Economic Efficiency and the Distribution of Benefits from College Instruction

Abstract

Economic efficiency implies an equating, at the margin, of benefits and costs.In this paper we explore a concept of "efficiency" which is broader than the usual framework and which applies to commodities and services produced and distributed largely outside the private, profit maximizing sector.An assessment of the economic efficiency of producing such a commodity requires the determination of its outputs and the valuation or weighting of these outputs.'Our principal point is that these weights, in turn, depend on who receives the outputs; thus, distributional issues are at the heart of economic efficiency studies involving a wide range of activities undertaken in the governmental and private, nonprofit sectors.2One of these activities-the production and distribution of college instruction in economicsillustrates well the significance of this particular approach to the analysis of economic efficiency.We argue that in analyzing the economic efficiency of instruction, distributional issues-that is, who receives the benefits-should be considered explicitly; if not, they will necessarily be considered implicitly.The pervasive failure to include distributional issues in efficiency studies suggests an excessively narrow concept of efficiency.This is particularly inappropriate in evaluating instruction, since in education, as in most services, decisions regarding what to teach and how to teach have a strong influence on who receives the benefits.3

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