Exam 9: Investments in Human Capital: Education and Training

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The costs of a college education fall into three categories.First,an investor incurs out-of-pocket expenses of attending college,such as tuition,textbook purchases,and expenditures on other supplies.Second,attending college imposes an opportunity cost from foregone earnings on the investor.Third,attending college usually imposes a psychic cost on the investor because learning is hard work.
The benefits of a college education include higher lifetime earnings over what can be earned in jobs that require only a high school diploma,higher lifetime job satisfaction,and greater appreciation of non-market activities and interests beyond the investment period.
It isn't appropriate to compare total dollar benefits to total dollar costs because the cost of investing in schooling is borne in the present,while the benefits of investing are enjoyed in the future.Other things being equal,a given dollar amount of benefit is worth less than the same dollar amount of cost because of the delay experienced in waiting to realize the benefits.Proper adjustment must be made in order to allow for this difference in timing of investment costs and investment benefits.