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By Ann White, Annies Attic

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Some parents, even those who can afford to pay for education, may not act in the best long-term interests of their children. Nor are children always rational and compliant. Finally, 34 j. b. delong, c. goldin, and l. f. 37 Education can also facilitate the economic advance of those from disadvantaged backgrounds. The credit market imperfections facing many families in financing educational investments, along with the possible broader social benefits of education, help justify substantial government subsidies for investment in human capital.

Details of the construction of the educational productivity indexes are given in appendix 2B. The indexes cover the civilian work force (aged sixteen or older) in each year. The reported educational productivity changes are based on chain-weighted prices. ) Changes from 1915 to 1940 are for Iowa; changes for the other periods cover the entire United States. The education groups used are 0–4, 5–6, 7–8, 9–11, 12, 13–15, and 16 or more years of schooling. The chain-weighted index covering years t to t' uses the average educational wage differentials for t and t'.

But risks have not vanished, as household saving very nearly did during the late 1990s. 59 Precise estimates of the gap between private and social returns to investment in physical capital are hard to make. 60 Thus, provided that effective policies can be designed, enacted, and implemented, government policies to boost saving and investment could produce social benefits that exceed their cost. Strategies for Boosting Investment in Physical Capital That it is desirable in principle to influence saving and investment does not mean that it is possible to do so effectively in practice.

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