Economics is “the branch of social study that deals with production, distribution and consumption of commodities having exchange value and with the social phenomena arising from such activities.” The resources available for the production and distribution of commodities, compared to requirements are usually scarce so much so that, Cohen defines economics as the “study of the production and distribution of all scarce resources whether physical goods or intangible services – that individual desires”.
When resources are scarce, the individual takes wise decisions in making choices from among a variety of products and processes of their production, costs of production, processes of distribution, distribution of the available resources, etc. Thus, economics deals with human behaviour.
According to Robbins, “Economics is the science which studies human behaviour as a relationship between ends and scarce means which have alternative use”. As economics deals with the study of choices from among the alternatives, it is defined as the “science of choices”. Comprehending all these aspects of economics Samuel defines, “Economics is the study of how men and society choose, with or without the use of money, to employ scarce productive resources to produce various commodities over time and distribute them for consumption, now and in the future, among various people and groups in the society”.
Education is traditionally regarded as the process of developing culture, and of determining the “tone and texture of life”. It is the process of producing a value system, inculcating knowledge and developing skills and attitudes. In the words of Carter V Good, education is “the aggregate of all the processes by means of which a person develops abilities, attitudes and other forms of behaviour of positive value in the society in which he lives”. In recent years, education has been increasingly regarded as the process of developing human capital. Thus, both in the traditional and modern views, education is regarded as the process of production of knowledge, skills, attitudes (human capital) as well as the distribution of these in among people and groups. Both in the process of production and distribution, education requires resources and usually resources are scares.
Therefore, the planner takes wise decision in the matter of distribution and utilisation of the scarce resources. In other words, he attempts not only to reduce the cost of production and distribution, but also to attain the maximum productivity of the resources expended; and these form the subject matter of educational planning.Thus, although education and economics appear to be two independent discipline, in reality they are inter-related and inter-dependent.
In the words of Vaizey, the relationship between economics and education is reciprocal; and each contributes to the other as stated below:
Economics suggests the purpose, content and methods of education. For instance, when economic development and rapid growth of various sectors of economy,-say, agriculture, industry, trade etc. are the concern of a nation ,economics suggests that national development in general, productivity at all levels in particular, should be the major objectives of education; and its methods should be pragmatic and practical oriented. An economic analysis of the productive aspects of technology determines the scope of technology of education, and the content of its use. As stated earlier, economics is the “science of choices”; and as such, it helps to take decisions about the allocation of resources to education vis-a-vis the allocation to agriculture, industry, health, housing etc. It suggests sources of finance for education which are available, and to be tapped.
Economics makes an economic analysis of problems of education regarding priority, productivity and finance; and thus, assists educational planning. Economics analyses educational programmes in terms of costs, returns, investments and manpower planning. As against these contributions of economics, education provides the value system, knowledge, and skills for all economic endeavours geared to economic growth and development, for solving problems of economic development, regarding resources, production, consumption and distribution, productivity, employment, national growth, per capita income etc. Indeed, these contributions of economics to education and of education to economics are the subject matter of economics of education. In other words, economics of education is the area common to economics and education, and caused by their interaction.Economics of education analyses education usually in two respects – to study the economic values of education, and to study the economic aspects of an individual system of education. The former deals with the increase in productivity of the labour force due to pre service and in service education, as well as the returns of education, whereas the latter deals with the economic optimisation of an individual system of education. Thus economics and education are inter dependent an inter related to each other thereby to form a new subject called economics of education.