The contributions of California higher education to the state's economic prosperity and to its social and cultural health are discussed. Direct economic impacts of higher education are reviewed, and the methodology and assumptions employed in economic impact studies are described. Studies by the major segments of California higher education employed the Caffrey-Isaacs methodology, using a cash-flow transactions matrix and expenditure multipliers. The analyses applied to the 1981-1982 year, with attention to the economic impact of the California State University, the University of California, the California community colleges, and California's independent colleges and universities. In analyzing higher education's impact on human capital development, the focus is national and California employment trends, trends in the award of degrees in the different sectors of higher education, and returns on government investment in human capital. The impact of higher education on individual personality and social life is also assessed. Focal areas include: unemployment rates for the civilian labor force by educational level for 1965, 1970, 1975, and 1980; and participation rates for community service programs in California community colleges, 1978-1979. Appended are descriptions of 12 studies of higher education's economic impact. (SW)