Determinants of Social Demand - Economies of Scale

The universe of knowledge is highly diverse. There are certain branches of knowledge whose value to human culture and civilisation is not visible on surface. They are not transparent but latent (i.e. not direct). Philosophy, higher mathematics, pure physics, literature, history etc. are illustrations of disciplines whose commercial values are not immediate and clear. Private enterprise will not be  enthusiastic and  volunteering to provide patronage to these disciplines. Even the number of persons who would aspire to pursue these disciplines with a strong sense of love and commitment are few.

In such situations, the state, which is a repository of collective wisdom and long term interests, has to act as an umbrella for such forms of knowledge, which may be considered as ‘uneconomical’ by the market. It also needs to be noted that private initiative, entrepreneurship, leadership or voluntary effort will not be uniformly distributed in all regions of a  country. This observation is strengthened when one looks at the field of higher education. The incidence of ‘capitation fee’ based ‘self financing’ professional colleges is confined to a few states in the country. Even in these states there are districts without a single professional college. Professional educational institutions get attention as it is profitable to open and run them.

This is not true of general graduate education. In such situations creation, promotion and distribution of knowledge becomes imbalanced and skewed if it is left only to the market forces of demand and supply. Even though there may be limited demand for some forms of generally believed ‘obscure’ knowledge, it would not be sufficient to meet the operational costs. Intervention by the state which can make use of economies of scale is desired in such cases. Economies of scale is thus an important factor determining public investments in education, especially higher education.