Education: a Public or Merit Good - Essay Example

Should education be regarded as a public good or merit good Education can be defined as experiences that range from formal learning to the building of understanding and knowledge through day to day experiences. Many scolars have designated education as a lifelong process. Each one of us have different sources of informal education such as family members, peers, books and mass media etc. Education is the birthright of an individual. Government world wide is working to make education accesseble to each and every individual. According to the Universal Declaration of Human Rights "Everyone has the right to education... Education shall be directed to the full development of human personality and to the strengthening of respect for human rights and fundamental freedoms. It shall promote understanding, tolerance and friendship among all nations, racial or religious groups, and shall further the activities of the United Nations for the maintenance of peace." (art.26 - Universal Declaration of Human Rights) This is a research paper to find out if education falls under public good or merit good. For this purpose it is important to define public good or merit good. A public good in economics can be defined as a good that is non-rival which means consumption of the good by one individual does not reduce the amount of the good available for consumption by others (Varian, 1992). The term public good is often used to refer to goods that are non-excludable which means that it is not possible to exclude individuals from the good's consumption. If we take an example of a sweet, if it is consumed by a person it is not available for another person. Where as fresh air and clean drinking water may be considered a public good as it is not generally possible to prevent people from breathing and drinking it (Wikipedia, 2007a). There are very few absolutely public goods, but common examples include law, parks, street-lighting, defence, traffic light, etc. The theory of public goods was first developed by the economist Paul A. Samuelson. In his classic paper The Pure Theory of Public Expenditure published in the year 1954 he defined a public good as follows: ...[goods] which all enjoy in common in the sense that each individual's consumption of such a good leads to no subtractions from any other individual's consumption of that good... (Samuelson, 387-389) In other words public goods are those products where, for any given output, consumption by additional consumers does not reduce the quantity consumed by existing consumers. Since there is no marginal cost involved in producing the public goods, it is commonly thought that they must be provided free of charge. In other words those who benefit less than the cost of using the public good will not use it which will lead to a loss of welfare. Public goods are mostly non-excludable, which means that if once provided anyone can use them, which when charged will lead to "free-riding". This is the reason that these goods will not be provided by free market. However, the public pays a price through the taxes paid to the government (ieg.ee, N.D.). A merit good is defined as a good that is under-consumed if provided by the market mechanism. The main reason for this is individuals take into consideration how the good benefits them as an individual. They do not consider the benefits that consumption generates for others in society. In pure economic terms, this is because the positive externalities of the good are not internalized by consumers. A merit good is a product that society values and judges that each and every individual should have it regardless of whether an individual wants it or not (Wikipedia, 2007b). Merit goods are products that are generally not distributed by means of the price system, but based on merit or need of the society. These goods can be supplied by free market, but not on the right quantity. They are provided by state as "good for you" (ieg.ee, N.D.). Should education be considered as a public good or a merit good Traditionally, in many parts of the world education used to be a private good with positive externalities. Today it is accessible to a large number of individuals through the intervention of technology and government largesse. Education has being transformed into a non-pure public good. Technology-borne education is non-rivalrous which is the property of a public good and has positive externalities. It can be replicated and disseminated virtually cost-free to the next consumer through the Internet, television, radio, and on magnetic media. Distance learning is popular world wide. However, there are limitations for this kind of education. Specialization in a particular field of education such as national security is accessible to only those individual who qualify for it. Further the online education available today may be stopped at any point. It can be said that all forms of education are not public goods (Vaknin, 2007). In the third world, not all individuals have the privilege to get educated through internet, television and radio, as most of them are busy in fulfilling their basic needs to sustain their life. One can hardly benefit from the daily news without owning a radio or a television set - which would immediately have a tendency to exclude the homeless and the rural poor in many countries. Non-rivalry and non-excludability are ideals - not realities this can be applied strictly only to the sunlight. Even the air we inhale the environmentalists keep warning us, about its scarcity due to its pollution (Vaknin, 2007). Though technology driven education is non-rivalrous and non-excludable in nature still it cannot be considered as a pure public good as there are many who cannot access it. The next question that rises in our mind is if education can be considered as a merit good Merit goods are those goods and services to which people are entitled as a birthright. This privilege is given to them simply by virtue of being members of society, regardless of ability to pay. However this does not mean that these goods are totally free to everyone but just because an individual is not able to pay he/she should not be excluded. Basic education and safe drinking water are merit goods. Merit goods differ from public goods such as defense, the legal system, and parks because merit goods can be and often are privately produced and paid for. Education can be private or public good. The water we drink may come from a public provider, but we pay for it just as we pay for electricity from private utility suppliers. So merit goods do not have to be produced by the public sector in order to ensure that they are available (Economic Brief No. 16). Basic health and education are merit goods that can be provided by free market but have major drawbacks when only provided privately. Main problem is that individuals will not buy the sufficient amount of them even if they can afford it. Individuals would not go into expensive insurance schemes as they think nothing will happen to them, but if something does happen, they can't afford to pay. This will lead to an uneven distribution of income as rich will be more educated and thus can potentially earn more in the future. Another problem is that if the merit goods when provided privately, they are usually affordable only to the rich. As education has positive externalities, government thinks everybody should have them (ieg.ee, N.D.). Good education will contribute to the economic growth and the overall well-being of the individual and the society. Hence education is a merit good where the social benefits exceed the private benefits. When a child is of the age of going to school, the parents are the ones who pay for the education. Hence the beneficiary of the education will not be the person who has to pay for it. Parents who are not financially well of could think of reducing their expense of educating the child. This could lead to a conflict of interests. It would be in the child's best interests to receive the highest quality of education available. In addition to the external benefits a well educated individual will gain society as a whole will also be better off. An individual, who cannot read or write, is a burden on the society as they would more than likely need supporting, whereas an educated individual would contribute to the welfare of the nation (Margetts, N.D.). For this reason government intervention in many parts of the world has made education as a merit good. Policies to make the basic education as compulsory have led to the benefit of both individual and society. It might take the form of an explicit government subsidy to reduce the private costs of consumption and cause an expansion of demand. In conclusion, though education is non-rivalrous and non-excludable, it cannot be considered as a pure public good. Education is a merit good as merit goods can be and often are privately produced and paid for. Education is mandated for or offered to the children of the general public by the government.The basic education is compulsory in most of the countries and is accessible to every on at a reasonable price. Work cited Economic Brief Merit Goods: A Policy Dilemma The community leader's letter No. 16, 7 March 2007 ieg.ee, Distinguish between public goods and merit goods 6 March 2007 Margetts, S. Merit Goods 6 March 2007 Samuelson, P.A. The Pure Theory of Public Expenditure. Review of Economics and Statistics (1954) 36 (4): 387-389. Vaknin, S. Is Education a Public Good In: Malignant Self Love - Narcissism Revisited Eighth, Revised Printing (January 2007). Varian, H.R. Microeconomic Analysis W. W. Norton & Company; 3RD edition (February 1992) ISBN 0-393-95735-7. Wikipedia, (a) Public good 6 March 2007 Wikimedia Foundation, Inc, 7 March 2007 Wikipedia, (b) Merit good 27 February 2007 Wikimedia Foundation, Inc, 7 March 2007 Read More