Is Education a Public Good or a Private Good?

Advocates for more generous support of students frequently bemoan what they perceive as a social shift from viewing higher education as a “public good” to viewing it as a “private good.” What they mean is that the public gets benefits from people going to college and should not be transferring responsibility for the costs of education to students themselves. This conversation would be more constructive if its terms were more clearly defined and its categories less starkly delineated.

The concept of public goods is central to economic analysis of the role of government in the allocation of resources. Public goods are defined by two characteristics:

1) Non-excludability: It is not possible to exclude non-payers from consuming the good.

2) Non-rivalry in consumption: Additional people consuming the good do not diminish the benefit to others.

National defense and mosquito control are standard examples of public goods. The military cannot exclude from protection individuals who fail to pay their taxes. If the neighborhood is sprayed for mosquitoes, everyone in the area will benefit, whether or not they have paid. Moreover, I am no less safe if you are also protected by our army and get no additional mosquito bites just because you are also free from the pests.

Not many goods are perfect public goods. Some have one characteristic or the other. It is difficult to impose tolls on city streets (the streets are for the most part non-excludable), but traffic congestion is obviously a problem (rivalry). On the other hand, it is easy to prevent people who do not pay from entering a half-empty concert hall (excludable) but their presence (assuming they are well-behaved) would not diminish the enjoyment of those who are listening (non-rival).

Higher education is not a pure public good. It is clearly possible to exclude people who do not pay. What people who call education a public good mean is that there are positive externalities—not all of the benefits accrue to the students. Society benefits when more people go to college. People with a college education earn more than others, but their higher earnings do not reflect the whole of their contribution. Others who work with them earn higher wages because of the added flexibility, innovation, and productivity of the labor force. People with a college education tend to be more active citizens, with their volunteering and other activities benefiting those around them. There are more new products and services for all of us to enjoy because of the contributions of college graduates.

So the benefits of higher education are shared by the participants and the rest of society. It follows that it is reasonable for the costs to be shared as well. It would be inefficient not to subsidize colleges and their students. People would under-invest in their own education if they had to pay the full cost, because they would not choose to foot the bill for the benefits shared by all member of the society.

This argument does not, however, mean that students should not be paying a significant share of the cost of their own education—and even borrowing funds to make this investment. The students don’t reap the full benefit—but they do enjoy a significant fraction of it. They are likely to be better off—both financially and otherwise—than their compatriots who do not go to college.

This is not an either/or question. The benefits of college are not all public and they are not all private. The debate should be over what fraction of the cost of postsecondary education students should bear and how large society’s subsidy to them should be. It should not be over whether education is a “public” or a “private” good.

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