of labour
and t h e s h i f t of p a t t e r n s of demand towards occ!upmt' a 103s
.
r e q u i r i n g more education, ( i e . towards e d ~ c a t i o n - i n t e n s i v e
technological progress) t h e s e advances could not have been
adopted.

When t h e s e e f f e c t s a r e a l l considered, i t i s s u r e l y reason-

a b l e t o suppose t h a t t h e r e a l National Income i n 1960 would
have been a g r e a t deal smaller than i t was i f t h e 1930 edu-
c a t i o n a l d i s t r i b u t i o n had remained. 3O

Galenson and P y a t t , 31 have conducted a study of t h e

e f f e c t s of labour q u a l i t y on economic growth i n underdeveloped c o u n t r i e s

using t h e aggregate production f'unction. Among t h e important determin-

a n t s o f labour q u a l i t y a r e edxcation l e v e l s , h e a l t h , housing, and s o c i a l

security. Denison's study whi.ch a.tt.ributed almost one q u a r t e r of U.S.

growth from 1929 - 1957 t o education, czroused much i n t e r e s t i n l e s s devel-

oped e o w l t r i e s s i n c e i t i s usually ass-med t h a t t h e marginal r e t u r n s t o ed-

 1

ucation a r e higher i n l e s s developed countries. Galenson and w a t t es-

timated t h a t a 1%increase i n labour q u a l i t y i n 52 c ~ u n t r i e swas accom-

panied by a 2.27% increase i n c a l o r i e s p e r head, 0.13% increase i n invest-

ment i n dwellings, 0.11% increase i n higher eCiucation, 0.04% increase i n

social security benefits. Galenson and rfyatt admit however t h a t t h e r e

are many conceptual d i f f i c u l t i e s i n t h e wqy of measuring e f f e c t i v e

educational i n p u t s , and t h e growth producing e f f e c t of t h e d i f f e r e n t

levels and types of 'education i s not a t a l l uniform. I n addition t h e r e

i s t h e problem of time l a g s between educational input and output. An

increased expenditure on pr-irnary education a t y e a r t w i l l not become an

economic a s s e t u n t i l year t + n, t h e n varying with t h e year of schooi-

ing. The l a g w i l l be smaller f o r o t h e r forms of education, p a r t i c u l a r b

short term vocational t r a i n i n g , but it e x i s t s . Another problem i s t h a t

of t h e i n t r i n s i c value of a p a r t i c u l a r type of education a s a development

stimulus. The case f o r vocational t r a i n i n g i s c l e a r . Students i n voca-

t i o n a l schools a r e being prepared d i r e c t l y f o r working l i f e , and such

t r a i n i n g can be looked upon a s an immediate input i n t o a nation's pro-

ductive fund. Adult education, on t h e o t h e r hand, v a r i e s g r e a t l y i n i t s

purpose. Much of i t , p a r t i c u l a r l y i n underdeveloped countries, i s q u i t e

u t i l i t a r i a n i n purpose, including l i t e r a y y courses and evening t e c h n i c a l

training. Galenson and w a t t decided t h a t :

Since so l i t t l e i s known about the composition of adult edx-

c a t i o n , it was f e l t t h a t t h i s categoyy had b e t t e r be o m i t t e d .
Of conventional primary, secondary, and higher education,
t h e r e can be l i t t l e doubt i n terms of ultimate contribution
t o economfc efficiency, though immedLate payoffs may vary with
t h e s p e c i f i c type.
 I

The primary conclusion of t h e study was:

The i n c r e a s e i n higher educational enrollment showed some pron-

i s e a s an explanatory v a r i a b l e , p a r t i c u l a r l y among t h e low i n -
come c o u n t r i e s . This suggested t h a t p a r t i c u l a r a t t e n t i o n might
be p a i d t o t h e r o l e of t h i s f a c t o r i n t h e s e c o u n t r i e s . However,
t h e r e l a t i o n s h i p was not s u f f i c i e n t l y s t r o n g t o warrent t h e
f l a t a s s e r t i o n t h a t an expansion of h i g h e r education i s essen-
t i a l t o gr0wth.3~

Apart from c r i t i c i s m s of t h e s t a t i s t i c a l l i m i t a t i o n s

of t h e ' s t u d i e s mentioned, t h e planning of educational expenditure based

on t h e s e s t u d i e s has somewhat uubious relevence f o r both developed and

u n d e r d e v e l ~ p e dc o u n t r i e s . F i r s t l y , and p o s s i b l y most damning, i s t h e

r e l i a n c e of such s t u d i e s on t h e marginal p r o d u c t i v i t y theory of f a c t o r

incomes. Secondly i t does not provide a b a s i s f o r showing how much ad-

d i t i o n a l investment t h e r e should be i n education, o r marginal i n v e s t -

ment d e c i s i o n s . There i s a l s o no d i s t i n c t i o n between cons&tion and

investment a s p e c t s of education. Fourthly, no valuable i n d i c a t i o n i s

forthcoming of t h e s o r t of education t h a t should be encouraged i n UII-

derdeveloped c o u n t r i e s i n t h e f u t u r e . F i f t h l y , s i n c e t h e r e i s a high

degree o f complementarity between education, h e a l t h , research, and devel-

opment and c a p i t a l and labour i n p u t s , t h e marginal r e t u r n s t o investment

i n education could be brought t o zero quickly enough i f t h e o t h e r l'sourcesll

of growth a r e not present a s w e l l .

 111. INTERNATIONAL AND INTERTEMPO~AL,COMPARISONS OF SELECTED EDUCATIONAL -
INDICES

The use of "norms", o r i n t e r n a t i o n a l , intertemporal, and i n t e r -

industry comparisons of such figures a s educational expenditures, enrollement

r a t i o s , and labour force educational l e v e l s t o r e l a t i o n t o G.N.P. p e r c a p i t a ,

i s i l l u s t r a t e d p a r excellence by t h e work of Harbison and m e r s . 33 To ob-

t a i n a rough idea o f - t h e nature of t h i s approach, i t would be a s well t o

quote from one of these two authors, i n t h i s case F. Harbison. There a r e

two p r i n c i p a l objectives of t h i s approach:

The f i r s t i s t o rank a l a r g e number of countries on t h e b a s i s of

one o r more q u a n t i t a t i v e i n d i c a t o r s of human resource develo2ment
and t o group them i n t o l e v e l s of human resource development. The
second i s t o determine whether t h e a r e s i g n i f i c a n t s t a t i s t i c a l
r e l a t i o n s h i p s among various human resource i n d i c a t o r s and measures
of economic development. I f we can e s t a b l i s h some q u a n t i t a t i v e
benchmarks, these w i l l be usef'ul f o r a more d e t a i l e d q u a l i t a t i v e
a n a l y s i s of l e v e l s of human resource development. 34

Benjamin Higgins, comments r a t h e r sco-rnrully on t h i s approach

a s a b a s i s f o r educational planning and decision'making on resource a l l o -

cation. To quote:

From a l o g i c a l point of view t h e use of "noms" t o determine

t h e appropriate s i z e and p a t t e r n of t h e educational budget, i s
s primitive form of "econometric approach". That i s it involves
looking a t ad>-anced countries i n t h e p a s t and saying "high i n -
come countries seem t o spend about 5% of t h e i r G.N.P. o r 25% of
t h e i r aggregate governmental bu , o r X percent of t o t a l pub-
,
l i c i ~ v e s t m e n t on ,education." %t
Therefore if developing countries want t o have high incomes too, they must

5. do t h e same-i. e. i q l y i n g t h a t t h e r e a r e causal relationships between

' a e s e various indices and economic growt'n; and y e t many educational plans
 *
of underdeveloped. countries attempt t o achieve t h e various r a t i o s of devel-

oped countries, without acknowledging t h a t comparisons of developec coun-

t r i e s i n t h e process of development with present day underdeveloped coun-

t r i e s can l e a d t o very misleading conclusions. The use of cross section

studies of developed countries t o project and plan the future growth pat-

t e r n s of present day developing countries s u f f e r s from a l a r g e number 02

s t a t i s t i c a l problems, t h a t a r e a l s o inherent i n t h e approach being considered.

' Harbison and Myers, i n t h e i r study, employed fourteen different

types of indicators of human resource development i n t h e i r c l a s s i f i c a t i o n

of 75 countries i n t o four major catagories. Among these was a composite

index consisting of the:

... arithmetic t o t a l of (1) enrollment a t second l e v e l of edu-

cation a s a percentage of age g r m p 15-19, adjusted f o r length
of schooling, and (2) enrollment a t the t h i r d l e v e l of education
a s a percentage of t h e age group, multiplied by a weight o f 5. 36

The.reason f o r the weights selected was t h a t i n t h e i r judgement:

... higher education should be weighted more heavily than sec-

ond l e v e l i n such an index. 37

Using t h i s index t h e 75 countries i n t h e i r sample were c l a s s i f i e d i n t o four

catagories:

Level I. Underdeveloped countries (17).

Level 11. Parkially developed countries (a).
Level 111. Semi-advanced countries (21).
Level IV. Advanced countries (16).

A high p o s i t i v e correlation was found between the composite index and G.N.P.

per c a p i t a l (expressed i n U. S. d o l l a r s ) , while a high negative correlation

 - 25 -
was observed between t h i s index and the percentage of the labour force enga-

ged i n agriculture. The deviation of individual countries f o r t h i s t r e n d

l i n e a r e explained v a r i o ~ s l yi n t e r n s of physical natural resource i-vaila-

b i l i t y , over or under investment i n education r e l a t i v e t o t h e i r f i n a n c i a l

capacity as indicated by G.N.P. per capita, p r i o r investment i n human re-

sources which has provided a base f o r l a t e r , more rapid economic growth, e t c .

Although Harbison andMyers emphasize t h a t there i s no suggestion of causal

relationships i n high or low correlations between t h e i r indices, they do

tend t o a s s e r t t h a t t h e i r method provides answers t o the c r i t i c a l areas of

choice which confront . a l l nations, i r r e s p e c t i v e of t h e i r l e v e l of d e v e l o p

ment. These c r i t i c a l questions are:

The r e l a t i v e emphasis on q u a l i t y versus quantity i n a l l lev-

e l s of formal education.

The s t r e s s i n g of science and technolorn versus law, a r t s , and

humanities i n secondary and higher eChcation.

Thk reliance on pre-employment formal education versus i n -

service t r a i n i n g i n s k i l l development.

The conscious manipulation of wage and salary s t r u c t u r e ver-

sus dependence on market forces, building incentives.

Consideration of the needs and desires of the individual

versus the needs and desires of t h e s t a t e i n the general r a l
t i o n a l e of human resource development.

The authors' answers t o the above questions a r e presented i n

t h e i r section on "Choices of Strategy of Hwnan ~ e s o u r c eDevelopment". These

choices a r e r e l a t e d t o t h e imperatives and pressures t h a t a r e present a t

each $eve1 of de-relopment. Ir. the underdeveloped countries ( ~ e v e I)

l the

increase i n production of primary i n d u s t r i e s i s a prime necessity f o r econ-

omic development, and the expansion of, primary education i s a major s o c i a l

objective. Furthermore a "crash" programme must be undertaken of secondanj

education, along with "major reliance" on i n s t i t u t i o n s f o r s k i i l de;elop-

ment. A t a higher l e v e l , university graduates a r e a l s o needed, and:

... they must be sent road u n t i l l o c a l instutions f o r higher

learning a r e developed. 3
I n t h e p a r t i a l l y developed countries (Level 11):

. . . t h e economic imperative i s t o b u i l d t h e base f o r industri-

a l i zation while expanding a g r i c u l t u r a l development. 39

Thus there i s an acute shortage of a l l catagories of technical and prof-

essional personnel, requiring the importation of such s k i l l s from abroad.

I1
University education i s an a t t a i n a b l e and mandatory goal." The top p r i -

o r i t y must be given t o reform and expansion of secondary education, with

special emphasis on mathematics and science, and a l s o the education of sub-

professional personnel and technicians.

I n the semi-advanced countries (Level 111), the emphasis again

i s on technical and s c i e n t i f i c t r a i n i n g a t a l l l e v e l s of education, along

with expansion a t a l l l e v e l s .

I n the advanced countries (Level -v), there i s universal secondary

education, and higher education i s "within t h e reach of a l l t h a t a r e quali-

f i e d f o r it .If 40

. The obvious naivete of many of t h e suggestions by Harbison and

m e r s tends t o detract from t h e possible importance of t h e i r approach a s a

general indication t o underdeveloped countries on a strategy of human re-

source development. They have assumed implicitly t h a t the developing coun-

t r i e s w i l l follow a c e r t a i n path, a n d ' t h a t t h i s growth path w i l l be s i m i l a r

t o t h a t which t h e presently developed countries took i n t h e p a s t . Further-

more they neglect t h e e s s e n t i a l l y heterogeneous nature of ~ d e r d e v e l o p e d

countries i n such an aggregate approach. Many of t h e i r suggestions a r e

given without consideration of cost c o n s t r a i n t s , and underlying t h e whole

a n a l y s t s i s t h e implication of causality. I n p a r t s of t h e book t h e impli-

cation becames a mere statement of f a c t . For example, i n the case of

Japan :

... t h e f a c t t h a t i t s current r a t e of growth i s t h e highest

of any i n d u s t r i a l nation suggests a causal connection betw en
an educated labour force and subsequent economic growth. El
Despite t h e obvious l i m i t e d a p p l i c a b i l i t y of the Harbi son and.

Myers o r t h e "norms" approach a s a guide t o e f f i c i e n t resource a l l o c a t i o n ,

it has s t i l l been used i n underdevel~pedcountries f o r educational planning. 1

I n t h e course of t h e s e r i e s of UNESCO conferences,a f i g u r e of
4-5% of GNP has come t o be accepted a s an appropriate f i b w e
f o r expenditure on education, f o r no other reasons except t h a t
a number of advanced countries spend about t h i s amount. b2

Furthermore, concentration on these norms means t h a t a country i s ignoring

t h e f l e x i b i l i t y which e x i s t s with regard t o education policy because of t h e

e l a s t i c i t y of s u b s t i t u t i o n between d i f f e r e n t educational l e v e l s , and between

o t h e r f a c t o r s of production f o r education. India, f o r example, appears t o

have a very "education intensive" programme system i n comparison t o coun-

t r i e s a t the same l e v e l of development. The p o s s i b i l i t i e s of f a c t o r s u b s t i -

t u t i o n and edilcation l e v e l s u b s t i t u t i o n , i s not countenanced i n t h e apprcach

being considered, whereas such substituion i s a very r e a l p o s s i b i l i t y i n t h e

 1

f'uture, given the r a t e of technical progress. This approach seems t o imply

a c e r t a i n i n f l e x i b i l i t y over t i k e of t h e education system, whereas f l e x i -

b i l i t y within education f o r rapid econornic grow-En i s probably a more desi-

rable goal f o r the educational planners.

 Rather than attempting t o estimate t h e precise contribution

t h a t education makes t o economic growth, manpower forecasting or the mn-

power approach proceeds on the assumption t h a t economic growth cannot take

place without a c e r t a i n stock of s k i l l e d and t r a i n e d manpower. A s the t i t l e

suggests, t h e method involves forecasting t h e f'uture demand o r requirements

f o r different l e v e l s of manpower at some predetermined date i n t h e future,

on t h e b a s i s of technological r a t h e r than economic (i.e. market) require-

I

ments. Through t h i s method, s c i t s protagonists proclaim, shortages o r

surpluses can readily be i d e n t i f i e d , and thus t h e educational system can

be corrected t o meet these technological discrepancies as closely as pos-

sible. Apart from the s t a t i s t i c a l problems t h a t a r i s e through the use of

t h i s approach, a number of preliminary questions come t o mind. F i r s t and

foremost, i s t h i s approach a method of planning of education o r more f'un-

damentally a forecasting technique, t h a t allows l i t t l e range of choice

f o r t h e decision makers? How and i n what ways does shortage and surplus

d i f f e r from the economic concepts of excess demand and excess supply? It

would be opportune a t t h i s juncture t o examine the reasons why market forces

have been i n the main rejected a s a means of equilibrating f a t w e supply and

demand f o r manpower i n both developed and underdeveloped countries, and

more reliance placed on the use of projection techniques f o r estimating f'u-

t u r e surpluses and shortages of s k i l l e d manpower.

I

It i s common f o r many underdeveloped countries t o have surpluses

along with shortages of c e r t a i n s k i l l s . I n order t o u n d e r s t a ~ dwhy t h i s s i t -

uation should a r i s e , one needs t o examine t h e factors t h a t determine t h e

supply and demand f o r various types of s k i l l s , and t o consider t h e way t h e

market functions with respect t o such s k i l l s . A f'uller treatment than I

propose t o give, would consider not only t h e determinants of t h e dis'tribu-

t i o n of s k i l l s i n ar, econoqr, but a l s o t h e s o c i a l , c u l t u r a l , and economic

determinants of t h e supply and demand f o r such s k i l l s i n t h e market. In

t h i s b r i e f o u t l i n e t h e major question asked i s why 'the market f o r s k i l l s

may not be cleared, especially i n underdeveloped countries.

Harvey Leibenstein 43 distinguishes t h r e e ways i n which t n e

terms shortage and surplus can be used. F i r s t l y , i n t h e sense it i s used

i n market theory, implying f a i l u r e t o c l e a r t h e market; secondly, shortage

o r surplus of a c e r t a i n s k i l l may be s a i d t o e x i s t when t h e r e i s t o o l i t t l e

o r t o o much of it t o achieve a c e r t a i n end; t h i r d l y , shortage may r e f e r

t o f a c t o r bottlenecks i n what would appear t o be otherwise a f e a s i b l e s i t -

I
uation. Under t h e conventional (marginal productivity) economic theory,

t h e p r i c e ~ y s t e mw i l l operate i n such a way a s t o eliminate surpluses and

shortages, but i n r e a l i t y it does not f o r a number of reasons. One possible

reason i s t h a t t h e r e e x i s t s fixed f a c t o r proportions with regard t o c e r t a i n

s k i l l s , such t h a t t h e e l a s t i c i t y of s u b s t i t u t i o n between s k i l l s i s almost

zero, under c e r t a i n technical o r i n s t i t u t i o n a l conditions. Although s u b s t i -

t u t i o n e l a s t i c i t i e s of zero a r e very unlikely i n r e a l i t y , f o r c e r t a i n types

of occupations they may be very low, and thus impose an i n t o l e r a b l e burden

on t h e p r i c e mechanisms. I n s t i t u t i o n a l arrangements may a l s o prevent t h e

proper working of t h e p r i c e mechanism t o r e f l e c t t h e demand and supply s i t -

uation; such arrangements w i l l then give r i s e t o shortages and surpluses.

A l a c k of p e r f e c t information on job opportunities i n t h e market, nay l e a d

t o a desire t o stqy i n a p a r t i c u l a r makket r a t h e r than r i s k t h e changes in-

volved i n entering a wider market. 'Furthermore firms i n underdeveloped

countries may not know a l l the possible techniques of product.ios and t h e

possible output outcomes associated with each d i f f e r e n t production techni-

que, and thus overestimate the degree of f a c t o r ' r i g i d i t y among d i f f e r e n t

types of labour. This m a y a l s o r e s u l t i n t'he d.eliberate over-exaggeration

of s k i l l requirements f o r c e r t a i n jobs. These d i s t o r t i o n s i n the labour

market may be even more acute when the long gestation l a g between educa-

t i o n inputs and outputs on the market i s brow.&t i n t o the picture, and t h e

additional f a c t t h a t the market adjustment process v i a the p r i c e mechanism

i s subject t o supply and demand type lags. 1t i s f o r the above reasons,

(and no doubt other more subtle reasons) t h a t t h e manpower approach tends

t o r e j e c t t h e functioning of the market v i a the p r i c e mechanism t o elimin-

a t e shortages and surpluses i n t h e future, and rely more on the e s t i m t i o n

of c e r t a i n technological requirements f o r s k i l l e d manpower.

A f'urther question t h a t a r i s e s i s whether t h e manpower approach

i s a planning approach or merely an example of t h e use of projection techni-

ques and nothingmore. I f t h i s i s so, i n what way does planning, a s it i s u-

s u a l l y defined, d i f f e r from forecasting? Planning, which could generally be

d e f i ~ e da s aiming a t t h e f'ulfillment of c e r t a i n objectives, i s somewhat

dLfferent from forecasting, which could be defined a s aiming a t predicting

f'uture developments. The difference between t h e two, i f often defined by

t h e way i n which autonomous variables a r e defined. I n forecasting, auton-

omous parameters a r e determined on the b a s i s of expected behaviour by public

o r p r i v a t e i n s t i t u t i o n s (i.e. individuals). I n the planning case, t h e value

of one o r more parameters a r e regardeg a s t a r g e t s , e i t h e r i n terms of def-

i n i t e values t o 6e assigned t o c e r t a i n parameters, o r variables t o be max-

imized. A p r i o r i , it does not make any difference t o the forecaster/planner

from an a n a l y t i c a l point of view. Thus a s long a s t h e values of t h e para-

meters a r e "given", it does not matter whether these values a r e regarded

as t a r g e t s o r not. The e s s e n t i a l difference between the forecaster and

planner, i s r a t h e r t o be found i n t h e choice of dependent. variables. Plan-

ning. assumes o r r a t h e r implies t h e possibLlity t h a t policy xakers (those

who m k e t h e t a r g e t s ) can influence c e r t a i n psralneters i n t h e model, where-

as t h e f o r e c a s t e r cannot, and must r e l y on constant o r fixed parameters and

coefficients. The f o r e c a s t e r w i l l tend t o use t h e paraaeter t o which t a r g e t

conditions have been assigned a s h i s v a r i a b l e , and t h e lnstrrgnent v a r i a b l e

i n t h e planner's model being regarded a s autonomous by the forecaster. %is

difference i n assumptions and conditions i s e s s e n t i a l t o the understanding

of t h e t h e o r e t i c a l impact, of planning. While t h e forecaster i s not con-

cerned, a s such, with t h e degree of optimality i n h i s system, t h i s i s t h e

planner's raison d l e t r e . ~ m p i r i c a l lt h~ i s means t h a t t h e planner w i l l have

t o focus on t h e degree of optimality of d i f f e r e n t f a c t o r combinations and

distributions. A d e t a i l e d knowledge of t h e a c t u a l technical r e l a t i o n s h i p s

r e f l e c t e d i n h i s model i s essential., I n t h e sense t h a t t h e manpower approach

i s not concerned with optimality, but r a t h e r with t h e prediction of manpower

requirements i n the f u t u r e on the b a s i s of a projected p a t t e r n of f i n a l de-

mand, i n d u s t r i a l and occupational s t r u c t u r e , it would be d i f f i c u l t t o con-

s i d e r it anything more then a t o o l of educational planning, a s indeed a r e

t h e previously m2~tionedapproachs. The contention t h a t the manpower ap-

proach i s b a s i c a l l y nothing more than a forecasting approach, i s borne out

 I

when t h e acproach i s examined.

One can conceptualize t h e manpower approach on two levels: at

e i t h e r t h e production requirements l e v e l , o r a t the consumption demand

f o r education services level. The f i r s t method involves forecasting the

production requirements f o r different l e v e l s of manpower, whereas t h e second

method involves estimating the overall social and economic demand f o r ed-

ucation on the b a s i s of income e l a s t i c i t i e s of demnd for educatior,. In

r e a l i t y the manpower approach a s used, has concentrated on estimating future

labour requirements along similar l i n e s t o those sometimes used i n pro-

jecting t h e demand f o r the factors. I n t h e manpDwer approach the p r i c e

aspect i s ignored o r considered unimportant f o r projection purposes, and

there a r e fixed or determinable labour-output coefficients f o r the various

types of labour. The end goals of a manpower forecast a r e estimates of t h e

numbers of people required a t t h e forecast date i n each economic a c t i v i t y

and occupation and estimates of t h e numbers of people who musr be t r a i n e d t o

meet these requirements.

The s t a r t i n g point i s an analysis of t h e current structure of

employment by economic a c t i v i t y (sectors and i n d u s t r i e s ) , and occupational

groups, f'urther subdivid.ed by educational and t r a i n i n g attainments, age, and

sex. Then the c i v i l i a n labour force must be estimated f o r the forecast

year, and perhaps f o r one or two intermediate years, depending on the length

of the forecast period. k b o u r force requirements of individual sectors must

then be projected, and then summed t o f i n d the t o t a l anticipated labour force.

Forecast employment i n each sector must then be allocated t o occupational

categories, and thus the estimated demand f o r various types of manpower a t

the target year i s arrived a t . The pioblem now occurs of t r a n s l a t i n g t h e s e

occupational requirements i n t o educational requirements of both a general

and s p e c i f i c nature. From t h e estimates of educational requirements, t h e

r e q u i r e d inflow t o t h e labour f o r c e of t r a i n e d personnel can be derived.

This involves s u b t r a c t i n g from t h e s e f i g u r e s , f o r planning purposes, t h e

a n t i c i p a t e d r e t i r e m e n t s , deaths, withdrawals, and emigrants, during t h e f o r e -

c a s t p e r i o d from t h e c u r r e n t stock of workers. A comparison of t h e expected

needs and t h e expected, remaining stock of workers i n d i c a t e s t h e inflow of

workers o f each type t h a t w i l l be needed over t h e planning period. The r e -

s u l t i n g f i g u r e s can then be matched with t h e a n t i c i p a t e d supply of people i n

each occupation who w i l l be e n t e r i n g t h e labour f o r c e over t h e time horizon

of t h e p l a n . Thus proper manpower planning involves both f o r e c a s t s of

production needs and p r o j e c t i o n s of t h e number of s t u d e n t s entering the

e d u c a t i o n a l system. The comparisons o f production requirements with t h e

a n t i c i p a t e d s u p p l i e s of labour f o r c e e n t r a n t s w i l l i n d i c a t e whether e x i s t i n g

e d u c a t i o n a l f a c i l i t i e s a r e adequate and of t h e r i g h t type t o provide t h e

t r a i n i n g r e q u i r e d by t h e labour f o r c e of t h e f u t u r e , o r whether, i f c u r r e n t

enrollment t r e n d s continue, s u r p l u s e s o r shortages of s k i l l e d people may

arise. Appropriate p o l i c y decisions might t h e n be taken t o ensure t h e * s i r e d

occupational mix. 44, 45, 46

C r i t i c i s m s of t h e manpower approach a s presented h e r e can be on

t h e b a s i s of i d e o l o g i c a l o r e t h i c a l c o n s i d e r a t i o n s o r merely on t h e b a s i s of

mere p r a c t i c a b i l i t y . Those who would argue a g a i n s t t h e approach on ideolo-

g i c a l o r phil.osophica1 grounds, g e n e r a l l y base t h e i r c r i t i c i s m s on t h e con-

t e n t i o n t h a t t h e "true1' purpose of education i s t o c o n t r i b u t e t o an i n d i v i d -

u a l ' s p e r s o n a l development, and t h u s an approach t o educational planning t h a t

i s e s s e n t i a l l y economic i n i t s o r i e n t a t i o n and which seems t o use s o c i e t y ' s

needs f o r a "human c a p i t a l " a s a b a s i c c r i t e r i o n , i s immoral o r u n e t h i c a l ,

t o say t h e l e a s t . This c r i t i c i s m however could be flung a t a l l t h e approaches

described i n Yne essay. On t h e o t h e r hand, t h e r e a r e those who p r o f e s s no

p h i l o s o p h i c a l o b j e c t i o n s t o t h e manpower approach, but who f e e l t h a t t h e i m -

p o s s i b i l i t y of making v a l i d long term f o r e c a s t s of manpower needs makes

t h i s approach dangerous, t h e more so because i n d i v i d u a l c a r e e r s can be

wrecked i f people pay t o o much a t t e n t i o n t o f a u l t y o f f i c i a l f o r e c a s t s .

This p o i n t of view holds l i t t l e water when one compares t h e p o s s i b l e payoff

between t h e p r o s p e c t s of a long p e r i o d of unemployment due t o not l i s t e n i n g

t o c o r r e c t o f f i c i a l f o r e c a s t s , r a t h e r t h a n heeding a p o s s i b l e g u i d e l i n e t o

f'uture employinent p o s s i b i l i t i e s . I n t h i s sense t h e value of t h e approach

i n suggesting p o s s i b l e s t r a t e g i c b o t t l e n e c k s o r p o s s i b l e chronic s u r p l u s e s

i n t h e process of development i n underdeveloped c o u n t r i e s i s s e l f - e v i d e n t .

On more p r a c t i c a l grounds, t h e approach s u f f e r s frora a l a r g e num-

b e r of e m p i r i c a l d i f f i c u l t i e s . It v i r t u a l l y ignores t h e consumption a s p e c t s

o f education, and t h e probably very high income e l a s t i c i t y of demand f o r

education i n developing c o u n t r i e s due t o t h i s consumption coaponent. The

approach may succeed a t i t s very b e s t i n e s t i m a t i n g t h e p r i v a t e production

minimum requirements f o r educational f a c i l i t i e s , b u t not minimum s o c i a l r e -

quirements. This s o c i a l element i n education w i l l vary g r e a t l y with t h e ob-

j e c t i v e s of t h e v a r i o u s c o u n t r i e s , and xi11 t h u s a l s o vary g r e a t l y i n s i z e .

The p o s s i b l e f l u c t u a t i o n s i n business a c t i v i t y over time w i l l a.ffect t h e demand

f o r v a r i o u s types of s k i l l s ; and u n l e s s t h e s e f l u c t u a t i o n s can be a c c u r a t e l y

 1

p r e d i c t e d , shortages and surpluses. a r e bound t o a r i s e . Factor p r i c e s may

a l s o change over time, e s p e c i a l l y with regard t o d i f f e r e n t types of s k i l l e d

labour, t h a t may have a disincentive e f f e c t i n terms of market response t o

undertaking a c e r t a i n type of education i n t h e s h o r t run. Also a s p r i c e s

of d i f f e r e n t types of labour change, so a l s o w i l l t h e labour cutput co-

e f f i c i e n t s and thus t h e q u a n t i t i e s of each type of labour i n t h e production

process, t h a t i s t h e p r i c e e l a s t i c i t i e s o f demand f o r f a c t o r s mw not be

zero o r near zero, a s t h e manpower approach assumes. This i s an argument f o r

more f l e x i b i l i t y i n t h e education system, r a lher than s t r i c t vocational

t r a i n i n g programmes, i n t h e form of a more general education. This view

i s enforced by t h e i m p o s s i b i l i t y of p r e d i c t i n g t h e progress and p a t t e r n of

technological change over time. A f u r t h e r d i f f i c u l t y i s t h a t preparation

f o r various jobs can be obtained by a number o f d i f f e r e n t routes, v i z . ap-

p r e n t i c e s h i p s , on-the- job t r a i n i n g , and f o m a l education. A wh'ole range

of d i f f i c u l t i e s a r i s e s regarding t h e type of f a c i l i t i e s t h a t should be pro-

vided, which i s t h e most e f f i c i e n t approach, and what q u a l i t y of worker i s

required. The d i f f i c u l t y of i n t e r p r e t i n g occupationel requirements i n terms

o f educational requirements i s not overcome i n t h i s approach. Associated

problems include what p u p i l - t eacher r a t i o s should be assumed, and what type

and length o f t r a i n i n g t h e teachers themselves should have.

It i s d i f f i c u l t t o a r r i v e a t any f'undarnental conclusions with

regard t o t h e manpower approach, o t h e r than t o note t h a t it s u f f e r s , a s do

t h e previous approaches from a c e r t a i n degree of imperfection i n i t s imple-

mentation. The f a c t t h a t it i s used a s a b a s i s f o r educational planning i n

many, if not most underdeveloped c o u n t r i e s , i s possibly a t r i b u t e t o i t s

being s l i g h t l y l e s s inaccurate than t h e o t h e r ap2roaches and a l s o t o i t s

 ,
being possibly e a s i e r ' t o compute.

Manpower forecasting, although f a r from an i d e a l approach t o

r a t i o n a l development of educational resources, does a t l e a s t provide a

. framework f o r analysis and a guide t o the collection of additional required

data, i n a way t h a t no other method possibly does. To close on a note of

q u a l i f i e d optimism, I w ~ u l dl i k e t o quote from Wilkinson, who notes t h a t a l -

though :

... manpower planning i s not an exact science ... (in fact)

....
a t b e s t it i s an a r t , s t i l l i n i t s infancy ( t o delay plan-
ning u n t i l ) our data were complete and a fool proof methodoloy
were developed ... (would mean t h a t ) no forecasts of educa-
t i o n a l needs would ever be made .... (~urthermore,) the enor-
mous outlays on education today and i n t h e future demand t h a t we
a t l e a s t make a determined e f f o r t t o determine how we can b s t
a l l o c a t e these expenditures t o meet our needs e f f i c i e n t l y . 67
 The use of econometric models f o r a s s i s t i n g educational glanning

i s a comparatively r e c e n t development i n t h e f i e l d , and they f a l l i n t o two

major c a t e g o r i e s ; those based on input-output approach, and those r e l y i n g

mainly on l i n e a r programming techniques. For t h e most p a r t they have

sprung out of t h e previous manpower approach t o educational planning, i n

t h e sense t h a t they a r e conceptually and methodologically very s i m i l a r . The

two d i f f e r e n t types of model arose out of a need f o r a more rigorous s t a t e -

ment ( i e . . i n mathematical terminology) of t h e problems f a c i n g t h e manpower

approach, namely those of i n t e r t e m p o r a l consistency and balance i n t h e

growth o f t h e educational system, and t h o s e a s s o c i a t e d with optimizing prob- ..

lems both between t h e educational expenditures and o t h e r expenditures, and

between t h e d i f f e r e n t types of education (sub-optimizing p r o b l e m ) .

. -
I n t h i s s e c t i o n I propose t o examine only one modei, t h a t of t h e

input-output type, and t o l e a v e t h e l i n e a r programming models t o a l a t e r

paper.
48 This model i s t h e simple input-output model a s f i r s t developed

by H. Correa i n h i s book, 49 and p r e s e n t e d i n a more simple fashion i n a

j o i n t a r t i c l e with J. Tinbergen i n Kyklos, 1962. 50

!The o r i g i n a l simple model c o n s i s t e d of s i x l i n e a r d i f f e r e n c e

equations, designed t o t a k e i n t o account t h e following c h a r a c t e r i s t i c s of

t h e r e l a t i o n s h i p between economic development. F i r s t l y t h a t economic l i f e

needs a stock of q u a l i f i e d manpower, and t h e flows of graduates from secon-

dary and h i g h e r education r e p r e s e n t s a t any one time "a very s m d l p o r t i o n

of t h i s stock." 5 l Secondly, education o f t e n c o n s i s t s of a s e r i e s of suc-

c e s s i v e s t a g e s , each depending on t h e former l e v e l f o r i t s supply of new r e -

cruits. Thirdly, t h a t p a r t of t h e stook of q u a l i f i e d manpower must be used

i n t h e education process i t s e l f , i n t h e form of a "feed-back" i n t o t h e edu-

c a t i o n system i n t h e form of teachers. Fourthly, q u a l i f i e d manpower may b e

imported, t o meet i n i t i a l shortages t h a t may develope e s p e e i a l i y i n t h e i n -

i t i a l s t a g e s of economic growth. Thus t h e s i m p l i c i t y of t h e model i s jus-

t i f i e d by t h e authors on t h e grounds t h a t on t h e b a s i s of c l a r i f i c a t i o n ,
(1
. . . it b r i n g s out 'some of t h e b a s i c p r o p e r t i e s bf the' mechanisms. 11 52
'

Furthermore t h e model does not aim a t a comslete d e s c r i p t i o n of t h e educa-

t i o n a l system under t h e forces of supply and demand, b u t r a t h e r it aims t o

describe t h e demand flows of various types of q u a l i f i e d manpower t o be ex-

pected from t h e organizers of production and education. Thus:

The purpose of t h e i r model i s t o a i d i n t h e process of planning

f o r education and f o r labour market p o l i c i e s , t a c i t l y assuming
t h a t ways and means can be found t o induce t h e population t o
seek t h e d e s i r e d education. 53

The complete model, a s f i r s t presented, i s designed t o b r i n g out

t h e r e l a t i o n s h i p s o u t l i n e above, and t h e importance of stocks and f l o v s i n

t h e education system. It c o n s i s t s , a s previously mentioned, of s i x l i n e a r

d i f f e r e n c e equations .'
The following symbols a r e used, l e a v i n g out t h e time index t.:

: t o t a l volume of production (income) of t h e country.

Na : t h e lzbour f o r c e with a secondary education.
'N : t h e labour f o r c e with a t h i r d l e v e l education.
ha : t h o s e who have e n t e r e d t h e labour f o r c e N 2 w i t h i n t h e previous 6 y e a r s .
n3: t h o s e who have e n t e r e d t h e labour f o r c e /V3 within t h e previous 6 y e a r s .
4% : t h e number of s t u d e n t s i n secondary education.
$ : t h e number of s t u d e n t s i n t h i r d l e v e l education.

(1) N;= $75 Z

where a = a t e c h n i c a l c o e f f i c i e n t = .2 (u.s. d a t a ) .
\
Thus t h e number of people with secondary education i n t h e labour
 f o r c e , i s d i r e c t l y proportiorial t o t h e volume of production,
t h u s i f Y= i s c o n s t a n t , then t h i s r e l a t i o n s h i p w i l l h o l d over
time.

- - . where = a "disappearance" o r dropout r a t i o p e r

+,.pC: u n i t of time f r o m t h e secondary l e v e l e d u c a t e d l a b -
o r force.
= .ox.
Thus t h e number of people with secondary l e v e l education i n t h e
labour f o r c e , i s a l s o r e l a t e d t o t h e previous p e r i o d labour
f o r c e with secondary education, p l u s t h e a d d i t i o n a l e n t r a n t s
w i t h i n t h e previous s i x y e a r s .

hsk=n t-,
2
- h3r
Thus t h e number of newcomers t o t h e labour f o r c e with secon-
dary education i s equal t o t h e number of s t u d e n t s one time
e a r l i e r minus t h e number of s t u d e n t s now i n a t h i r d l e v e l ed-
ucation.

(4) N;+~')N%-I where $

= a "disappearance r a t i o " = .01.
t m3e and ) ? = -01.
Thus the'nwnber i n t h e work f o r c e with t h i r d level. o r h i g h e r ed-
ucation equals t h e number i n t h e work f o r c e with t h i r d l e v e l o r
h i g h e r education i n p e r i o d t-1 reduced by a proportion ( )I3 = .01)
who d i e o r r e t i r e p l u s t h e e n t r a n t s i n t o t h e work f o r c e - o f s t u - .
dents i n one y e a r t with t h i r d l e v e l education.

Ih
3
=h
3
&,
Thus t h e number of. newcomers i n t o t h e labour f o r c e with t h i r d
l e v e l o r h i g h e r education, equals t h e number of st.udents i n t h e
t h i r d l e v e l of h'lgher education i n t h e p e r i o d t-1.

a1 = a " t e c h n i c a l c o e f f i c i e n t "
= .02.
t h e teacher/student r a t i o f o r t h o s e with
fl-=
h i g h e r educaCuion who axe teaching a t sec-
ondary l e v e l = .04.
fT3= t h e teacher/student r a t i o f o r those with
h i g h e r education who a r e teaching a t t h i r d
1
l e v e l o r h i g h e r education = .08.
Thus implies a student/teacher r a t i o = 25: 1.
and r3 implies a student/teacher r a t i o = 12: 5: 1.

The authors s t r e s s t h e need f o r educational planning and exten-

s i o n o f t h e e d c c a t i o n a l system over time. They mention t h e long l a g s between

i n p u t s i n t o t h e educational system, and t h e f i n a l output, i n t h e form of

q u a l i f i e d graduates. I n f a c t i f every process of education t a k e s s i x y e a r s

t o complete (which they assume), then ,the t h r e e processes of primary, sec-

ondary, and h i g h e r education, r e q u i r e an educational cycle of eighteen y e a r s .

However,, i n t h e i r model only t h e two l a t t e r processes a r e considered, s i n c e

t h e primary l e v e l of education i s not recognized a s a bottleneck t o t h e ex-

pansion of t h e secondary and h i g h e r processes. This assumption i s a very

extreme one t o t a k e e s p e c i a l l y with regard t o underdeveloped c o u n t r i e s ,

where t h e expansion of secondary and h i g h e r education, due t o t h e very nature

of t h e successive n a t u r e of t h e system, i s c o n d i t i o n a l upon t h e expansion of

primary education.

Correa and Tinbergen were i n t e r e s t e d i n t h e q u a n t i t a t i v e changes

i n t h e s t r u c t u r e over time a s i t adapts and responds t o t h e requirements of

t h e e d u c a t i o n a l planners ( o r goal s e t t e r s ) . These q u a n t i t a t i v e changes

they were i n t e r e s t e d i n took t h e form of asking t h r e e main questions.

(1) What s t r u c t u r e of t h e educational system i s r e q u i r e d t o l e t

t h e econoqy grow a t a giiren r a t e , and how does t h e educa-
t i o n a l system change with t h a t growth r a t e ?

(2) What f o r e i g n a s s i s t a n c e ( i n t h e form of imported t e a c h e r s o r

manpower) i s needed i f t h e growth o f t h e econow i s t o be
a c c e l e r a t e d without changing t h e t e c h n i c a l c o e f f i c i e n t s of
e i t h e r t h e economy o r t h e educational system?

(3) What a d a p t a t i o n s a r e needed i f t h e same a c c e l e r a t i o n i s t o be

obtained i f t h e r e i s no f o r e i g n a s s i s t a n c e ?

The answers t o t h e s e q u e s t i o n s a r e u n i n t e r e s t i n g i n t h e l i g h t of

t h e extreme s i m p l i c i t y of t h e o r i g i n a l model, and w i l l consequently not be ex-

amined. Balogh ' s c r i t i c i s m of t h e "Cavalier approach" taken by t h e two auth-

o r s , 54 i s somewhet u n j u s t i f i e d i n view of t h e e x p l i c i t statement by them,

t h a t t h e model was not intended t o be more than an i n t r o d u c t i o n t o t h e prob-

lem of a mathematical approach t o planning. One can however, c r i t i c i s e t h e

55, 56
b a s i c s t r u c t u r e of t h e model.
 The assumption t h a t a given output r e q u i r e s a f i x e d volume of

manpower with f i x e d amounts of education and t r a i n i n g , i s a very extreme l i m -

i t a t i o n on t h e f l e x i b i l i t y of t h e model, and deprives t h e educational planner

o f one of t h e most valuable methods of varying t h e manpower requirements

with v a r i a t i o n s i n labour i n t e n s i t y i n i n d u s t r y . The same i s t r u e of t h e

r e l a t i v e l y i n f l e x i b l e nature of t h e o t h e r parameters, e s p e c i a l l y t h e teacher/

student r a t i o s . This r a t i o i s one of t h e most important s t r a t e g i c policy

v a r i a b l e s i n t h e hands of educational p l a n n e r s , who by varying t h e r a t i o

can g r e a t l y a f f e c t t h e production r a t e of t h e educational system, and a l s o

minimize t h e teacher supply bottleneck i n underdeveloped c o u n t r i e s . The

f a c t i s t h a t considerable l a t i t u d e , e x i s t s f o r s u b s t i t u t i o n of labour f o r

c a p i t a l and v i c e versa, and for s u b s t i t u t i n g a d d i t o n a i manpower education

f o r manhours, i . e . v i a automation, i t m a y be p o s s i b l e t o produce t h e same

output with a smaller number of w e l l t r a i n e d workers. I n ehor+,, t h e choice

of technology and i t s implications f o r education, i s a major aspect of devel-

opment planning, a s i s t h e choice between more echcation and t r a i n i n g and

l e s s employment, o r l e s s education and t r a i n i n g and more employment i n each

sector. Owing t o t h e f a c t t h a t t h e model i s a t such a high l e v e l of aggre-

g a t i o n , it has t h e disadvantage when a p p l i e d t o underdeveloped countries of

f a i l i n g t o a n t i c i p a t e c e r t a i n s t r a t e g i c b o t t l e n e c k s , t h a t may h o l d up econ-

omic growth.

The model s u f f e r s , a s do t h e o t h e r approaches c u t l i n e d , from t o o

much emphasis on t h e investment a s p e c t s r a t h e r than t h e consumption aspects

of educational expenditures. To plan t h e requirements f o r education on t h e

b a s i s of f i x e d production c o e f f i c i e n t s w i l l seriously underestimate t h e over-

a l l s o c i a l requirements. As willcinsoh has remarked:

The b a s i c weakness of t h e model stems from i t s being nothing mofe

than an adaptation of t h e popular two s e c t o r physical c a p i t a l
9 and q3 ) a l -
models involving a f i x e d capital-output r a t i o , ( c f . ' ,
lowance f o r depreciation, ( r a n d h3 ), and r e a l c a p i t a l from o e
s e c t o r being used t o produce t h e output i n t h e second s e c t o r . 37, 58

Due t o t h e model's s i m i l a r i t y t o t h e c a p i t a l models, t h e r e a r e

more o f t h e problems i n t h e c a p i t a l models incorporated i n i t s s t r u c t u r e .

The assumption t h a t only higher l e v e l educated manpower teachers i n t h e

secondary l e v e l of education, i s but one example of t h e attempt t o approx-

imate a p h y s i c a l c a p i t a l model, along with t h e l i m i t a t i o n t o only two

(1
sectors", t h e secondary and higher education l e v e l s . I n addition the

model works on t h e i m p l i c i t assumption t h a t t h e r e i s some s o r t of e x i s t i n g

optimum educational s t r u c t u r e i n t h e i n i t i a l planning period, such t h a t no

shortages i n t h a t p e r i o d need t o be elimjnated. Many more c r i t i c i s m s of

t h e o r i g i n a l model and t'ne subsequently developed models could be presented.

From t h i s b r i e f exploration of one model used i n t h e s o - c a l l e d

11
econometric approach" i t i s evident t h a t a s a b a s i s f o r decision making and

educational planning it leaves much t o be desired. I n common with t h e p r e -

vious approaches, it s u f f e r s from a l a r g e number of s t a t i s t i c a l , methodol-

o g i c a l , and p r a c t i c a l d i f f i c u l t i e s and l i m i t a t i o n s , but t h i s should not be

allowed t o d e t r a c t from i t s usefulness i n helping t h e educational planner t o

conceptualize t h e problems he faces. The only r e a l l y meanirgfulconclusion

one can a r r i v e a t from t h e examinadtion of t h e approach, i s t h a t t h e planning

of education i n developed and e s p e c i a l l y underdeveloped c o u n t r i e s , i s s t i l l

very much an a r t , with a heavy r e l i a n c e on informed judgements o r "guess-

timates", even i n t h e "econometric approach".

 CONCLUSIGN

The various approaches t o educational planning, examined i n t h i s

essay have a l l shown, i n d i f f e r e n t ways, t h e major problems facing planners

d e s i r i n g t o obtain objective c r i t e r i a f o r t h e a l l o c a t i o n of resources t o ed-

ucation, even i n developed countries.

The human c a p i t a l approach, i n which educatior! i s considered

i n terms of investment i n human c a p i t a l , s u f f e r s from a l a r g e number of s t a t -

i s t i c a l problems, such .as the measurement of t'ne r e t u r n s t o education i n t h e

form of income streams. Problems a l s o a r i s e over t h e choice of the approp-

r i a t e r a t e of discount t o use i n deriving present values f o r educational i n -

vestment. To what extent a r e t h e r e t u r n s t o p r i v a t e education 0n.W p r i v a t e

r e t u r n s , and how l a r g e a r e the external s o c i a l c o s t s and b e n e f i t s of edu-

cation? Furthermore, hgw can one successf'ully distinguish between the con-

sumption and investment components of d i f f e r e n t types and l e v e l s of education?

It appears t h a t no d e f i n i t e . c r i t e r i a can be obtained f o r planning and approp-

r i a t e "mix" of education f o r developing countries using ;t,he human. c a p i t a l

approach. I f educational investroent i s t o be maximized f o r growth purposes,

it could be argued t h a t vocational r a t h e r than formal education of a specific

type should be emphasized, but even t h i s may l e a d t o a r a t h e r narrowly based

t e c h n i c a l type of education, t h a t introduces r i g i d i t i e s i n t o t h e educational

system and prevents a f l e x i b l e adaptation t o r a p i d economic growth.

The r e s i d u a l approach a l s o remains unsatisfactory f o r planning

education i n underdeveloped countries. L i t t l e work has been done on the

s i z e of t h e r e s i d u a l and t h e importance of improvements i n labour q u a l i t y

towards increasing f a c t o r productivit.y and growth. The e x i s t i n g l i t e r a t u r e

suggests t h a t the r e s i d u a l i s a "catchall" v a r i a b l e , including such diverse
components a s education, h e a l t h , housing, s o c i a l s e c u r i t y , e c o n o i c s of

s c a l e , e t c . , and consequently p r e s e n t s almost insuperable problems i n "dis-

entangling". The work of Denison has gone a long way toward i s o l a t i n g t h e

c o n t r i b u t i o n of education t o growth of n a t i o n a l income p e r c a p i t a , b u t not

f a r enough t o s t a t e with any c e r t a i n t y t h a t a given amount of investment

should be a l l o c a t e d t o various types of education. The assumptions under-

l y i n g t h e use of Cobb-Douglas type production functions a l s o i n c r e a s e s t h e

s c e p t i c i s m over t h e i n t e r p r e t a t i o n of t h e s i z e of t h e r e s i d u a l . Polow's
11
Vintage" model, f o r example, s u c c e s s f u l l y i n c o r p o r a t e s most of t h e r e s i d -

u a l back i n t o t h e labour and p h y s i c a l c a p i t a l v a r i a b l e s i n t h e form of

" c a p i t a l embodied" and "labour embodied" t e c h n i c a l progress. 59 As with

t h e human c a p i t a l approach, few c l u e s a r e forthcoming f o r c r i t e r i a t o s e l e c t

t h e optimum l e v e l of investment i n education i n u n d e r d e v e l o ~ e dc o u n t r i e s .

The h i g h l y aggregative nature of t h e a n a l y s i s does not permit t h i s .

The use of educational i n d i c e s (such a s t e a c h e r l s t u d e n t r a t l o s ,

e d u c a t i o n a l expenditures and enrollment r a t i o s i n r e l a t i o n t o G .N. P. ) h a s

c e r t a i n planning advantages i n terms of s i m p l i c i t y . But comparisons between

c o u n t r i e s and over time of such i n d i c e s , do not n e c e s s a r i l y i m p b t h a t d e s i -

r a b l e l e v e l s of educational expenditures can be derived. Educational planning

t h e o r i s t s who argue t h a t every country should have an educational system

geared s p e c i f i c a l l y t o t h a t country's needs, would a l s o look upon such an

approach with considerable doubt. Since it i s almost impossible t o p r e d i c t

an i n d i v i d u a l country's time path of development with any degree of accuracy,

it would a l s o be p r e c i p i t o u s t o base f u t u r e educational expansion and t h e de-

s i r e d e d u a t i o n a l s t r u c t u r e on i n d i c e s obtained from t h e h i s t o r y of economic

development of o t h e r c o u n t r i e s .
 The manpower planning approach, s u f f e r s from similar methodol-

ogical, conceptual, and s t a t i s t i c a l problems t o the educational indices ap-

proach, i n t h a t i t i s impossible t o accurateiy predict future pasnpower re-

quirements i n r e l a t i o n t o future economic growth. It i s a l s o impossible

t o accurately assess future supply and demand conditions f o r d i f f e r e n t l e v e l s

of s k i l l e d manpower i n the labour market i n rapidly developing countries.

The highly mathematically sophisticated econometric approach, r e -

l i e s on a l a r g e number of value judgements a s t o the "desired" nature of ed-

ucation. The attempts by Tinbergen, Bos, and Correa t o develop an i n t e r n a l l y

consistent econometric planning model f o r education can only be considered

rudimentary t o say the l e a s t . However it i s a s t a r t t o perhaps more soph-

Y
R
i s t i c a t e d educational planning models t h a t may provide important i n d i c a t o r s

of t h e s t r u c t u r e and development of education f o r developing countries. 1

I d e a l l y educational planning policy makers i n underdeveloped coun-

t r i e s should ,not, and indeed generally do not, concentrate on arg or,e of t h e

approaches mentioned, but should judiciously i n t e g r a t e them-if f o r no other

reason than t o minimize t h e p o s s i b i l i t y of committing a major planning blunder.

Although each approach has i t s major shortcomings, c o l l e c t i v e l y they m a g

provide very useful t o o l s f o r planning education i n developing countries.

No one would a h o c a t e t h a t educational planning can be reduced t o

a completely q u a n t i t a t i v e dimension, indeed t h i s would be t r a g i c , i n t h e sense

t h a t many unquantifiable q u a l i t a t i v e phenomena ( c u l t u r a l , s o c i a l , p o l i t i c a l ,

and economic) may be t h e most important ingredients of an educational plan

f o r underdweloped countries. The p o s s i b i l i t y and dangers of neglecting t h e

11
human" element and concentration on t h e "human c a p i t a l " elements of education

a r e very r e a l i n a narrow economic approach.

 REFERENCES

l " ~ I ef a i l u r e t o t r e a t human resources e x p l i c i t l y a s a form of c a p i t a l , a s

a produced means of production, a s t h e product of investment, has fos-
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do manual work requiring l i t t l e knowledge and s k i l l , a capacity with
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T. W. Schultz, "~nvestmenti n Human capitaL1', American ~ c o n o & c~ e -
-,
view VOL 51, NO. 1, pp. 1 16. -
*see B. W. Wilkinson, Studies i n t h e Economics of Kducation, Department
of Labour (Ottawa, Queents P r i n t e r , J u l y 19651, p. 7.

3 ~S.. Eckaus, "Education and Economic ~rowth", i n S. J. Mushkin, ed.,

Economics of Higher Education (Washington, D. C., U. S. Governnent
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%.A. Musgrave, "Notes on Educational Jmestment i n Developing ~ a t i o n s "

i n L. Riefman, ed., Financing of Ed1xatior; f o r Economlc Growth
( p a r i s , O.E.C.D., 1966), pp. 31 40. -

7 ~ e eF. Harbison and C.A. Myers, Education, Manpower and Fconomic Growth
(New York, McGraw-Hill Book Co., 1964)~ Chapters 4 6. -
%ilkinson, op. c i t . , p. 9.
9 ~ C.. Correa, i n "The choice Between General and Vocational ducati ion" ,
Kyklos, Vol. XIX, 1966, t r i e s t o circumvent t h e problem using a.prob-
a b i l i t y of productive employment approach.

'OH. C. Correa azd J. 'Einbergen, "Quantitative Adaptation of Bducation t o

Economic ~ r o w t h " , Kyklos, Vol. XV, December 1962, pp. 776 786. -
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have developed f o r education, shows t h i s neglect.

ill'. W. Schultz, " ~ a p i t a lFormation by ducati ion", Journal of P o l i t i c a l Ec-

onomy, VOL 67, NO. 6, 1960.

l%ilkinson, op. ci.t., p. 9.

1 3 ~ s e f u l a r t i c l e s discussing t h e problem of what c o s t s t o include i n educa-

t i o n a r e i n T. W. Schul'cz, The E c c n o ~ i cValue of Education (Nev York,
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=
. Valzey, I h e Costs of Educa-
-t i o n (London, u l l e m and Unwin, 1958). See a l s o H. B l i t z , "!The
Nation's Educational Owtlaf"' i n S. J. 3hshkin, ed., ope c i t e
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P o l i t i c a l Economy, ~ o l 70,
, NO. 5, Part 2, October 1962, pp.
-
106 122. Eo F. Renshaw, " ~ s t i m a t i n gt h e Returns t o ducati ion",
Heview of Economics and S t a t i s t i c s , Vol. 42, August 1960, pp. 318
32h. G. S. Becker, "Underinvestment i n College ~ducati,.on?", American
-
Economic Heview, Vol. 50, May 1960, pp. 3% -
354.
15~. L. Hansen, Human Capital Requirements for Educational Expansion \ Chic-
, Conference on Education and Economic Development, 1963).

S. Becker, Human Capital: A Theoretical and wnpirical Analysis, N a t -

16~.
t i o n a l Bureau of Economic Research ( N e w York, Colwnbia University
Press, 1964) ,

l 7 ~ e eW. J. P l a t t , "Educational Policy f o r ~conomicGrowth", i n N.N. Sarish

and M, Verhulst, eds.,
.
Management Sciences i n t h e Emerging Countries
(0xf ord, Pergamon Przss, 1965)

~ % i ~ n s o n op.
, cit. , pp. 24 - 25.
'9~. R. P r e s t and R. Turvey, ' ' c o s t - ~ e n e f i t Analysis: A Survey", in Surveys>
of konomic Theoq, vol. 3 ondo don, MacMillm, 1967).

200tto m k s t e i n , "A Survey of t h e Theory of Yublic Wrpenditure Criteria",

i n Public Finances: Needs, Sources and Utilizations, National Bureau
of Economic Research (princeton, New Jersey, minceton University
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2 1 ~ i e r r e Masse, Optimal Investment Decisions, Rules f o r Action and Criteris.

f o r Choice (Englewood C l i f f s , New Jersey, Prentice-Hall, 1962).

2 2 ~ o s e sA%ramovitz, "~conomicGroTth i n t h e United Sbates, A Review Article",

American ~cokomicReview, 01. I , September 1962, pp. 760 '771.-
23 an Tinbergen, " ~ u rlnneorie der Langfristigen Rirt schaft s- e n t w i c k l w " ,
Weltwirtschaftliches Archiv, Band 55, 1942, pp. 511 549. -
2!FOr more recent studies of t h e causes of economic growth using t h e aggregate
production function see Solomon Fabricant, "Basic Facts on Productivity
bhange", Occassional raper No. 63 (New ~ o r k , National Bureau of Econ-
amjc Research, 1958).
- - , R. Solow, " ~ e c h n i c a lChange and t h e Aggregate
Production ~u_nction", Review of gconomics a r ~ dS t a t i s t i c s , Vol. XLIII,
August 1961. 0. Niiatamo, "Development of Productivity i n Finnish. In-
dustry, $25 -
1952", grbductivitf ~easurementReview, NO. -15, NOV-
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250dd Aukrust, "~nvestmentand Economic ~rowth", Productivity ~easurement

Review, No. 16, February 1959, pp, 35 -! 50.
 W. Kendrick, Productiv5ty Trends i n t h e United States, National Bureau
of Economic Research (Princeton, 1Vew Jersey, Princeton University
Press, 1961).

Solow, " ~ e c h n i c a lProgress, Capital Formation, and Economic ~ r a r t h " ,

American sconomic Review, Vol. 52, May 1962, pp. 76 -
86. Solow de-
duced t h a t 8?lo of t h e increase i n G.N,P. i n the United States f o r a
similar period was due t o technical progress, organization or t h e re-
sidual.

h'. Denison, The Sources of r;conoraic G ~ m t hi n t'ne United States the

Alternatives Before Us; Supplementary Paper No, 13 (New York, Com-
mittee f o r Ecoonomic Uevelqment, 1962). Denison a h 9 takes i n t o
account changes i n t h e s t r u c t u r e of c a p i t a l , economies of scale, advance-
ment of knowledge,.rcduced waste i n agriculture, changes i n employment
and hours of work, increasedexperience, b e t t e r u t i l i z a t i o n of women
workers, and changes i n t h e age-sex composition of t h e labour force.

F. Denison. "Measurim - t h e Contribution of Education t o Economic ~r^ro~hh",

i n E. A. 6. Robinson and -J. Vaizey, The Kconomics of Kducation ondo don,
Macbtillan, 1966) - ,,- pp. -
-- 202 260. E. 3'. Oenison, "lfieasuring t h e Con-
t r i b u t i o n - of Kducation (and t h e ~ e s i d u a l )t o ~conomicGrowth", i n
J. Vaizey, ed., 'fie Residual Factor and Economic Growth, OECD %dW
Group i n ' k e Economics of Education (Paris, OECD, 1964), pp. 13 55. - i
Galenson and G. Pya-bt, The Qpality of Labour and Kconondc Development i n
Certain Countries: A Preliminary Study, Studies and Reports, New
Series No. 62 [Geneva, Intern&tional Labour Office, 1964).

3 3 ~ a r b i ~and
~ n Myers, op. c i t e

341'. Harbison, in Robinson and Vaizey, op. c i t . , pp. 356 - 357.

3 5 ~ .ILiggins, Kcononic Uevelopment (New York, N. W. Millon and Co., Re-
vtrsed Edition, 1968), p. 431.

36Harbison and Myers, op. cit., pp. 31 - 32.

3 7 ~ e , pa 32.

381bid., p. 176.

39mia., ., 176 - IT?.

4 0 ~ i d . , p. 184.

i d . , p. 195.
4 2 ~ i g g i n s , o-p. c i t . , p. 432.
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CO. Ltd.,
-
Education and ~conomicDevelopment (London, Frank Cass and
19661, me 51 62. - - .

%or a more d e t a i l e d description of t h e methods used i n t h e manpower approach

see H. S. Parnes, a an power Analysis i n Educational ~ l a n n i n g " , i n
H. S. Farms, ed., Planning Education f o r Econcmic and Social Uevel-
upment ( p a r i s , OECD, 1962) pp. 73 ,
84. -
&%or t h e use of t h e manpower approach i n c e n t r a l l y planned economies see
G. S. Korov, "'e Manpower Approach t o EducationaL ~ l a n n t n g " , i n
H. M. P h i l l i p s , ed., Economic and Social Aspects of Educational Plan-
% ( r a r i s , UNESCO, 1963), pp. 131 145. -
&or comparisons of forecasting a i d planning see K. Eide, "Educational
Developments and Economic Growth i n O E D Member Countries", i n
Hobinson and Vaizey, ap. c i t . , pp. 89 173. -
4 7 ~ i ~ k i n s o n ,op. c i t . , p. 38,

483he l i n e a r programing models of importance t h a t have been developed i n

t h e sphere of educational planning are: S. Bowles, he E f f i c i e n t
A l l o c ~ t i o nof Resources in- ducati ion ",
Quarterly journal of xconomics,
-
Vol. 88, 1967, pp. 189 219. I m a Adelman, "A Linear Programning
Model of Educational Planning: u Case Study of Argentina", i n Irma
Adelman and E. Thorbecke, eds., The Theory and Design of Econo~ic
Development ( ~ a l t i m o r e , John Hopkins Press, 1968), pp. 385 417. -
. .

4 9 ~ . C. Correa, The Economics of Human Resources (Amsterdam, North Hol-

land Publishing Cot, 1963) .
5 0 ~ o r r e aand dnbergen, op. cit., pp- 776 - 7%.
5 l ~ .rinbergen and H. C. Bos, "A planning Model f o r t h e Education Requirements
of Economic ~evelopment ",
i n J. Tinbergen, ed., Econometric Models of
Education ( p a r i s , OECD, 1965), p. 9.

5 4 ~ .Balogh, 'lCoonaonts on t h e Paper by Messrs Tinbergen and Bos", i n J.

Vaizey, ed., T ~ Residual
P Factor and Economic Growth, pp. 180 .187. -
5 5 ~ .K. Sen, "comments on t h e ?ap& by Messrs Tinbergen and BOS", i n J.
Vaizey, ed., The Residual Factor and Economic Growth, pp. 188 197. -
5 6 ~ .Bornbach, "Comments on t h e Paper by Messrs ~ i n b e r i e nand ~ o s " , i n J.
.
Vaizey, ed., The Residual Factor 2nd Kconomic Growth, pp. 170 179. -
 *
5 8 quote
~ from Enbergen i s illuminating i n t h l s respect. "mere i s a
c l e a r s i m i l a r i t y betwem maDpower and c a p i t a l equipment, since both
a r e "durable goods". Education of new manpower accordingly compares
with new investment. Teachers, a "durable good" again, "producing"
t h e newly educated, can be compared with second order c a p i t a l goods,
as distinguished i n some models of economic growth." From 2. Tin-
bergen, "r;ducational ~ssessments", i n He M, P h i l l i p s , eft., %.
c i t e , p. 195.

5 9 ~ .Solow, "~nvestmentand Economic ~rowth", Productivity Measurement

Review, No. 19, November 1959, pp. 62 68. . -
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Becker, G. 8. Hman Capital: A Theoretical and Etnpirical Analysis. llational

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