INVESTMENT IN HIGHER EDUCATION: SUPERVISION NOTES

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