You may have noted that, with the launch of the new ERC web site, there is also a new title on the browser page, “ERC: Supporting Education.”
Just as individuals tend to take a more philosophical view on our past, present and future as we approach significant birthdays, so are we undertaking this exercise as we approach the ERC’s 70th anniversary next year. In the midst of economic crisis, it becomes ever clearer that understanding economics from both financial and civic perspectives is growing more crucial for us to be able to respond appropriately at an individual level. And for individuals to respond constructively to crisis and a growing awareness of inequity, economic education needs to be more inclusive and accessible; hence, a new focus for the ERC.
And with a new focus comes new questions.
Can we realistically expect that wider access to education will help people to make more informed decisions? Isn’t the necessary information already widely accessible? What returns can be expected upon completion of a demanding economics education?
When considering return on investment, it is useful to consider the different kinds of non-financial capital which are being invested, and from which we expect a return.
Human capital is our labour, and as regards non-financial capital, the least difficult to measure. It is usually measured in units of time.
The Office for National Statistics (ONS) has undertaken considerable work in defining and measuring social capital within the UK. Social capital, according to the ONS, can be broken down into three broad types of relationships: bridging, bonding and linking. Bridging social capital refers to distant, cross-cutting relationships, often used to ‘get ahead’ in life; bonding refers to those relationships which sustain us in times of crisis, those that we turn to to ‘get by’ in life. Linking social capital refers to structured, hierarchical relationships within formal institutions, for example an unemployed person interacting with social services in the Benefits Agency.
Individual capital is understood to be an individual's 'inner wealth'; it extends beyond knowledge to embrace experience, wisdom and confidence.
Knowledge capital includes the frameworks, methodologies and analysis that form the core curriculum of every quality education. Knowledge is above and beyond information and data. Whereas information and data are readily available throughout the Internet and other media channels; knowledge is not. Having said that I count amongst my friends many who have achieved a wealth of knowledge capital without having completed a university degree.
The relevant question is, what can we expect for the returns on social and individual capital, from the relatively large sums of financial and human capital investments disbursed towards an education?
From a social capital perspective, an education offers opportunities to cultivate all three classes of social capital, beyond our own comfortable social circles. An extended community of people to turn to to ‘get by’ and ‘get ahead’ in life is what opens doors of opportunity. For sure, an education isn’t a ‘lucky break.’ It presents more doors for us to open, but it remains our own responsibility to open the doors and to step across the threshold, to grasp the unknown possibilities on the other side.
This is where individual capital enters the picture. Individual capital helps us to step beyond what we’re used to, to be undeterred by barriers and doors; individual capital is to a person what multi-factor productivity is to an economy. Having redefined what is considered to be difficult and what is considered to be too great a risk, we can take on greater challenges with the understanding that the outcome is one that will not bankrupt our bank accounts; if our reserves have sufficient funds in financial, social, civic and human capital, then indeed, we can afford to invest sums of individual capital to step out of our comfort zones and aspire to become accustomed to something better.
A conversation with a prospect considering embarking on the long, arduous journey of an MBA degree offered another perspective on the value of an academic education. “In this market,” Gary acknowledged, “I need every competitive edge I can get... Kristina, I don’t need to run faster than the bear, I just need to run faster than you!” Perhaps I should add another class of Darwinian capital to my reflections on education and capital returns.