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Ｐｒｉｖａｔｅ　ｂｅｎｅｆｉｔｓ　ａｒｅ　ｂｅｎｅｆｉｔｓ　ｔｈａｔ　ｄｉｒｅｃｔｌｙ　ｔｏ　ｔｈｅ　ｃｏｎｓｕｍｅｒｓ　ｏｒ　ｐｒｏｄｕｃｅｒｓ　ｆｒｏｍ　ｅｃｏｎｏｍｉｃ
ａｃｔｉｖｉｔｙ．　Ｉｎ　ｃｏｎｔｒａｓｔ，　ｅｘｔｅｒｎａｌ　ｂｅｎｅｆｉｔｓ　ａｒｅ　ｐｏｓｉｔｉｖｅ　ｓｐｉｌｌｏｖｅｒ　ｅｆｆｅｃｔｓ　ｏｆ　ｃｏｎｓｕｍｐｔｉｏｎ　ｏｒ
ｐｒｏｄｕｃｔｉｏｎ　ｔｈｅｙ　ｂｒｉｎｇ　ｂｅｎｅｆｉｔｓ　ｔｏ　ｔｈｅ　ｔｈｉｒｄ　ｐａｒｔｙ．

Ｉｎ ａ ｆｒｅｅ ｍａｒｋｅｔ， ｉｎｄｉｖｉｄｕａｌ ｃｏｎｓｕｍｅｒｓ ｏｎｌｙ ｃｏｎｓｉｄｅｒ ｔｈｅ ｐｒｉｖａｔｅ ｂｅｎｅｆｉｔｓ ｉｎ ｔｈｅ ｃｏｎｓｕｍｐｔｉｏｎ 　

ｏｆ ｍｅｒｉｔ ｇｏｏｄｓ（ｕｎｉｖｅｒｓｉｔｙ ｅｄｕｃａｔｉｏｎ）． ｔｈｅｙ ｉｇｎｏｒｅ ｔｈｅ ｆｕｌｌ ｓｏｃｉａｌ ｂｅｎｅｆｉｔ ｏｆ ｔｈｅｉｒ ａｃｔｉｏｎｓ（ｔｈｅ 　

ｐｏｓｉｔｉｖｅ ｅｘｔｅｒｎａｌｉｔｙ ｉｎ ｔｈｅ ｆｏｒｍ ｏｆ ｂｅｎｅｆｉｔｓ ｔｏ ｔｈｉｒｄ ｐａｒｔｉｅｓ） ｄｕｅ ｔｏ ｓｅｌｆ ｉｎｔｅｒｅｓｔ ａｎｄ ｂｅｃａｕｓｅ 　

ｔｈｅｙ ｌａｃｋ ａｄｅｑｕａｔｅ ｉｎｆｏｒｍａｔｉｏｎ ｔｏ ｕｎｄｅｒｓｔａｎｄ ｔｈｅ ｔｒｕｅ ｐｒｉｖａｔｅ ａｎｄ ｓｏｃｉａｌ ｂｅｎｅｆｉｔ． Ａｓ ａ ｒｅｓｕｌｔ，
ｒｅｓｏｕｒｃｅｓ ａｒｅ ａｌｌｏｃａｔｅｄ ａｔ ｔｈｅ ｐｒｉｖａｔｅ ｅｑｕｉｌｉｂｒｉｕｍ ｏｆ Ｐ１ ａｎｄ Ｑ１ ｉｎ ｔｈｅ ｍａｒｋｅｔ ｉｎｓｔｅａｄ ｏｆ ｔｈｅ 　

ｓｏｃｉａｌ ｏｐｔｉｍｕｍ Ｐ＊ ａｎｄ Ｑ＊. this generates a welfare loss(triangle area) with society losing 　

out units that are not produced beyond Q1 up to Q* that would have generated more 　

benefits to society than cost. the private benefit that students can gain is that occupational 　

mobility may increase as students could be more skilled and higher educated, so they may 　

gain higher productivity and hence earning potentials may increase in the long run.
according to the abstract 1, a graduate from university may gain an extra 160000 of average 　

higher earnings over working life than non-graduates with A-levels. In addition, there must 　

be extra benefits of higher education. for instance, the firms which hire university graduates 　

may decrease the costs of production and hence the products the firms produced may be 　

more price competitive, so foreign demand for the products may increase and hence 　

exports revenue may increase. As a result, aggregate demand for the country may increase 　

as net exports(X-M) is a main factor of AD. (foreign direct investment may increase because 　

the country's labors are more skilled due to higher educational level, higher productivity of 　

labors may decrease the costs of production, so aggregate demand may increase as I is an 　

injection to the circular flow of income.

However, there is uncertainty of value of private benefit gained by university graduates.

Because there may be structural unemployment. The education gained from university may 　

mismatch the requirement of the job position provided by the firms. For instance, a students 　

who major in textile, however with greater foreign competition from East and South East 　

Asia, the advantage of the education was lost. The consequence was that those graduates 　

with skills in such manufacturing industries could not substitute to other jobs in the economy 　

resulting in occupational immobility. In addition, there must be a time lag between 　

university study and the reward of increased earnings. Because it may take a long time for a 　

new graduates to become a manager in a famous company due to low working experience 　

and quallfications. It takes at least 3-5 years for them to become more efficient and 　

productive. They may get promoted and take more responsibility in the long run and hence 　

gain higher salaries.

However, there is uncertainty of value of external benefit gained by the whole economy.
　

There is probably a brain drain as some graduates move abroad to work. For instance,

those graduates may immigrate to China, which is an emerging economy with large market.
　

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Ａｓ ａ ｒｅｓｕｌｔ， ｈｕｍａｎ ｃａｐｉｔａｌｓ ｉｎ ＵＫ ａｒｅ ｎｏｔ ａｃｃｕｍｕｌａｔｅｄ ａｎｄ ｈｅｎｃｅ ｌｏｎｇ ｒｕｎ ａｇｇｒｅｇａｔｅ ｓｕｐｐｌｙ 　

ｍａｙ ｎｏｔ ｉｎｃｒｅａｓｅ（ｐｒｏｄｕｃｔｉｖｅ ｐｏｔｅｎｔｉａｌｓ ｍａｙ ｄｅｃｌｉｎｅ）． Ａｌｓｏ， ｐｕｔｔｉｎｇ ａｎ ａｃｃｕｒａｔｅ 　

ｖａｌｕｅ ｏｎ ｔｈｅ ｐｏｓｉｔｉｖｅ ｅｘｔｅｒｎａｌｉｔｉｅｓ ｇｅｎｅｒａｔｅｄ ｂｙ ｅｄｕｃａｔｉｏｎ ｉｓ ｈｉｇｈｌｙ ｃｏｍｐｌｅｘ ｉｎ ｒｅａｌｉｔｙ

　 　

ｓｏ ｔｈｅ ｐｏｓｉｔｉｖｅ ｃｏｎｔｒｉｂｕｔｉｏｎ ｔｏ ｔｈｅ ｗｈｏｌｅ ｅｃｏｎｏｍｙ ｆｒｏｍ ｔｈｅ ｅｄｕｃａｔｉｏｎ ｃａｎｎｏｔ ｂｅ ｑｕａｎｔｉｆｉｅｄ．
　

However, it must be sure that new staffs will still gat trained when they get their first job so
the value of external benefits may be exaggerated.

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