The Social Return of Public Education

Half Sigma does the math:

Here is a quick calculation based on the following assumptions:

• $10,000 per year per student for education
• 14 years of education (Headstart plus K-12)
• 4% discount rate

Thus the poor person graduates from high school with a $183,000 education investment.

Assuming he will work for 47 years after that, he needs to earn [i.e. pay in taxes - Φ] $8,700 per year in order to make up the money invested in his education.

Unfortunately, the social return to educational expenditure is not limited to the paltry tax revenue it generates. The return is also avoiding the negative externalities generated by: (1) under-supervised school-aged children; and (2) uneducated adults. Now, measuring the second of these becomes devilishly difficult given the confounding variables: The people who slog through 14 years of public schooling are almost certainly more intelligent than those who drop out, and would almost certainly do much better than our existing class of dropouts were public education withdrawn. But we can assume that it is non-trivial.

The first externality is even harder to grapple with: what are we to do with children from age 6 to 18, absent education? As many observers have pointed out, the public schools serve as de facto day-care for a larger and larger fraction of their inmates. Recognizing this, however, doesn't really prepare us to repeal child-labor laws.

This is not to say that the tradeoffs we currently make are optimum. Certainly, by high school, many more students should be re-routed into industrial or clerical tracks than we presently do. And in the final analysis, if we really want to escape this trap, we must have a smarter population.