Mark Blaug

Where Are We Now in the Economics of Education

Abstract This essay offers a birds eye view of new directions in the economics of education. An increasing awareness of the socialization function of education, of the screening hypothesis, of the ‘incomplete’ employment contract and of labour market segmentation is leading, it is argued, to a picture of the economic value of schooling which is simply miles removed from the old-fashioned belief that education enhances cognitive knowledge and that employers pay educated people more because they know more. The new way of looking at the economic value of schooling is illustrated by the example of youth training and work experience programmes.

The Myth of the Old Poor Law and the Making of the New

No Matter which authority we consult on the English Poor Laws in the nineteenth century the same conclusion emerge: the Old Poor Law demoralized the working class, promotedd population growth, lowered wasges, reduced rents, destroyed yeomanry, and compounded the burden on retepayes; the poverty which it relieved; the problem of devising an efficeient public relief system was finally solved with the passaage of the“harsh but salutry†Poor Law Amendment Act of 1834. So Unanimous are both the indictment and the verdit of historians on this question that we may forego the pleasure of citing “chapter and verse.â€

The Formalist Revolution of the 1950s

Something happened to economics in the decade of the 1950s that is little appreciated by most economists and even by professional historians of economic thought. The subject went through an intellectual revolution as profound in its impact as the so-called Keynesian Revolution of pre-war years. I call it the Formalist Revolution after Ward (1972, pp. 40–41), who was the first to recognize the profound intellectual transformation of economics in the years after World War II.

On the Historiography of Economics

This title focuses on the importance of the history of economic thought as an intellectual discipline. It counters the arguments of some contemporary economists who describe it as studying the mistakes of the past. However, all the great economists – Smith, Ricardo, Marx, Marshall, Keynes and even Milton Friedman – have drawn on the history of economics to find an appropriate pedigree for their own theoretical innovations. This important volume contains high quality articles – written from different perspectives – demonstrating the importance of the history of economic thought.

The Poor Law Report Reexamined

In an earlier article, I pleaded for a reappraisal of the Old Poor Law. Despite what all the books say, the evidence that we have does not suggest that the English Poor Law as it operated before its amendment in 1834 reduced the efficiency of agricultural workers, promoted population growth, lowered wages, depressed rents, destroyed yeomanry, and compounded the burden on ratepayers. Beyond this purely negative argument, I tried to show that the Old Poor Law was essentially a device for dealing with the problems of structural unemployment and substandard wages in the lagging rural sector of a rapidly growing but still underdeveloped economy. It constituted, so to speak, “a welfare state in miniature,†combining elements of wage-escalation, family allowances, unemployment compensation, and public works, all of which were administered and financed on a local level. Far from having an inhibitory effect, it probably contributed to economic expansion. At any rate, from the economic point of view, things were much the same after 1834 as before. The Poor Laws Amendment Act of 1834 marked a revolution in British social administration, but it left the structure of relief policy substantially unchanged.

The Fundamental Theorems of Modern Welfare Economics, Historically Contemplated

Modern welfare economics is formally summed up in two so-called fundamental theorems. The fi rst fundamental theorem states that, subject to certain exceptions—such as externalities, public goods, economies of scale, and imperfect information—every competitive equilibrium is Paretooptimal. The second fundamental theorem states that every Pareto-optimal allocation of resources is an equilibrium for a perfectly competitive economy, provided a redistribution of initial endowments and property rights is permitted; alternatively expressed, every Pareto-optimal allocation of resources can be realized as the outcome of competitive equilibrium after a lump-sum transfer of claims on income. The thinking behind these theorems was laid down in the 1950s after the publication of the Arrow-Debreu (1954) proof of the existence of general equilibrium. Nevertheless, the labels “fi rst and second fundamental theorems,” or rather “fi rst and second optimality theorems,” seem to have been fi rst used by Kenneth Arrow (1963, 942–43). These labels are not found in the many books and articles on welfare economics that appeared in the 1950s and 1960s (Boulding 1957; Koopmans 1957; De V. Graaff 1957; Little 1957; Baumol 1965), and yet by 1970 or thereabouts, these labels had become canonical (Varian 1987, 510–17; Layard and Walters 1978, 26).

Is Competition Such a Good Thing? Static Efficiency versus Dynamic Efficiency

This paper addresses the rationale for antitrust legislation. It is a striking fact that the legitimacy of antitrust law has been taken for granted inthe United States ever since the Sherman Act of 1890 and, until the advent of the so-called Chicago School, it was even taken for granted by conservativeAmerican economists. Europeans, on the other hand, have always been lukewarm about legal action against trusts and cartels and this attitude is found rightacross the political spectrum in most European countries. Nevertheless, in both the U.S.A. and Europe, the ultimate justification for antitrust law derives from economic doctrine regarding the beneficial effects of competition. But what exactly are these beneficial effects and how secure is the contention of economists that competition is always superior to monopoly? Surprisinglyenough, competition, that central concept of economics, is widely misunderstood by many economists, both as a market phenomenon and as an organizingprinciple of economic reasoning.

The Trade-Off between Rigor and Relevance: Sraffian Economics as a Case in Point

Piero Sraffa published Production of Commodities by Means of Commodities in 1960, and this enigmatic little book invited explanations of its meaning, particularly as its subtitle, Prelude to a Critique of Economic Theory, held out hopes of an ambitious research program. In the almost half-century since its publication, it has attracted a small following, particularly in Europe, but it has failed to make much of an impact on American academic economics. This is odd because Sraffian economics in many ways satisfies the relentless concern of mainstream American economics with mathematical rigor. As a species of general equilibrium theory, Sraffian economics is indeed rigoros but it appears to be irrelevant to the sort of issues that concern modern economists.

The distributional effects of higher education subsidies

Abstract This article provides a review of the inconclusive debate between Hansen-Weisbrod and Pechman on the distributional effects of subsidies to public higher education in California, with particular reference to its significance for other American states and for European countries. The cross-sectional effects are distinguished from the longitudinal, lifetime effects, and an effort is made to state the necessary and sufficient conditions to infer lifetime redistributive effects from observations of current data. Some general conclusions are drawn for the case of the United Kingdom.

The rate of return on investment in education in Thailand

This paper summarizes the findings of a study carried out in 1970 by a small team of Thai and foreign research workers under the auspices of the National Education Council of Thailand. The study consisted essentially of (1) a statistical analysis of the structure of personal earnings in Greater Bangkok as revealed by a household survey specially conducted for the purpose; (2) an analysis of the costs of education in the entire country from data gathered by a mailed questionnaire to public and private schools; and (3) a calculation of private and social rates of return on educational investment in Thailand, making use oj (1) and (2).1 An earlier paper reported on the statistical analysis of earnings (Blaug 1974). The present paper concentrates on the rate‐of‐return calculations, with a passing glance at the cost figures.