Opportunity Costs How a College Education Increases

Opportunity Costs

How a college education increases one's human capital

It is a universal belief that a more educated workforce leads to an incredible human capital. Therefore, the thought of retaining higher educated graduates is important towards regions and cities maintaining competition among themselves. This eventually leads to technological and economic growth. While there has been a compilation of data from many regions and states in educational achievement, there also exist relentless research studies showing the impact universities and collage have (Frank, 2005).

A study by New York federal bank published in their Economic Geography journal in 2011 demonstrates that universities and colleges increase Human Capital in their regions. Utilizes educations Department data as from 1999 down to 2000 and also 2006 shows the magnitude of volume of college degrees attained in metropolitan regions. It also makes use of survey by American Community's data in estimating levels of human capital (Frank, 2005).

Because of unnoticeable positive relationship of human capital and college education in an area, policy makers have focused on the retention and generic expansion of graduates across regions. This is expected to generate significant successful human capital increase. However, the knowledge gained from development and academic research may have a great positive impact on the local economy resulting in increased demand for skilled labor. Additionally, the human capital levels present across regions will be affected by the degree type attained in the metropolitan region. For instance, if there are more science degrees then there will be science-oriented, human capital workforce (Frank, 2005).

How a nation's production possibilities curve ever shift inward

Evidently, this is a common phenomenon. Technological improvement would lead to an outward shift that would add an advantage to both kinds of goods. In addition, it precipitates a workforce increase that would lead to exploitation of more factor resources, efficiency, and an improvement in the end production of goods. Use of resources inefficiently or unemployed resources would result due to inward shift. Frontier production possibilities would be affected by following examples:

1) Important supply of labor: the U.S. population according to recent founding is declining at an alarming rate, which greatly results in challenges to the growth of their economy. Similarly, in the next 30 years, nations like Italy and Japan will experience major changes to their human capital since the structure of their labor population has a large number of retirees.

2) Productivity factor changes, either capital or labor: So many things may impact land, capital or labor productivity. War decimates labor and capital. Both are damaged by environmental factors, as experience in sub-Sahara Africa and in America during 1930s dust bowl which affected farm production in America significantly. Another perfect example is misled economic policies liked the one that happened in South America 1960s and also 1970s. During that time, the discussion of poor countries' economic development created two major camps. One camp believed that nations specializing greatly in industries that they have greater productivity can lead to their development, which is what the economy of Asia did. South American economies decided to use the import-substitution way eventually discouraging imports from outside and focusing on producing everything. This import-substitution policy made them operate and invest in places where they were producing unsatisfactorily; this led to the drastic reduction of their frontiers (Frank, 2005).

"The U.S. economy could achieve greater growth by devoting fewer resources to consumption and more to investment; it follows that such a shift would be desirable."

Lack of proper investment in real and human capital to cater for depreciation reduces the capacity of an economy. Real capital, like equipment and machinery, wears out as they are used and their productivity falls with time. The labor productivity falls alongside the real capital output. Acquisition of modern skills also influences the productivity and quality of labor. Therefore, an economy that does not invest heavily in technology and people will experience its PPF moving slowly inwards (Frank, 2005). Investment expenditure has also deep insight impact on economic growth in the end. Devoting a smaller or larger portion of gross domestic output to capital goods investment expenditures means fewer or more capital goods at the end are produced. The economy productive capabilities are greatly supported by capital goods. Any addition of capital investment enhances the ability of producing goods and eventual economic growth. A reduction in the amount of capital discourages production capacity (Frank, 2005).

Increasing the production of capital goods inevitably goes hand in hand with reduced production of most preferred consumer goods highly purchased in the household sector. This trend between investment and consumption is very important to the economic growth process at long-run. Through the devotion of less resource to consumption and more on investment, further economic growth is encouraged in the future. The economic growth will be negatively affected by devoting fewer resources to investment and more to consumption (Frank, 2005).