Class 1

Education Economics and
Planning
Class 1
27.09.2023
PhD candidate Faina Gachabayova

Azerbaijan
’s
Education
System
Meaning of Economics of Education
Economics is the study of how society chooses to allocate scarce resources
that have alternative uses, to produce goods and services and to distribute
them for consumption among the members of the society
Economics deals with planning, allocation of scarce resources, utilization of

human resources, production of goods and services, etc.
Economics of Education covers the generation, allocation and utilization of

resources for education through the creation of human capital
Scope of Economics of Education
• Demand and supply of education
• Education demography
• Educational finance: sources and distribution
• Taxation for education
• Costing: cost benefit of investment in education
• Cost-quality relation
• Wastage in education
• Productivity in Education
• Educational manpower development
• Migration of school leavers and labour market
• National economic growth and development
• Consequences of schooling on the economy
• Efficiency and equity
Late introduction of Economics of Education
What are the reasons for the early neglect of economics of Education?
1. Misconception by leaders that education is a non-productive investment
This made economic planners pay more attention to the industrial, agricultural and other sectors
of the economy they consider more productive
2. Education was overlooked as an area of investment

World Bank provided capital investments in such areas as infrastructure, agriculture, industries
3. Lack of comprehensive model for an economic analysis of education investment behavior

Economic interdependence between production and consumption seemed not to apply to
education
Education was seen to be provided at no market price - free
What is your opinion?
Is it true that the study of economics of

education is not relevant?
Is there any justification in the study of

economics of education?
Some justifications:
• The rising cost of education increases pressure on available resources,
making it necessary to introduce economics into education
• There is a need to match the type of education provided and the type
that is needed by the economy
• There is a need to address the problem of quality of education
provided in schools
• There is a need to ensure education is properly linked to other sectors
of the economy
4 Economic Concepts in Education
There are four (4) key economic concepts that we need to answer the
question:
Production: the process involving human labour, of generating output of
goods and services.
Savings: Some of the tangible goods produced are consumed immediately to
satisfy people’s needs, but some are withheld for later consumption, which
are known as savings
Investment: This is the part of production that is not saved, but enter directly
or indirectly, the production process, also known as capital formation
Consumption: The process which does not contribute either to better
employment or higher financial remuneration
Costs
Cost in education Private Institutional Social
Cost of education
reflects the real Tuition Non-tuition Earning foregone Recurrent Capital
Inst Cost + Private costs –
resources
Tuition - Scholarship
(material, human,
time) used up
Books Teaching costs Equipment
(spent) in the
production of Transport Non-teaching costs Building
educated
individuals, as Uniform Consumable materials
estimated in
monetary terms Living costs Scholarship
Other costs
Private cost
Private costs is also known as household cost
This comprises of the money which the family, household or any private body
expends on education as well as the opportunity costs
Such costs include students tuition fees, students’ clothing, students’ food,
books and stationery, transport fare to school.
But income foregone by the student by being in school is also a cost.The

university student should have been gainfully employed in the production of
goods and services instead of being in university
Institutional cost
This is made up of capital costs and recurrent costs
Capital costs are associated with durable educational inputs: land, site,
utilities, buildings, furniture and equipment which render services for
not less than one year.
Recurrent costs include costs of non durable items such as salaries,

allowances, stationeries, utilities, repairs etc. Recurrent costs are the
cost of operating the school.
Social cost
Social Cost is usually estimated through appropriate adjustments in
private and institutional costs
Social Cost is regarded as the total cost of education to the entire

society
Both institutional and private costs are regarded as social cost, except
that the cost of scholarship and tuition are removed from institutional
and private costs respectively
Why to consider cost analysis in education?
1. To test the economic feasibility of educational plans
2. To undertake educational reforms
3. Encourage efficiency in utilization of resources
4. Adapting innovations to education
Factors influencing cost in education
• the demand for educational services
• teacher force
• operation techniques
• the size of enrolment of learner
• institutional variables (age of school, curriculum, student/teacher
ratio, etc.)
Education Planning: Current questions
• What is educational planning?
• How does it work?
• Can it be used everywhere or only in certain places?
• Who are the planners? What do they do? How does one become a planner?
• What are the dangers in planning? And the dangers in not planning?
• How does today’s educational planning differ from earlier forms?
• How does a country get started? What actual progress has been made?
• Why, despite this new educational planning, is there a world educational crisis ?
• What about the future ?
• Can educational planning as it stands today cope successfully with the formidable problems
that lie ahead for educational systems? If not, then in what ways must planning be further
strengthened ?
Educational planning, in its broadest generic sense, is
“the application of rational, systematic analysis to the process of educational

development
with the aim of
making education more effective and efficient
in responding to the needs and goals of its students and society ”

Planning is…
Educational planning deals with the future, drawing enlightenment from the past.
Planning is a continuous process, concerned not only with where to go but with how to get there and
by what best route.
Planning, to be effective, must be concerned with its own implementation-with progress made or not
made, with unforeseen obstacles that arise and with how to overcome them.
Plans are not made to be carved in stone but to be changed and adapted as the occasion warrants.
As plans for one period move into action, planning for the next must be under way, nourished by
feedback from the first.
Planning is, or should be, an integral part of the whole process of educational management
Planning helps…
It can help the decision-makers at all levels-from classroom teachers to
national ministers and parliaments-to make better-informed decisions.
It can do this by helping them see more clearly the specific objectives in
question, the various options that are available for pursuing these
objectives, and the likely implications of each.
Planning can help to attain larger and better aggregate results within
the limits of available resources.
Considering the following:
the state of the society, where it wants to go, and what it will require,
educationally, to get there;
the nature of the students, their needs, aspirations and practical
prospects;
the state of knowledge itself and the state of the educational art and
technology;
the innate ability of the educational system to examine itself critically
and to take intelligent action to improve its own performance.

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Education Economics and

PhD candidate Faina Gachabayova

Economics deals with planning, allocation of scarce resources, utilization of

Economics of Education covers the generation, allocation and utilization of

2. Education was overlooked as an area of investment

3. Lack of comprehensive model for an economic analysis of education investment behavior

Is it true that the study of economics of

Is there any justification in the study of

Cost in education Private Institutional Social

But income foregone by the student by being in school is also a cost.The

Recurrent costs include costs of non durable items such as salaries,

Social Cost is regarded as the total cost of education to the entire

“the application of rational, systematic analysis to the process of educational

in responding to the needs and goals of its students and society ”

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