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September 05, 2007
Education Investment
Damn, the change in the meaning of the word "investment" has reached even the Telegraph now:
In 2006, £49.4 billion was invested in education, compared with £27 billion in 1996.
It's been a deliberate attempt to obfuscate since the 80s. Everyone is in favour of "investment" because we understand that if you invest now you get better returns in the future. But the word was recast to mean that any government spending was "investment". Thus an increase in government spending could be sold as an increase in investment.
As is made clear here, 75% of this spending is in fact on salaries: that isn't investment, that's current spending. As is also made clear here we've not received a return on that "investment".
September 5, 2007 in Your Tax Money at Work | Permalink
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Comments
This kind of investment is about as sensible as investing in any of the interesting business proposals I get from Nigerian businessmen on a weekly basis.
Posted by: Zorro | Sep 5, 2007 1:21:21 PM
If I pay to do a course at Birkbeck college of £2,500, you would argue that it was mainly consumption, not investment, as most of the cost was lecturers salaries? I don't think that's how most people understand the term.
Posted by: Matthew | Sep 5, 2007 3:49:47 PM
Oh come on Matthew, an old man and his dog could identify the replacement of the word 'spending' with 'investment' in politics. Here's a challenge for someone, how many times did Gordo use the word 'spending' versus 'investment' in this year's budget announcement in parliament?
Posted by: Andrew Paterson | Sep 5, 2007 8:18:09 PM
errr am i missing something? its pretty universally accepted amongst economists that education spending can be usefully thought of as investment in human capital. its a factor of production that can be accumulated and utilised in production of goods and services. similarly it depreciates over time like physical capital and has an opportunity cost and a calculatable rate of return. countries with greater stocks of human capital, measured by literacy or school enrollment or the like tend to have higher national income and higher growth, not to mention all the positive social externalities associated with an educated populace.
its largely irrelevant that the majority of this is spent on teachers salaries, or rather that simply reflects the relative costs of labour in our economy. the point is that it represents an increased investment £ per student, representing the £ per capita investment in human capital. irrespective of whether one agrees that this is desirable, to dismiss it as consumption spending seems a little bizarre.
Tim add: I'll agree that human capital is indeed capital. I'm not all that sure about the connection between gowth in it and the amount spent on hte education system though.
Posted by: jimbob | Sep 5, 2007 9:52:32 PM
Answering my own little quiz, the word 'invest' or 'investment' was used 45 times in the 2007 Budget speech. The word 'spend' was used... zero times.
Anybody dare to venture to say the budget didn't involve any actual spending of taxpayers money?
Posted by: Andrew Paterson | Sep 5, 2007 11:37:00 PM
Looking back at the 1996 Budget Speech, the word 'invest' was used once and 'investing' not at all.
Posted by: Andrew Paterson | Sep 5, 2007 11:41:55 PM
Andrew, you ignore the point - would my spending £10k on my education be 'investment' or would you only allow the bit that didn't fund the lecturers salaries? Salaries account for 80% of most spending - is that proportion never investment? Spending doesn't mean it's not investment, and vice versa.
Posted by: Matthew | Sep 6, 2007 8:26:41 AM
I won't argue that point Matthew, what I will argue is that it's absurd that pretty much all government spending is now framed as 'investment'. The word 'spend' is out of fashion, even where it's far more accurate. I don't really see how one can invest in defence for example.
Posted by: Andrew Paterson | Sep 6, 2007 8:55:45 AM
"I won't argue that point Matthew,"
OK, but I will.
If I am a manufacturer of a type of machinery, the cost of production a machine is current spending, not investment.
If I am a purchaser of that same machine, it is very very likely that that will treated as a capital investment.
Investment is - almost always - ONE OFF expenditure that helps to reduce your own costs, or increase your revenue, ON AN ONGOING BASIS. Salaries do not fall into that bucket.
By contrast, you pay for a course because you expect that that one off cost will increase your earnings potential on an on-going basis.
Simple.
Posted by: Cleanthes | Sep 6, 2007 1:41:01 PM
