Engineer and software entrepreneur Louis Woodhill offers a simple answer in the latest Forbes to the question: Does an increased investment in education produce an attractive return? “No, it does not.”

Now, here is the bad news. While total real ($2010) government spending on education increased almost 13-fold from 1951 to 2009, the measured GDP return on physical capital actually declined slightly, from 47.7% to 44.1%. This could not have happened if we were getting an appreciable economic return on our huge “investment” in education. …

… Assuming that about 25% of our total population is in school at any one time, average real (2010 dollars) government spending per student rose from $1,763 in 1951 to $12,209 in 2009. This is an increase of about 7 times. Assuming an average of 13 years of education per student (some go to college, some drop out of high school), this means that during this 58-year time period, we increased our real “investment” in the human capital represented by each student from $22,913 to $158,717.

Meanwhile, we have also been investing more in physical capital. Real nonresidential produced assets per worker increased from $79,278 in 1951 to $206,717 in 2009. So, each worker in 2009 had $127,439 more in physical capital and $135,804 more in educational “capital” to work with than he did in 1951.

Unfortunately, it is clear from the numbers that GDP tracks only physical assets, and not the sum of physical assets and educational “assets”. Excluding the GDP produced by the housing stock, the ratio of GDP to nonresidential produced assets has been essentially constant over the 59 years 1951–2009 (it has oscillated with the business cycle around a midpoint of 48.2%).

So, it appears that our massive “investments” in education have produced no measurable economic return. Should we be surprised by this? No. Average scores on standardized tests have not risen, despite the fact that we are “investing” seven times as much in real terms in each student than we did six decades ago. So, even by the measures used by the educational establishment, it is clear that the higher spending has not created any additional human capital.

The nation and its people would be much better off today if most of the additional “investment” in education that we have made over the past six decades had been used to create more nonresidential produced assets. GDP, real wages, and our standard of living would all be considerably higher.

If we are going to continue our “investment in education,” doesn’t it make sense to pursue some new ideas?