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Usher, Dan
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Queen's Economics Department Working Paper 870
Most people believe that education - especially elementary education - conveys a civic externality. Students are taught, not only to be productive but to be honest, upright, law abiding and loyal to their country. Education conveys benefits to society as a whole, over and above the benefit to the student in enhancing his future earning power. The civic externality is incorporated into an "anarchy" model. People can choose to be farmers or bandits, utilities in these occupations must be equal in equilibrium and education reduces the incidence of banditry by inculcating a distaste for a life of crime. The model serves to clarify the civic externality by removing many other features of the market for education. It shows how the civic externality can place a wedge between private and social returns to education, causing the usual estimates of the return to education to be much too low. It also shows that the presence or absence of a civic externality may depend on how education is provided, in particular, that universality may be critical. This consideration speaks for public as against private education, even with a voucher system, but the civic externality must be weighed against other externalities to education in any assessment of the merits of alternative educational arrangements.
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Working Paper

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