Resource Allocation in Education
| Date | 01 February 1971 |
| Published date | 01 February 1971 |
| Pages | 135-150 |
| DOI | https://doi.org/10.1108/eb009662 |
| Author | C. SELBY SMITH |
| Subject Matter | Education |
THE JOURNAL
OF
EDUCATIONAL ADMINISTRATION
135
VOLUME
IX,
NUMBER
2
OCTOBER,
1971
Resource Allocation
in
Education
C. SELBY SMITH
The paper
is
devoted
to the
question
of how to
allocate
a
given
educational budget. Alternative avenues
of
expenditure
on
post-
secondary education
are
treated
as
investment projects
and
their
benefit-cost ratios
are
compared.
The
analysis
is
essentially static
and
is
based
on two
investigations carried
out by the
author,
one in
Canada,
the
other
in the
United Kingdom.
The
paper
is
organised
into three sections.
The
first discusses
the
methodology underlying
the
two
detailed studies.
The
second presents conclusions
on
particular aspects
of the
general problem
of
allocating resources
within formal education,
and is
divided into four parts:
the
balance
between private
and
social costs
and
benefits, between academic
levels
of
education, between types
of
education
and
between male
and female education.
The
final section
of the
paper contains four
more general points
and
emphasises
our
ignorance
in
much
of
this
area.
INTRODUCTION
This paper
is
devoted
to the
question
of how to
allocate
a
given
educational budget. Despite
the
large
and
growing volume
of
resources devoted
to
education
the
principles
by
which they
can be
allocated within education between
a
wide variety
of
competing
ends
are not
easy
to
determine
nor
readily applicable.
The paper
is
organised into three sections. Section
I
discusses
the
methodology underlying
two
investigations carried
out by the
author
in the
United Kingdom
and
Canada. Section
II
presents
conclusions
on
particular aspects
of the
general problem
of
allocat-
ing resources within formal education. There
are
four parts
to
this
second section.
The
first
is
concerned with
the
balance between
private
and
social costs
and
benefits.
The
second part
is
concerned
with
the
balance between academic levels
of
education,
the
third
with
the
balance between types
of
education
and the
fourth with
the balance between female
and
male education.
The
phrase
"academic level" refers
to the
distinction between,
for
example,
courses
for
undergraduates,
for
technicians
or for
tradesmen.
The
DR. CHRISTOPHER SELBY SMITH
is
Research Fellow
in the
Education
Research Unit, Research School
of
Social Sciences, Australian National University,
Canberra.
He
holds
the
degrees
of
B.A. (Hons.) (Melbourne)
and
D.Phil. (Oxon.).
136 Journal of Educational Administration
phrase "type of course" refers to the distinction between, for
example, chemistry, mechanical engineering or economics courses.
A course refers to a specified formal education, defined by its type
and academic level. The third and final section of the paper contains
four more general points.
METHODOLOGY
Alternative avenues of expenditure on education are treated as
investment projects, following the procedure of Fisher, Hirschleifer
and Feldstein, although it is not being denied that education is both
investment and consumption. Lending and borrowing decisions are
ignored.
Problems may occur because of failure to achieve optima else-
where. These are assumed away, although they could affect
decisions within formal education. The analysis is concerned with
sufficient (empirical) conditions for an increase in welfare. The
investigation is economic and is relevant only for small changes since
it uses the marginal calculus. Selection aims at maximising net
social benefit, the net addition to consumption resulting from under-
taking a project. Constraints could be single or multiple, but the
former is assumed. The investment period is assumed to be the
length of the course (assumed to cover all costs) while the constraint
can refer to resources irrespective of kind.
When all outlays are equal and occur in a single period selection
is trivial: proceed down the list as far as possible after ranking
projects according to incremental present values. When these and
inputs both vary between projects, one selects those yielding a ratio
of net social benefit to input above the marginal ratio (initially
fixed approximately through intuition and prior knowledge and
revised later if necessary), so long as negative yields are excluded.
For mutually exclusive projects compare the marginal ratio with
that of their differences. The resultant ranking of projects is
transitive.
In this context reinvestment income can be neglected. However,
investment budgets are generally not fixed, but a function of, inter
alia, productivity and opportunity costs. When budgets are fixed,
known at the decision date for all future spending periods and must
be exhausted, opportunities forgone elsewhere can be neglected.
But such situations are rare. The social opportunity cost of a public
project is the value of the next best alternative use for the resources,
approximated by the discounted consumption stream replaced. In
a more general situation social opportunity cost would need to be
subtracted from the project's net social benefits.
The assumptions made are, of course, crucial. The analysis is
To continue reading
Request your trial