A principled approach to educational policy

Although government programs are devoted increasingly to human rather than physical capital, the economic study of education policy is still in a stage of adolescence. This paper suggests that much can be learned by applying a simple framework based upon public finance principles such as efficiency and equal justice or horizontal equity. Among the implications presented here are that almost all educational spending, outside of out-of-pocket educational expenses, is effectively ''expensed'' for tax purposes; the values of government subsidies are not consistently measured; and most new proposals add to current law complexity and fail to ask such basic questions as where additional education spending is likely to produce the highest social rate of return.