This manuscript sets out to identify the most important developments in economic analysis which have a bearing on the planning of higher education, in an attempt to introduce a greater degree of rationality and accountibility into the system of educational planning. The paper begins with a discussion of the development of higher education's rather than on the internal production of cognitive or other changes. The discussion proceeds from an iontroduction to the human capital model and the criteria for educational investment, where the linkage between education and increased earnings is subject to modification, to the macro-educational role of the public sector. After treating what the appropriate public role is in higher educational subsidization, the author examines the support of subsidization on the basis of social benefits. The incentive-choice theory is presented as a possible alternative upon which to base educational planning efforts. It is seen to have both a diagnistic and prespective aspect. The paper concludes with the presentation of research and training directions dictated by acceptance of the incentive model.