Education, R&D, and social progress

Starting from the hypothesis that the objectives of policymakers should encompass not only economic performance but also the overall wellbeing of individuals, the paper presents a model to examine the effects of a multidimensional objective of policymakers with respect to the composition of educational expenditure. The results show that a positive relation between economic performance and social progress considerations occurs when policymakers have strong preferences for collective goals. With more selfish policymakers, who have an interest in privately profitable activities, lower levels of economic performance emerge if social progress considerations are introduced in the objective function. Furthermore, wellbeing considerations are particularly effective in fostering economic performance where human capital productivity is lower and/or higher budgets are devoted to education.