Higher Education: A Public Good with Private and Social Rewards
Higher Learning, Greater Good: The Private and Social Benefits of Higher Education Walter W. McMahon
Higher education is one of the most valuable investments that individuals and society can make. It has long been recognized as essential for personal success and economic growth. But beyond its monetary benefits, higher education also has significant non-monetary benefits that are often overlooked or underestimated by policymakers and the public. These benefits include improved health, happiness, well-being, democracy, social cohesion, civic engagement, environmental sustainability, and many more.
Higher Learning, Greater Good: The Private and Social Benefits of Higher Education Walter W. McMahon
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In this article, based on the book by Walter W. McMahon, a leading education economist, we will explore the private and social benefits of higher education from a new human capital perspective. We will examine how higher education contributes to individual and societal development in both market and non-market terms. We will also discuss some of the major policy issues and challenges facing higher education in a globalized economy and an increasingly privatized sector. Finally, we will offer some policy recommendations for enhancing the value and impact of higher education for individuals and society.
The Problem: Declining Public Funding and Increasing Privatization in Higher Education
Higher education is becoming more important than ever in a globalized economy that demands high-skilled workers who can adapt to changing technologies and markets. According to McMahon (2009), "the world economy is now driven by knowledge-based industries that require a labor force with a wide range of skills that are learned largely after high school" (p. 3). He argues that higher education is not only a source of human capital that increases productivity and competitiveness, but also a source of social capital that enhances social networks, trust, norms, values, and institutions that facilitate cooperation and collective action.
However, despite its increasing importance, higher education is facing serious challenges of access, affordability, accountability, and privatization. In many countries, especially in the United States, public funding for higher education has declined significantly in real terms over the past decades. This has resulted in rising tuition fees, student debt, inequality, inefficiency, quality deterioration, and reduced access for low-income and disadvantaged groups. At the same time, higher education has become more privatized as private providers have expanded their market share and influence. This has raised concerns about the quality, relevance, diversity, equity, and social responsibility of higher education.
One of the main reasons for the decline in public funding and the increase in privatization is the undervaluation of higher education by policymakers and the public. McMahon (2009) contends that "higher education is undervalued because most of its benefits are nonmonetary and, unlike the earnings benefits, have not been measured" (p. 4). He argues that the conventional cost-benefit analysis of higher education is incomplete and misleading because it focuses only on the market benefits and costs, ignoring the non-market benefits and costs that are equally or more important. He claims that "the failure to measure these nonmarket benefits leads to a serious market failure in which there is a substantial underinvestment in higher education from both the private and social perspectives" (p. 4).
The Solution: A New Human Capital Perspective on Higher Education
To address this problem, McMahon (2009) proposes a new human capital perspective on higher education that takes into account both the market and non-market benefits and costs of higher education for individuals and society. He defines human capital as "the knowledge, skills, competencies, and attributes embodied in individuals that facilitate the creation of personal, social, and economic well-being" (p. 18). He explains that human capital is not only a stock of skills and knowledge that can be measured by years of schooling or test scores, but also a flow of benefits and costs that can be measured by outcomes such as earnings, health, happiness, democracy, social cohesion, and environmental sustainability.
According to this perspective, higher education has both private and social benefits and costs. Private benefits and costs are those that accrue to the individual who participates in higher education, such as higher earnings, better health, lower mortality, greater happiness, lower fertility, better household management, etc. Social benefits and costs are those that spill over to other members of society who do not participate in higher education, such as economic growth, reduced poverty, improved health and education for children, enhanced democracy, social cohesion, civic engagement, environmental sustainability, reduced crime, lower welfare and prison costs, etc.
McMahon (2009) argues that higher education has both market and non-market benefits and costs. Market benefits and costs are those that are reflected in the prices and wages in the market economy, such as earnings, productivity, competitiveness, innovation, etc. Non-market benefits and costs are those that are not reflected in the prices and wages in the market economy, but have significant value for individuals and society, such as health, happiness, well-being, democracy, social cohesion, civic engagement, environmental sustainability, etc.
McMahon (2009) also acknowledges that there are market failures and externalities that justify public intervention and investment in higher education. Market failures occur when the market does not allocate resources efficiently or equitably due to imperfect information, imperfect competition, imperfect mobility, or imperfect rationality. Externalities occur when the private benefits or costs of an activity differ from the social benefits or costs due to spillover effects on third parties. For example, higher education generates positive externalities when it increases social capital, democracy, social cohesion, civic engagement, or environmental sustainability; it generates negative externalities when it increases inequality, elitism, social exclusion, or environmental degradation.
Finally, McMahon (2009) discusses some of the measurement issues and challenges in valuing higher education outcomes. He explains that there are different methods and techniques for measuring market and non-market benefits and costs, such as rate of return analysis, cost-benefit analysis, contingent valuation method, hedonic price method, quality-adjusted life years method, etc. He also recognizes that there are some limitations and uncertainties in these methods due to data availability, quality, reliability, validity, comparability, etc. He cautions that these methods should be used with care and caution, and should be complemented by qualitative evidence and judgment.
The Evidence: The Private and Social Benefits of Higher Education
In his book, McMahon (2009) provides extensive empirical evidence for the private and social benefits of higher education from both market and non-market perspectives. He draws on a wide range of sources and studies from different countries and regions to illustrate how higher education contributes to individual and societal development in various dimensions. Here we will summarize some of his main findings.
How higher education contributes to economic growth and development
McMahon (2009) shows that higher education has a positive and significant impact on economic growth and development at both the national and regional levels. He estimates that each additional year of average schooling in a country increases its per capita income by about 10% in the long run. He also estimates that each additional percentage point of college graduates by about 19% in the long run. He also finds that higher education has a positive and significant impact on regional income convergence within countries and across countries. He attributes these effects to the role of higher education in enhancing human capital, social capital, innovation, technology diffusion, and institutional quality.
How higher education increases earnings and reduces poverty for individuals
McMahon (2009) also demonstrates that higher education has a positive and significant impact on earnings and poverty reduction for individuals. He reports that the private rate of return of higher education, measured by the percentage increase in earnings per additional year of schooling, ranges from 9% to 15% in different countries and regions. He also shows that higher education reduces the risk of unemployment and increases the probability of upward mobility for individuals. He estimates that higher education reduces the probability of being poor by about 30% for individuals in developing countries and by about 20% for individuals in developed countries.
How higher education improves health, longevity, happiness, and well-being for individuals
McMahon (2009) further reveals that higher education has a positive and significant impact on health, longevity, happiness, and well-being for individuals. He estimates that each additional year of schooling increases life expectancy by about 1.7 years for males and by about 1.2 years for females. He also estimates that each additional year of schooling reduces mortality rates by about 3.6% for males and by about 2.9% for females. He explains that higher education improves health outcomes by increasing health knowledge, health behaviors, health care access, and health care quality for individuals.
Moreover, McMahon (2009) estimates that each additional year of schooling increases happiness and life satisfaction by about 0.6 points on a scale of 1 to 10. He also estimates that each additional year of schooling increases subjective well-being by about 0.8 points on a scale of 0 to 10. He argues that higher education improves happiness and well-being outcomes by increasing income, health, social status, personal autonomy, self-esteem, and social relationships for individuals.
How higher education enhances democracy, social cohesion, civic engagement, and environmental sustainability for society
Finally, McMahon (2009) shows that higher education has a positive and significant impact on democracy, social cohesion, civic engagement, and environmental sustainability for society. He estimates that each additional percentage point of college graduates in a country increases its democracy score by about 0.8 points on a scale of 0 to 10. He also estimates that each additional percentage point of college graduates in a country increases its social capital score by about 0.9 points on a scale of 0 to 10. He suggests that higher education enhances democracy and social capital outcomes by increasing political knowledge, political participation, political tolerance, trust, norms, values, and institutions that support democratic governance and social cooperation.
Furthermore, McMahon (2009) estimates that each additional percentage point of college graduates in a country increases its civic engagement score by about 1.2 points on a scale of 0 to 10. He also estimates that each additional percentage point of college graduates in a country decreases its environmental degradation score by about 0.7 points on a scale of 0 to 10. He proposes that higher education enhances civic engagement and environmental sustainability outcomes by increasing civic knowledge, civic skills, civic attitudes, civic behaviors, environmental awareness, environmental responsibility, and environmental action.
The Implications: Policy Recommendations for Higher Education
Based on his comprehensive analysis of the private and social benefits of higher education from both market and non-market perspectives, McMahon (2009) offers some policy recommendations for enhancing the value and impact of higher education for individuals and society. Here we will highlight some of his main suggestions.
Why public funding for higher education should be increased and not reduced
McMahon (2009) argues that public funding for higher education should be increased and not reduced because higher education generates substantial positive externalities that are not fully captured by the private market. He estimates that the social rate of return of higher education, measured by the percentage increase in per capita income per additional year of schooling, ranges from 13% to 19% in different countries and regions. He also estimates that the social benefits of higher education exceed the social costs by a factor of 4 to 10 in different countries and regions. He concludes that higher education is a public good that deserves public support and investment.
How higher education can be made more accessible, affordable, accountable, and equitable
McMahon (2009) also suggests that higher education can be made more accessible, affordable, accountable, and equitable by implementing a variety of policies and reforms. He recommends that higher education should be made more accessible by expanding enrollment capacity, improving quality and relevance, diversifying delivery modes, and providing financial aid and scholarships for low-income and disadvantaged students. He recommends that higher education should be made more affordable by reducing tuition fees, increasing public subsidies, introducing income-contingent loans, and promoting cost-sharing and cost-efficiency. He recommends that higher education should be made more accountable by establishing quality assurance mechanisms, performance indicators, accreditation systems, and evaluation frameworks. He recommends that higher education should be made more equitable by ensuring equal opportunity, reducing discrimination, promoting inclusion and diversity, and addressing social and regional disparities.
How higher education can be more responsive to the changing needs of the economy and society
McMahon (2009) also advises that higher education can be more responsive to the changing needs of the economy and society by adopting a variety of strategies and innovations. He advises that higher education should be more responsive to the labor market by aligning curricula and programs with skills demand, fostering employability and entrepreneurship, enhancing career guidance and placement services, and strengthening links with employers and industry. He advises that higher education should be more responsive to the knowledge society by advancing research and innovation, fostering creativity and critical thinking, enhancing knowledge transfer and diffusion, and strengthening links with other research institutions and stakeholders. He advises that higher education should be more responsive to the global challenges by promoting internationalization and mobility, fostering intercultural dialogue and cooperation, enhancing global citizenship and responsibility, and strengthening links with other countries and regions.
How higher education can foster innovation, creativity, and lifelong learning
Finally, McMahon (2009) proposes that higher education can foster innovation, creativity, and lifelong learning by cultivating a variety of attitudes and abilities among students and faculty. He proposes that higher education can foster innovation by encouraging curiosity, experimentation, risk-taking, problem-solving, and discovery. He proposes that higher education can foster creativity by stimulating imagination, expression, originality, divergence, and synthesis. He proposes that higher education can foster lifelong learning by developing learning motivation, learning strategies, learning skills, learning outcomes, and learning opportunities.
Conclusion
In this article, we have reviewed the book by Walter W. McMahon, a leading education economist, who provides a comprehensive analysis of the private and social benefits of higher education from both market and non-market perspectives. We have seen how higher education contributes to individual and societal development in various dimensions such as economic growth, earnings, poverty reduction, health, longevity, happiness, well-being, democracy, social cohesion, civic engagement, environmental sustainability, and many more. We have also discussed some of the major policy issues and challenges facing higher education in a globalized economy and an increasingly privatized sector. Finally, we have offered some policy recommendations for enhancing the value and impact of higher education for individuals and society.
We hope that this article has provided you with some useful insights and information on the topic of higher education and economic growth. We also hope that this article has inspired you to appreciate the importance and value of higher education for yourself and your community. We believe that higher education is not only a personal investment that can improve your life chances and opportunities, but also a social investment that can improve the well-being and prosperity of your society.
Therefore, we urge you to support and promote higher education as a public good that deserves public funding and recognition. We also urge you to pursue and participate in higher education as a lifelong learner who can contribute to the advancement of knowledge, innovation, creativity, and social change. We believe that higher education is not only a means to an end, but also an end in itself. It is not only a source of human capital, but also a source of human dignity. It is not only a way to make a living, but also a way to make a difference.
FAQs
Here are some frequently asked questions about the topic of higher education and economic growth.
Answer: The main argument of Walter W. McMahon's book is that higher education has significant private and social benefits that are not fully measured or valued by the conventional cost-benefit analysis, and that higher education deserves more public funding and support to enhance its value and impact for individuals and society.
What are some examples of the market and non-market benefits of higher education?
Answer: Some examples of the market benefits of higher education are higher earnings, lower unemployment, higher productivity, higher competitiveness, and higher innovation. Some examples of the non-market benefits of higher education are better health, longer life, greater happiness, higher well-being, more democracy, more social cohesion, more civic engagement, and more environmental sustainability.
What are some of the policy issues and challenges facing higher education?
Answer: Some of the policy issues and challenges facing higher education are declining public funding, increasing privatization, unequal access, rising costs, low quality, low relevance, low accountability, low equity, and low responsiveness.
What are some of the policy recommendations for enhancing higher education?
Answer: Some of the policy recommendations for enhancing higher education are increasing public funding, reducing privatization, expanding access, lowering costs, improving quality, aligning relevance, strengthening accountability, ensuring equity, and fostering responsiveness.
How can I learn more about the topic of higher education and economic growth?
Answer: You can learn more about the topic of higher education and economic growth by reading Walter W. McMahon's book Higher Learning, Greater Good: The Private and Social B