Fritz Machlup, Die Hochschulausbildung im volkswirtschaftlichen Kalkül (1965)

Machlup’s Kiel lecture makes a deliberately provocative claim: higher education may be treated within economic calculation without degrading its cultural meaning. After the ceremonial opening, he turns the possible scandal of his title into the argument itself. The economist, he insists, is not pricing the university as a commodity; he is making explicit the comparisons already implicit in public budgets and private choices.

"Meine erste Aufgabe ist es, zu zeigen, daß solche Vorwürfe gegen den rational kalkulierenden Volkswirt ungerecht sind."

English translation: "My first task is to show that such reproaches against the rationally calculating economist are unjust."

The first conceptual move is therefore anti-reductionist: economic calculation is not a denial of culture but a theory of choice under scarcity. If legislatures allocate money to security, hospitals, theaters, museums, and universities, they have already performed comparative valuation. Rationality enters at the margin: the last million spent on each public purpose should yield roughly equal social benefit.

"Ob die mit einer Million bezahlten Leistungen kulturelle oder materielle Werte darstellen, ist vom Gesichtspunkt der Rationalität gleichgültig."

English translation: "Whether the services paid for with a million represent cultural or material values is, from the standpoint of rationality, immaterial."

This leads to Machlup’s main thesis: the value of higher education must be assessed as a mixture of consumption, investment, and possible waste, but the investment component is so productive that it dominates the calculation. The purpose of economics is to render implicit judgments explicit.

"Diesen Kalkül bewußt und gründlich durchzuführen, ist eine wichtige Aufgabe."

English translation: "To carry out this calculation consciously and thoroughly is an important task."

The lecture then distinguishes the university’s functions and payers. Its central activities are research, teaching, and learning; the state or foundation largely finances the first two, while students bear the hidden cost of learning through foregone earnings.

"Die Leistungen der Hochschule bestehen im wesentlichen aus drei Tätigkeiten: Forschen, Lehren und Lernen."

English translation: "The services of the university consist essentially of three activities: research, teaching, and learning."

Machlup’s private calculus of study is recognizably a human-capital argument. The student weighs fees, books, travel, and lost wages against intellectual enjoyments and future income. Drawing on American studies, especially Becker, he reports private rates of return of roughly 10–12 percent after controls for background and ability. Yet education capital is unlike ordinary capital: it is embodied, illiquid, and slow to amortize.

"Dagegen ist das Bildungskapital unverkäuflich, und seine Amortisation ist recht langsam."

English translation: "Educational capital, by contrast, is unsaleable, and its amortization is quite slow."

This point has curricular consequences. Because the payoff is long delayed and occupational demand changes, narrow specialization is risky; universities should emphasize foundations rather than merely current applications. Machlup also notes that if all potential students knew the full material and immaterial benefits and could finance study, private returns would fall. Their persistence suggests credit constraints, admission barriers, or undervaluation of nonpecuniary gains.

The second half shifts from private profitability to social productivity. Higher education benefits not only students but families, employers, colleagues, neighbors, future children, the nation, and even the world. These external benefits are difficult or impossible to measure, but they are central to the public case for universities.

"Daher sind die Sozialkosten und die Sozialerträge der Hochschulausbildung natürlich wesentlich größer als die privaten Kosten und Erträge."

English translation: "Hence the social costs and social returns of university education are of course substantially greater than the private costs and returns."

Machlup’s boldest estimate attributes economic growth from scientific and technical progress to higher education, while acknowledging methodological objections and the risk of overstatement. On this assumption, American statistics suggest a striking result:

"das Hochschulbildungskapital verzinst sich vom Standpunkt der Volkswirtschaft aus betrachtet mit etwa 24 Prozent pro Jahr."

English translation: "University educational capital yields, viewed from the standpoint of the national economy, a return of about 24 percent per year."

Even if one divides the productivity gain between real capital and educational capital, the university remains a highly productive social investment. Machlup strengthens the case by adding what the numbers miss: welfare from new goods, and the political-cultural contribution of humanistic, legal, and social-scientific learning to a stable constitutional order.

"die letzte für den Hochschulbetrieb aufgewendete Million scheint zum Nutzen der Gesamtwirtschaft mehr als andere Aufwendungen beizutragen."

English translation: "The last million spent on university operations appears to contribute more to the benefit of the overall economy than other expenditures."

The work’s relevance lies in its early, compact formulation of the economics of knowledge and higher education: it joins human-capital theory, public finance, externalities, and the limits of measurement. Its conclusion is not that every cultural value can be exactly priced, but that choices about universities already contain relative valuations. Machlup’s achievement is to give those valuations disciplined form.

"Dieser oft unartikulierten Wertung haben wir nun eine rationale Form gegeben"

English translation: "To this often inarticulate valuation we have now given a rational form."