This paper studies the role of education as a way of reducing private rent seeking
activities and increasing output. In many underdeveloped economies, for most
individuals, there is no private return to education. Nonetheless, according to this
paper, governments are better off by investing in public education. We view education
as a means to build personal character, thereby affecting macroeconomic long run
equilibrium by reducing the number of individuals who are engaged in private rentseeking
activities. We show that education is more efficient than ordinary law
enforcement because it has a long-run effect. The policy implication of this result is
that even when education does not increase human capital, compulsory schooling will
be beneficial in pulling underdeveloped economies out of poverty