Tuition Two conditions that justify government intervention in a market are the
ID: 1132545 • Letter: T
Question
Tuition
Two conditions that justify government intervention in a market are the presence of external benefits and equity concerns. Both of these issues are present in the case of primary and secondary education in the United States. Think about what education without government education would look like. In the absence of government intervention, all primary and secondary education in the US would be private. Public school districts would not exist. Parents would need to pay private firms (schools) to educate their children.
External benefits
If all education were private, it’s likely that people would buy too little education, from society’s point of view. External benefits are one reason. When a child is educated, he or she benefits and we expect his or her parents to take those benefits into account when they purchase education. But there are additional benefits to society which parents may ignore. As people become more educated, they are less likely to be unemployed or be criminals and are more likely to volunteer and vote. The presence of these external benefits is an example in support for the government getting involved in education. Equity Many families in the United States have low incomes. Among all children in first through twelfth grades in 2001, 46% were from families with incomes below $40,000. Since the cost of private education would be an important share of these families’ incomes, most Americans would be concerned about the fairness of relying on markets to decide how much education children receive. Current spending by these families on private education provides some support for this concern. Of all children in private school in 2001, only 25% were from families with incomes below $40,000. Therefore, equity concerns are another example in support for government getting involved in education.
Providing vs. producing
education Most economists think external benefits and equity concerns justify government intervention in education. But it is important to distinguish between government production of education and other forms of government intervention. At the level of elementary and secondary education, K- 12 education, government intervention today mostly means production of education by local school districts. To benefit, children must attend public schools. But this is not the only form intervention could take. There are other markets where government intervention takes the form of subsidizing people’s access to products—think of financial aid to college students, for example. Many people in the US think that government should move from producing education to subsidizing access. One form that subsidy could take is government providing vouchers to parents. Parents would use the voucher to help pay for their child’s education in a private school. After it receives the voucher, the school would turn it in and be paid by a local or state government. Today there is a lively debate between people who think K-12 education should be delivered publicly and people who think quality and efficiency would be higher if government provided vouchers and the education was delivered by private schools. Some of these quality and efficiency arguments can be based on material we covered this week. Price competition between private schools will pressure each one to produce efficiently. Competition for students will lead private schools to offer programs of interest to parents and their children.
Answer the questions below and make use of the sources supplied. Be sure to cite you sources in your answers.
1. Explain whether a potential exit by students with vouchers will lead to the improvement of public schools.
2. Discuss whether the implementation of vouchers will lead the best students to leave public school, which could lead to a decline in education for the students left behind in the public schools.
3. Consider what might happen to the students who use vouchers to leave public schools in order to attend private schools. How might their academic performance change as a result of switching?
4. Finally, think about the impact of a voucher system on the students in an urban setting. Describe whether all families would have an equal opportunity to access education.
Explanation / Answer
A potential exit by students towards private schools will not lead to any improvement of public schools. Rather it will harm the public schools as government will not be willing to invest any money and resources on the development of public schools. Schools will neither be technologically upgraded nor will their infrastructure be taken care of. Also, the brain-drain from public schools will mar the competitive atmosphere of public schools.
If this exit is in nominal limits then it will be of positive nature as the voucher scheme will help children of unprivileged socio-economic background to enter in a private school. A balance between both public and private schools will remain maintained in terms of number and composition.
The term “best students” should be replaced by “eligible students” as the voucher programs are designed to allow children of unprivileged socio-economic background such as low-income students or in special cases such as students with disabilities to enter in a private school as they qualify to receive a voucher. Therefore, this does not account for the best students leaving public school. The child’s upbringing and involvement of parents have a major role and impact on grooming of one of the “best students” who perform relatively well as compared to their batchmates. This is because parents with college degrees provide more educational support and motivation to their child. Students who have disengaged parents suffer no matter where they study.
Students who switch to attend private schools may perform much better as they are conscious of the opportunity they have received and therefore will try to make the best use of it. They are aware of their socio-economic conditions and so tend to work harder to perform well as compared to well-to-do students already studying in public schools. Studies have shown that higher socioeconomic status students do marginally better in public schools, while poor students do slightly better in private schools.
Role of parents also has a major role to play in the performance of a child and cannot be neglected (as discussed in above answer).
There is also a chance that they may not do well. Factor of risk is there in both the choices.
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