Chapter

Core Issues in the Economics of Education

Nicholas Barr

in The Welfare State as Piggy Bank

Published in print May 2001 | ISBN: 9780199246595
Published online November 2003 | e-ISBN: 9780191595936 | DOI: http://dx.doi.org/10.1093/0199246599.003.0010
 Core Issues in the Economics of Education

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In the world of certainty described in Ch. 2, people finance their education by borrowing in perfect capital markets against their future income, and such voluntary choices are efficient. Once risk, uncertainty, and imperfect information enter the picture, that result no longer holds, requiring state intervention to give people a mechanism for moving resources to their younger years. This chapter and the next point to these problems as they apply to four sets of actors – policy‐makers, consumers of education, borrowers, and lenders. This chapter discusses the complex objectives of education and then explains why it is not possible to quantify the benefits of education, with two implications: policy‐makers cannot measure external benefits and hence the efficient level of subsidy; nor is it possible to quantify definitively the efficient level of spending on education.

Keywords: benefits of education; borrowing; economics of education; external benefits; imperfect information; lending; objectives of education; risk; state intervention; uncertainty

Chapter.  4309 words.  Illustrated.

Subjects: Public Economics

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