Waiting for Godot: Cost-Effectiveness Analysis in Education

For more than thirty years I have been applying cost-effectiveness and costbenefit analysis to education. When I began this work in about 1970, there were almost no cost-effectiveness studies reported in the literature, and the term was not found in education at all. The term cost-effectiveness is now commonly used in justifying specific educational interventions. It has also become standard parlance among educational policymakers and decision makers. Ostensible concerns for cost-effectiveness in education are not surprising. The educational sector of the United States is second in size only to the health care sector in terms of its drain on national resources. It is considerably larger than the military sector. When one includes formal education and the various forms of training, it has been estimated that about 10 percent of the gross domestic product—about three-quarters of a trillion dollars in 1998—is allocated to education, encompassing formal education and various forms of training (Merrill-Lynch, 1999). These are massive sums, and they do not include the considerable opportunity costs of lost output for society resulting from student participation in education and training rather than the workplace. At the same time, there have been persistent concerns about the efficiency of educational spending. Hanushek (1986, 1997) has used results from educational production functions to argue that elementary and secondary schools allocate their resources in a highly inefficient way. Although his interpretations have been challenged by Krueger (2000), no one has argued that educational spending is highly efficient. Indeed, at least one of the reasons for the movement toward charter schools and vouchers is the