The limitations of economic analysis are evident when one considers the complexity of our society's needs and problems. Seven propositions which may be useful in planning and in financing higher education are: education is a form of human capital; the 3 major functions of higher education are discovering talent, instruction and research; there are few or no gains in the measured productivity of labor entering into higher education; earnings foregone by students are well over half of the real costs of the human capital formation by higher education; long-term projections of the demand for higher education are beset with uncertainty; if education is an investment in human capital, the central economic concept in planning and financing it should be the rate of return to investment; education changes the distribution of personal income. The implications of these propositions generate a number of problems pertaining both to resources for higher education allocated in accordance with the test of economic efficiency and to allocations that reduce the inequality in distribution of personal income. To achieve the organizational changes necessary for a more efficient allocation of resources, better economic incentives and better information for those who make allocative decisions are necessary. It is exceedingly difficult, however, to specify the nature of the incentives or define the particular types of information that would aid academic enterpreneurial and management endeavors. (JS)