Education as Consumption and Investment

When the words consumption and investment comes in front of eyes, we just consider that the topic relevant to economic portion, but how this zone quiet effected on education requires discussion. 

This has contributed to the popular view that consumption and investment are mutually exclusive categories, and that in most cases there is no difficulty in deciding to which category and item belongs. But in the analysis of economic growth, expenditures that are measure by national income accountants as consumption nevertheless appears to influence growth in the same way as other items labeled investment. 

What is Consumption?

Consumption is the value of goods and services bought by people. Individual buying acts are aggregated over time and space. Consumption pattern differ from people to people in respect to income which they spent. 

What is Investment?

The action or process of investing money for profit or material on different opportunities prevailing in the market is called as investment. 

Now there is problem to understand that whether education is consumption or investment; since expenditures on education are made by households or by the government acting on behalf on house holds out of taxes collected from them. Formal education is clearly consumption,

  Formal Education     Consumption

On the job training is clearly investment because it is an expenditure incurred by business enterprises.

Thus, national income according, which is an out growth of macro economics, treats educational expenditures as final consumption, without making any allowance for the fact that the education acquired by the labor force depreciates over time and gradually become obsolete in much the same way as machines with which labor force is equipped.

                                               (Education as Investment & Consumption)

                                                                                Sequence Diagram


In the end, I would like to say that, it is useful to think of three fold categories rather than two fold. One is the education and next is consumption and investment.