Cost Analysis for Improved Educational Policymaking and Evaluation

Abstract

Many important policy issues in education in the United States and elsewhere are concerned with resources invested in education. A common issue, for example, is whether the level of resources devoted to education is adequate and feasible. There is a concern among educators in many countries that not enough resources are devoted to education, especially resources targeted at basic educational programs for disadvantaged population groups; and some education programs favored by decisionmakers may be too costly and financially infeasible (World Bank, 1995). Another example is the issue of whether education resources are utilized efficiently in achieving desired educational goals. There is often a concern that additional spending on educational administrators or teachers may not lead to higher student learning. This raises interest in the role of incentives, compensation structure, and other potentially more cost-effective strategies for improving education outcomes (Hanushek & Jorgenson, 1996). Some observers argue that, because of a lack of competition, public schools are inefficient and public resources may be more productively spent on other approaches to schooling such as private schools and charter schools. These market approaches to schooling are concemed with issues of resources, efficiency, and the purposes of schooling (Cohn, 1996; Geske, Davis, & Hingle, 1997). One more example is the increased call for monitoring and evaluating how resources are actually utilized and distributed in education. Such a call may be derived from a concern over persistent inequities and disparities in public spending on education (World Bank, 1995) and from public demand for increased accountability in education. Analyses of resources utilization in education can contribute to more informed public discussion or debate on this and other important resource-related issues in education. The costs (or opportunity costs) of education refer to the resources utilized in the production of education; they are measured as the economic value of such inputs in their best alternative use. They consist not only of public spending on education personnel, facilities, supplies, and equipment, but also direct private costs of education (such as household spending on education fees, textbooks, uniforms, transportation, etc.), indirect private costs of education (such as students' forgone earnings), as well as private contributions in cash and in kind to education. Educational cost studies focus on resources utilized in education.