Education Flashcards
What are the positive externalities arising from education?
Citizenship, productivity and redistribution
What are the consequences of a high productivity?
- Spillovers –> one person’s increased productivity could increase someone else’s too, raising wages and well-being
- Taxes –> if a person’s higher productivity reflects in higher pay, then governments can benefit from higher tax revenues
What are the consequences of enhanced citizenship?
- More informed citizens and active voters –> improve the quality of the democratic process
- Less crime –> improves safety and lowers public costs of policing
- Enable immigrants to establish themselves
Positive externalities on education are compelling arguments for what type of public funding?
Public intervention in basic education, but less rationale for secondary & higher education
What would happen in a private-education only world?
Parents wouldn’t be able to buy their kids education and would be unlikely to succeed in getting bank loans because there is no collateral. This causes the EDUCATIONAL CREDIT MARKET FAILURE
What is the educational credit market failure?
When the credit market has failed to make a loan that would raise total social surplus by financing public education
What is the failure to maximize family unit?
When, even if families would be able to borrow funds to finance their kids’ education, families could still choose not to make the proper sacrifice to finance a good level of education to their kids
How is redistribution linked to public education funding?
Private system would limit income mobility for lower-class kids
What are the two mechanisms used by the government to interfere in education?
- Price mechanism –> offer discounts on educational costs on private education
- Quantity mechanism –> mandate that individuals obtain a certain level of education
What is the price mechanism used by the government to interfere in education?
offer discounts on educational costs on private education
What is the quantity mechanism used by the government to interfere in education?
mandate that individuals obtain a certain level of education
What are educational vouchers?
A fixed amount of money given by the government to families who can spend it either in public or private schools
What are the pros of educational vouchers? (no explanation)
- Consumer sovereignty
- Competition
What is consumer sovereignty in educational vouchers?
Allow individuals to more closely match their educational choices with their tastes
How does educational vouchers introduce competition?
Educational vouchers would make people choose schools that deliver the best product, so inefficient ones would not be chosen. Vouchers would level the playing field between private and public schools, removing the financial advantage currently held by the public ones.
What are the cons of educational vouchers?
- Excessive school specialization
- School segregation
- Inefficient use of public resources
- Education market might not be competitive
- Costs of special education
How do vouchers contribute to excessive school specialization?
Schools will tailor themselves to meet individuals’ preferences and threaten the common program
How could school specialization be solved?
In principle, it could be solved with regulation, but with time it would become onerous and defeat the purpose of school choice
Why are vouchers an inefficient use of public resources?
With vouchers, total public-sector costs would rise because the government would pay a share of the private school costs that are already being paid by individuals.
What would be a solution to vouchers an inefficient use of public resources
Target the voucher’s value to the family income. Higher amounts to families that need an education upgrade, reducing inequity in private schools
How is the education market?
Arguments in favor of education vouchers are based on a perfectly competitive market, when in reality it is more of a natural monopoly
What would happen to children who need special education in a voucher-like system?
These kids cost more and a common-cost voucher would not be sufficient for everyone, so schools would have an incentive to avoid special education or institute low quality systems for them
What are the two theories on enhancing productivity with education?
- Education as human capital accumulation
- Education as a screening device
What does the Education as human capital accumulation theory say?
More education raises a worker’s stock of skills and allows the individual to earn more on the labor market
What does the Education as a screening device theory say?
Higher education provides a means of separating high-ability individuals from low-ability ones. That is, who pursues more education is more motivated, but only increases their own productivity, so no social capital enhancement
How do the theories on productivity affect public policies?
In the human capital theory, governments should provide the means for people to pursue higher education, in order to enhance social capital. On the other hand, on the screening theory, governments should support the ESTABLISHMENT of education institutions, but not to subsidize any individual. This is because the returns on education are purely private, not social, it actually lowers the educational value of others
