Reduced or stabilized costs of education can only be attained by positive changes in productivity as defined by the ratio of outputs to inputs. Educational units or districts could do research on productivity improvement at low costs if they combined for such research and development (R and D) activities. The area of productivity research that holds the greatest potential for cost improvement is in the labor component of local school budgets. In general, when inputs are transferred from labor-intensive to capital-intensive, productivity increases. Large productivity gains and improved costs are offered by capital-intensive learning arrangements that emphasize (1) instructional differentiation, (2) complete integration of educational technology in a systems approach, (3) individualization of student learning (to harness student time and energy more fully), and (4) specialization of labor functions into professional, paraprofessional, and student assistant functions. The area where the greatest productivity gains in real resources (and in educational costs) can occur is in the development of pilot models of learning-theory-designed man-machine-systems of individualized instruction that integrate human and nonhuman media. In addition to monetary gains, R and D on productivity improvement can also lead to nonmonetary payoffs such as improved community relations, professionalization of educators, and student involvement. (Author/JM)