Significance of education to economic development, Microeconomics

Significance of Education to Economic Development

The place and significance of education in economic growth and development has been well recognised in economic thought since the turn of the 20th  Century. This recognition began with the writings of Adam Smith. Before Adam Smith (since the time of Aristotle up to the period of Mercantilian economics), expenditures on health and education of workers, not to speak of the general population, was considered to be a waste of public resources. Aristotle distinguished between liberal and servile education, that is, education of free men and of slaves. He considered that slaves do not need any formal education. They pick up their skills, their tricks of the trade or services from their elders. This type of thinking was prominent even up to the Mercantilian period. It has been aptly summarized by Bernard De Mandeville: “Reading, writing and arithmetic are very necessary to those whose business requires such qualifications; but, where people’s livelihood has no dependence on these Arts, they are very pernicious to the poor who are forced to get their daily bread by their daily labour” (Robbins, “Theory of Economic Development”, 1968).

The logic of such thinking has to be understood in its economic context. Feudal economies of the past were discrete, relatively less interdependent, dominated by agriculture and allied activities, having low levels of technology and industrial development with limited markets. However, with the beginning of the 16th  Century, the post-Renaissance and Reformation period, there was a growth of colonialisation, discovery of new continents and countries and regions, expansion of markets, growth of towns, increases in people’s mobility and communications. Development of markets and the economy and society in general in Europe and England was also associated with the growth of colonialisation and colonial administration. It means that the data-base on human beings – observational and experiential data – was also expanding. Comparative perspective on this data-base was also emerging. It is from such a data-base and vantage of perceptions that Adam Smith asserted in a radical way that the expenditure on education and training of human beings is a form of fixed capital: “The acquisition of such talents …………… during his (acquirer’s) education, study or apprenticeship, always costs a real expense, which is capital-fixed and realised, as it were, in his person. ……………………….. The improved dexterity of the workman may be considered in the same light as a machine or instrument of trade which facilitates and abridges labour, and which, though it costs a certain expense, repays that expense with a profit.” (Adam Smith, “The Wealth of Nations”, edited by Cannan E, 1904, Vol. I, pp. 264-65). Since the time of Smith, economic theory has been increasingly conscious of the value of education in economic growth and social development. It is by now strongly believed that productivity of workers in the firm and on the farm, rise in levels of income and consumption, promotion of social and economic mobility of historically deprived sections of population, regulated growth of population, alleviation of poverty and suffering of masses of population are facilitated by schooling and education of the people. In other words, education contributes to overall development of society and elevation of quality of life of individual households.


Posted Date: 12/17/2012 2:47:51 AM | Location : United States

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