Agree heartily on point 3. In fact, I’d love to see Economics withdrawn from commerce faculties altogether, but I assume that the $ from the 1st year courses will ever prevent that.

Setting up the framework for the kind of cost-benefit analysis you mention would be a fascinating research project… some broad-minded PhD student should take that on one day.

@Tim: 1. Yes, it’s true that education correlates with thinking like an economist. That’s about the only positive externality argument I can reasonably buy, in fact. I wonder about the magnitude though. How much education spending would be needed to move the median voter sufficiently to generate a noticeable change in policy? Would it pass cost-benefit? I’m doubtful.
2. Yes, where the positive externality comes from education –> voting rather than woolly (shonky) “markets underappreciate social workers” arguments. But again, passes cost-benefit?
3. Principles-level micro should be in every university graduate’s portfolio. But so too should be intro philosophy, bit of history, some stats, intro pols. Unfortunately, our new BCom Core makes sure that students are almost completely unable to take anything outside of the commerce schedule — here’s hoping our students flip over to Arts or Sciences degrees instead.

Well, “no”…

Firstly, “Market wages fairly approximate the marginal value of another graduate in X”. The marginal social value, not the marginal private value, of education is what this whole post is about. That is, positive externalities from education. For example, if education in discipline X makes individuals more likely to vote for governments who implement better policies, then there is a social value to discipline X education that is not captured in the market wage of the graduate.

Secondly, “the appropriate solution ought to be a subsidy to the wage rather than a subsidy to the education investment”. Could be, but equally the positive externalities we’re talking about here could arise from the education itself, not from the conduct of a particular productive activity usually undertaken by graduates with that education. The democracy example above is of the former type. Spillover benefits from R+D activities are of the latter type, and yes, could be internalised either by a subsidy to the education or by a subsidy to the job.

By the way, nice post – I’ve always had much the same thoughts about educational subsidies. The million-dollar question is whether an economics education should be subsidised… or taxed (we’ve all heard of the studies showing that an econ education encourages conformity of the graduate to the self-interested rational actor stereotype… surely we want to discourage that? On the other hand, the economist authors of this blog are providing a public good at their own expense, and whether or not they’re doing it for altruistic reasons is irrelevant…. dispute unresolved).

I’m not sure why you think the wage is the appropriate price to subsidise, though. Schooling is not necessarily vocational so if the benefits accrue through education, rather than being realised through labour, then surely subsidising the education itself is preferable.