Economics of education is still a young discipline. While substantial understanding has been achieved in many parts of the world, the subject has not solved its own methodological problems or made much effort to do so. Now it is back in fashion, and people are beginning to ask questions about the scope of its application, the relevance of its methods and the purposes it serves. Educational economists investigate the implications of resource allocation and distribution for relations between educational variables and between these and the external environment. They seek to understand processes of skill creation, qualifications and their application, in ways analogous to the work of educational historians, sociologists and psychologists. Operationally, the economics of education is concerned with education and economic growth, employment, and income distribution. A major sub-theme has been the finance and distribution of resources within and between educational sectors and the measurement of their effectiveness and efficiency. This paper is limited to the period before World War II. It develops the seminal work of the founding fathers of the discipline, before the significant developments of North American scholars such as Mincer, Schultz and Becker in the 50s and 60s.