ECONOMICS OF EDUCATION: What are the different types of efficiency and how do they relate to education?



5a i). Examine the concept of efficiency in education

We have already seen that economics is the study of how man uses the scarce resources at his disposal to meet a variety of needs/objectives. Due to this challenge of scarcity, resources have to be used well so as to ensure there is no wastage. This is efficiency. On the other hand, equity is a normative term concerned with justice and fairness in the distribution of resources. Balancing between efficiency and equity is a major challenge in economics.


The term “efficiency” is commonly used by economists when discussing the production model. When used this way, the term efficiency normally entails achieving maximum output from a specified set of input while utilizing a minimum quantity of inputs. Simply stated, efficiency is realizing maximum output at minimal cost.

In education, efficiency can be described as achieving the greatest amount of educational output from a given level of inputs.

Types of Efficiency

  • Technical efficiency: A situation in which as few inputs as possible are used to produce a given output. In education, technical efficiency refers to the quantitative relationship between inputs and outputs. The inputs, in this case, are tangible ones, e.g. classrooms, libraries, laboratories, furniture, equipment etc.  The key question here is whether these inputs are being maximally utilized or are they overutilized/underutilized in relation to the output. For example, if a classroom with a capacity of 40 students has got only 20, then there is a technical inefficacy. Similarly, if the same classroom has 80 students, there is still technical inefficiency.


Image result for overcrowding in classrooms
Overcrowding is a sign of technical inefficiency


  • Economic efficiency: This refers to the method of production that produces a given level of output at the lowest possible cost. The economically efficient method of production is that technically efficient method of production that has the lowest cost. It is possible to have a technically efficient method but which is not economically efficient
In  countries such as Kenya, Teacher salaries are a huge issue
  • Internal (micro) efficiency: This refers to the extent to which an education system meets its internally set objectives. It is usually measured by the flow of students through the system with a minimum of waste. For example, an education system with low drop-out rates, low repetition rates, and high completion rates is said to be internally efficient and vice versa.
An education system with high completion rates is a sign of internal efficiency.
  • External (macro) efficiency: this refers to the extent to which an education system meets societal goals/objectives. This is usually measured by the quality of learning which is determined by the inputs and outputs of the education system. For example, if an education system produces graduates with skills that are relevant to the needs of the labor market, then it is said to be externally efficient and vice-versa. External efficiency does not imply internal efficiency. An education system may be internally efficient but its graduates might not be well-rewarded in the labor market, thus failing the external efficiency test.
An education system that produces graduates with skills that are relevant to the needs of the labor market is said to be externally efficient

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