This document discusses the relationship between education and economics. It begins by outlining how education contributes to human capital and economic growth. Individuals with more education are more productive and receive higher wages. The level of education attained by an individual is determined by factors like interest rates, costs of education, and wage differentials. Government plays an important role in education as a public good that is funded through taxation and contributes to equity and economic productivity. Overall, the document argues that investment in education is critical for developing human capital and stimulating economic growth.

1. The Economics of
Education
PRESENTED TO: Dr. Shahzada Qaiser
Presented By: Bilal Iqbal (142208)
Muhammad Umar Farooq (142219)
M.A Education (L & M)
Evening; Session (2014-2016)

2. Overview
• There is a robust relationship between
education and earnings. Why ?
• What determines the level of education
selected by an individual ?
• How can we define Human Productive
Capacity?
• Individuals with more human capital
receive higher pay; How ???

3. What Economics is ???
• ALFERD MARSHAL; “It’s a Social
Science which deals with how human being
is performing his daily actions, it is the
study of efforts of human being at
individual and collective level, which is
robust relationship that how he/she get
strive for prosperity and how resources
should be utilized for maximum level of
utility.”

4. Education & Economics
• Every Country development is dependent
on two main factors;
• Natural Resource;
• Fertile Countryside, Forests, Minerals,
Canal & Rivers etc….
• Human Capital
• Well Educated, Skillful and Well Trained

5. Human Capital Model
• Human Capital;“an individual’s productive
capacity.”
• Human Capital may be increased by
investments in:
– Education,
– Training (Skill Development), and
– Health Care
• Individuals with more Human Capital
receive Higher pay (since they are more
productive).

6. Choice Between High school
and College Degree

7. Education as Human Capital
•Education = Investment in Human Capital
& Investment of Capital
•Education is responsible for social and
economic development.
•Human Capital declines with immobility.

8. Factors influencing Human
Capital Investment
•Interest Rate (toward Education and training)
•The age of the individual,
•The costs of education, and
•The wage differential between high school
and college graduates.

9. Creation of Wealth and Education
•Elements in the creation of wealth (labor, physical capital,
technology), are enhanced through education
•Educated workers are more productive
•All areas of resources are refined through education
•Human capital—greater productivity in management
Public sector Private sector
Education
Human Capital

10. Education: An Important Industry
•Education is the country’s largest industry .
•There is a positive relationship between education and economic growth.
•Economic philosophies affect fiscal matters and the educational program.
Marx Keynes Galbraith Friedman Smith
Communist;
advocacy of a classl
ess society in which
private ownership
has been abolished
and the means of pr
oduction and subsist
ence belong to the c
ommunity.
Government
Intervention;
Public ownership ,
which means that
production and
substance belongs
to govt.
Liberal;
An economic th
eory in favor of
laissez-
faire, the free m
arket, and the g
old standard.
Conservative;
(Monetarism)
An economic p
olicy based on c
ontrolling a cou
ntry’s money su
pply.
Capitalism;
An economic
system based
on private
ownership of
capital

11. A Public Sector Responsibility
• Government through Policies produces education services
• Private sector organizations respond to consumer demand
• Education--a political responsibility at three levels of
government through taxation
• Federal system-public education designed to produce equity
Private sector Public sector
Taxation
PKR

12. A Public Sector Responsibility
•As educational services increases, economic
productivity and wealth increases
•Educational system—result and determinant of social
and economic progress
•Education produces no free services
Producer’s Good—Human Capital
Consumer’s Good—Purchaser of Education
and wants as a consumer

13. Stimulates Economic Growth
•Education is important to increases in economic
productivity
•The scope of educational services are determined by
 Constituency Members’ Experiences
 Government Officials
 Community (Society)
 Those with no direct relationship to education
interest group.

14. Economic Benefits of Education
Range of Job Opportunities
Job Security
Taxes paid to state
Life Expectancy
Averages Earnings

15. • Increasing Expenditures and the Economy
 Human Capital more important than Natural Resources
in wealth creation
 High Education development overcomes lack of natural
resources
 Poor Education System—lower individual economic
productivity
• Expenditures Benefit Individuals and
Society
 Social mobility, higher status, increased appreciation
for arts and culture, increased participation in democratic
process
Family, neighborhood, business, society and culture
benefit

16. Cost-Quality Relationship to
Education
•Problems with establishing this relationship
lack a definition of high quality that is
measurable and acceptable to all concerned
goals of education vary from time to time and
place to place
•Research limitations
many variables contribute to student
achievement, not just spending

17. References
1)Taleem Ki Jahateyn Unit 9-1 (CODE TEC631) Writer: Ghulam
Rasool Muhammad (AIOU)
2)Haq, Ikram Ul and Ahmed, Pervaiz, “Knowledge Economy for
Pakistan Perspective” (2012). Library Philosphy and Practice (e-
Journal). Page 687
3)Http;//digitalcommons.unl.edu/libphilprac/687
4)Relationship between Education and Economic Growth in
Pakistan: A time series analysis. Journal of International Academic
Research (2011) Vol.11, No.1.

18. Thank You ALL
for active
Participation