Education Policy & Finance Flashcards
What is market failure ?
Market failure is an equilibrium allocation of resources that is not pareto optimal.
– the potential causes of which may be market power, natural monopoly, imperfect information, externalities, or public good.
What is a Pareto optimality or efficiency ?
A situation where no individual or preference criterion can be made better off without making at least one individual or preference criterion worse off.
What is a merit good ?
Commodities that are usually provided for free or cheaply because Government want to encourage consumption e.g education. Merit goods can cause market failure.
How can higher education benefit society ?
Lower crime rates, higher civic participation and trust and improved public health.
Without government intervention students enroll to what point ?
Enrol to the point where MPB - MC is greater than or equal to 0.
With Government intervention students enroll to the point where ?
MSB - MC is greater than or equal to 0
When does socially optimal enrollment occur ?
When MSB = MC
Why do people not make privately optimal investment decisions
- Credit constraints
- Lack full information
- Not fully rational
Issues facing the higher education sector in Ireland ?
Fees
Admissions
Covid 19 –> Grade inflation, learning losses
Over educating
Why should Government intervene in education ?
On the grounds of efficiency and equity.
To prevent market failure
To reduce disparities in educational attainment which can have a knock on effect on income inequality from earnings.
To ensure socially optimal levels of enrollment (MSB = MC)
To ensure there is not under-investment in education
Alternative financing systems that could be implemented ?
- Graduate tax
- State-backed income contingent loan system
What does a simple model of enrolment look like ?
Draw
In the free market what is needed for their to be efficient allocation of resources ?
- Enforceable property rights
- Full information
- Competition among buyers and sellers
