Friday, November 23, 2007

Rate of Return of the Investment on Human Capital

>>>Did you ever noticed that our campus can be so beautiful ?
>>>Did you ever notice the positive externalities the environment of our campus provides ?
>>>Have you ever considered maybe without the externalities our grade won't be that great and even we won't be ready for the post-campus life ?
A very good friend of mine said how lucky I am being one of a very limited amount of people having the right to bear the HUGE and IMPACTFUL status as a student of University of Indonesia, the only university granted the name of the whole nation !!! (which is in economics, this can be considered as another positive externality ).
By receiving so much positive externalities, we get even higher social benefit than we actually pay back. We are community's investment. Therefore we should realize also that as a means of investment, we should give return to the community back. In long run, this return can take forms of more economy's output, more job creation, less inequality, more accummulation of wealth (which further leads to structural transformation). I'm questionning, is it possible to count the rate of return of such human capital investment ? and is it possible to produce an approach to count the multiplier effect of every increase in the investment on human capital to the increase in economy's growth or welfare ?
Maybe, this could be the answer to the pro-cons about the constitutional requirement that the government should allocate 20% of its expenditure to education each year..

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