This article presents a broad overview of human capital theory and presents highlights of the most recent evidence on the private and social returns to education. A distinction is made between the narrow social returns, as traditionally estimated in the economics of education literature, and the wide social returns that include externalities. The distributive implications of particular education finance policies are discussed. It is concluded that the education finance policies most conducive to social welfare are those that give priority to investment in the lower levels of education, including preschool, and the acquisition of general, rather than occupation-specific, skills. (Contains 6 figures and 16 tables.)