Applied cost-benefit analysis: Alternative question = ‘Who should pay for higher education?’ ‘Who should pay for the resource cost of investment?’
§ Would the net present value of the project be positive?
§ Would the social rate of return exceed the social rate of discount?
Set up analysis:
§ What is the criterion in a public-sector appraisal issue? Discuss (1) private/social returns, (2) the difficulty of measuring them, (3) the inter-temporal dimension. There is then the question of what the social discount factor should be. Social rate of time preference, or other plausible discount rates.
§ Cost of investing more in higher education:
- Expanding institutional costs (profs, capital, buildings). The marginal cost of an extra student is negligible. Economies of scale when capital is fully variable. New technology –
Human capital analysis points to tuition