Information Problems

Nicholas Barr

in The Welfare State as Piggy Bank

Published in print May 2001 | ISBN: 9780199246595
Published online November 2003 | e-ISBN: 9780191595936 | DOI:
 Information Problems

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Information problems constrain the usefulness of consumer choice about school education, suggesting that the state will continue to provide the bulk of finance for school education and, separately, will continue to be the major provider. In contrast, consumer choice is useful for tertiary education, where consumers are better informed than central planners. This argument is strengthened by the growing diversity of post‐compulsory education and training. These arguments underpin the case for market forces in higher education discussed in detail in Ch. 13. Imperfect information is also a problem in capital markets. Conventional loans (for example, to buy a house), when applied to investment in human capital, present borrowers and, for different reasons, lenders with significant risk and uncertainty.

Keywords: borrowers; capital markets; central planning; consumer choice; human capital; imperfect information; lenders; market forces; school education; tertiary education

Chapter.  3201 words. 

Subjects: Public Economics

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