Author Archives: philipcotterell

Do not pay, but get paid for education

The best investment a young person can make is in education. Investing now by going to school will pay off later by earning higher returns on a professional career. An interesting article, that touches upon this subject, appears in time magazine. A new program in Paris, stimulates disadvantaged children at three vocational high schools by rewarding them with payments (to be used for further educational purposes). These rewards will be given when students have high attendance records and perform well. Although this might be against an egalitarian principle, one might say that this is born from a leftist (or at least a Keynesian) principle. A free person in the market that comes from an disadvantaged environment, will not automatically maximise his own efficiency. A (government) stimulus is needed as an incentive. Moreover, it seems to work, which is always an pro in the country of economists:

“Similar motivation schemes have worked elsewhere in the world. In the U.S., for example, more than a dozen states have started rewarding students with cash for improved test scores and enrollment in advanced-placement courses. In Britain, the Education Maintenance Allowance (EMA), which focuses on helping children from lower-income families, awards students with monthly payments if they’ve met attendance and performance targets. Like its U.S. counterparts, the EMA initiative puts money directly into students’ pockets to spend as they wish. In the decade since it began, the program has reversed dropout rates by more than 2% annually.”

 Paying students for education can, interestingly enough, also come from a right-winged, free market ideal. In another French experiment, business school INSEAD sets up an investment fund for alumni that provides loans to students. The program is set up, because of increasing difficulties of student loan finance in the current turbulent times. The student here is seen as a commodity which has an expected return, that is above the market return. More interestingly, it adds an extra incentive by appealing to a sense of community, decreasing the investment’s risk:

 “One of the unique things about it is that students are funded by the community of alumni, and potentially the schools themselves. This makes them motivated to repay, because they know their repayments aren’t going to some faceless bank in New York.”

 Although the two examples are relatively different, it emphasises the fact that education has in fact much to do with economics. Education is an investment in “human capital”.

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