INTRODUCTION

Education, along with medical care, constitutes one of the most important components of social common capital and, as such, may require institutional arrangements substantially different from those for the standard economic activities that are generally pursued from the viewpoint of profit maximization and are subject to transactions on the market. Whereas medical care is provided for those who are not able to perform ordinary human functions because of impaired health or injuries, education is provided to help young people develop their human abilities, both innate and acquired, as fully as possible. Both activities play a crucial role in enabling every member of the society in question to maintain his or her human dignity and to enjoy basic human rights as fully as possible. If either medical care or education is subject to market transactions based merely on profit motives or falls under the bureaucratic control of state authorities, its effectiveness may be seriously impaired and the resulting distribution of real income may tend to become extremely unfair and unequal. Thus the economics of education and medical care may be better carefully analyzed within the theoretical framework of social common capital. In this chapter, we examine the role of education as social common capital within the analytical framework introduced in Chapter 2.

EDUCATION AS SOCIAL COMMON CAPITAL

We consider a society that consists of a finite number of individuals and two types of institutions: private firms that specialize in producing goods that are transacted on the market, on the one hand, and social institutions concerned with the provision of education as services of social common capital, on the other.