9711 Ema 412 Planning and Economics of Education

MASENO UNIVERSITRY
SCHOOL OF EDUCATION
DEPARTMENT OF EDUCATION MANAGEMENT
FOR THE DEGREE OF BACHELOR OF EDUCATION WITH INFORMATION

TECHNOLOGY AND POST-GRADUATE DIPLOMA IN EDUCATION
FOURTH YEAR SEMESTER 2/ POST GRADUATE DIPLOMA IN EDUCATION
Introduction
Educational Planning; History and rationale of Educational planning; Social and psychological factors in
educational planning; General problems of educational planning in and outside Kenya; Methodologies of
educational planning. Planning for changes in the educational system; Administrative factors and educational
planning; Economics of education; Leading economic issues of basic concern and their relevance to Kenya;
Principles of economics of education and planning: micro-economics of education, macro-economics of
education and socio-economic development.
Course outline.
1. Planning And Economics Of Education………………………………………………………………………..
a. Educational Planning
2. The Concept Of Planning As Applied To Education…………………………………………………………..
3. Historical Development Of Educational Planning…………………………………………………………….
a. The Ancient Period Of Planning
b. The Modern Period Of Planning
4. UNESCO Conference 1948 (Characteristics Of Planning)
5. Kinds Of Educational Planning……………………………………………………………………………….
6. Critical Areas Of Choice In Educational Planning
7. General Functions Of Planning
8. The Process Of Educational Planning………………………………………………………………………..
9. Methodologies Of Educational Planning……………………………………………………………………..
a. Social Demand Approach
b. The Cost Benefit Analysis Approach
c. Manpower Requirement Approach (MRA)
d. The Basic Needs Approach
10. Major Problems Facing Educational Planning In Educational Countries…………………………………
Implication Of Educational Planning………………………………………………………………………….
11. Solutions To Educational Planning…………………………………………………………………………….
12. Economics Of Education…………………………………………………………………………………………
a. Why Economists Are Interested In Economics Of Education
b. Consumption and Investments Aspects Of Education.
c. The Theory Of Human Capital
13. Education and Economic Growth and Development……………………………………………………..
a. Equity, Efficiency, Effectiveness, Accessibility And Quality Of Education
EMA 412-PLANNING AND ECONOMICS OF EDUCATION KEVIN MC’OUDA EMAIL: MCOUDA@TEACHERS.ORG

EDUCATIONAL PLANNING
Possible definition of planning;
 Is a conscious and deliberate government effort to mobilize, control and direct resources in an economy towards
desired goals and objectives.
 It is a national educational process of preparing set of decisions for future directed into achieving the set goals and
objectives (Namaswa 1999),
 It is an intelligent preparation for future involving choosing between and amongst several alternatives for the best
choice (Muiya 1998).
 According to Anderson and Bowman(1964), planning is the process of preparing sets of decisions for future
actions, while Droor (1963) Holds that planning is the process of planning a sets of decisions for action in the
future directed at achieving goals for optional means. Cleland (1961)contends that planning involves planning to
meet the future however Carlson (1961) asserts that planning is focusing our desired objectives, anticipating
problems and developing solutions’
 According to COOMBS (1970) Education planning is the application of rational systematic analysis in the
process of educational development with aim of making education more effective and efficient in
responding to the needs and goals of students in the society.
 Planning is the intellectual anticipation of possible future situations, the selection of desirable situations to be
achieved (objectives) and the determination of relevant actions that need to be taken in order to reach those
objectives at a reasonable cost.
 In other words, planning implies thinking about the future and trying to assume control over future events by
organizing and managing resources so that they cater to the successful completion of the objectives set forth.
THE CONCEPT OF PLANNING AS APPLIED TO EDUCATION

What does this definition imply? Let’s look at the key terms in this definition: First , the term rational is used with specific
reference to the planners in the sense that;
 Educational planners ought to be people endowed with the capacity to think about educational problems,
 It is concerned with social goals, means to achieve goals as well as the processes and controls of the learning
activities.
 It is concerned with conceptual designing on which decisions and actions by groups concerning education may
made.
Secondly, the term systematics analysis really points to the development of education. It is often argued that education
should develop in orderly fashion. In Kenya , good example of this desire for orderly can be seen from the fact that
education has had to be planned right from the dawn of independence by the way of commissions, committees and task
forces,
a) The first commission after independence came up with report of Kenya Education Commission
(The Ominde Report of 1964) that sort to reform the education system inherited from the
colonial government to make it more responsible to the needs of the country. The commission
proposed an education that would foster national unity and creation of sufficient human capital
for national development. The sessional paper no.10 0f 1965 on African Socialism and its
application to planning in Kenya formerly adopted Ominde report as basis of for post
independent educational development.
b) The report of national committee on educational objectives and policies (The Gachathi Report
1976) focused on redefining Kenya’s educational policies and objectives giving consideration
to national unity and social, economic and cultural aspiration of the people of Kenya. It resulted
in government support of Harambee schools and this led to establishment of national center for
early childhood education (NACECF) as the Kenya institute of Education (KIE)

c) The report of the presidential working on the 2nd University in Kenya (The Mackay Report
(1981). It led to removal of the advanced level of education, establishment of 8:4:4 system of
education and expansion of other post-secondary training institute, led to establishment of Moi
University and the commission of Higher Education.
d) The report of presidential working party on Education and manpower training for the next
decade and beyond (The Kamunge Report 1988). Focused on improving education financing
quality and relevance. This led to introduction of policy of cost sharing between government,
parents and communities.
e) The commission of inquiry into education system of Kenya (The Koech Report 2000). Was
mandated to recommend ways and means of enabling the education system to facilitate national
unity, mutual social responsibility, accelerated industry and technological development, life-
long learning and adaptations and response to changing circumstances. It recommended totally
intergrated quality education and training.
f) Recent policy initiatives have focused on the attachment of education for all (EFA) and in
particular the universal primary education (UPL). The key concerns are quality, equity
effectiveness, relevance and efficiency within education system.
g) In the year 2003 Nark government introduced the free primary education and free day
secondary education in 2005.
The second aspect or systematic analysis is the argument advanced that education should develop in national fashion.
Should we in Kenya segment our education system as it is done in most developed countries? Or should we advance a
uniform system? For example one of the national goals in this country states that education should bring about national
unity amongst the Kenyan populace.
The third important term of definition is that education should be made more efficient in order to realize productive
man power, it means that quality education should be provided to individuals to avoid problems of the educated employed
by better curriculum, better distribution of educational facilities and human resources.
The fourth implication is that education has responded to the changing needs of the society. Society is dynamic and
not static therefore education should respond appropriately to those since independence the society demands for
technological form of education hence education should undergo those revolution i.e IT in education in Universities.
Fifth, Education planning is dynamic concept because;
 It provide reasonably detailed procedures as well as procedural modification with information updates.
 It provide a coordinating link among long range goals and intermediate programs and detailed operating plan for
implementing annual programming in concern with immediate and long range frame-works.
Sixth deals with a perception of the whole in a sense that:
 It blends procedures with knowledge.
 It is independent and fits comprehensive planning of other public agencies which contribute to the development
and welfare of the country.
 It must consider such disciplines like economics, politics and cultural pattern of living.
 It must also consider people, physical objects and ecological forces and other iterrealationships.
Seventh definition also emphasize the influence of policies in education. In Kenya, policies has had to affect educational
plan along after they have been formulated and implemented the introduction of the school milk program for primary
school pupils were made long after the education plan had been formulated and implemented.
Eighth , going by the definition , education planning is a process that does the following :
Produces valid information in the form of alternatives courses of action to achieve established educational
objectives.
Serves as guidance for monitoring educational activities.
Provides basis for examination and refinement of educational objectives and goals .
Provides means of continuous review of education.
Fit comprehensive planning of other public sector of economy
It employs appropriate tools such as project planning, budgeting system, network scheduling.
Revolves around methods of analysis ,decion making , setting objectives and community organization ,
It establishment an inventory of needs to determine the logical process for gathering, end projecting information.
It adheres to scientific steps of empirical observation and theorizing about cause, effect, relationship of social
phenomena.
Planning is potting the use of ourtime resources and efforts towards the realization of what we want to accomplish.
Planning may be regarded as a systematic application of problems of policy, consisting the main link between research
and policy making (1964).
A plan is a guide to achieving previously established objectives in an optimum manner and planning is future goals and
actions oriented.
Formulation of goals and objectives →→implimentation of goals and objectives →→evaluation of goals and
objectives.
In between the blocks there are intervening variables ie. Budgeting , therefore planning is not an act but a process. It has
no natural end
HISTORICAL DEVELOPMENT OF EDUCATIONAL PLANNING
Development of educational planning can be traced to roots of the society and can be examined in two ways:
i. The ancient /pre-contemporary period- this had what is known as AD-HOC education planning. This is where
a plan is established to solve a problem and once the problem is arrested the plan is disbanded .it is discontinuous
in nature and is not seen as spiral.
ii. The modern /contemporary period – is an ongoing activity i.e an activity which is continuous , spiral in nature
and does not end.
THE ANCIENT PERIOD OF PLANNING

Educational planning owes its origin in the ancient civilization of the Nile, Athens, Sparta, Peru, of the Incas and Cham
during the Ham dynasty. In those society indeed there was a close relationship between education and the philosophy of
the society.
In the city of Sparta, they had a particular constitution solely devoted to educational planning known as the Xenophon
constitution. The second part of this constitution was devoted to education. The Spartans felt that education could serve a
particular purpose in the society hence need to plan. The aim of education was to produce an ideal citizen, a soldier who
was honest, loyal and courageous. Education training had militaristic outlook and geared towards the production of
citizens who could defend the state.
In china, during Ham dynasty there was some formal education plan. Although it was crude, it had some goals to achieve.
Plato, in his famous book “the republic”, proposed a scheme which was supposed to make a school system accountable to
the society. He called for need to emphasize school system to meet societal needs.
In Peru under rule-ship of INCAS, the rulers saw link between education and achievement of national development.
During the renaissance period in Europe, particular attention was paid to on educational planning as a means of achieving
intellectual and societal change. Characters under these were:
i. John Knox; he greatly remembered for coming up with an education system which catered for material
wellbeing of Scotts.
ii. Comenicus : he proposed a plan for tertiary level education.
iii. Diderot: he was commissioned by Emperes Cathreen II of France to produce document which would consolidate
the development of tertiary level of education.
Main criticisms of traditional planning

The main criticisms of the traditional planning approach included the following:
 Too much focus on plan preparation and not enough on plan implementation It was assumed too
quickly that once a good plan had been prepared the implementation would follow almost
automatically. Hence very few mechanisms were set up for systematic monitoring of plan
implementations.. Furthermore, the fact that many plans were prepared by external technical
assistants) did not facilitate national ownership, without which implementation is likely to fail.
 Plans were being prepared in a top-down, technocratic way Most plans were prepared by the
planning units (and their technical assistants) with little or no involvement from the rest of the
ministry staff, not to mention staff at decentralized levels of management and civil society
partners. The consequence was again a severe lack of identification with (or even knowledge of)
the objectives of the plan and priority actions by those responsible for implementing it. Indeed,
while a plan can easily be prepared by a handful of technical experts, the responsibility for its
implementation involves, the entire ministry staff and requires the commitment of all.
 Not enough consideration was given to the changing environment Plans were being prepared
with the implicit assumption that the planners have all the information and techniques needed to
develop a complete, correct plan which can be executed from beginning to end. Many plans
simply ended up on the bookshelves of the Ministries, however, whenever they were
implemented, it was done in a rigid, mechanical way. Not enough flexibility was built in to adapt
to changing circumstances. This need for flexibility and continuous adaptation became
increasingly more obvious during the second half of the 1970s (after the first oil crisis) and
during the 1980s, when the overall economic environment became more unstable and
unpredictable.
THE MORDERN PERIOD OF PLANNING
In 1917, there was revolution in Russia which lead to emergence of socialism and by 1923, socialistic ideas gave birth to
modern educational planning. Russia had 5 years of development plan and was the first kind of plan in the world. The
western world was very skeptical about this kind of planning. It was not until economists came up and pointed out link
between education and economic growth and development in the 1950s that a need arose to plan.
The colonist of the European copied their master’s form of education planning especially after attaining independence.
This is true of African and Indian countries. Kenya in 1964 according to UNESCO 1948, education was seen as basic
human right that everybody is entitled to. This idea was reinforced by Addis Ababa conference of 1961, the African state
in the conference promised to have universal primary education by 1980. The UNESCO conference came up with various
solutions which formed the general framework of educational planning.
UNESCO CONFERENCE OF 1948 / CHARACTERISTICS OF EDUCATIONAL PLANNING
Came up with following resolutions:
Educational planning is a focused, it should have long term planning, medium-term planning and short-term and
annual planning.
Education planning should be comprehensive. There should be harmony between and amongst the various forms
of education ie. Informal, formal and non-formal education.
Education planning should be integrated in the broader economic political, social development of the country.
Education planning must be concerned with qualitative rather than quantitative education.

A summary of differences between traditional and strategic planning
 Table 1 below summarises some of the major differences between the traditional planning approach, (which was
commonly practiced in the education sector until the late nineties) and the more recent strategic planning
approach adopted in an increasing number of countries.
 In reality, the differences are often less contrasted and many plans that claim to be strategic have kept several
characteristics of the traditional planning approach which has been prevailing for so long.
 Indeed, adopting a strategic planning approach is not just a technical move. It implies a more fundamental
challenge of building up a new management culture based on the values of participatory decision-making,
accountability and openness for change.
 This is a process which needs time to produce results, particularly in countries in which some of the most basic
conditions for an efficient public service system are simply not fulfilled.
Table 1. Blueprint contrasts between traditional and strategic planning
Ancient Planning Modern Planning
Input oriented Result oriented
Technocratic Participatory
Neutral Mobilization instrument
Linear planning Iterative planning
Rigid implementation Flexible implementation
Routine based Change oriented
Compliance monitoring Performance monitoring
Emphasis on the plan document Emphasis on plan implementation
What are the factors affecting educational planning?
 Funding and budgeting- This includes all the money allotted toward salary, infrastructure, purchases, benefits,
maintenance, and every other expenditure for a specific period of time. This period of time is called a fiscal year. By
definition, a fiscal year is the length of time that a budget is supposed to last for an educational year.
 The human factor - Outsourcing and in-sourcing workers means finding enough people to man the different needs-based
services that either provide the education, protect the premises, or maintain the grounds. Think of the amount of teachers
needed to educate. Add to that the slots for the people who will support the mission of the organization by providing the
teachers with what they need. Then, think about the other stakeholders in the community at large. All of these factors are
equally important in the long run.
 Laws- There are such things as educational laws that protect both students and educators. As such, legal protection is also
an expenditure to think about. Laws also dictate work hours, hourly wages, licensing and workman's compensation among
many other things.

 School Board regulations- While educators meet and plan for curriculum and standards, the school board acts as a major
political force that curbs, moderates and votes in favor or against changes made to the educational system. In some states
the school board has as much power as to fire and hire superintendents and principals. Some school boards have the power
to forbid the teaching of some things over others. As they are members of the community voted in by other board
members, there are allegiances and circles of trust that directly affect educational planning.
 The community- The community must be taken into consideration as far as the services it will need, the type of
infrastructure it can support, the resources that can be found, and the demographics of the clients. A high-risk community
cannot support or be educated by an institution that cannot meet its immediate needs. This in no way implies that high-risk
communities (where there is high crime and minimal parental support) cannot be rehabilitated through education. It CAN.
However, to get to a point of total change, small steps of immediate importance must be met. These include safety and
security, meeting nutritional needs, addressing special populations, language services, and much more.
Follow UNESCO and you will find a lot of publications (I include one of Coombs with the answer). You will find that
there are indeed many variables that ease (and/or complicate) educational planning.
KINDS OF EDUCATIONAL PLANNING

i. Panning with adequate facts, backed by rather than voluminous statistics. This type is certainly the most
desirable but it’s the one least likely to be carried into effect simply because in practice, the necessary facts and
statistical data are seldom available.
ii. The second type of planning can be perhaps best defined by the title of the book by Wolgang Satolper(1966), who
spent 2 years drawing up the development plan for the federation of Nigeria. His book is called Planning without
facts. – a very realistic type of planning in many cases it is simply impossible to ascertain all the facts ideally
necessary for perfect planning.
iii. The third type is planning without purpose or planning for the sake of planning. It uses techniques which are
more theoretical mathematical models and of which objectives get lost in the discipline of methodological
framework but does not consider with or without facts
CRITICAL AREAS OF CHOICE IN EDUCATIONAL PLANNING
a) The choice between the level of education; the emphasis is given on primary, secondary or tertiary when
making investment in education. Priority can be given to primary level but only at expense of secondary and
higher education, priority can also be given to secondary education, then primary given second priority based on
demand.
b) The choice between quality and numbers (quantity)- you must consider depending with the level of education
ie. Primary, secondary and higher education. For instance in primary you might consider numbers based on free
compulsory education.
c) Science and technology vs the liberal arts- this is much applicable in the higher education to balance between
science and technology. What proportion of students should attend science and engineering faculties and what
proportion should attend arts faculties? This question is not intrinsic but one of the practical needs of the country.
If you increase the number of students taking engineering then you are faced with a financial and thorny political
crisis because courses of sciences costs four times what arts cost
d) Formal education vs non formal education- ie. Education before employment and training by employing
institutions or on the job training. This problems becomes particularly acute craftsman level. Pre-employment
training of craftsmen in secondary vocational schools is a poor investment in most countries, it is much
advantageous to provide the craftsmen with secondary education first and develop craft skills.
e) The choice of incentives- considers whether the plans are able to create market incentives, creating different
salary scale and raise financial reward for particular type of jobs.
f) The purpose of education- should education aim at satisfying the needs, desires and hopes of individual or
should it be directed towards meeting the needs of the state? Countries professing the so called liberal philosophy
would rather choose the second but problem is not nearly so simple in new developing countries.

Therefore education planning…..is the application of rational systematics analysis to the process of
educational development with the aim of making education more effective and efficient in responding to the
needs and goals of its students and the society (COMBS)
The planning process;
Sector Analysis Policy Review
Policy formulation
Preparation of medium-t erm plan + updating
Preparation of operationa l plan: year 1+correction
Regular internal reviewing
Annual review
Preparation of operational plan: year 2 +correction
Repetition of yearly planning and monitoring cycle
Mid-term review
Repetition of yearly planning and monitoring cycle
Final evaluation
GENERAL FUNCTIONS OF EDUCATIONAL PLANNING

Educational planning is an absolute necessity because:
 It ensures success of the institution. It takes into consideration the important issues, conditions,
constraints and factors in education. Its focus is on future objectives, vision and goals. It is proactive in
nature in that it emphasizes perception and ability to apply theory and profit from it in advance of action.
 It clarifies goals and the means to achieve those goals. Thus it eliminates trial-and-error process, reduces
chances of failure and ensures success. In other words, it provides intelligent direction to activity.
 The scarcity of financial and other non-material resources poses a challenge to education. Planning is a
response to such challenges and explores the possibilities of alternative uses and optimum utilization of
limited resources.
 Effective and efficient planning saves time, effort and money.
 It is a coordinated means of attaining pre-determined purposes.
 Education is a public service demanded by the public and supplied by the government. For any
government effort of such a large magnitude as education, planning is absolutely necessary
 Educational planning is one of the components of the overall national socio-economic development. The
over-all planning has to provide the objectives of education and the finances for educational development
for accomplishing these objectives.
 Significance of Educational Planning:
 To make every program of an educational institution or organization grand success
 Proper educational planning saves time, effort and money as planning in every field is a time-saving, an
effort-saving and a money-saving activity.
 Educational planning is a sound method of solving educational problems by avoiding the trial and error
method of doing things.
 Educational planning is essential for the best utilization of available resources.
 Educational planning checks wastage and failure and contributes to the smoothness, ease and efficiency
of the administrative process in the field of education.
 Through proper planning in education, education can be the best means by which society will preserve
and develop its future value system, way of life of an individual, knowledge, skills and applications, and
culture of the country.
 Through proper educational planning, the means and ends of the society can be properly interacted
through educational system. It implies that the educational system utilizes a large proportion of the
country’s educated talents and a major part of public expenditure.
 Educational planning is highly essential for preparing a blueprint or plan of action for every program of
an educational institution or organization.
 Planning in education is necessary for making one’s educational journey goal-oriented and purposeful.
 It is essential to maintain, sustain and enhance the thinking process of an individual, institution or
organization.
 Planning in education is necessary to highlight the universal aims of education required for every nation
for its development in every respect.
 To bring total development of a nation in time, in which educational development is one among its
various aspects.
 To reflect the modern developments like explosion of knowledge, advancement of science and
technology, development of research and innovation while reformulating the aims and objectives of
education in the light of the particular situation a country is facing.
 It explores and provides the best possible means of making the wide use of available resources leading to
maximum realization of the educational goals.
 Educational planning facilitates gathering of educational experts, teachers, supervisors and administrators
for taking decision in relation to the realization of purposes of educational program.
 Educational planning gives equal importance to the purposes of different classes of experts such as
sociologists, economists, scientists, politicians, educationists etc.
ASSIGNMENT: Explain the models of educational planning
THE PROCESS OF EDUCATIONAL PLANNING

The planning procedure involves:
a) Identification of national education goals- goals are the end of which plan is made. The national goals given by
Ominde Commission report of 1964 must be considered at all cost when doing any educational planning. These
are;
 Education should foster a sense of national unity and nationhood.
 Education should serve the needs of national development.
 Education should foster the dignity of cultural values
 Education should promote social equity and remove divisions of race, tribe and religion.
 Education should make an individual be able to fit locally , foster international understanding among all
people of the world.
 Education should promote the conservation of the world’s environment.
Identifying goals involves analysis of the present steps of education stems at all levels. The analysis is usually done on the
basis of data available not only on number of enrolment by level and type of education and total cost previously described
but also on quality of the education. The goals set must be:
 Be relevant and be realizable
 Should be general
 Community oriented and long range.
 Poses clarity of purpose.
 Be operational
The goals should be geared to answering the following questions
i. What choices should be made?
ii. For whom should these choices be made?
iii. To what degree must the ends be met?
iv. At what rate must these choices be implemented and the needs be met?
v. In what order of priority?
vi. How will the goal be recognized when reached?
These questions will lead to generate actions that determine the entire course planning will take;
b) Formulating educational objectives.
c) Choosing the best alternative possible of achieving the planned objectives.
d) Consider the conditions factors that would influence the achievement of planned objectives.
e) The decision making process itself implementation stage.
f) Feedback /evaluation.
Types of Educational Planning:

1. Administrative Planning:
Generally speaking administrative planning refers to planning in administrative perspective. In the field of education,
administrative planning relates to distribution of responsibilities and powers for different levels of education. In
administrative educational planning, the administrative responsibilities and powers are phase-wise planned in relation to
the level of different educational administrators.
This planning of education makes a detail plan on structure and organization of education at different levels – primary,
secondary, higher secondary, higher – general, technical and professional. This planning prepares planning on duration of
an educational program, organization and co-ordination of educational programs, financial allocation or budget for the
program, engagement of educational officials in the program, and smooth management of the program etc.
2. Academic or Curricular Planning:
This type of educational planning refers to planning for smooth academic transaction of the syllabus for any course at any
level of education. It encompasses planning on education in relation to needs and demands of the individual and society.
Formulation of educational goals, formation of curriculum committee for development of curriculum and selection of
appropriate strategies and methods of teaching, planning of content units, planning for evaluation, planning for review of
the curriculum, planning for use of library, planning for special provision for the gifted and remedial instruction for slow
learners etc.

3. Co-curricular Planning:
This planning of education is necessary for bringing total development of a student in one point and total development of
an educational institution or organization in another point. This planning includes planning for student welfare services,
planning for sports and games, planning for social activities and programs, planning for cultural activities and
programmes, planning for hobbies etc.
4. Instructional Planning:
This sort of planning in education is macro-level in nature as its deals with planning in classroom situation in relation to a
particular topic of a concerned subject. This planning refers to emotional and organisational climate of the classroom.
It includes planning for specification or instructional objectives, selection and organisation of learning activities, selection
of appropriate means for presentation of learning experiences, monitoring of the learning or instructional progress,
selection of suitable evaluation techniques for learning outcomes etc.
5. Institutional Planning:
This type of educational planning gives a practical shape to the meaning of educational planning. In this context
educational planning refers to the needs and requirements of every institution to be achieved through creation and
maintenance of a planning atmosphere in the institution.
Although institutional planning includes all types of planning cited above by focusing on curricular and co-curricular
planning, but there is the need of having a discussion on institutional planning. This situation occurs because of two basic
purposes. Such as-to give a practical meaning, shape and form to educational planning and to start educational planning at
the grass-root level.
By “Institutional Planning” we mean the plans initiated, formulated and implemented by individual educational
institutions. Certifying it as a planning at grass-root levels it includes all types of planning in its jurisdiction. These are:
o Planning for administration.
o Planning for academic or curricular development.
o Planning for non-academic or co-curricular activities
o Planning for school-community relations.
o Planning for discipline.
o Planning for developmental activities or programs.
o Planning for proper utilization of community resources for total development of the institution.
METHODOLOGIES OF EDUCATIONAL PLANNING
Major Approaches to Educational Planning – Explained!

A. Social Demand Approach:
This approach was used in the Robbins Committee Report on Higher Education in Britain. In India too, this approach is a
popular one while opening new schools and colleges in particular.
In this method are involved the following steps:
(a)To estimate the proportion of students completing school education and are likely to enter into higher education.
(b)To estimate how many of these successful school leaving students would actually apply for admission to colleges.
(c)To determine how many of the applicants should be given admission to higher education.
(d)To determine the length and duration of the study.

Thus, the major issue involved in this approach is to forecast future demands for seats keeping in mind social and
educational trends as well as demographic changes. The underlying assumption in this approach is that expansion of
education is beneficial to the economy and thus, additional expenditure on education would not create a burden too heavy
to bear.
This approach is more prevalent in those societies which favour traditional cultural values, where decisions are taken on
the basis of public opinions (in a fragile polity and sometimes in a democracy) and in societies where the social
environment is generally pessimistic in nature.
The approach is based on currently expressed preferences and does not take into account public expenditure on education
vis-a-vis the benefits as the demand for education may far exceed the resources available in a vast country like India.
Also, it sometimes leads to a mismatch between the output of higher education and the demands of the economy.
The social demand has been high that the government has not been able to meet it. Evidence:
 There are many Kenyans seeking University education in overseas countries.

 Current policy encourage private initiatives in higher education by the government.
 The current policy of cost sharing in provision of education.
 The increase of public universities and several constituent colleges serves to explain the social demand in
education.
Application of SDA to education

Advantages
1. It is starting point of planning, all other approaches start with this apperoach.
2. It is suitable political tool to meet the needs of general public.
3. It is possible to provide education planner with appropriate number of the place where education facilities have to
be provided.
4. Where resources are acutely limited and where we are seeking to provide those kinds of educationwhich will offer
the greatest good to the greatest number such planning techniques are the best.
Disadvantages
1. The approach has got no control over such factors as the price of education. It fails to collaborate on who should
shoulder the costs of education.
2. The approach has no control over the absorptive capacity of the capacity of the economy for trained personnel
hence leads to educated unemployed.
3. The approach does not in any way claim to whether the resources expended to education are economically
allocated and that extent the approach is poor. The approach ignores the quality and quantity of man power
required in an economy.
4. The approach does not take into account the concept of investment in man but much on consumption of
education.
5. It is wrong assumption to say that salaries reflects productivity.
6. The earnings of workers are more influenced by economic variable than by productivity consideration,
B. Social Justice Approach:

This approach emphasizes justice to the disadvantaged sections of society and is based on Article 45 of the Indian
Constitution. This approach is aimed at making special provisions for the socially, economically and educationally
disadvantaged communities for a longer duration. This includes opening Ashram schools for tribal areas, special
concessions and scholarships, incentives and relaxation.

C. Rate of Returns Approach:
According to this approach, investment in education should take place in such a way that the returns from the investment
are equal to the returns from other kinds of investment of capital, e.g., investment in industry. This principle is known as
‘equi-marginal returns’ in economic theory and could be extended to educational sector.
This approach treats education as an investment in human capital and uses rate of returns as a criterion in allocation of
financial resources. The approach implies that if the rate of return is low, expenditure on education should be curtailed.
However, in reality, it is difficult to apply this approach to education due to problems associated with measuring rate of
returns in education.
An educated person’s earnings or rate of returns depend upon his/her innate intelligence, parental socio-economic status,
motivation and aspirations. Hence, it is not easy to attribute the rate of returns only to education acquired. Hence, this
approach is least frequently applied to education.
D. Manpower Planning Approach:
In this method, the general demand for and the capacity of supply of human resources in different streams of and at
different levels of the educational sector are estimated.
The approach asserts that the system of education produces the right quality of human resources with desirable
knowledge, attitudes and skills in the right numbers and thus, education is directly linked with economic development.
The application of the manpower planning approach depends on these factors:
(a) An appraisal and analysis of the existing employment conditions and the system of education,
(b) Planning the system of education vis-a-vis the manpower needs of the economy, and
(c) Using the financial resources (which are limited) in an optimum way so as to fulfill the demands of the
employment sector without incurring wastage on account of unemployment.
(d) Making an appraisal of the number of students enrolled, the number of existing teachers and their
qualifications, enrolment in teacher education institutions (availability of future teachers), as well as the
existing number of school buildings, equipment’s, infrastructure and other facilities.
(e) The requirements of the employers regarding occupational and/ or professional qualifications for
employees, their levels of training and abilities should also be assessed.
The manpower planning approach takes note of the fact that the teaching profession requires approximately 60% of the
highly qualified human resources of a country which competes with the demand for manpower in other economic sectors.
A detailed projection of the demand for human resources is difficult due to the uncertainty of productivity trends. Some
developed countries such as Norway, France and Sweden estimate their future manpower needs so as to meet the demands
of the economy whereas others such as Great Britain estimate the numbers to be educated on the basis of students’
demands. When a planner decides to use MRA to pan for education , there are several assumption that he or she makes
regarding education;
i. Education prepares peoples for work ie. Through education that people develop knowledge skills,attitudes that
are conducive to the world of work.
ii. Education and training can enhance work performance which in turn leads to increased productivity and
production. This assumptions links education to productivity to investments.
iii. Education can be used to certify workers for membership that education leads people into various competitions.
iv. These are relationship between education training and workforce requirement.
In trying to estimate labor requirement of a country we do not have single method of doing testing but several methods’
however the questios normaly asked by the planner when doing the future focast are the following;
 What are the numerical labor requirement of a country?
 What skills will be required to meet these requirements ?
 What educational requirements would be needed to produce skills required by the country?

These questions form basis of making future labour demand, normally the basic methods that are used include
a. Employer data based method- is the simplest method used in focusing the labour demand of the country,
various employers in the country are asked to provide the type of skills they require at different occupational
level. The results are important in making one year focused and at such ignores long term planning.
b. Traditional high and middle level labour survey techniques- is very popular with most developing countries ,
inventions by occupational classification of middle and high labour caters for both public and private sectors in
the country. Assumptions are made based on desirability of appropriate educational qualification for various
occupational categories.
Advantages of MRA
 It provide planners with useful information about the link between educational and the labour market.
 The issue of trying to produce labour force according to the needs of the economy solves the problem of
shortages and oversupply of various type of manpower. This approach hence limits the imbalance of
educational output against the jobs available.
 It is useful tool for holistic planning , macro-planning in the sense that we plan for the whole economy rather
than for some particular region.
 It gives a useful guidance on educational attainment of qualification of the labour force highly by the
economy thus acts as link between training institution and labour market.
 The approach aims at self-sufficiency in man power resources since it adds in construction of occupational
pyramid of labour force.
 The approach assist in maximizing socio-economic growth for two reasons – provides what the society needs
and it also avoid wastage of resources on educating surplus labour.
 It gives educators useful guidance on how roughly educational qualification ought to be developed in future.
Disadvantages /case arguments against/cons/demerits

It tends to confine itself to high manpower and assumes the low level manpower /informal sector of
economy- the unskilled labour force which are also beneficial in driving the economy.
It sometimes impossible to make accurate requirement in 20-30 yrs to come because many
technological demographic social and political changes affect the quality and quantity of labour force.
The approach limits education economic ends but know that education system should not only serve
economic ends but also social and political ends.
It does not address itself to the cost issue in detail on how manpower will be financed but concentrate
on projections which are likely to be white elephant in the economy.
Assumes the consumptions functions of education and concentrate on the investment functions.
The cost benefit Analysis Approach

CBA is a planning tool used to evaluate desirability of given intervention. It is used to analyze the cost effectiveness of
different alternatives in order to establish whether the benefit out-weight the cost.
With respect to education, CBA deals with a systematic comparison of the magnitude of the cost and benefit of
investment in a given level of education in order to asses’ economic profitability.
Purpose of Cost –Benefit Analysis:

The principles of cost-benefit analysis (CBA) are simple:
 Appraisal of a project: It is an economic technique for project appraisal, widely used in business as well as
government spending projects (for example should a business invest in a new information system)
 Incorporates externalities into the equation: It can, if required, include wider social/environmental impacts as
well as ‘private’ economic costs and benefits so that externalities are incorporated into the decision process. In
this way, CBA can be used to estimate the social welfare effects of an investment
 Time matters! CBA can take account of the economics of time – known as discounting. This is important when
looking at environmental impacts of a project in the years ahead
The Main Stages in the Cost Benefit Analysis Approach

At the heart of any investment appraisal decision is this basic question – does a planned project lead to a net increase in
social welfare?
o Stage 1(a) Calculation of social costs & social benefits. This would include calculation of:
o Tangible Benefits and Costs (i.e. direct costs and benefits)
o Intangible Benefits and Costs (i.e. indirect costs and benefits – externalities)
o This process is very important – it involves trying to identify all of the significant costs & benefits
o Stage 1(b) - Sensitivity analysis of events occurring – this relates to an important question - If you estimate that a
possible benefit (or cost) is £x million, how likely is that outcome? If you are reasonably sure that a benefit or
cost will ‘occur’ – what is the scale of uncertainty about the actual values of the costs and benefits?
o Stage 2: - Discounting the future value of benefits – costs and benefits accrue over time. Individuals normally
prefer to enjoy the benefits now rather than later – so the value of future benefits has to be discounted
o Stage 3: - Comparing the costs and benefits to determine the net social rate of return
o Stage 4: - Comparing net rate of return from different projects– the government may have limited funds at its
disposal and therefore faces a choice about which projects should be given the go-ahead.
There are two categories of costs incurred in education;
i. Private cost; these are costs which are met in entirely by an individual beneficiary of education process and by
members of his /her immediate family in purchasing education or additional education. These costs are books,
tuition fees and examination fees, stationery, uniforms, catering, accommodation and transport.
ii. Social costs; are costs are incurred by society/state government/donor agency and other interested parties in
providing an individual with education. There is direct and indirect social costs. Example of direct social costs
include salaries and allowance to teachers, grants, bursaries and scholarship. The indirect social costs like
opportunity cost forgone in terms of taxes which should otherwise been paid by the people, unemployed liability.
Benefits refers to returns/gain monetary and non-monetary that accrue to an individual being the impact of obtaining
education in any given level of education. These benefits are in two; private and social benefits.
The private benefits are benefits which accrue to an individual as a result of acquiring education.
Psacharopulost(1985) assets that completion of secondary education means average an extra 40% gain on annual earning
while higher education is associated with 77% gain over secondary education. These differentials are even higher in
developing and developed countries in secondary education (139% extra in earnings while higher education is 167% gain
earning.
2. For an individual not only increase earning but also reduces the likelihood of unemployment.
3. Education raises participation in the labour market, makes one be able to adapt to technological advancement.
4. Education affects the sizes of the family/educated people are able to express family planning and have got fewer
children.
5. Education enables one to develop connections which he/she can exploit for its advantage.
6. Educations imparts extra competencies to individual
The non-monetary benefit include;
 Makes one be able to acquire social prestige in the society.

 Better health and hygienic conditions are associated with education.
 Enjoy fringe benefits in place of work and enjoys degree of freedom and autonomy.
 Changes taste fashions and preference.
The social benefits of education are benefits realized by the society to whom the beneficiary belongs to i.e the direct
benefits are;

i. Higher productivity- there is direct correlation between education and increased productivity.
ii. Increased revenue –government is able to realize more income revenue as a result of directing taxing the
educated, work force, the more educated the more tax.
The indirect benefits are also called externalies/spillover benefits since they spill over to the members of the society where
the educated happens to be.- in church , village, home etc. these are;
 Education reduces corruption thereby creating an upright citizens.
 It brings about improvement and motivation in the society by promoting research and inquiring attitude of the
mind.
 Educated individuals help spread knowledge generally in the society.
 Education promote mobility of labour especially geographical mobility.
 Education promotes the sprit of patriotism, social cohesion and understanding.
 There is positive relationship between education and health especially mother’s health viewed from angles of
nutrition and life expectancy.
Cost benefits is normally applied to education
Advantages
i. Provide convincing grounds where beneficiaries of education system should keep in financing education.
ii. It favors the allocation of resources to level of education with highest return.
iii. May suggest ways of increasing profitability of education.
iv. Provides a conceptual framework for examining the cost in relation to relative earning of labor.
v. Provide information about economic consequences of alternative education policies.
vi. Provide a planner with vital information about links between education and labor market
vii. It is possible to measure quality of the increase in productivity of an educated consumer.
viii. Shows direction in which education system is expanding so as to maximize the earning capacity of the products.
Objections/disadvantages
i. Education does not make workers more productivity but simply acts as a filter or screening device that enable
employees to identify those with superior neutrality and ability.
ii. Earning differentials reflects differences in natural ability, motivation, social background, sex occupation etc.
iii. Private rate of return are meaningless as individual do not make educational choices as though they are making
purely financial decision.
iv. Rate of return analysis assumes full employment levels of workers in the economy whereas many developing
countries are experiencing unemployment of graduates.
v. It is difficult to measure benefits accruing from investment in education especially spillover benefits and indirect
benefits.
vi. It’s wrong assumption to say that salaries reflect productivity.
vii. The earning of workers are more influenced by economic variable than productivity consideration.
Question for research;

Describe basic needs approach of educational planning
MAJOR PROBLEMS FACING EDUCATIONAL PLANNING IN EDUCATIONAL COUNTRIES
a) Rising demand for education

b) Financial constraints facing education.
c) The power imbalance.
d) Rural and agriculture development
e) Training for business and government.
f) Out of school training.
g) Teacher and supply demand.
h) Educational productivity and innovation.
i) Social consequences of education.
j) Government policies.
k) Inaccurate population data
l) Time element – the time lag between the formulation and actual implementation of the plan.
IMPLICATION ON EDUCATIONAL PLANNING

The problems just outline how vast implications for educational planning. How can we go about strengthening
educational planning to cope with them? We know that we cannot overnight achieve the comprehensive long range
integrated educational planning which would be ideal, in fact no nation has yet rejected this idea while we must keep the
ideal in view , we must be practical in pursuing it and not expect the impossible overnight.
SOLUTIONS TO PROBLEMS OF EDUCATION PLANNING

 There should be mutual coordination of all those who are concerned with educational planning as a whole.
 Serious attention should be directed towards developing clear educational policies and priorities so tha t
educational planners has some better notion on what they are planning.
 The political authorities should allow for the establishment of planning offices and have enough commitment to
planning activities.
 Policies makers should refrain from treating the development of alternatives as a practical rather than technical
matter.
 Educational administrators must actively support changes implied on educational planning.
EDUCATED – UNEMPLOYED PHENOMENA

Reasons why there are high number of educated but not employed persons in Kenya……………………
 Unemployment in the country is particularly high with Senior Secondary School Certificate
holders because this class of job seekers do not have any particular skill or skills. They merely
acquired general education. Nobody talks of Primary School graduates because this category of
people is just starting their education. There is a large measure of expansion in the education
sector which is not as much as the expansion in the economy.
 A second reason for the large measure of unemployment amongst primary and secondary school
holders is because of the content of our educational curricular. Unfortunately, most primary and
secondary schools are yet to re- orientate themselves for vocational and technical education. Even with
the new National Policy on Education, most students in our secondary schools have not
embraced technical and vocation education. This is because of the wrong orientation of students
towards technical and vocational education. Most students are not interested in technical and
vocational education which is job – oriented.
 We must state at this juncture that unemployment is already being observed with respect to graduates
of Colleges of Education, Polytechnics and Universities. This is particularly with Arts and Social
Science Graduates and not with Science and Science-related discipline.

 Another characteristic of the Kenyan unemployment situation is that although there is a large
measure of unemployment, there is scarcity of skilled labour. This fact is supported by Eze (1983)
who attributed this to the fault of the country’s educational system which does not emphasize
vocational and technical skills. This is why mechanics, electricians, masons, stenographers, welders etc
are in short supply.
 The Kenyan Government is also to be blame because of the salaries and incentives offered to
those with vocational and technical education. There are no special incentives provided for those with
such skills over others who do not possess such skills. This set of graduates do not also rise as fast as
those with no skills in the civil service so in the public service, skilled workers tend to lag more
behind in terms of promotion opportunity than those without special skill. For instance in the
Ministry of Works and Housing; plumbers, electricians, fitters and overseers tends to stagnate in
terms of promotion and earnings as compared with general clerical officers or executive officers. It is
necessary to point out that even at the higher level in the public service, graduates of Arts and
Social sciences who are employed as administrative officers within a short time rise to higher
positions and earn more than engineers, architects and graduate teachers.
 One other characteristic in the Kenyan Labour Market as noted by Eze (1983) is lack of
uniformity in the spread of unemployment amongst the products of our educational system
throughout the country.
 Employers of labour in Kenya tend to be tied to government policies which generally favour the
employment of people of state of origin. It is no secret that there still exists in the country
ethnic and state considerations and sentiments which tend to militate against employment based on
merit and the need of the employers. It is sad to note that most state governments of the
federation openly and privately pursue this as a policy. Most applicants in some states of the
country do not like to seek employment outside their home states. The reason is because of the
attitude of employers of labour towards them. Also, many job seekers feel that they are more
secure in their home states.

ECONOMICS OF EDUCATION
Economics is the social science which deals with how man utilizes the scarce economic resources to satisfy his needs.
Economics of education is the application of economic tools in education.
Meaning and Scope of Economics of Education :

Economics of Education as an area of study cannot be said to be a separate field of inquiry that is totally different from the
ordinary economics. Economics of Education is the application of Economic principles, concepts, laws to the process of
Education. Economics of education studies human behavior (in terms of human decisions), action(s) and reaction(s))
about schooling (Babalola, 2003).It further looks into how human behavior affects economic development. Economics of
education is one of the branches of ordinary economics, though, it is the study of how educational managers make official
or approved choices from scarce available resources which is meant for the realisation of the best possible educational
outcomes.
Economics of Education employs the use of some elementary concepts commonly used include;
 Labour economics,
 Public sector economics,
 Welfare economics,
 Growth theory and development economics.
World known classical economists like Adam Smith, Alfred Marshall, John Stuart Mill had discussed education and
development extensively, advocating for public investment in education. So, by the 1950s, economists gave attention to
issues such as the relationship between education and economic growth; relationship between education and income
distribution and also the financing of education. Economists analyse the production of education in this world where
resources such as the capital invested in buildings or technology and the labour of the teacher workforce are necessarily
scarce. This scarcity of resources means that policymakers must decide:
a. How much to spend on each stage of education (i.e. what to produce);
b. How to provide educational services in a way that maximises its benefits to society (i.e. how to produce
education); and
c. Who should have access to each stage of education (i.e. for whom is education provided).
There are three decision makers or stakeholders in the educational system.

These are (1) The society (2) The institutions or providers (suppliers) of education and (3) Individual or Households
(purchasers of educational services).
The twin problem of scarcity and choice face these major stakeholders. The fundamental problem of economics of
education is how the society, institution and the households make use of the limited human and material resources they
have, to best satisfy their unlimited wants for education. The solution to the fundamental problem requires the application
of certain economic concepts.
The study of economics of education includes private and social rates of returns to education, human capital and signaling
theories of education, non-pecuniary benefits of education, education and economic development, contribution of
education to the economy, measuring educational expenditure, manpower planning, educational planning and human

resource development, educational cost, cost analysis, educational production, educational effectiveness and efficiency,
costs-efficiency and cost-effectiveness, cost-benefit analysis and economics of teacher supply, educational and equity.
QUIZ;
1. Define economics of education.
2. Differentiate between ordinary economics and the economics of education.
The Economic Issues in Kenya

Being a poor country and one of the fastest growing economies in the Africa, there are some unique economic issues
in Kenya as explained below;
i. Low per capita income- Usually, developing economies have a low per-capita income. The per capita income in
Kenya in 2014 was $1,560. In the same year, the per-capita Gross National Income (GNI) of USA was 55 times that of
Kenya and that of China was 40 times higher than Kenya. Further, apart from the low per-capita income, India also has
a problem of unequal distribution of income. This makes the problem of poverty a critical one and a big obstacle in the
economic progress of the country. Therefore, low per-capita income is one of the primary economic issues in Kenya
ii. Huge dependence of population on agriculture Another aspect that reflects the backwardness of
the Kenyan economy is the distribution of occupations in the country. The Kenyan agriculture sector has
managed to live up to the demands of the fast-increasing population of the country.
iii. Heavy population pressure -Another factor which contributes to the economic issues in Kenya is
population. Today, Kenya’s population stands at about 50 million. We have a high-level of birth rates
and a falling level of death rates. In order to maintain a growing population, the administration needs to
take care of the basic requirements of food, clothing, shelter, medicine, schooling, etc. Hence, there is an
increased economic burden on the country.
iv. The existence of chronic unemployment and under-employment-The huge unemployed working
population is another aspect which contributes to the economic issues in Kenya. There is an abundance
of labor in our country which makes it difficult to provide gainful employment to the entire population.
v. Slow improvement in Rate of Capital Formation-Kenya always had a deficiency of capital. However,
in recent years, Kenya has experienced a slow but steady improvement in capital formation. We
experienced a population growth of 1.6 percent during 2000-05 and needed to invest around 6.4 percent
to offset the additional burden due to the increased population.
vi. Inequality in wealth distribution- According to Oxfam’s ‘An economy for the 99 percent’ report,
2017, the gap between the rich and the poor in the world is huge. In the world, eight men own the same
wealth as the 3.6 billion people who form the poorest half of humanity. Unequal distribution of wealth is
certainly one of the major economic issues in Kenya.
vii. Poor Quality of Human Capital- In the broader sense of the term, capital formation includes the use of
any resource that enhances the capacity of production. Therefore, the knowledge and training of the
population is a form of capital. Hence, the expenditure on education, skill-training, research, and
improvement in health are a part of human capital.
viii. Low level of technology -New technologies are being developed every day. However, they are
expensive and require people with a considerable amount of skill to apply them in production. Any new
technology requires capital and trained and skilled personnel. Therefore, the deficiency of human capital
and the absence of skilled labor are major hurdles in spreading technology in the economy.
ix. Lack of access to basic amenities In 2019, according to the Census of Kenya, nearly 7 percent of
Kenya’s population lives in rural and slum areas. Also, only 26.6 percent of households in Kenya have
access to drinking water within their premises. Also, only 16.9 percent of households have toilet
facilities within the household premises. This leads to the low efficiency of Kenyan workers. Also,
dedicated and skilled healthcare personnel are required for the efficient and effective delivery of health
services. However, ensuring that such professionals are available in a country like Kenya is a huge
challenge.
x. Demographic characteristics According to the 2019 Census, Kenya had a population density proves
that the dependency burden of our population is very high.
xi. Under-utilisation of natural resources Kenya is rich in natural resources like land, water, minerals,
and power resources. However, due to problems like inaccessible regions, primitive technologies, and a
shortage of capital, these resources are largely under-utilized. This contributes to the economic issues in
Kenya.
xii. Lack of infrastructure The lack of infrastructural facilities is a serious problem affecting the Kenya
economy. These include transportation, communication, electricity generation, and distribution, banking
and credit facilities, health and educational institutions, etc. Therefore, the potential of different regions
of the country remains under-utilized.
Solved Question
Q1. What are the primary economic issues in India?
Answer:
 The primary economic issues in India are:
 Low per capita income
 Huge dependence of population on agriculture
 Heavy population pressure
 The existence of chronic unemployment and under-employment
 Slow improvement in Rate of Capital Formation
 Inequality in wealth distribution
 Poor Quality of Human Capital
 Low level of technology
 Lack of access to basic amenities
 Demographic characteristics

 Under-utilisation of natural resources
 Lack of infrastructure
JUSTIFICATION FOR THE STUDY OF ECONMICS OF EDUCATION

The justification is on the following grounds:
 First, the rising cost of education and the increasing pressure in available resources, make it necessary
to introduce economics into education. Devising the means of reducing the rising cost of education, for
example, should be the concern of education economists.
 Secondly, there is existing high level of unemployment among school leavers in the face of selective
manpower shortages in some other sectors of the economy. It therefore appears that there is a
mismatch between the type of education provided, and the type needed by the economy. There is therefore
the need to synchronize the two situations with appropriate economic techniques.
 Thirdly, there is the problem of quality of education provided in schools. Today, many employers
of school products are complaining about the poor performance of these school leavers. The overall
effect on the economic productivity of the country calls for some economic intervention.
 Fourthly, education is only one of the sectors of the economy, among several others. Since, each sector
partly depends on others for survival, economics of education will ensure that education is properly
linked to other sectors. For example, it could be projected and provided in the educational
system through rational economic plans.
 Fifthly, the increasing politicization of education has resulted in uncoordinated expansion of the
educational system. Nwadiani (1992) has noted that the determinants of the direction of education,
allocation of resources, control, the content and learning environment have become purely political, and
therefore calls for serious economic concern. On the whole, it should be recognized that education is no
longer a “domestic animal”. As an integral part of the economy, it can no longer be excluded
from the various economic influences and therefore requires serious economic attention.
CONCLUSION
From the discussions so far, it could be seen that economics of education, as a course, tries to bring together
in a systematic manner, various economic considerations that bear on education. The emphasis is on
the relationship between education and economic factors. All education economists should explore this
relationship and see how educational and economic factors can be blended.
THE RELATIONSHIP BETWEEN EDUCATION AND THE ECONOMIC SYSTEM .

THE ROLE OF THE ECONOMIC SYSTEM IN (I) FINANCING OF EDUCATION, AND (II) ABSORBING THE
EDUCATED MANPOWER
Economic System: An economic system is the structure of production, allocation of economic inputs,
distribution of economic outputs, and consumption of goods and services in an economy. It is a set of

institutions and their social relations. Alternatively, it is the set of principles by which problems of economics
are addressed, such as the economic problem of scarcity through allocation of finite productive resources.
Examples of contemporary economic systems include capitalist system, communist system, socialist system and
mixed economy.
1. Capitalist Economic System: A free market is a market without economic intervention and regulation
by government except to enforce ownership and contracts. It is the opposite of a controlled market,
where the government regulates how the means of production, goods, and services are used, priced, or
distributed. This is the contemporary use of the term "free market" by economists and in popular culture;
the term has had other uses historically. A free-market economy is an economy where all markets within
it are free. This requires protection of property rights, but no coercive regulation, no coercive
subsidization, no coercive government-imposed monopolistic monetary system, and no coercive
governmental monopolies. Capitalism is a way of organising economic relations based on private
control over the means of production, including farms, factories and knowledge.
2. Communist Economic System: Planned economy (or command economy) is an economic system in
which the state or workers' councils manage the economy. It is an economic system in which the central
government makes all decisions on the production and consumption of goods and services. Its most
extensive form is referred to as a command economy, centrally planned economy, or command and
control economy. In such economies, central economic planning by the state or government controls all
major sectors of the economy and formulates all decisions about the use of resources and the distribution
of output. Planners decide what should be produced and direct lower-level enterprises to produce those
goods in accordance with national and social objectives.
3. Socialist Economic System: A socialist economy is based upon the principle of welfare of the people.
As opposed to capitalism, a socialist economic system is based upon the principle that economic
activities should be undertaken so that people would be able to use goods produced thereof, instead of
employing the production for profit. Many economic philosophers had previously refused to believe in
this system as a legitimate one, but countries with socialist economic system, have proved the
importance and success of the element of socialism in the governance of any economy. This has
eventually led to the evolution of mixed economies.
4. Mixed Economic System: A mixed economy is an economic system that includes a variety of private
and government control, or a mixture of capitalism and socialism. There is not one single definition for a
mixed economy, but relevant aspects include: a degree of private economic freedom (including privately
owned industry) intermingled with centralized economic planning and government regulation (which
may include regulation of the market for environmental concerns social welfare or efficiency, or state
ownership and management of some of the means of production for national or social objectives).
Relationship between Economic Systems and Education:

There is a very close relationship between education and the economic system. For instance, in a socialist
economy, the aims of education, curricula and methods of teaching are determined keeping in mind welfare of
the society at large with a focus on democratic ideals, secularism, modernization, social reforms and national
development. The control of education is exercised by the central and/or the state governments. On the other
hand, in a capitalist society, these decisions are taken by the state government whereas in a capitalist economy,
these factors are decided by market forces, i.e. by demand and supply.
Views of early economists on education as consumption and investment

a. Early Greeks and roman philosopher such as Plato saw education as an investment to be
utilized in shaping the youths to be thoughtful citizens who would serve the state. There
were groups in ancient Greeks and Roman society who saw knowledge as an acquisition,
as a pleasurable pursuit to enjoy in contrast to using it to help the society to acquire better
goods and service.
b. Adam Smith (1976) who is the founder of economics as a discipline saw education as an
important in eliminating inefficiency and corruption thereby morally upright citizen who
would facilitate good governance characterized by social economic enhancements.
c. David Ricarco and Robert Mathews within in the 20th C saw a means of developing
attitude and habits conducive population and maintenance of civil liberty.
d. John Stuart Mill utilization associates known as the Ironians in the late 19 th C that
education be seen as an important cultivator of favorable habits of appropriate behavior
motivation for self-empowerment promotion of productivity.
e. Karl Max supported the education of workers which would give them skills. He came out
strongly against human consequences and division of labour which intended to reduce
work to more ends and furthermore capitalizing producer. He envied education as making
balance to the tendency of capitalizing development which encodes the working security.
Principles of Economics of education

EDUCATION AS CONSUMPTION AND EDUCATION AS INDIVIDUAL, SOCIAL AND NATIONAL
INVESTMENT
A. Education as an Investment: The economic view of education traditionally has employed the human
capital framework developed by Becker (1964). In this framework, education is viewed primarily an
investment wherein individuals forgo current labour market earnings and incur direct costs in return for
higher future wages.
The original theoretical work by Becker (1964), Ben Porath (1967) and others spurred a tremendous
amount of empirical work, which has generally supported the implications of the human capital model
(Freeman 1986). As individuals and nations increasingly recognise that high levels of knowledge and
skills are essential to their future success, spending on education is increasingly considered an
investment into a collective future, rather than simply as individual consumption. However, investment
in education competes for limited public and private resources. The challenge of expanding educational
opportunities while maintaining their quality and ensuring their equitable distribution is linked to
questions of education finance. Education is seen as an investment because it entails costs in the present
and because it increases productive capacity and income (of the educated individual to be sure but also
of society in general) in the future. Private returns accrue to individuals, while social returns accrue to
the whole society (including the individuals). In most cases, private returns are greater than social
returns because governments give more in subsidies than they take away in taxes.
Developed nations around the world invest an average of 6% of their gross domestic product (GDP) in
systems of public schooling. The national importance of education is based on the significant positive
influence it has on individual lives and on the welfare of communities. Education is primarily a way to
train children in the skills they will need as adults to find good jobs and live well. But education also has
broader social and economic benefits for individuals, families, and society at large. These benefits are
received even by people whose relationship to the public school system does not extend beyond
“taxpayer.” The widespread improvement of social and economic conditions is a direct outcome of an
educated population that is able to use information to make good decisions in a better manner and which
is collectively trained for work better. A great deal of recent research demonstrates how the benefits of
supporting public education extend far beyond each child’s individual academic gains. A population that
is better educated has less unemployment, reduced dependence on public assistance programs, and
greater tax revenue. Education also plays a key role in the reduction of crime, improved public health,
and greater political and civic engagement. Investment in public education results in billions of
KENYAN SHILLINGS of social and economic benefits for society at large.
B. Education as Consumption: At the same time, the human capital framework does not rule out that
education may also provide immediate consumption. Indeed, many economists have discussed the
consumption value of education. For example, Schultz (1963) identifies current consumption as one of
three benefits of education, along with investment and future consumption. For the most part, however,
consumption aspects of education have received relatively little attention in the literature. Several trends
suggest that consumption may be becoming an increasingly important part of the choice of whether,
where, and how to attend college.
QUIZ;
1. Which are the different economic systems?
2. Differentiate between education as consumption and as an investment.

Why are the economists interested in in education?
a. Education has private and social benefits to the society which should be measured.
b. Education has monetary and non-monetary return which economists want to evaluate.
c. Education makes workers more productive, gives them skills and knowledge, makes them efficient and because
employers value educated workers.
d. Makes us to cooperates and respect others
e. Education has positives neighborhood effect with educated people
f. Gives individuals abilities to several task simultaneously, makes individual to be geographically vertically and
horizontally stable.
g. Education leads to economic growth in development
Why do teachers study economics of education?

i. Education is costly to both individuals, NGOS, interested parties and the society therefore education must be
subjected to economic tools for analysis.
ii. The subject help to create awareness of the society and resources in the economy therefore the need for choice.
iii. Helps to make education system more efficient and effective by controlling wastage rates, graduation rates and
survival rate.
iv. Helps evaluate the cost and benefits of a given education level.
v. Education tools of analysis helps determine contribution of education to economic growth and development.
vi. Helps answer the question on why, how and where are able to go beyond the policy of management rhetoric i.e
avoid false promises.
vii. Helps answer the question on why we are able to go beyond primary level of education.
viii. Because of the over changing economy variable we need some basic economic concepts on why provision and
beaurocratic cost sharing fees payment are necessary.
ix. Through education helps us know the difficulties involved in measurement of effects of education on health,
earning and growth in education.
Consumption and investment aspects of education

By consumption is meant the utilization of goods and services for one’s immediate sales functions. It is the process of
using of goods and services.
By consumption aspects of education it’s meant that one is able to device some satisfaction by receiving a given level of
education. When we receive education, we feel dignified, this is consumption aspects of education.
By investment it meant the expenditure on goods and services that don’t directly satisfy immediate needs. It is spending
on goods to use them in future.
By investment aspect of education, education is seen as an act of preparing a learner to the present moment by having
undergone designed instructional process that the resulting qualities are employed for other specified purposes. It means
making current sacrifices in education to acquire future satisfaction.
Education is considered as an investment because it provide skills which can be used to provide goods and services i.e
when we purchase university degree.

Micro & Macro Economics:
Objectives:
After the study of e-content students will be able to
 Understand the meaning and concept of Macro and Micro economics.

 Explain the Macro and Micro aspects of pricing of education.
 Differentiate between Macro and Micro analysis of economy.
Introduction:
Economics is divided into two different categories: Microeconomics and Macroeconomics. Microeconomics is the study
of individuals and business decisions, while Macroeconomics looks at the decisions of countries and governments.
 While these two branches of economics appear to be different, they are actually interdependent and complement
one another.
Many overlapping issues exist between the two fields.
 Microeconomics studies individuals and business decisions, while macroeconomics analyzes the decisions made by
countries and governments.
 Microeconomics focuses on supply and demand, and other forces that determine price levels, making it a bottom-
up approach.
 Macroeconomics takes a top –down approach and looks at the economy as a whole, trying to determine its course
and nature.
 Investors can use microeconomics in their investment decisions, while macroeconomics is an analytical tool mainly
used to craft economic and fiscal policy.
Microeconomics
Definition:
• Microeconomics is the study of individuals, households and firms’ behavior in decisions making and allocation of
resources. It generally applies to markets of goods and services and deals with individual and economic issues.
• Microeconomics is a branch of economics that studies the behavior of individuals and firms in making decisions
regarding the allocation of scarce resources and the interactions among these individuals and firms.
Concept of Microeconomics
 Microeconomic study deals with what choices people make, what factors influence their choices and how their
decisions affect the goods markets by affecting the price, the supply and demand.
 One goal of microeconomics is to analyze the market mechanisms that establish relative price among goods and
services and allocate limited resources among alternative uses.
o Microeconomics shows condition under which free markets lead to desirable allocations.

 It also analyzes market failure, where markets fail to produce efficient results.
 While microeconomics focuses on firms and individuals, macroeconomics focuses on the sum total of economic
activity, dealing with the issues of growth, inflation, and unemployment and with national policies relating to these
issue.
 Microeconomics also deals with the effects of economic policies (such as changing taxation levels) on
microeconomic behavior and thus on the aforementioned aspects of the economy.
 Modern macroeconomics theories has been built upon micro foundation i.e. based upon basic assumptions about
micro-level behavior.
Micro- economic Analysis

Micro Economics studies the behavior of small individual factors in an economy.
It mainly focuses on:-
o Individual consumer satisfaction
o Market demand for the product of an individual producer.
o It study the equilibrium of firm & industry
Scope of Micro- economics

 Are the resources in the country fully utilized or not?
 What should be produced & in what quantity? ( Theory of value)

o The problem of selecting technique of production. ( Theory of production)
 How the goods & services produced are distributed? (Theory of distribution)
 How effectively the resources are allocated? (Economics of welfare)
 Whether the capacity of the economy to produce goods & services is growing or is static? ( theories of economic growth)
Importance of Micro- Economic Analysis

• Allocation of resources
• The distribution of national income
• Consideration of welfare
• Importance of applied field of economics Limitation of Micro- Economic Analysis
• It always thinks of individual factors of production or individual consumer so it may not be always true on aggregate
levels.
• Its result or conclusions are always on certain assumption.
• The aggregate analysis or the overall approach to any economic problem is beyond the reach of it.
Macroeconomics:
Definition: • Macroeconomics is a part of economic study which analyzes the economy as a whole. It is the average of the
entire economy and does not study any individual unit or a firm. It studies the national income, total employment,
aggregate demand and supply etc.
Macroeconomics is the study of the performance, structure, behaviour and decision-making of an economy as a whole. It
focus on the national, regional, and global scales to maximize national income and provide national economic growth.
Concept of Macroeconomics:
 The term ‘Macro’ has been derived from a Greek word ‘Macros’ meaning ‘large’. Thus Macro- economics is
the study and analysis of an economy as a whole.
 The study of the performance, structures behavior and decision making of an economy as a whole, rather than
individual markets.
 Macroeconomists focus on the national, regional and global scales
 For most macroeconomists the purpose of this discipline is to maximize national income and provide national
economic growth.

 This growth further increases utility and improve standard of living for the economy’s participants.
Macro Economics involves the study of:
 The behaviour of an economic system as a whole

 Aggregate and average covering the entire economy
 Behaviour of large aggregators such as – total employment, national product, national income, price- levels etc.
Macro Economics deals with problems such as:

• Unemployment in the country
• Inflation/ deflation
• Economic growth
• International trade
• National output
• National expenditure
• Level of saving & investment
Scope of Macro Economics:
The scope of Macro Economics lies in the study of analysis of the following:
• Theory of employment
• Theory of income
• Theory of price level
• Theory of growth
• Theory of distribution
• Theory of national income
Nature of Macro Economics:
• It is a study of national aggregates

• It studies economic growth It ignores individual differences between aggregates
Importance of Macro- economic Analysis:
 It never neglect the relationship between demand & supply as in case of microeconomic analysis.
 It always gives the complete picture about the economy as whole hence it helps to understand working of the whole
economy.
 Macro- economic has increased the utility of economics.
 It can be used for the development of microeconomic theories
 It helps in formulation of economic policies.
 It studies and analyses growth and development in an economy.
Difference between Micro Economics and Macro Economics:
Micro Economics Macro Economics
Meaning it studies individuals units It studies the economy as a whole

Of an economy
Fields of It studies individual economic unit such It studies national

study as: a consumer, a firm, a household, an Aggregate such as: national income, national
industry a commodity etc. output, general price level, level of
employment etc.
Problems it deals with micro problems such as It deals with problems at a macro level like
determination of: price of commodity, a problems of employment, trade cycles,
factor of production, satisfaction of a international trade, economic growth etc.
consumer etc.
Nature It is based on disaggregation of units. It is based on aggregation of units

It considers individual differences between It does not consider individual
different units differences
between aggregates
Objectives Maximize utility Full employment
Maximize profits Minimize costs Price stability
Static analysis i.e. Economic growth
Favorable balance of
payment situation
Methodology Does not explain the time
element Dynamic analysis i.e. it is based on time lags,

Equilibrium conditions are measured at a rates of change, past and expected values of
particular period variables.

Review Questions:
1).What do you mean by macro-economics? Explain with examples.
2).What are the main goals of macro-economics?
3).What is the difference between microeconomics and macroeconomics?
4).What are the examples of individual economic agents?
THEORY OF HUMAN CAPITAL

Todaro defines human capital as productive investment in human being, it includes skills, ability, knowledge and health
care resulting from expenditure in education and on job training. In 1960, Shutz (1961) and Denson (1962) showed that
education contribute to growth of economy by improving the skills and capacity of the labour force. Dension used growth
accounting model while Shutz employed the rate of return analysis to measure the contribution of education to economic
growth. Dension came up with simple equation as;
Y=f(k:l)
Where y= output and k= capital and l= labour
Characteristics of human capital

a. It is developed right from childhood.
b. Human capital can’t be bought or sold just like physical capital; man can lend out his human capital but still
remains with it.
c. Human capital just like physical capital is subject to depreciation due to change in technology, memory lapse and
lack of continuous training.
d. Human capital is nonspecific in nature, it is occupationally mobile.
e. Human capital is intangible from investment, it cannot be physically seen or felt, and it is deep seated in man.
f. It has the ability to last longer than physical capital (machines) takes longer hence length of production is long.

Criticism leveled against the theory of human capital
a) Dead end jobs- the theory states that if one is in a dead job then one cannot rise to higher status, this is false
because individuals are known to get higher pay even in lower jobs.
b) Consumption motives- we can’t treat education as investment, part of it is for consumption, the consumption
motive influences people to receive education and investment of human capital.
c) Educated and unemployed-the theory assumes the problem of educated unemployed like in Kenya and India
where we have individual who are educated who can’t get jobs in both government and private sectors.
d) Human capital theory fails to explain the level of economic development in developing countries to be low yet
these countries invest large volume of national budget in education.
e) Human capital theory fails to explain why workers with the same qualification are in different sectors of
economy.
f) The contribution of education to economic growth is difficult to isolate and assign numerical value because,
economic growth can be felt due to the influence of political, social and technological changes taking place in the
economy.
SIMILARITIES AND DIFFERENCES BETWEEN PHYSICAL AND HUMAN CAPITAL
In order to sort out the confusion often associated with physical and human capitals, our focus in this
section will be on the similarities and differences between these forms of capitals.
SIMILARITIES
By virtue of your education and training, you may consider yourself as a human capital. Do you think
you have any similarity with other forms of production? If you take the case of physical capital (for
example, land, equipment and facilities), you may realize that both yourself and physical capital, are both
means of production, implying that both you as a human capital and other aspects of physical capital can be used
to produce goods and services.
To this extent, both you as a human capital, and other aspects of physical capital are related and therefore
similar. Again, you may realize that both you as a human capital and physical capital are capable of
making returns over the investments made on both of you over a period of time.
DIFFERENCES
The differences between human and physical capitals are highlighted as follows:
First, unlike physical capital, human capital hardly goes into extinction even where it becomes out-dated: the
educated labour force is able to adjust and acquire new skills through further education and training.
Also, unlike physical capital, human capital cannot b e sold, since it is an integral part of the educated labour
force.
Again, unlike physical resources, human capital is not only a useable commodity, but also decides how
much can be achieved with the other resources. The implication is that human capital, unlike physical
capital, is required in all sectors of the economy.

Lastly, unlike physical capital, human capital is created through investment in education, and the expected
income stream is represented by a relatively higher level of life-time earnings.
3.3 PROBLEMS OF HUMAN CAPITAL DEVELOPMENT

Human capital development, particularly in developing countries like
Nigeria, has not been an easy task. We would like to take a loop at some of these problem.
 The first one relates to the rapidly growing population in many developing countries. In most of these
countries, the population growth rates exceed by 2 per cent per annum, suggesting that a large proportion of the
population is below the working age, and therefore non-productive. This means that a greater percentage
of the national resources need to be invested in their education.
 The second related problem borders on the issue of mounting unemployment.

 Harbinson (1974) has even noted that the rate of increase in the labour force, exceed the rate of increase in
population growth. This situation creates problems for the human resource development planner, who
should be concerned with what to do with the surplus labour, This is also a major source of
unemployment in many developing countries.
 The next problem relates to the inability of human resource development planners to measure the actual
contribution of human capital to national development. It is assumed that education is a major component
of human capital. But you may have realized from personal experience that the progress an individual makes
in a given occupation does not necessarily depend on education and qualification, but on such other
factors as: natural ability, drive, initiative, social background and the policy of the organization in which
he may be employed. Indeed many people with a low level of education do succeed, where ability and
skill are not directly acquired through formal education.
 A final problem area in human capital development is incentives. It is one thing to estimate the needs for
manpower of various qualifications, but quite another to induce persons to prepare for, and engage in occupations
which are most vital for national growth. For example, the rewards of some categories of personnel and
technicians are far from sufficient to attract the numbers needed: the pay of teachers is often inadequate, and
the earnings of scientists and engineers, in comparison with administrative officers in government circles,
are too low.
The important thing to note about the problems is that they are interrelated.
The systems approach should therefore suggest to the human capital analyst that he has to look at the
problems from that perspective and evolve solutions along that line. The next section examines
some of these solutions.
DEALING WITH THE PROBLEMS

 You may ponder on the following suggestions as possible ways of dealing with the outlined problems
of human capital development.
 As regards the issue of rapidly-growing population, the human capital development strategist must
give closer attention to population problems and make suggestions on population control measures.
 The case of mounting unemployment, may be contained by considering ways and means of absorbing surplus
manpower and directing i t into productive activities. This may be achieved by diversifying
investments, for example investing in rural development and building modern industries,
 Following the problem experienced in measuring the actual contribution of human capital to national
development, the method involving the estimation of production costs of the labour force, in terms of the
returns on the original investment incurred in educating the relevant proportion of the labour force.
 On the problem associated with incentives, the human capital development planner must consider
deliberate measures to influence the allocation of manpower into high-priority activities and occupations.
Such measures may include scholarship support for particular kinds of education, removal of barriers inhibiting
people to progress in the occupation, and in some cases outright compulsion.
 The urgent need in the area of human capital development, calls for urgent attention to the problems that
may frustrate it. The above suggestions may therefore constitute a step towards effective resolution of
the problems.
CONCLUSION
The conclusion is that human capital, as a major factor of production, needs a special attention by human
capital development strategists, in terms of the militating problems and their possible solutions.
SOURCES OF FINANCE FOR EDUCATION

There are multiple sources of finances for education in India. The funds for higher education mainly come from three
different sources, viz. government, fee income from students and other sources of income from philanthropy, industry,
sale of publications, etc. Reliance on government for resources has almost doubled right from the first plan. On the other
hand, fee income has drastically declined. Other sources contribute around 10 per cent throughout the period. Higher
education has been largely a state funded activity with about three-quarters of the total expenditure being borne by
government.
The sources of finance for education in Kenya can be broadly classified into external and internal or domestic sources.
A. Internal sources: The domestic/internal sources of funding are broadly divided into public and private sources.
The public sources include contributions made by central, state and local governments.
Private sources of finance:
1. Student fees: It is well known fact that free and compulsory education is made at the primary stage, while fee
structure at the secondary and university level has remained constant during the post-independence period,
attempts at raising fees structure incorporates a large element of in-built subsidy, which is given
indiscriminately to all the students, furthermore, Kenyan education policy provides an open invitation to all
qualified students to involve in the institution of higher education regardless of their capacity to profit from
such education.
2. Educational Loans: The loans by banks and private institutions, (HELB) , being repayable in easy
instalments, can create a self-generating fund which can be recycled for the education of generations of
students. It would assist students to continue their higher education, because the education unemployment is
increasing day by day which affects the repayment of loans
3. Individual/trusts donations: There is a decline in the proportion of contributions for education from private
sources, and the philanthropic contributions have dried up. Therefore steps to be taken to augment private
resources for education as no government can finance entire education system: the combined efforts of the
government and the general public could meet the finance.

B. Public sources of finance: It includes the funds contributed from central and state, university grants, UNICEF,
NCERT and financial aid.
1. Central government: provides grants-in aids for centrally Sponsored schemes. These schemes are formulated
by the Central Government and are included in the Centre’s five year plans, the Centre persuades the states to
implement these schemes through financial incentives in the form of grants-in aid meet a larger proportion of
the total expenditure of the states on those schemes. The Central Government provides assistance, for
centrally assisted schemes.
2. State Governments in financing education: The state meets the non-plan and plan expenditure on education
at all levels. The state incur no plan expenditure on education about one-fifth of their revenue in a financial
year.
3. Grant-in-aid of revenue: The constitution provides for transfer of resources to the state government through
grants-in-aid of revenue.
Types of Educational Costs:

Costs can be classified into two types :
 Individual or Private Costs
 Institutional or Public or Social Costs
 Direct Costs
 Indirect Costs
 Opportunity Costs
Cost of Education
Institutional Cost Private Cost Social Cost
Recurrent Capital Tuition Non- Earning

Cost Cost Tuition Foregone
Additional Books & Uniform Transport

Living Stationery
Cost
Institutional Cost + Private

Building Equipment Scholarship - Tuition
Cost Cost
Teacher Non-Teacher Consumable Scholarship Unspecified

Cost Cost Material Items
.
We will now look at the meaning of each of these types of costs

(a) Individual Costs or Private Cost: Individual costs or private costs of education are those costs of education
incurred by a learner or by his/her parents/guardians or by the family as a whole.
These concern individuals in families and represent costs which the individuals and the families must bear in return
for the education received. Individual costs are of two types: direct and indirect.
Examples of private costs are as follows : Tuition and examination fees and other such fees, institutional supplies,
manuals and books, transport, uniforms and foregone earnings.
b) Institutional/Public/Social Costs : These costs concern society and refer to such costs (or expenditure) as are
borne out as a result of all education and training activities in a society at a given point of time. Costs incurred at the
institutional level (government, private or mixed) are called institutional costs or public costs of education. Public
costs are those that include financing by the government on the basis of taxes, loans and other public revenues. The
institutional costs of education are, generally, analysed in terms of;
Variable and fixed costs of education,
Recurring and non-recurring costs of education and
Current and capital costs of education. Institutional/Public/Social costs are also of two types:direct and
indirect.
(c) Direct Costs: These are those costs that are directly visible. They include all money expenditure incurred on
different items by the student. Direct costs are expenses that can be separately identified and charged as part of the
cost of a product, service, or department. Typical direct costs include items such as instructional and other programme
materials printed, fuel, oil and repairs of vehicles used for home-to-school transportation, centralised data processing
services, in-house equipment repairs, field trips, expenditure on tuition fees, other fees and charges, purchase of
books, stationary, uniforms, hostel expenses and transport.
(d) Indirect Costs : Indirect costs are those costs that cannot be directly charged to a particular programme, but are
attributed to services, which are necessary to operate the program. Such services include, but are not limited to,
accounting, budgeting, payroll preparation, personnel management, and purchasing, warehousing and centralised
data processing. Some programs cap the allowed indirect cost rates, others have an administrative cap that limits a
combination of direct administrative costs and indirect costs, while others do not allow indirect costs at all, requiring
that the entire award amount be spent on direct costs. These expenses are not paid directly to your school, but are
associated with attending school. You and your family can control some of them.
(e) Opportunity Cost: Opportunity cost is a concept you did not see in the definition of economics. But not seeing it
doesn’t mean that it isn’t there. There is yet more to say about the definition, but this is the logical place to introduce a
related concept. Opportunity costs are everywhere, due to scarcity and the necessity of choosing. Opportunity cost is
not what you choose when you make a choice -it is what you did not choose in making a choice. Opportunity cost is
the value of the forgone alternative - what you gave up when you got something. The opportunity cost of going to
college is the money you would have earned if you worked instead. On the one hand, you lose four years of salary
while getting your degree; on the other hand, you hope to earn more during your career, due to your education, to
offset the lost wages. Thus, opportunity cost is the cost of alternatives foregone
RATIONALE FOR COST ANALYSIS IN EDUCATION
It is not for nothing that cost analysis is carried out in education. The following reasons therefore justify the
introduction of cost analysis in education. The following reasons therefore justify the introduction of cost- analysis
in education;
a. Costing and Testing the Economic Feasibility of Educational Pan -Indeed, Coombs and Hallak
(1972) recognizes this reason for cost analysis as the primary one. Many countries usually set

unrealistic and unrealizable plan targets without proper costing. Effective cost-analysis will ensure that plans
are matched with available resources.
b. Costing Educational Reforms: It is common to see some countries embark on major
educational reforms, without first considering the cost implications. This has happened in
Nigeria with the case of the U.P.E. of 1976, and the U.B.E scheme of 1999 where no meaningful
cost analysis in terms of teacher demand and supply, pupils’ enrolment, buildings, equipment and
facilities, etc, was carried out. This accounted for the variou lapses experienced in the implementation of
these programme. Cost analysis could have given the direction of implementation.
c. Encouraging Efficiency in the Utilization of Resources: Education is competing for resources
with other sectors of the economy. Efficiency criteria demands that investments should only be
made in areas where there are minimum wastages. Cost analysis is an indispensable tool in this
direction, because it ensures that factors that can lead to wastages are identified and eliminated.
d. Adapting Innovations to Education: Today, there are numerous technological innovations which
could be adopted to education (for example, computer and multi-media facilities). Taking advantage of
such innovations is often difficult. In all events, cost considerations could help in reaching decisions to alter
the existing practices and adapt or adopt the innovations.
FACTORS INFLUENCING COST OF EDUCATION

THE DEMAND FOR EDUCATION AND TEACHER FORCE
 One of the things you need to know is that the demand for education is one of the factors
influencing costs of education. In the year 2000, the number of students seeking admission into
Nigerian Universities was over 50,000 but in the year 2003, it might increase to 70,000. Politicians now use
education as a vote catching weapon. Increased demand for education will inevitably mean expansion of
educational facilities. Expansion of educational facilities at all levels, to a great extent, accounts for
rising cost of education.
 A second factor influencing cost of education is teacher force This has been described by Nwadinani
(2000) as the most dominant factor. Education industry, as Nwadiani stated, is labour intensive. This
according to him is responsible for the rising salary bill of teachers which takes over 90 per cent of
recurrent cost of primary and secondary education put together.
OPERATION TECHNIQUES, SIZE OF ENROLMENT OF LEARNERS AND INSTITUTIONAL
VARIABLES.
 Let us take up the first issue that is the operation techniques. Let us start it by saying that most educational
institutions, particularly, universities are very resistant to change. In other words, they are very
conservation. They adopt their own operation technique and hardly change it. The adopted operation
technique continues to be the same for many years relying on handicraft technology.
 You may be aware that some teachers are more resistant to change than illiterate rural farmers.
They fear to try out innovations, teachers know that they must be in the class to direct the learning
before the students’ However, with improved technologies and mass application of electronic system
to instruction, the presence of the teacher is diminishing. In pre-primary and primary school, the
teacher is still very much needed. He plays a very dominant role in this type of situation, the cost of
education increased.
 Another factor influencing cost of education is the size of enrolment of learners. It is obvious that
where enrolment increase then the unit cost of education decrease. In other words, the larger the
size of enrolment, the smaller the unit cost of education. In Nigeria, we have small schools in some states
which are costly to run. However, because of government policy to provide for all, she (the
government) continues to maintain the small schools.

 Another factor influencing cost of education is what is called institutional variables. Institutional
variables will include such factors as age of school, design of buildings, curriculum in operation,
location of school and student- teacher ratio. Age of school has a strong influence on capital cost of
education. New schools need more learning facilities, equipment and instructional materials to make
learning process more meaningful. It is necessary to point out here that age also influences recurrent cost
particularly with respect to maintenance.
 In situations where the design of the school building is very complex, we find an increase in the cost of
education. Similarly, schools where the curriculum is technical oriented, the cost of education will increase.
Technical education requires more money to purchase or procure the inputs into the system.
Technical school require specialized structures and workshops.
 Student teacher ratio varies according to the educational level and courses offered. The student teacher ratio
in a secondary school will obviously be lower than we find in a university. Student- teacher ratio actually has a
strong influence on the cost of education. The higher the student-teacher ratio, the lower the cost of
education.
NATIONAL ASPIRATIONS AND INFLATION AS FACTOR INFLUENCING THE COST OF
EDUCATION
 You need to be aware that national aspirations are another factor influencing the cost of education. A nation’s
aspirations may include the need to modernize, the need to acquire military powers, the need to excel
in power and steel, the need to be self-sufficient in food production to all its citizens.
 Most national leaders feel that the shortest route to development is formal education. Kenya is one
of those countries whose aspiration is to use education to bring about developmentThis fact has
increased the nation’s budget for education. Coombs and Hallack (1987) and Nwadiani (2000) have
identified three indicators which show the level of national education aspirations. According to them, these
are the proportion of Gross National Product that is devoted to public education expenditure, the share
of the total public budget by education and the unit cost of education per citizen in any
country. These efforts, according to Nwadiani (2000), indicate the priority given to education which at the
end of the day affects the cost.
 Inflation is another factor influencing the cost of education. Inflation means more money than the
available goods. In Kenya, inflation has brought a lot of damages to education. We discover that every
year, more funds are allocated to the education sector. One area where we have the greatest influence of
inflation on education cost is the area of personnel emoluments. In order to raise the salaries of teachers, to
be in line with rising prices, other aspects of education industry suffer.
 The building of hostels, classrooms and purchase of equipment are slowed down or at times forgotten. Most
educational institutions are unable to purchase technology equipment, video tapes, computers and its accessories.
The result is that the quality of education is seriously affected.
APPROACHES OF REDUCING COST OF EDUCATION

There is a four-step approach to reducing costs:
1. Create a center-led organization approach. The key to improvement is a procurement organization that cuts across
business silos. It could even be virtual -- rather than physically collocated -- as long as it can operate as a cohesive unit.
Cross functional teams that are organized around categories and technologies can help provide the foundation for smarter
sourcing. Like having a core unit for subjects in schools so that once an approach, a methodology is to be implemented the
core its taught and then it percolated down to each member with ease and even the new one would get training from the
same members.
2. Generate quick wins by reducing complexity. Reducing the complexity in the system will reduce the cost anyways.
For example In education it simply means that you need to keep the system simple. We still in education have so much of
paper work, everything to be hand written, everything in individual work style, we must have format for everything saving
time and energy.
3. Establish robust processes. More effective practices and other innovations can help create lasting improvements in all
aspects of the educational process. Small improvements are the key to big results. Examples include establishing pricing
of education, negotiating the work load, using material and resources in the teaching learning process and leveraging your
spend across categories.
4. Develop a fully integrated cost reduction system. To ensure cost effectiveness ensure that all systems, people and
processes are all the time alert and aware that all the happenings in the field of education are having a cost. The building,
the energy supply ,the things, the human resource are all there with a cost. So everything is to be utilized to a judicious
extent, of course overuse and exploitation is to be avoided.
Education and economic growth and development

Development is that which designate the utilization and once single program and techniques which rely on local
communities as units of action and which attempt to combine outreach assistance which organized local self-
determination and attempt and which correspondingly seek to stimulate local initiative and leadership as primary
instrument of change. Development is measured using 3 three methods;
a) Gross National Product (GNP); is also known relational income. Refers to the total output of goods and services
produced by nationality of a given country within and without the country during a given period of time. GNP
excludes the output of force men who are living in a given country
b) GNP per capita; refers to income that every Kenyan should get at every given point if the total national income
was divided by the total number of people living at that time. It is more accurate and indication of economic
growth than GNP alone because GNP does not take population into account.
c) Social indicators; development is also measured in terms of social improvement , number of health facilities,
quality of food that people put on table, literacy level, access to primary, secondary and tertiary education, level of
employment, types of housing transport and communication.
Human development; helps in enlarging peoples choices of wealth , life, acquisition of basic needs and access to
resources for standard living , political and social choices freedom, productivity, self-respect and guaranteed human life.
Economic development; is more comprehensive form than development and focusses on not only economic growth but
also on standard changes on economy and general improvement of an individual and the nation as a whole group is
growing over long period of time and during which the population of people living below the object poverty don’t
increase where increased incomes make people to lead better lives.
Features of a country experiencing economic development

I. Reduction of illiteracy
II. Increased skilled labour
III. Improvement of health facilities.
IV. Increased technological knowledge.
V. Increased entrepreneurship ability.
VI. Access to education.
VII. Better distribution of income.
VIII. Freedom of expression of ideas.
IX. Access to communication system and services.
X. Access to shelter and housing.
Economic growth; is the size of the country national income over given period of time which comes about due to
increase in production of goods and services by economic growth we are talking about steady and continuous increase in
production of goods and services in a country. Under developed is a situation where there is growth in negative direction
characterized by;
 Poor infrastructure.
 Low labour productivity.
 Disparity in income distribution.
 Low level of services and investment
 High population growth rate.
 High level of poverty and underutilization of resources.
 High dependency on developed counties.
Social development; concerned with social welfare services that don’t relate directly to the development of country e.g.
existing harmoniously with other people and development of positive culture.
Relationship between education and social development

a) Through education we are able to equalize opportunities and reduce regional inequalities.
b) We are able to reduce difference between groups and provide education as a basic human right.
c) Education makes people gain social prestige I,e. to higher social order.
d) People are able to know other peoples culture and tradition.
e) Education instills in individual certain traits conducive to development e.g. making one accountable responsible
and hardworking.
f) Education leads to reduced fertility- educated people have small family.
g) Education makes people geographically, vertically and horizontally mobile.
Education and economic development.
 Education provides skills which can be used to produce goods and services.
 Education makes us enjoy our environment and be able to protect it.
 Education solves the problem of unemployment.
 Education leads to increased output in all factors of economy –transport, tourism e.t.c
 Education makes people get jobs they deserve.
 Through education pupils’ talents’ are tapped.
 Education increases population’s earning hence increase in tax for governments.
CAUSES OF INEQUALITY IN EDUCATIONALOPPORTUNITIES
1. Inequalities of educational opportunities: Inequalities of educational opportunities arise in various ways. In places
where no primary, secondary or collegiate institutions exist, children do not have the same opportunity as those who have
these facilities in the neighborhood. This should be overcome by the widest dispersal of educational institutions consistent

with economy, and efficiency, by instituting adequate scholarship programs, by providing the needed hostel facilities or
by making suitable transport arrangement.
2. Poverty: Poverty among a large section of the population and the relative influence of a small minority acts as a
hindrance in achieving equality in educational opportunities. Even if equal basis, children from poor families do not have
the same chance as those who come from richer ones. To overcome these handicaps, it is desirable to abolish fee
progressively, to provide free books, stationary and even school meals and uniforms and also scholarships.
3. Differences in the standards of schools and colleges: Differences in the standards of schools and colleges create an
extremely intractable form of educational inequality. When admission to an institution such as a university or professional
college is made on the basis of marks obtained at the public examination at the end of the higher secondary stage, as often
happens, the marks do not at all provide a common yardstick for a student from a rural area who attend an ill-equipped
school in his village and a student from an urban area who attends a good city school. To overcome this to some extent at
least, it is necessary to evolve more reliable and egalitarian methods of selection, whether for admission to institutions or
for award of scholarships.
4. Differences on home environment: A child from a rural household or an urban slum having non-literate parents does
not have the same opportunity which a child from an upper class home with highly educated parents has. These
inequalities are obviously the most difficult to overcome and here the progress essentially depends on the general
improvement in the standard of living of the population. Here, special attention at school can be paid to children from the
underprivileged groups and provision of day study centers orboarding houses to overcome this problem.
5. Gender inequality in education: A peculiar situation in Kenyan context is the gender inequality education. There is
wide disparity between the education of boys and girls at all stages and in all levels of education. Various steps like
reservations for girls in educational institutions of various branches of studies have been effected. Also steps like fee
concessions, scholarships and other incentives are made available for girl students in order to enhance girls’ education.
6. Disparity between advanced classes and backward classes: There is a wide gap of educational development between
advanced classes and the backward ones-the scheduled castes and scheduled tribes. On grounds of social justice as well as
for furtherance of democracy, it is essential to make special efforts to equalize educational opportunities between these
groups.
7. Absence of earnest striving to achieve equality of opportunities: To achieve perfect equality may be unattainable.
But an impassioned faith and earnest striving is in the direction is very essential. In a good system of education there
should be a continuous attempt to identify factors which tend to create significant form of inequality and to adopt
measures either to eliminate them altogether or at least to reduce them to the minimum.
EDUCATION AS AN INVESTMENT
All types of education do not fall into the category of consumption. There are certain levels and types of education
that provide the individual with skills and knowledge which enables him to improve his capacity to produce more goods and
services. For example, a knowledge of agricultural science and skills in cultivation would increase the farmer’s productivity.
What we have in mind her is investment.
Investment is what a rational individual does, that is putting money in a business with the aim of making profits. In
education, investment, according to Eneasator (1996) refers to the act of putting money or resources into education
with the aim of making profits or returns. Investment is therefore characterized by economic motives. This type of education
contrasts with the consumption type of education, where non-economic objectives predominate.
Given the foregoing discussion, you may think on your own what consider you to be the benefits of seeing
education as an investment. Your consideration should not fail to highlight the following areas

• It is an investment to an individual because his earning capacity and income are enhance;
• It is an investment from the national point of view, because the increase of productivity
and the supply of qualified manpower contribute to national development;
• Type of education categorized as investment, usually serve as consumption education,

too. Thus, in addition to the economic benefits, the individual enjoys the non-economic
benefits of education, which make it a consumption good.
The economic benefits of investment in education.
You must be aware of the benefits of education. At least, you are offered employment. You live in a decent home
and can acquire for yourself some of the good things of life. Let us at this juncture begin to think about the wider economic
benefits of education to the individual and society. The economic benefits of investing in education are reflected by
the increase in income of educated people. This increase in income is due to improvement in the skills of the educated which
of course increase their productivity at work. Weibrod (1986) stated that “education widens employment possibility to
technological change and thereby the ability to remain employed”. The direct benefit of education to society is the
higher productivity of educated workers and the additional contributions to national income over their entire working
lives (Psarcharopoulos in Nwadiani, 2000).
Non-economic benefits of investment in education.

Investment in education also has some non-economic benefits. Actually, they are benefits that individuals, families,
neighbours, communities and society derive from in education. For the individual; the non-economic internal and
external. The individual gets internal psychic satisfaction for receiving a particular type or level of education.
The individual gets widened employment possibilities, decreased unemployment, improved fringe benefits and working
conditions, improved health and longer life, improved use of leisure time, efficient consumer behaviour and improved
ability to manage personal assets.
MEASURING THE EFFICIENCY OF THE EDUCATIONAL SYSTEM
You must have come across the concept ‘efficiency’ in other courses and discipline. But you may not have
paused to ask yourself what is efficiency? What does efficiency mean? This unit defines the word efficiency with some
concrete examples and goes on to discuss types of efficiency.
Meaning of efficiency
The word efficiency appears to have originated from Economics. The concept arose from the fact that
every organized human activity start by defining the objectives to be achieved or output expected. In order to achieve the
objectives, certain inputs must be available. Efficiency, according Arinze in Bosah and Eneasator (1996: 1974) is defined
in terms of the optimal relationship between inputs and outputs in an enterprise. We usually say that an activity is
performed efficiently if a given quantity of outputs is obtained with a minimum number of inputs or, alternatively if
a given quantity of inputs yields maximum outputs.
However in education, some efficiency measures include:
▪ Cost per full time equivalent student
▪ Student – faculty ratio
▪ Student – teacher ratio

▪ Percentage of classroom time utilized.
Education and economics are all concerned with production. The concept of efficiency is used to analyse
production which one kind of goods or services is transformed into another. Education, as we mentioned, is also
concerned with production. A number of inputs (teachers, students, content, buildings, books instructional
materials, etc) are combined in different ways in order to achieve educational ends. In other words, various inputs
are transformed in order to achieve outputs. It is therefore obvious from all this that when people talk about
improvement in the efficiency of the educational system, they are generally referring to change in the way different
inputs are combined to yield outputs.
Generally, efficiency in education has two dimensions. These are according to Arinze (1996)
 the flow of students through the system with a minimum of wastage and
 the quality of learning achieved in the system at given levels or periods
It must be pointed out that wastage in the flow of students manifest quantitatively in the form of drop out
and repetition. The quality of learning is determined by the inputs and outputs of the educational system. The
second aspect of efficiency is more controversial and uncertain. This is the quality of learning. It may have to deal
with the extent to which the learning outcomes are in agreement with what the society or nation desires.
The two concepts of efficiency
From all that has been said in the previous paragraph, we can see that there are two concepts of efficiency when we
consider the overall context. These include:
1. Internal efficiency
2. External efficiency
First, an educational system is said to be internally efficient when it turns out, graduates without wasting any student-
year, or without drop-outs and repeaters. In other words, an internally efficient educational system is one which turns
out, graduates without wasting any student year or without drop- out and repeaters. However, one must point out that the
same system may be externally quite inefficient if the graduates it turns out are not what the society, economy, or higher
levels of education wants. The graduates so turned out may be wrongly qualified, not meeting the university entrance
requirements. They may be unemployable and redundant.
Arinze in Bosah and Eneasator (1976) stated that the external efficiency of an educational system involves
relationships between general and vocational education and between schools and world of work. This means that
the external efficiency of an educational system has to do with the relationship between general and vocational
education and also between schools and the world of work. An educational system is said to be eternally
efficient if the graduates turned out fits into the world of work.
Meaning of effectiveness.
Having discussed the meaning of efficiency and the types of efficiency, we need to take up another related
concept which is “effectiveness”. Effectiveness is a concept that cuts across many disciplines. For instance, we talk
about the effectiveness of an educational system, the effectiveness of an accounting system, the effectiveness of political
programme, the effectiveness of a Bank or a financial institution and the effectiveness of a community organisation.
Effectiveness is normally defined in terms of the achievement of objectives. For example, a Senior secondary School
is said to have achieved its objectives if its students perform well in the Senior Secondary School Certificate
Examination. We usually say that an activity is performed effectively if the objective set out is achieved. On the other
hand, we usually say that an activity is performed efficiently if a given quantity of outputs is obtained with a
minimum inputs. So, we define efficiency in terms of the optimal relationship between inputs and outputs in an
organisation or enterprise.
CAUSES OF EDUCATIONAL WASTAGE
There are many different kinds of wastage in education. We shall borrow from the classification of Arinze in
Bosah and Eneasator (1996:176) who grouped the causes of wastage in education into three, name;
a. the nature of educational inputs
b. the nature of processing
c. the nature of outputs
I. The causes of educational wastage are largely due to the nature of educational inputs. This includes
the nature and ability of students, the nature and types of educational resources, the goals of the
educational system, and the nature of the content (curriculum). One aspect of manifestation is drop-
outs within our educational system. We find cases of drop-outs in primary schools, secondary schools and
tertiary institutions. The main reasons for drop-outs are ill-health and death, truancy financial difficulty or
poverty, learning difficulties among students, and at times, parents wish, some pupils or students fell
sick during their academic career and the ill-health is so serious that they cannot continue with their
education. Some even die in the process. Some students also enrol into a programme but habitually
absent themselves from lessons or lectures. In some cases, they abandon the programme. Some students
face financial problems due to the socio-economic background of their parents or guardians. There are also
students who have learning difficulties. They find it difficult to grasp what is taught.
II. Another cause of educational wastage is the nature and types of educational resources, including
teachers and facilities available for education. Secondary schools, particularly, those in the rural areas
of the country lack sufficient apparatus for science practicals. Some schools in the rural areas of
the country lack Mathematics and Science teachers.
III. The nature of the goals of the educational system is also another cause of wastage in education. We find
out that where the goals of the educational system are practical-oriented, then the products would be gainfully
employed on graduation. But where the goals emphasize merely literacy and general education, then the
products would be unemployed.
IV. The nature of the content of the curriculum could also be a cause of wastage. In a situation where the content
of the curriculum consists of English Literature, History, Christian or Islamic Religious Knowledge, Music
Geography, Kiswahili language and French, then the products of the school may graduate without any hope.
V. The cause of educational wastage could be process-based; say administration or management, the examination or
certificate system. The nature of administration or management of the school system could be faulty in the
sense of the administrator being autocratic or high-handed. It could also be a liazze faire administrator – who
allows everything to go its own way without making effort to put things right. It could be that the nature of
the examination system where emphasis is laid on one-shot examination instead of continuous assessment, is
the cause of the wastage
VI. The last but not the least cause of wastage in the Nigerian Educational System is the nature of the outputs. It could be
that the graduates from the educational system do not conform to the initial objectives or even that the graduates
find it difficult to fit into the society. Somebody who studied literacy subjects, for example, may not fit in very
well in a computer-literate society. The graduates may not be fully employed, or it could be that they have not
acquired the changes and thoughts desired by the larger society.
HOW TO REDUCE EDUCATIONAL WASTAGE
a) For those who drop-out from school for reasons of ill-health, school heads and medical units of schools should
monitor student’s health so as to detect those who are sick and need medical attention. The Federal and State
Ministries of Education, Voluntary organizations, Financial institutions like banks and wealthy individuals
should award bursaries and scholarships to students to enable those who may drop-out to complete
their programmes.
b) The National Educational Technology Centre should assist schools by donating instructional materials to them.
The quality of the teacher should be improved for better performance on the job. Educational institutions

should organize conferences, seminars and workshops for serving teachers on the improvement of teaching
methods and techniques.
c) There is now more emphasis on science and technology, computer science and allied courses. So, the contents of
our curriculum should be in line with science, technical and computer areas.
d) The management or administration in our educational institutions should be re-examined with a view to
improving its quality. First of all, the various national and county Ministries of Education and their agencies
should as a matter of necessity appoint qualified and competent educational administrators to head various
institutions. Politics should not influence the appointment of educational managers or administrators of our
institutions. Administrator of our educational institutions, be the Primary school Headmasters, Secondary school
Principals, Provosts of our Colleges of Education, Rectors of Polytechnics and Vice-chancellors of our
Universities should be democratic in the management of affairs of their institutions.
e) Educational institutions should continue to lay emphasis on continuous assessment. Certificate acquisition, should
as much as possible be de-emphasized.
f) The graduates of our various schools or educational institutions should acquire changes in behaviours and
thoughts as desired by the society. Our graduates should fit well into the society.
DETERMINANTS OF EDUCATION DEMAND
Meaning of demand Ordinarily, demand means a request made as of right or urgently. But we have to look at
the meaning of “Demand” in economic terms. In economic terms, demand means the desire of would-be
purchasers or users of a commodity. Nwadiani (2000) defines demand more critically as the amount of a
commodity, like education, that would be bought at a price over a period of time. Product of very many inputs (teacher,
teaching aids, buildings, administration, funds, etc). It shares the same qualities of ostentatious goods – goods
with very high prices. The price which people pay for education rises every day. A lot of wealthy individuals in the
society demand for schools or educational institutions that are very costly. Thus, we normally talk of elasticity of demand.
Elasticity of demand is defined by Nwadiani (2000:18), as “the economic behaviour of consumers in the market place
in terms of their responsiveness to the quantity of a commonly demanded when there is a small change in price. Two
of such behaviours are represented in the graph in figure two below
D
D
P
P
D
D
Q Q
Elastic Inelastic
Determinants of education demand

1) Authorities in Economics of Education including Nwadiani (2000), Sheehan (1973) have stated that the
demand for education in the world over is a function of economic factors, including cost, fa mily disposable
income, expected benefits, availability of non-educational alternatives, unemployment rates and socio-cultural set
up.

2) Cost is one of the major determinants of the demand for education. It is the responsibility of the Kenyan government
to provide education for her citizens. But we know that this is not usually the case. In fact much of the cost
of education is borne by private individuals and at times, local communities.
3) Family disposable income is another major determinant of the demand for education. Most families are very
poor in Kenyan. Only a few are rich. Those families who are very poor have little or no income to dispose
towards the education of their children. Nwadiani (2000) had argued that poor families will certainly
find it difficult to pay fees and that even when free education is offered, it imposes a substantial financial burden
through earnings forgone and out of pocket expenses for clothes, travel, books or materials.
4) Another determinant of education demand is the availability of non- educational alternatives. Writing on
this Akangbou (1998) and Nwadiani (2000) pointed out the decision to invest or not to invest in education would
depend on the availability or not of non-educational alternatives. Education, as we know, is very essential for
individual and societal progress.
5) Socio-cultural elements is also another determinant of the demand for education socio-cultural
elements here refer to social origin and pattern which affect values and attitudes towards education
demand. Writing on this, Nwadiani (2000) noted that children.
6) There is high rate of unemployment among school leavers in Kenya. This has affected the
demand for education. Actually, when people discover that there are no ready jobs, they will not be
motivated to pursue education.
Educational equity and social cohesion
The role of education has become greater as its wider social benefits gain recognition. Research has shown that
educational inequity is an important contributor to income inequity.
More equitable access to educational opportunities, therefore, can play a role in reducing income inequities and
combating poverty. There is now some evidence that greater inequity leads to poorer economic growth rates,
while growth rates are positively correlated with greater equity. Thus, education can also contribute indirectly to
higher economic growth rates through its impact on reducing inequity of income distribution.
Education policies can help bridge the gap between other inequities such as the urban-rural divide, and linguistic
and cultural divides. Gender equity is also an important social goal and is also one of the six EFA goals which can
be influenced through education. By working through these mechanisms, education can contribute to greater
social cohesion.
While education policies can capitalize on these positive effects of education, it is important to remember that the
education system does not automatically contribute to greater equity: it has to be designed to do so. An education
system can, in fact, contribute to re-enforce existing inequities through the various stages of educational
provision. There is considerable evidence to suggest that educational performance at the primary and secondary
levels is heavily determined by the socioeconomic status of students’ parents.
Educational performance at the secondary level is a key determinant of whether a student will progress to the
tertiary level. The income levels of those who proceed to the tertiary level are much higher than income levels of
those who do not. Further education and training at a later stage in life is also highly correlated with having good
qualifications to begin with. In this way, existing socio-economic inequities can be solidified or even exacerbated
by the way the education system is organized. To overcome this vicious circle, and turn it into a virtuous circle,
requires careful educational planning that gives due consideration to the aspect of equity.
The quality of education

“In the many countries that are striving to guarantee all children the right to education, the focus on access often
overshadows attention to quality. Yet quality determines how much and how well children learn and the extent to which
their education translates into a range of personal, social and developmental benefits” (UNESCO, 2004). Most
governments recognize that Education for All cannot be achieved without improving quality. Yet, in many parts of the
world a significant share of children leave the school system without having acquired a minimum set of cognitive skills.
Defining quality remains a challenge. The easiest approach identifies learners’ cognitive development as the major
explicit indicator of education quality. Assessing the capacity of schools to promote values and attitudes is much more
challenging. The following chart provides a framework in the context of education quality:
A framework for understanding quality
The concern for the quality of education does not only apply to developing countries. Even in the most advanced
systems, governments are confronted with the need to better understand what makes a good education in an effort to build
a framework to assess and monitor education quality. European countries have agreed upon the following dimensions:

Table 2. Sixteen indicators on the quality of school education
SELF ASSESMENT.
Q1.
a) Define the term planning as applied to education (5mks)
b) Suggest possible solutions for success in educational planning
(5mks)
c) Analyze the socio-psychological factors affecting educational planning
(10mks)
d) Discuss five factors influencing the social demand of education
(10mks)
Q2.
a) Describe the historical background and rationale for educational planning in developing
countries (10mks)

b) Discuss unemployment in Kenya and suggest possible solutions
(10mks)
Q3.
a) Discuss the assumptions of the labour requirements approach in relation to education.
(10mks)
b) Briefly discuss the merits and demerits of cost – benefit analysis to educational planning
(10mks)
4
a) Using relevant examples, explain the economics of education
(10mks)
b) Discuss five practical uses of education to education policy makers education in Kenya
(10mks)
Q5.
a) Describe five characteristics of educational planning (10mks)
b) Explain in detail the procedures that characterize the planning process in education from the
beginning to the end (10mks)
a) Describe the historical development of educational planning (15mks)

b) Discuss the Basic Needs Approach to educational planning in the Kenyan education system
(10mks)
b) Discuss the views of Shultz (1961) and Denison (1962) about the concept of investment in
education (5mks)
a) Discuss any ten causes of educational inequalities in Kenya (10mks)
b) What measures do you advocate in containing the inequities in Kenyan education system?
(10mks)
a)Describe the six stages involved in the process of educational planning (12mks)
b) Discuss any four ways in which education contributes to socio-economic development of a
country (8mks)
a) Explain the reasons behind the current persistence rise in the demand for higher education in
Kenya (10mks)
b) Explain five measures that could be employed to contain the problem of “educated
unemployed” (10mks)

Cost Benefit Analysis deals with a systematic comparison of the magnitude of the costs and
benefits of investment in a given level of education in order to assess its economic profitability.
Examine the costs and benefits of educational investment in the light of this statement. (20mks)
Notes were compiled by: KEVIN MCOUDA

EMAIL: mcouda@teachers.org
MASENO UNIVERSITY
SCHOOL OF EDUCATION
Find more notes as well as live lessons at WWW.KENYAPLEX.COM

9711 Ema 412 Planning and Economics of Education

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MASENO UNIVERSITRY

FOR THE DEGREE OF BACHELOR OF EDUCATION WITH INFORMATION

FOURTH YEAR SEMESTER 2/ POST GRADUATE DIPLOMA IN EDUCATION

EMA 412-PLANNING AND ECONOMICS OF EDUCATION KEVIN MC’OUDA EMAIL: MCOUDA@TEACHERS.ORG

THE CONCEPT OF PLANNING AS APPLIED TO EDUCATION

EMA 412-PLANNING AND ECONOMICS OF EDUCATION KEVIN MC’OUDA EMAIL: MCOUDA@TEACHERS.ORG

HISTORICAL DEVELOPMENT OF EDUCATIONAL PLANNING

THE ANCIENT PERIOD OF PLANNING

Main criticisms of traditional planning

EMA 412-PLANNING AND ECONOMICS OF EDUCATION KEVIN MC’OUDA EMAIL: MCOUDA@TEACHERS.ORG

Table 1. Blueprint contrasts between traditional and strategic planning

Ancient Planning Modern Planning

Input oriented Result oriented

Neutral Mobilization instrument

Linear planning Iterative planning

Rigid implementation Flexible implementation

Routine based Change oriented

Compliance monitoring Performance monitoring

Emphasis on the plan document Emphasis on plan implementation

What are the factors affecting educational planning?

EMA 412-PLANNING AND ECONOMICS OF EDUCATION KEVIN MC’OUDA EMAIL: MCOUDA@TEACHERS.ORG

KINDS OF EDUCATIONAL PLANNING

EMA 412-PLANNING AND ECONOMICS OF EDUCATION KEVIN MC’OUDA EMAIL: MCOUDA@TEACHERS.ORG

The planning process;

Sector Analysis Policy Review

Preparation of medium-t erm plan + updating

Preparation of operationa l plan: year 1+correction

Regular internal reviewing

Preparation of operational plan: year 2 +correction

Repetition of yearly planning and monitoring cycle

Repetition of yearly planning and monitoring cycle

GENERAL FUNCTIONS OF EDUCATIONAL PLANNING

THE PROCESS OF EDUCATIONAL PLANNING

Types of Educational Planning:

EMA 412-PLANNING AND ECONOMICS OF EDUCATION KEVIN MC’OUDA EMAIL: MCOUDA@TEACHERS.ORG

METHODOLOGIES OF EDUCATIONAL PLANNING

Major Approaches to Educational Planning – Explained!

EMA 412-PLANNING AND ECONOMICS OF EDUCATION KEVIN MC’OUDA EMAIL: MCOUDA@TEACHERS.ORG

 There are many Kenyans seeking University education in overseas countries.

Application of SDA to education

B. Social Justice Approach:

EMA 412-PLANNING AND ECONOMICS OF EDUCATION KEVIN MC’OUDA EMAIL: MCOUDA@TEACHERS.ORG

EMA 412-PLANNING AND ECONOMICS OF EDUCATION KEVIN MC’OUDA EMAIL: MCOUDA@TEACHERS.ORG

Disadvantages /case arguments against/cons/demerits

The cost benefit Analysis Approach

Purpose of Cost –Benefit Analysis:

The Main Stages in the Cost Benefit Analysis Approach

 Makes one be able to acquire social prestige in the society.

EMA 412-PLANNING AND ECONOMICS OF EDUCATION KEVIN MC’OUDA EMAIL: MCOUDA@TEACHERS.ORG

Question for research;

MAJOR PROBLEMS FACING EDUCATIONAL PLANNING IN EDUCATIONAL COUNTRIES

a) Rising demand for education

IMPLICATION ON EDUCATIONAL PLANNING

SOLUTIONS TO PROBLEMS OF EDUCATION PLANNING

EDUCATED – UNEMPLOYED PHENOMENA

EMA 412-PLANNING AND ECONOMICS OF EDUCATION KEVIN MC’OUDA EMAIL: MCOUDA@TEACHERS.ORG

EMA 412-PLANNING AND ECONOMICS OF EDUCATION KEVIN MC’OUDA EMAIL: MCOUDA@TEACHERS.ORG

Meaning and Scope of Economics of Education :

There are three decision makers or stakeholders in the educational system.

EMA 412-PLANNING AND ECONOMICS OF EDUCATION KEVIN MC’OUDA EMAIL: MCOUDA@TEACHERS.ORG

1. Define economics of education.

2. Differentiate between ordinary economics and the economics of education.

The Economic Issues in Kenya