Demand for education, and its estimation

Abstract

Since education produces major externalities and has important merit want characteristics, the estimation of a demand schedule is extremely difficult. Demand estimation for higher education is made somewhat easier because of the great importance of the associated costs and the relevant private substitutes, i.e. private colleges and universities. Therefore higher education is a good candidate for the application of the individual (economic) preference approach, which is based on the assumption that individuals are aware of their need for education about as they are aware of their needs for products provided by the open market. The estimation of demand for primary and secondary education can rely only to a minor extent on the individual (economic) preference approach. The voter's behavior approach analysis is likely to be more directly applicable. Study of the behavior of voters and the behavior of legislators and members of school boards can shed light on the demand for education. Analytic insight can be gained also by the “voting with one's feet”, and the “calculus of consent” methods. Finally, benefit-cost analysis can be applied in situations where education gives an extremely weak demand signal. In education we often are less interested in overall benefit-cost estimates than in the benefit-cost positions in which different important interest groups find themselves with regard to education. Such analysis requires the identification of significant interest groups, bargaining strategies, and bargaining patterns, as well as of ways in which education decision makers respond to group pressures.