Economic Criteria for Education and Training

T HE current surge of enthusiasm for education rests to a considerable degree on presumptions of its economic benefits. The recent attempts to measure "human capital" and the rate of return on it are efforts to explore the basis for these presumptions and, in this way, to establish economic criteria for education. In this paper I will criticize the use of rate of return criteria for education and suggest an alternative approach.' The objective of the first section will be to evaluate the working of the "price system" in education and the usefulness of criteria for education which are based on it. In the second section an alternative approach to the formulation of criteria for education is proposed and some illustrative empirical results presented. In the third section the application of this approach to education and manpower planning will be discussed briefly.