Abstract:

The essence of development lies with human-capital accumulation, in particular education. This is because, as evidenced by the East Asian experience, education leads and promotes sustainable economic and social development, and is essentially one of the few factors which development should really care about. Poverty, in the long term, is to be eradicated through education and economic development. The paper posits a possible Say's Law for education, whereby the creation of a critical pool of better educated skilled workers generates its own demand by attracting investments in the services and manufacturing sectors of the economy that uses this pool. In an age of global value and production chains, and global scale of direct investment and movements of financial capital, this effect of demand self-generation of the supply of educated workers can be especially pronounced. Countries that prioritize education in their national economic and social development plans are especially likely to benefit from this Say's Law effect of investing in education. The paper contrasts this view of the role of investment in education with the findings from some recent studies that highlight mismatched supply of and demand for graduates of tertiary education in East Asia, and points out that while in the short run such mismatches may well be present, in the long run the Say's Law effect is likely to prevail.