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Comparative and International Education Society

The Macro-Planning of Education: A Clarification of Issues and a Look into the FutureAuthor(s): George PsacharopoulosSource: Comparative Education Review, Vol. 19, No. 2 (Jun., 1975), pp. 214-224Published by: The University of Chicago Press on behalf of the Comparative and International EducationSocietyStable URL: http://www.jstor.org/stable/1187765

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THE MACRO-PLANNING

OF

EDUCATION:

A

CLARIFICATION

OF ISSUES

AND

A

LOOK

INTO

THE

FUTURE

GEORGE

PSACHAROPOULOS

IT

IS

HIGHLYPROBABLE

hat

at

this

very

moment,

someone

in

Ministry

X of

country

Y

is

making

a

decision

that

will

have

long-lasting

effects

on

the

country's

school

system.

The decision could

refer to

the amount

of resources

devoted

to

education

as a whole versus

the

rest

of

the

economy,

or to the amount

of

money

spent

on

pri-

mary

versus

secondary

schools.

Alternatively,

the

decision

could refer

to the

size

of classroom windows or to the number of hours of Latin taught at the secondary

school level.

This

decision

could

have

been arrived

at

by

a

variety

of

means,

rang-

ing

from

purely

political

criteria to

the

application

of

optimal

control

theory.

The

purpose

of this

paper

is,

firstly,

to

clarify

a

number

of

issues

centering

around the

nebulous

concept

of

macro-educational

planning.

This

clarifica-

tion

will,

hopefully,

dissolve

some

myths

on

the

state

of

the arts

of

educational

planning

today.

The

second function

of this

paper

is to

consider

some

omitted

parameters

that

could

influence

the

planner's

objective

and

methodology. Finally,

an

account

is

given

of

how the

field

is

likely

to

move in

the future.

ON

CONCEPTS AND

MODELS

Different

people

mean

very

different

things

when

talking

or

writing

about edu-

cational

planning.

Therefore,

let

me make it

clear

at the

outset

what

I

mean

by

this

concept.

Planning,

in

general,

refers

(or

should

refer)

to

the

examination of

many

feasi-

ble

alternatives

and

choice

among

them

according

to

an

objective.

If

there are

no

alternatives

to

consider,

the

choice

element

is

absent

and

therefore

the

concept

of

planning collapses.

This is

an

important point

to

be

remembered

throughout

this

paper.

Another

often

forgotten

point

is

that

the

concept

of

planning

contains

two

different

elements: a

positive

element,

namely

the

establishment

of

the

range

of

feasible

alternatives,

and

a

normative

element,

namely,

the criterion for

choice

(often

called

the

objective function ).

Unless

these two

different

elements are

kept

distinct,

confusion

arises

(as

has

often

been the

case).

Now,

macro-planning

refers to

decisions

at a

very

aggregate

level.

In

the

case

of

education,

for

example,

it could

refer to

the

way

the

state

budget

is

allocated

between different levels of schooling. Macro-planning is not concerned with

curricula

changes

and

the

shape

of

classrooms.

Although

the

latter

are

very

im-

portant

questions

in

education,

they

refer

to

micro-planning

and

are

outside

the

scope

of

this

paper.

214

June

1975



COMMENTARY

One

question

that

arises

at

this

point

is

whether

the

macro-planning

of

edu-

cation

is

really necessary.

Why

not

let the

education

sector

follow

its

own

develop-

ment

without

any

attempt

to

regulate

the

amount of resources

devoted

to it as

a

whole, or the way these resourcesare allocated by school type and level?

This seems to be

one

of the

few

issues

for which

consensus

exists

in

the

eco-

nomics of

education: an

attempt

should

be

made

to

specify

a kind

of

strategy

for

the

development

of

the education sector.

The classic

reason

is

the

divergence

between social

and

private

costs

and benefits:

to

the

extent

that

education

is

sub-

sidized

by

the

state,

individuals

are

prone

to

pursue

their

own

optimum

rather

than

the

social

optimum (whatever

the latter

means).

The result

of

discrepancies

of

this

kind

is

a

sub-optimal

resource

allocation

from the social

point

of

view.

Another reason

why

market forces

cannot

be

entirely

relied

upon

for

allocat-

ing

school resources is that the

production

side of education is

already

in the hands

of

the

public

sector

which

does

not

obey

profit

maximizing

critiera.

This

argument

could

also

be extended

to

the

demand

side,

the

public

sector

being

the

major

em-

ployer

of

graduates

in most

countries.

Once

we

agree

that the

macro-planning

of

education

is

desirable and

that

it

refers to

overall

(strategic)

allocation

decisions,

the

question

what

are

the dis-

ciplinary

tools of

arriving

at

such

decisions

arises. Shall

we invite

educators,

so-

ciologists,

economists,

psychologists

or

political

scientists

to

elaborate

a

macro-

educational

plan?

The

ideal,

of

course,

would

have

been

a

combination

of

all. Yet

I

have

never

seen

the

interdisciplinary approach

working

in

practice.

Although

this

often ad-

vocated idea looks

nice

on

paper,

different

specialists

not

only

have different con-

cerns but

they

also

talk

different

languages

when

they

get

together.1

The

result

has been that

in

most

countries

today

educational

plans,

if

made at

all,

are

elab-

orated

by

law

school

graduates.

Other

countries

employ

scores

of

economists

and

sophisticated

models to arrive at

an

educational

plan

which

(maybe

fortunately

enough)

is never

implemented.

But

the

reason

the

economics

discipline

has

been

popular in educational planning is that the definition of planning itself coin-

cides

with

the

subject

matter of

economics

(namely,

the

allocation of

scarce

re-

sources

among

alternative

uses).

Having

sorted

out

some

conceptual

issues

we

come

to the

methodology

of

macro-educational

planning.

I

will

argue

that there

exist

three

major ways

of ar-

riving

at

decisions in

education

(Figure

1):

(1) By

inertia,

namely by

following

past

trends

and

past

allocation

decisions;

(2)

By

a

political

decision

to deviate

from

the

past

trend,

in

order,

for

example,

to

increase

the level

of

literacy

of

the

population;

(3) By

applying

one of

the

many

technocratic

macro-educational

planning

models, as found in the literature.

1I

will never

forget

an

international

meeting

of

this kind where

I

was

talking

about

my

rates

of

return,

the

psychologist

was

describing

experiments

with

his

rats,

while

the

educator

insisted

on

changing

the

structures

without

ever

specifying

what

these

structures

were.

Comparative

Education

Review

215



GEORGE

PSACHAROPOULOS

FIGURE 1

A

TAXONOMY

OF

MACRO-PLANNING

MODELS

(1)

Inertia

(2) Political

T (a)

Social

demand

(3)

Technocratic

(i)

Manpower

equirements

(b)

Manpower

planning

(ii)

Cost-benefit

(iii)

Synthetic

Since the

rest

of this

paper

will

concentrate on

technocratic

planning

methods

it should

be noted

here that

these

methods are less

dangerous

than

they

look.

Critics of

educational

planning

techniques

usually

forget

that

the

solution

of

the

models

is

never

implemented.

For

example,

I

could

not name a

single country

that

has

actually

based

the

expansion

of its

school

system

on the

results

of

cost-

benefit

analysis.

But the

critique

and

further

development

of

these

models

are

not

useless.

For

although

never

implemented

as

such,

they

serve

two

important

functions.

Firstly,

they

contribute to

an

understanding

of

the

relationship

between

education

and

other social

parameters (like

employment

and

personal

income

distribution)

which would go undetected if planning took place according to inertia or poli-

tics.

This

is

the

positive

function of

these

models.

Secondly,

these

models

serve

a

normative function

by

making

those

responsible

for

educational

reform

(like

administrators and

politicians)

aware that

something

they

did not think

of

before

is

at least

relevant to

the decision

they

are

about to

take. Then

policy

makers,

without

realizing

it,

make

decisions

consistent

with

the

solution of

technocratic

models. For

example,

the

British

educational

budget

has been

recently

reshuffled,

more

being

now

spent

at

the

lower

(nursery)

school

level than

for

higher

edu-

cation.

Although

it is

impossible

to

trace

back

this

decision

to the

application

of

a

formal model, this reallocation of resources is consistent with

the

findings

of

the

cost-benefit

model

(which

has

shown

that

the

lower

levels

of

education

have

a

higher

payoff

than

the

higher levels).

Having argued

that

formal

planning

models

are

implemented

only

in

an

in-

direct

sense,

we turn

to

clarify

some

issues on

technocratic

methods.

As

shown

in

Figure

1,

there exist

two

major

approaches

according

to

which

education

can

be

planned:

(a)

The social

demand

approach, namely,

the

expansion

of

the

school

system

in such a way as to accomodate all those who want to

study

at a

given

educational level

and

who

have

the

required

qualifications

for

entry

to

that

level,

and

(b)

The

manpower

approach

according

to

which

the

school

system

should

216

June

1975



COMMENTARY

expand

in such

a

way

as to

provide

the

qualified

labor

for the achievement

of

output

targets

or

for

satisfying

economic

efficiency

criteria.

There are two points to note regarding this classification. Firstly,

the

distinc-

tion

between

(a)

and

(b),

above,

already

implies

the

adoption

of an

objective

(normative criterion).

In

the

first

case

the

objective

of the

planning

exercise

is

the

satisfaction

of the

private

demand

for

education.2 The

manpower

approach,

on

the other

hand,

adopts

the

objective

of

satisfying

social

economic

goals,

which

might

not

necessarily

coincide

with what individuals want.

The

second

point

to

note

is

that the

social

demand

approach

is not a

gen-

uine

macro-educational

planning

model since the element

of

choice

is

missing

from

it.

The

planner

in

this

case

has

simply

to accommodate the number

of

projected students. But note also that there is considerable room for micro-

planning

within

the

social demand

approach,

as,

for

example,

in

choosing

an

efficient

teaching technology.

Manpower planning

models

are

traditionally

sub-classified into:

(a)

The

man-

power

requirements

approach

which is

geared

to

the

achievement

of

output

tar-

gets;

(b)

The

cost-benefit

model

which takes

into account

the

social

cost

of

pro-

ducing

graduates

(whereas (a),

above,

does

not);

and

(c)

Synthetic

models

which

attempt

to reconcile the

two

previous

polar

cases.3

Historically,

the man-

power requirements approach

has

been used more

extensively

than

any

other

method,

mainly

because

of

its

intuitive

appeal.

( You

have

to have the

necessary

skills

otherwise

your

economy

will

not

grow ).

But

the

extreme.assumptions

of

this

approach

were

early

realized and

techniques

(b)

and

(c),

above,

were

devel-

oped.

The

two

main

drawbacks

of the

manpower

requirements

approach

have

been

the

neglect

of

the

cost

side

in

the

production

of

graduates

and

the

assump-

tion of

zero substitution

in the

production

of

output.

The

controversy

between

the

two basic

approaches,

(a)

and

(b),

is

far

from

academic.

The

manpower requirements approach

has

traditionally

recommend-

ed the expansion of the higher levels of education, whereas cost-benefit analysis

usually

results

in a

recommendation

for

the

expansion

of

the

lower levels of edu-

cation.4

This

policy

contrast

between

the

two

approaches

should be

always

borne

2

Note

that

the social

objective

of

this

approach

refers,

paradoxically,

to the

private point

of

view.

It

does

not

have

the usual social

connotation

of economics.

I

For a

review of these

models

see

G.

Psacharopoulos,

Substitution

Assumptions

Versus

Em-

pirical

Evidence in

Manpower

Planning,

De Economist

(November/December,

1973)

and

Syn-

thetic

Models

in

Manpower Planning,

in

G.

Psacharopoulos,

ed.,

The

Methodology

of

Educational

Planning (O.E.C.D.,

forthcoming).

Note that there

exists

a

host of other

classifications

like

econo-

metric, mathematical, and linear programming. However, I find these classifications mislead-

ing

as

they

do not refer

to

the

basic

underlying

planning philosophy

but rather to

the

presenta-

tion or

solution

technique.

'

The

reason

for

this

differential

recommendation

is

the

low cost of

primary

schooling

in

cost

benefit

analysis

(particularly

the

zero

foregone

earnings),

and

the

alleged

fixed

qualified

labor-

output

ratio in

the

manpower requirements

approach.

Comparative

Education Review

217



GEORGEPSACHAROPOULOS

in

mind,

not so

much

because

the

results of the

one

or other exercise

might

be

im-

plemented

as

such,

but

because

of

the function

of these models

in

forming

an

opinion

among

administratorsand

politicians.

ON

OBJECTIVES

AND

MYTHS

Today,

it

would

be naive

to

deny

the

superiority

of

models

(b)

and

(c)

as

against

the

manpower

requirements

approach.

Yet there

exists

a

feeling

of

disen-

chantment

among

practitioners

in

applying

a

model based on cost-benefit

analy-

sis.

The same

20

year-old arguments

are

repeated

again

and

again, failing

to

take

into

account

some

recent'developments

in

the

field. In this

section,

I

will

try

to

dis-

solve

some

long-standing myths by

reviewing

a

number

of

methodological

issues.

The

discussion

is

organized

in

terms of the

changing

objectives

of the

planner.

Until

the mid 50's

or

thereabout,

education

was

provided

on

the

basis

of

social

demand.

Thereafter,

efficiency

considerations

dominated

the scene

until

the

early

70's.

Today,

there

is

a

shift

of

emphasis

from

efficiency

considerations

to-

wards income

distribution and

employment

objectives.

What

is

meant

by

efficiency

is the

allocation

of

resources to education

to

satisfy

an

optimality

criterion.

In

the

case of

the

manpower

requirements

ap-

proach,

for

example,

it

would

mean the

possibility

of

producing

the

target-year

output.

In

the

case

of

the cost-benefit model

it

would

mean

maximization

of

the

community's wealth by investing in those educational levels that show the highest

economic

payoff.5

Estimation

of

efficiency

measures

in

education

are

mostly

based on labor

earn-

ings

classified

by

level of

schooling.

The difference between

the

earnings

of

grad-

uates of

two

adjacent

school

levels

is

interpreted

as a

proxy

for

the benefit result-

ing

from

extra

schooling.

This

proxy

has

been

criticized

in

many

respects,

the

most

often cited

objection

being

that

wages

might

have

little

to

do with

the social

mar-

ginal

product

of

labor. This

basic

objection

had

its

own

evolution

regarding

the

specific

reason

why

there

might

exist a

divergence

between

observed

earnings

and the marginal productivity of labor.

The

early

formulation

was

that

market

wages

in

our

economy

are

determined

by

custom,

social

tradition,

nepotism

or

non-profit

maximizing

employers (like

the

public

sector).

In

this

case,

so

the

argument

goes,

observed

earnings

cannot

be used

to

estimate

efficiency

measures in

education.

Although

this

is

certainly

true,

those who

cite

this

argument

forget

(or

are

not

aware)

that

there

exist

ways

of

basing

efficiency

calculations

on

imputed wages

which

are free from

the

above

distortions.

There

basically

exist

two

methods

of

arriving

at

imputed (or

shadow)

wage

rates

by

educational

level.

One is

econometric

shadow

pricing, namely by

fitting

a

production

function

with

disaggregated

labor

inputs

and

finding

the

6

ote

that

the

efficiency

criterion

is

inapplicable

in

the

case

of

the

social

demand

model. To

put

it

differently,

the

social

demand

approach

is

an

objective

on

its

own,

namely

the

provision

of

school

places

to

those

who

wish to

enroll.

218

June

1975



COMMENTARY

marginal

product

of

the different

categories

of

labor.6

Another

way

of

shadow

pricing

is

by

simply

observing

wages

by

educational

level

in

the

non-organized,

competitive

sector

of

the

economy.

These

wages

would

be

free

from

the

above

mentioned distortions and might even be more reliable than those resulting from

the

yet

primitive

econometric

techniques.

A

second

formulation of

the

objection

to the

marginal

productivity

assump-

tion

is

the

ability argument.

The

earnings

differential between a

university

and

a

secondary

school

graduate

might

overstate the

benefit

due

to education

be-

cause

the

university

graduate

is

presumably

more

able

and would

have

higher

earnings

even

if

he did not attend

college.

This

ability-objection

has been

tradi-

tionally

met

by

adjusting

the

earnings

differential downwards

by

40

per

cent,

the

remaining

60

per

cent

representing

the

effect

of

educatidn.

Recent

evidence,

how-

ever,

indicates that the effect of

ability

is not as much as

originally

thought.

When

both

ability

and

education

enter

into

an

earnings

determining

function,

the

co-

efficient

of

schooling

remains

more or

less

stable.'

The most

recent

formulation

of

the same

objection

is that

employers

use

edu-

cational

qualifications

as

a

screening

device,

namely

for

selecting

the more

able

(educated)

from

the less

able

(uneducated).

In

other

words,

the

social

pro-

ductivity

aspect

of education is

challenged

as

the same selection could have taken

place

by

less

expensive

tests.

Although the screening hypothesis is still being debated in the literature, there

exist

a

series

of

arguments

against

it.

In

the

first

place,

the

social

product

of

edu-

cation

can

be

established

by

the

production

function

method

mentioned earlier.

Secondly,

rates of return

to

completed

educational

levels

are

not

always

higher

than

the

returns

to

drop-outs

of

the same

level.

The

opposite

would

have

been

observed

if

employers placed

a

value

on

the

diploma.

Lastly, age-earnings

profiles

by

educa-

tional

level

(and adjusted

for

ability)

diverge

rather than

converge

over

time.

Note

that

the

opposite

would

have

been

observed if education were

simply

used

as

a

screening

device,

as

employers

would

later

correct

salary

mistakes made

at

the

time of hiring.8

Since

more educated

persons

earn

higher

salaries

than less

educated

persons,

education

should have

something

to do with

the

way

income is distributed

in

our

society.

The

concern

with

the

equity

objective

is

very

recent

and

the

exact

role

of

education

is

far

from

clear.

One

might

think

a

priori

that

the

statistical

positive

ee

G.

Psacharopoulos,

Estimating

Shadow

Rates

of

Return

to

Investment in

Education,

Journal

of

Human

Resources

(Winter,

1970)

and

R.

Layard,

et

al.,

Qualified

Manpower

and

Economic

Performance

(Allen

Lane,

1971).

7

See Z. Griliches, Notes on the Role of Education in Production Functions and Growth Ac-

counting,

in

W.

Lee

Hansen,

ed.,

Studies

in Income

and

Wealth

(National

Bureau

of

Economic

Research,

1970);

Z.

Griliches and

W. M.

Mason, Education,

Income,

and

Ability,

Journal

of

Political

Economy

(May/June,

1972,

Part

II);

and

J.

C.

Hause,

Earnings

Profile:

Ability

and

Schooling,

Journal

of

Political

Economy

(May/June,

1972,

Part

II).

8

R.

Layard

and

G.

Psacharopoulos,

The

Screening

Hypothesis

and the

Returns

to

Education,

Journal

of

Political

Economy

(September/October,

1974).

Comparative

Education

Review

219



GEORGE

PSACHAROPOULOS

association

between

earnings

and

education

would

result

in

a

more

equal

income

distribution

the more

schooling

is

provided.

Therefore,

education

could

be

used

as

an

instrument to

promote

the

equity

objective.

But the

following

research

indi-

cates that the relationship between schooling and the structure (as opposed to the

level)

of

earnings

is not

simple.

Becker,

Mincer,

and

Chiswick,

for

example,

have

arrived

at a

theoretical

re-

lationship,

based on human

capital

theory,

between

schooling

and

income

dis-

tribution.9

In

their

empirical

work, however,

they

take

for

granted

the

proposi-

tion

that the

higher

the

level

of

schooling

of

the

population,

the

more

unequal

the

income

distribution.10

This

proposition

assumes that the rate

of return and

the

level

of

schooling

are

independent

random

variables.

Certainly,

this result

should

be

interpreted

with caution

as

it

has been well established

that

the

rate

of

return

and the level of

schooling

are

negatively

correlated.

It is

a

statistical

fact that

university

graduates

earn

more

than

non-graduates.

However,

the

question

of

who

really

finances

the

graduate's

study

remains.

To

the extent

that the

finance

comes from

the

taxpayer's

money,

the

question

shifts

to

whether it

is

the

high

or

low

family

income

students

who

enroll in

college.

In

an

initial

study

of

this

kind,

Hansen and

Weisbrod

found that the California

sys-

tem of

higher

education is

redistributive in

favor

of

the

higher

income

groups.12

Although

similar

studies

have

been

made

in

Florida and

Hawaii,

the

redistributive

effects

of

public higher

education

remain

inconclusive.13

The effect

of

schooling

on

earnings

and

therefore,

the

role

of

education

as

an

equalizer

of

income

distribution,

has been

recently challenged.

Bowles

found

that

it

is social

class

rather

than

years

of

schooling

that

determines

earnings.'4

His

con-

clusion

is

that the

role

of

schooling

is

mainly

the

transmission of

status

from one

generation

to

the next. In

another

study,

Jencks

finds

that

social

class,

schooling,

ability,

and

occupation

account for

very

little of

income

variance

between

in-

dividuals.15

He

therefore

concludes

that

income

redistribution

can

be achieved

'

See

G.

S.

Becker

and

B.

R.

Chiswick,

Education

and

the

Distribution of Earnings, American

Economic

Review

(May,

1966);

B.

R.

Chiswick,

Minimum

Schooling

Legislation

and

the

Cross-

Sectional

Distribution

of

Income,

Economic

Journal

(September,

1969);

B. R.

Chiswick

and

J.

Mincer,

Time-Series

Changes

in

Personal

Income

Inequality

in

the

United States from

1939,

with

Projections

to

1985,

Journal

of

Political

Economy

(May/June,

1972,

Part

II);

and

J.

Mincer,

Schooling,

Experience,

and

Earnings (National

Bureau

of

Economic

Research,

1974).

10

This

proposition

is

never

stated

explicitly

in

the

above cited

work.

11

See

G.

Psacharopoulos,

Returns

to

Education:

An

International

Comparison

(Elsevier-Jossey

Bass,

1973).

12W.

Lee

Hansen and

B.

Weisbrod,

Benefits,

Costs,

and

Finance of

Public

Higher

Education

(Markham,

1969)

and

The

Distribution

of

Costs

and

Direct

Benefits

of

Public

Higher

Educa-

tion:

The

Case

of

California,

Journal

of

Human

Resources,

(Spring,

1969).

13

See in

particular

J.

Pechman,

The

Distributional

Effects

of

Public

Higher

Education

in

California,

Journal

of

Human

Resources,

(Summer,

1970)

and

J.

E.

Hight

and

R.

Pollock,

The

Distribution of

Transfers

Among

Income

Classes

Resulting

from

Higher

Education

Expenditures:

A

Comparison

of

California,

Florida,

and

Hawaii,

Journal

of

Human

Resources,

(Summer,

1973).

1,

.

Bowles,

Schooling

and

Inequality

from

Generation

to

Generation,

Journal

of

Political

Economy

(May/June,

1972,

Part

II).

5

C.

Jencks,

Inequality

(Basic

Books,

1972).

220

June

1975



COMMENTARY

by

direct means

(like

taxation and

subsidies)

rather than

by

indirect

and doubtful

means

like

schooling.16

Employment

creation is a recent

objective

in

macro-planning,

and

it is one of

growing importance. The reason employment is considered an objective per se is not

only

because

of

the

demoralizing

nature of

unemployment

but also

because of its

adverse effects

on

efficiency.

However,

efficiency

measures

in education can be cor-

rected

for

unemployment.

Concern

in

this

area

has

mainly

focused on the trade-

off

between

efficiency

and

employment

and on

the

relationship

between

education

and

unemployment.

Overall

unemployment

(not

related to

education)

has been often attributed

to

Keynesian

reasons

(lack

of sufficient

aggregate

demand)

or structural reasons

(namely,

lack

of

sufficient

physical

capital

and

low

substitution

possibilities

in

production).

Disaggregating

unemployment

by

education one

might expect

a

priori

that

persons

with

high

educational

qualifications

exhibit the lowest unem-

ployment

rate.

Empirically,

however,

this

is

not the

case.

Unemployment

seems

to

peak

at the

secondary

level.17

The

theories

put

forward

to

explain

this

phenomenon

are

either economic

or

sociological.

Economic

explanations

run from

simple

supply

and

demand

relationships

combined

with

downward

rigid

wages

to

sophisticated

search models. The

latter

predict

that more

educated

persons

will

search

longer

before accepting a job since earnings variance is greater for them than for the less

educated.

Sociological

theories,

on

the other

hand,

maintain that education

(par-

ticularly

of

the

secondary

general

type)

raises the

graduate's expectations

regard-

ing

employment

and

makes

them

unwilling

to

accept

manual

jobs.18

SOME MITTEDARAMETERS

Much of

the

discussion

on

the

objectives

and

methodology

of

educational

planning

is conducted

abstractly,

without reference to the context

of

a

particular

country.

For

example,

because of

the

evidence

on

high

substitution

possibilities

between different kinds of educated labor, it has been

argued

that the cost-benefit

model

is more

valid

than

the

manpower

requirements

approach.

Although

this

is

true

in

principle,

it

is

not

a

universal

statement. For the exact

methodology

to

be

followed

should

vary

depending

on at

least

three

inter-related

dimensions:

the

kind

of

country

in which

it

will

be

applied,

the

level

of

education to be

planned,

and

the

weight

policy

makers

put

on

different

objectives.

These

parameters

are

usually

omitted

in

macro-planning

discussions.

The cost-benefit model

should be

relatively

more

appropriate

in

advanced

'a

or a

critique

of the results

by

Bowles and

Jencks

see

G. S.

Becker,

Comment,

Journal

of

Political

Economy

(May/June,

1972,

Part

II)

and G.

Psacharopoulos,

Jencks

and

Inequality

Com-

parative

Education

Review

(October,

1974),

pp.

446-50.

17

D.

Turnham,

The

Employment

Problem

in Less

Developed

Countries:

A

Review

of

the

Evi-

dence

(O.E.C.D.,

1971).

'

nternational Labour

Office,

Matching

Employment

Opportunities

and

Expectations:

A

Pro-

gramme

of

Action

for

Ceylon (1971).

Comparative

Education

Review

221



GEORGE PSACHAROPOULOS

countries. The

reason

is

not

only

that

the

degree

of substitution

is

greater

in

rich than

poor

countries, 9

but also

because

their stock

of

educated

labor

is

such

that it makes the

development

of

bottlenecks

less

likely.

The

social

demand

approach would be also more applicable in the context of an advanced country.

Rich

countries

can afford

to

satisfy

the

private

demand

for

places

without

risk

of

serious

bottlenecks.

The reason

is that

in these countries

there

exists

a

consider-

able

overlap (shaded

area

in

Figure

2)

between

the social

demand

(read

private

FIGURE 2

THE

TWO SOURCES

OF DEMAND

FOR

EDUCATION

o c i a l

a n p o w e r

supply )

for

skills

and

the

skills

resulting

from

a

manpower

exercise.

Note

that

the

opposite

would

hold

in

less

developed

countries where

the intersection

of

the

two

circles

would be more

limited,

and

therefore

there

would

be

more room

for

manpower planning.

The

cost-benefit

model

would

also

be more

appropriate

in

large

rather

than

small

countries.

The

reason is that in

countries

with

a

small

labor

force,

changes

re-

sulting

from

planning

could

be

non-marginal

in

relation

to

the base.

This

would

certainly change

relative

wages

and

therefore invalidate

the estimated

cost-

benefit

measures.

One

cannot

plan

primary

education

in

an

advanced

country,

no matter what

approach

is

used;

the

social

demand

will

automatically

take

care

of

this

level.

But

one

can

plan

the

primary

level

in

less

developed

countries

where enrollment

rates

are well below 100 per cent. The situation is different at the

post-compulsory

edu-

cation

level,

where

the

distinction

between

general

and

vocational

education

could

dictate

to

some

extent

the

methodology

to

be used. For

example, secondary general

and

the

humanities

could

be

planned

according

to

social

demand

(if

this

is con-

sistent with

the

objective

of

the

planner)

whereas

secondary

technical and certain

fields

of

higher

education

(like

medicine and

engineering)

could be

planned

according

to

cost-benefit

analysis.

As

mentioned

earlier,

the

adoption

of

an

objective

is

inherent

in

the

concept

of

educational

planning.

Now

the

particular objective adopted

would to

a

large

extent

dictate

the

methodology

to

be

followed.

Some of

the

planner's

possible

objectives

might

include:

output

maximization;

income

distribution;

employ-

I

ee

G.

Psacharopoulos,

Returns

to

Education:

An

International

Comparison

(Elsevier-Jossey

Bass,

1973).

222

June

1975



COMMENTARY

ment

creation;

bottleneck

avoidance;

literacy,

or

satisfaction

of social

demand.

The

precise objective

to

be

adopted

is

in

turn a

function

of

the

country's degree

of economic

development.

For

example,

rich

countries

are

now

less.

concerned

with output growth and concentrate on income distribution. Poor countries, on

the other

hand,

are

concerned

with

output

maximization

as well

as

literacy

and

the

avoidance

of

bottlenecks.

Similarly,

rich

countries

might

be

willing

to

sacrifice

efficiency

for

the sake

of

satisfying

social

demand. The

first

four

objectives

are

more

consistent

with

the

application

of

a

manpower

planning

methodology,

whereas

the last

two

objectives

are

more

consistent

with

the

application

of

a

demographic,

transition

proportions

model.

A

POST-SCRIPT

ON

THE

FUTURE

How will

the

field of macro-educational

planning

move into

the

future?

Will

more

countries

attempt

to

plan

their

school

system

or will

there

be more

reliance

on

market

solutions? What

methodology,

if

any,

will

be

used to

shape

the

struc-

ture

of

the educational sector?

What

will be the

major

areas

of research? In

this

section

I

offer

some

propositions

on

the

way

I

see

the

field

developing

in the

years

to

come.

There

will be

more reliance on model

solutions.

An increased

number

of

countries

will

be

committed

toplan

their

educational

system

one

way

or

another.

A discrepancy will still exist between the way policy makers in these countries

think

they

are

planning

the

system

and

the

way

it

actually

operates.

Yet

this

dis-

crepancy

will diminish over

time

as

politicians

and

administrators

realize the

opportunity

cost

of ad

hoc

decisions.

Although

model solutions

might

not be

im-

plemented

as

such

(as

they

have never

been,

after

all), they

will

help

to

shape

the

opinion

of

those

responsible

for

decisions

in

education.

It

is

in this

sense

that

no

model

can

be

dismissed as

being

academic

or

having

no

relevance

to

policy

making.

Labor

market

based

models

will dominate

the

scene

versus

non-market ones

(like

demographic

or Markov-chain based). The reason is that the economic ef-

fects

of

education

are

manifested

in the

market for different

skills.

Among

the

different models

mentioned

earlier,

the

emphasis

will

be

towards the

synthetic

ones. The

social

demand

approach

will

be

increasingly

used

to

assess

(ironically)

the

supply

side.

But

the

social

demand

model

will

also

rely

on

the

relative earn-

ings

of

graduates

rather

than on

mechanical

(and

therefore

non-behavioral)

transition

proportions.

Labor

market based models will

rely

on

the

starting

salaries of

graduates

rather

than

average

or

even historical

age-earnings profiles.

The

reason is that

starting

salaries

are

more

sensitive

to

changing

market

conditions

and

are,

therefore,

a

better

indicator of

the

actual

state

of the

market.

Moreover,

starting

salaries

by

educational

level

are

least contaminated

by

the distortions mentioned

earlier

in

this

paper.

The

way starting

salaries can be used

in

this context is

by

giving

a

sig-

Comparative

Education

Review

223



GEORGE

PSACHAROPOULOS

nal

of

what

kind

of

skills

are

developing

shortages

or

surpluses

so that

appropriate

action is

taken. For

example,

if

the relative

earnings

of

graduates

of

one field

of

higher

education

are

rising

relative

to

other

fields,

one

might

consider

adopting

a

policy of more open admissions to this field.

There will

be a

tendency

towards

revolving,

non-fixed

horizon

plans.

It

is

ac-

tually

surprising why

it

has

not

been

realized earlier that one

could never

stick

to

an

even medium

term

plan.

What

is

best

by today's

standards,

may

not

be

best

by

those

of

tomorrow

when

new data

will

be

available

or

even

new

objectives

pre-

vail.

Five

year

plans

will

continue to

be

drafted,

but it should be

also understood

that

they

contain

indicative

specifications

which

are

not to be

followed

to

the

last

digit.

The

value

of

these

plans

lies

more

in

understanding

the

positive

relationship

between

education

and the

economy

than

in

setting

normative

targets.

There will also be a

tendency

towards

shifting

an increased

part

of

the cost

of

schooling

to

the

individual,

particularly

at the

higher

levels

of

education.

This

is

because

of

the realization

that

free education is

a

Utopia.

Schooling

has

a

significant

social cost and

therefore

shifting part

of

it to the

individual

would

pro-

mote

the

efficiency

objective.

Since

this

might

be in conflict

with

the

equity

ob-

jective,

the loan

system

will

be

used

more

frequently.

On

the

research

front,

one

line

of

activity

will

be

geared

towards

understand-

ing

some

areas

which

have thus far

received

inadequate

attention

like

informal

ways

of

learning skills,

the role

of

education in

rural

areas and

the

effectiveness

of

new

formal

teaching

methods.

Another

line

of

activity

will

concentrate

on

inte-

grating

the

various

objectives

after

the

planner

has

assigned

some

weights

to

them.

As of

today,

we

have

some

knowledge

only

of

the

partial

effects

of

schooling

on

the

efficiency

objective,

and we

have

just

scratched

the

surface

of

income dis-

tribution and

employment

effects of

schooling.

What

we

seem

to

be a

long

way

from

is

integrating

all

these

(and

possibly

other

non-economic

objectives).

Finally,

let

me

close

with the

hope

that

along

with

new

research,

more em-

phasis

will

be

put

on

disseminating

the

results

of

existing

research. It

is not

uncom-

mon today that officialsresponsible for educational planning either ignore general

principles

that

would

have

affected their

decision or

even

overlook

results

specific

to

their

particular

country.

What

I

would

like

to

suggest

is

that

research

grant

donors

and

international

foundations in

particular

give

more

attention

to

the

translation

of

existing

results into

actual

implementation

of

policy.

This

could

be

achieved

by

establishing

a

kind

of

tutorial

service.

As mentioned

earlier,

someone

in

Ministry

X in

country

Y

gets

his

pen

and

allocates

the

educational

budget

in

a

certain

way.

This

allocation

decision

is

usually

made

by

administrative

inertia,

i.e.,

by

just

following

past

investment

decisions.

The

tutor's

role

would

be to

iden-

tify

this

person

and

discuss

with

him

the

implications

of

what he is

about to

do.

Although

the

output

of

this

tutorial

service

would

be

less

conspicuous

(e.g.,

in

terms

of

publications),

I

believe

it

could

have

a

beneficial

effect

on

the

way

re-

sources are

allocated to

education

today

around

the

world.

224

June

1975

psacharopoulos, g. - the macro-planning of education- a clarification of issues and a look into the...

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