Consumer Behavior: The Case of Higher Education
Economists distinguish between consumption goods and investment goods. A lay definition of a consumption good is a good that is "used up" when it has been consumed -- the hamburger we buy and eat at McDonald's; the gas we put in our car. When it's gone, it's gone.
In contrast, an investment good is a good that we consume and derive "utility" from on multiple occasions over time; i.e., our home, our automobiles, even the latest laptop or iPhone -- we purchase the good today but it has a useful life of a few or even many years.
Education, and specifically higher education, has characteristics of being a consumption good and an investment good. When I decide to attend the local university, I am purchasing an investment good -- I am spending a lot of money. The education I receive over time will pay dividends and provide financial benefits to me for many years into the future.
At the same time, while we are purchasing higher education, there are consumption "benefits" that accrue to us -- the joy of an outstanding lecture, the thrill of watching our basketball team beat our archrival, a night of partying after a mid- term exam, the individual we meet who later becomes our spouse, providing us years and years of happiness.
Education is not the filling of a pail, but the lighting of a fire. William Butler Yeats
33
Economic literature on human capital also makes a strong case that the consumption of higher education by one individual increases the utility of others in society.
If as a result of my obtaining a college degree I earn more income throughout my lifetime, I will pay more in state, local and federal income taxes that can be used to provide health care, shelter, and parks to a broader population, hence increasing the utility of those consumers.
If as a result of my acquisition of a college degree I follow a healthy lifestyle, I am, in a sense, reducing health insurance costs, not just for me, but for society.
If I gain a skill set from my higher education that ensures me a higher probability of being employed and thus have less need for public assistance, society in general is better off.
Higher education is a consumption good with benefits, not only to the consumer but society as a whole and, perhaps more importantly for the individual consumer, it's an investment with a great rate of return.
Consumer Behavior: The Case of Higher Education
Economists distinguish between consumption goods and investment goods. A lay definition of a consumption good is a good that is "used up" when it has been consumed -- the hamburger we buy and eat at McDonald's; the gas we put in our car. When it's gone, it's gone.
In contrast, an investment good is a good that we consume and derive "utility" from on multiple occasions over time; i.e., our home, our automobiles, even the latest laptop or iPhone -- we purchase the good today but it has a useful life of a few or even many years.
Education, and specifically higher education, has characteristics of being a consumption good and an investment good. When I decide to attend the local university, I am purchasing an investment good -- I am spending a lot of money. The education I receive over time will pay dividends and provide financial benefits to me for many years into the future.
At the same time, while we are purchasing higher education, there are consumption "benefits" that accrue to us -- the joy of an outstanding lecture, the thrill of watching our basketball team beat our archrival, a night of partying after a mid- term exam, the individual we meet who later becomes our spouse, providing us years and years of happiness.
Education is not the filling of a pail, but the lighting of a fire. William Butler Yeats
33
Economic literature on human capital also makes a strong case that the consumption of higher education by one individual increases the utility of others in society.
If as a result of my obtaining a college degree I earn more income throughout my lifetime, I will pay more in state, local and federal income taxes that can be used to provide health care, shelter, and parks to a broader population, hence increasing the utility of those consumers.
If as a result of my acquisition of a college degree I follow a healthy lifestyle, I am, in a sense, reducing health insurance costs, not just for me, but for society.
If I gain a skill set from my higher education that ensures me a higher probability of being employed and thus have less need for public assistance, society in general is better off.
Higher education is a consumption good with benefits, not only to the consumer but society as a whole and, perhaps more importantly for the individual consumer, it's an investment with a great rate of return.
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