The wonderful thing about economics is that it recognizes truths about the world that laypeople cannot intuitively grasp, based on simple statements about human action. Consider two concepts: opportunity costs and marginal decision-making based on marginal benefits and costs.
If you really understand these two concepts, then it must seem normal to you that there is such a thing as optimal environmental pollution. Just writing that line causes me some discomfort, as I know that a significant number of readers will immediately object. How can there be such a thing as optimal pollution? After all, pollution is bad. And we do not want bad things. Only a bad person can claim that there is optimal pollution—an economist.
Yet this claim is based on the very simple observation that every action has an opportunity cost. A rational decision therefore takes marginal changes into account. The whole concept is easier to understand with a less controversial example. Consider your household. Even in it, there is such a thing as an optimal level of mess. Even mess is bad. Nobody wants a mess. But it somehow arises in our households – especially if human cubs are living there too. And so we all have some of that “optimal” mess in our homes.
Having a mess-free home means constantly devoting all your time to tidying things up, dusting, and vacuuming. Maintaining complete order would require a high opportunity cost. Spending them would not justify the utility of the additional order. An economist would say that you have a level of clutter in your home whose marginal cost of cleaning it up is greater than the pleasure of removing it. Thus, you only clean up to the point where MC < MU (marginal cost < marginal utility).
Each person has a slightly different level of optimal mess. And that, moreover, evolves over time as costs and benefits change. For example, when young children start living in the household, the optimal level of household mess tends to shift significantly higher. The production of mess will increase, and at the same time, the opportunity cost of cleaning up the mess will rise. Households with children are simply messier.
This text is not meant to be about mess or pollution, but I had to prepare the mental ground. I am going to write about a similarly emotive subject – investing in education. Specifically, about investing in the form of the time children spend in schools.
And just as with pollution, there is an “optimum” also in this case – an optimal number of years of schooling beyond which it is bad for kids to go to school. The opportunity costs do not justify the additional benefits. I hope that after the short lesson from the introduction, there is not a single reader who will now close this text on the assumption that its author must be a bad person. An economist.
Although education is good, it does not mean that we always want as much of the good as possible. In fact, we only want as much of the good as long as the marginal benefits of it are greater than the marginal costs of the last “piece of good“. MU > MC.
The number of years children spend in schools has been increasing worldwide for a century and a half. In 1900, the average European stayed in school for about 2 years. In the middle of the 20th century, it was 5.3 years (8.3 years in Czechoslovakia) and currently, it is about 12 years. In developed countries like England, Germany and also in Slovakia it is around 13 years. In South Korea, for example, it has been almost 14 years. However, this is an average. In Slovakia, we currently have 40% of young people who have been in school for 18 years.
And now the bad economist’s question: isn’t that too much? Aren’t we past the point where the marginal costs of additional years of schooling have surpassed the marginal benefits of the knowledge gained?
Perhaps there is no one-size-fits-all answer. But do we really need nearly half of people to go to school for 18 years? They are entering the adult world and beginning to create value as 23-24-year-olds. Isn’t that a bit late? Asks the man who went to school for 21 years and also completed his doctoral studies.
It seems as if the current system is geared towards maximizing the number of years we can keep children and young people in the classroom. Would it not be worth experimenting with ways to minimize the time needed to provide students with the necessary education?
Not only do the costs of one year of education reach €3,000 to €5,000 from public funds, but we are also facing a demographic crisis and an aging population. Already now, there is a shortage of people in the labor market, the burden on the Social Insurance Agency is increasing, and young people continue to postpone starting a family and having their first child. Do the marginal benefits of the last year of schooling really exceed the marginal costs?