Meaning and Scope of Economics of
Economics as a social science subject concerns itself with making choices
and finding alternatives. It studies how society decides what, how and for
whom to produce goods and services. Infact Lionel Robbins defined
Economics as a social science subject that studies human behaviour as a
relationship between ends and scarce means which have alternative uses.
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.
Infact Economics of education studies human behaviour [in terms of
human decisions), action(s) and reaction(s)] about schooling (Babalola,
2003).It further looks into how human behaviour affects economic
development. Economics of Education employs the use of some
elementary concepts commonly used in 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.
On the whole, economics of education is the marriage between ‘Mr.’
Education and ‘Miss’ Economics, and once married, Miss Economics
must have her department and bear the name of Mr. Education. The two
then merge to become one and thereafter referred to as Economics of
Education. You must note that there is a difference between Economics of
Education and Economic education.
At the end of this lecture, you should be able to:
1. define economics of education;
2. differentiate between ordinary economics and economics of
3. identify the fundamental problem of economics of education; and
4. explain what an economist of education can do to solve the
fundamental problem in the educational system.
1. Define economics of education
2. Differentiate between ordinary economics and the economics of
3. What is the fundamental problem of the economics of education?
4. Explain what an economist of education does to solve the
fundamental problem in the educational system.
What is Economic Education?
This is the education provided by somebody (a teacher or any other
educated person) on different economic issues and problems. It is the
education provided to assist a rational man in organizing his different
thoughts whenever he is faced with day-to-day economic issues and
One of the contemporary economic issues is the increase in the
price of petrol in Nigeria. It will take an expert in the area of economics of
education some efforts to point out to people, the effect of this increase in
petrol price on the economic activities at a given time. There are tertiary
institutions that offer courses in this area, and they include University of
Ibadan, Ibadan, Obafemi Awolowo University, Ile–Ife and many others.
People are trained in these institutions to teach economic concepts to the
public through the students in secondary schools, and thereby focusing
attention at providing solutions to the economic problem in the society.
So, it falls within the class of political education or sex education. It
should be realized that a better part of our working day is spent in making
economic decisions either as a producer or as a consumer.
Economic education can therefore, help us to arrive at a better set of decisions than
those we would have originally made.
What is Economics of Education?
We shall make efforts in this section to define economics of education.
This is aimed at bringing out the existing differences between economic
education and economics of education. 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
So far, the educational sector is established to meet
and satisfy the human quest and thirst for knowledge, most of the needs of
man will always create a demand for educational resources. The total
supply of these resources, even when fully employed, cannot meet every
desire of man, and this is as a result of insatiability of human wants.
Since it is not possible to meet all the needs of human being, a rational society
goes on to choose between these wants. In that wise, the different
principles of scale of preference and opportunity cost will come into play.
Economics of education therefore is the systematic study of how to choose
those alternative(s) that would give mankind the greatest satisfaction.
The Fundamental problem of Economics of Education
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
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 which we shall dealt with in this
Educational Resources are Limited
Resources: such as men, money, materials are limited in supply and serve
as input into the educational system. These inputs include
1. Men (M): teachers, policy makers, non-teaching staff;
2. Materials (M): students (raw materials), teaching and research
materials, teaching aids and other equipments;
3. Money (M): cash, cheque and notes;
4. Management (M): polices, plans, programmes, time table and
educational laws; and
One noticeable characteristics of resources in education is that they
are not always enough, knowing fully well that the education industry is a
centre for production of educated manpower, who are invariably injected
into the economy of different nations.
For example, there is 24hours in a day and as an undergraduate student;in the
Department of Educational Management you offer courses in Department of Teacher
education, Special education, Guidance and Counseling, General Studies plus courses
in other faculties outside education.
You will discover that in the process of your academic work, you will have so many
assignments, tests an personal issues to attend to each of the days, but you will find
out that the 24hours in a day will not be enough, and you may be tempted to ask God
to increase the length of the day. This is an example of how time, which is
an input can be limiting. Economics of education is therefore concerned
with the problem of economizing all available required resources.
Educational Wants are Unlimited
Hardwick, Khan and Langmead (1994) affirmed that individual wants are
virtually unlimited, whilst the resources available to satisfy those wants
are scarce. Educational wants create a demand for scarce resources, and
this implies that wants are competing for the same resources.
If the above happens, it is therefore rational to conclude that wants that are most
pressing will be satisfied first under direct competition. Really, it is not
possible to satisfy all identified educational wants at the same time,
because educational resources are limited. To this end, decision makers
will have to make choices among the alternative educational wants.
Consequently, economics of education concerns itself with how to use the
limited educational resources to satisfy the unlimited educational wants.
1. Economics of education is a branch of economics which uses
economic tools to solve educational problems and tackle
2. The difference between economics of education and ordinary
economics is the dominance of education as a variable in every
argument and application of economic principles, laws, and
concepts to education issues.
3. Economics of education is the study of how educational managers
make choices concerning the use of the scarce educational
resources, and this is what economists do in the education system.
4. The fundamental problem of economics of education is how the
decision makers shall make use of the limited resources at their
disposal to best satisfy their unlimited educational wants.
1. Define economics of education
2. Explain the difference between ordinary economics and the
economics of education
3. What is the fundamental problem of economics of education?
4. Explain the duty of an economist in the educational system.
Babalola, J.B. (2003). “Fundamentals of Economics of Education”,
in J.B. Babalola (Ed). Basic Text in Educational Planning, EPPU. Ibadan:
Deparment of Educational Management, University of Ibadan.
Hardwick, P;Khan,B. and Langmead, J.(1994). An Introduction to
Modern Economics,4th Edition, New York: