Socially Desirable Merit Goods - Essay Example

SOCIALLY DESIRABLE MERIT GOODS by Introduction The term merit goods refer to services or products that are largely beneficial to the wider society if they are made available and used (Fiorito & Kollintzas 2004). Because of the nature of merit goods, well-structured governmental institutions mostly handle them in order to control the production and the price of such goods. The private sector primarily operates under the dynamics of the free market system. Many individuals in the society would miss enjoying the benefits of merit goods if left to the private sector because they would appropriate a high price for the good or service, limiting the individuals who can have access to the good. Therefore, many people would be unwilling to access the merit goods at a high cost. The inaccessibility would lead to underproduction of the good, and ultimately leading to underutilization of the good or service. In most cases, government institutions are tasked with handling the provision of merit goods. Merit goods are on provision at a subsidized rate, or in other instances provided free of charge. Providing them at a subsidized price makes it possible for many people to have access and for the society to derive external benefits created by merit goods from consumption. For instance, education is usually considered a merit good, and especially the basic education from early childhood to the university or college. An educated society results in reduced cases of hard crime, increased productivity, higher rates of employment and a growing economy because of direct input of high-quality labour. An educated society also translates into strong governmental and non-governmental institutions and interests from foreign companies who would thrive with good quality employment. The government would also benefit directly from increased tax collection from employed individuals. Secondary Education in the United Kingdom (UK) The present secondary education system in the UK is an improvement of an older system that allotted students at the age of 11 years to either of the three school types through performance and selection examinations. This method of allocation was later replaced by the current system where children are admitted into comprehensive schools regardless of their level of performance (Connolly, Farrell & James, 2013). This system currently offers vocational and academic curricula simultaneously. In the UK, Secondary education follows primary education. It is given to students above 11 years. There are states owned secondary schools and privately owned secondary schools in the UK. All the government-owned secondary schools in the UK adhere to a national curriculum provided by the government Department of Education. The curriculum principal aim is to standardize learning in the country, while also ensuring that content taught in the classrooms is one that is approved by the state. As at 2014, there were 6,260 secondary schools in England, approximately 3,280 of those schools are government-controlled schools (Gov.uk 2015). The role of Government in Providing Secondary Education Secondary education in England is managed by the Department of Education. The government institution is mandated with the management of school affairs for children aged three years to nineteen years old i.e. from early childhood to secondary education. The organization is responsible for educating children and providing childrens services in England regardless of the nature of their background. The Department of Education focuses mainly on supporting primary schools, secondary schools and monitoring of colleges to generate well-formed individuals, capable of handling life challenges (UK education: A central role 1983). Through their formulated curriculum, the government through the Department of Education aims at producing an educated workforce to fill in the employment opportunities. The UK government formed the Education Funding Agency (EFA) in 2012 as an oversight organization to the Department of Education. Among the numerous duties and responsibilities of the new body, EFA was tasked with ensuring equitable distribution of the governments education funding. The organization was also required to ensure that all children between the ages of 3-19 years complied with state education regulations. The group handles around £ 55 billion annually for educating 10 million children. Approximately half of these funds are dedicated to running secondary education schools in the country (Gov.uk 2015). The organizations mandate includes making sure that capital and revenue financial support is made on time and efficiently. EFA also maintains a productive management program of ensuring that the buildings that houses learning institutions are improved while at the same time providing state of the art spaces for learners is created. Government plays a critical role in running secondary schools. State-owned schools run on taxpayers money. There is always the risk of individuals using the money for personal interests and not for the greater interests of the taxpayers or the government. To solve this principal-agent problem, EFA is tasked with audit responsibilities where they follow up on particular spending on individual schools. Also by providing funding for the secondary education, the government ensures that there is a constant supply of secondary schools, thereby encouraging more individuals to join them and learn. By putting stringent measures for compliance by children between ages 3-19, and through funding of these schools, the government ensures generation of positive external benefits to the community. Private Sector as a Provider of Secondary Education Political debates about the provision of secondary education by privately owned organizations began after the establishment of free schools by a former Secretary of Education Mr. Michael Andrew Gove. Proponents of privately owned schools argue that privately owned schools would promote competition amongst students for placements in high calibre schools. The competition they argue would promote the expansion of the education sector since there would be an incentive for profit making. It is also argued that running the schools privately would bring about flexibility much needed for improving the quality of teaching. Analysts also suggest that capital financing for the secondary schools is imperative by private institutions to optimally allocate the resources. In as much as privatizing provision of education services would generate competition; it has been criticized much on the same competitive platform, analysts arguing that it would promote social segregation between the rich and the poor. Rich individuals would be able to take their children to better-performing schools, just because they can afford the costs. However, children from poor backgrounds would be competing on an unfair ground since they would not be able to go to good schools because of their financial status. It has also been argued that capital financing for the state-controlled schools is cheaper and done more efficiently by the government than it would under the control of private institutions (Education plc 2012). In an effort to minimize costs and maximize profits, privately run schools would pay their teachers fewer salaries, the ripple effect being production of low-quality results because of lack of motivation. Additionally, removal of the state from the equation would negatively affect the public because of increased education costs. This deterioration would change public commitment, and it would eventually deteriorate. Believers in privatizing educational services argue that privately owned schools perform better in delivering educational services (Leonard, Meek & Rose 1960). However, looking at the bigger economic picture, the costs of allowing privatization would have adverse effects many years back. The financial participation of the privately owned organizations in providing education is rather weak. This is because the government can raise the required operational costs faster and cheaper. This is because it is easier for the government to source for funds at more competitive interest rate, lower than the market price for such funds if the private organizations were to seek for funding. Regulating the education institutions would not be possible in a privately run set-up. Each school would teach and collude to sabotage the operations for self-gain, and not for the greater good of the society. Undeniably, the private sector does contribute positively to the education system, especially by raising the benchmark in terms of performance. The growth of the education industry is partly attributable to private organizations that propel the government to effect changes especially in terms of improving areas that need attention. However, it is of paramount importance for legislators and policy formulators to ensure that growth does not offset the level playing field into added inequalities. Even though there are additional functions for the private sector in the provision of education services, schools should not be privatized because they function best when state-owned, factoring in the overall public interest Positive Externalities of Secondary Education Positive externalities are side effects that are related to market actions, items or goods produced become beneficial to other parties, and the producer does not receive any compensation for them. This means that when such goods or services are consumed, they become beneficial to third parties, who receive the benefits as a spill over (Hazlett 2000). Economically, the marginal social gain becomes greater than the marginal private gain. Secondary education is important as the system demands that you pass through secondary before you commence college studies. After completion of general education, individuals can seek employment from the numerous job opportunities that arise every year. The overall benefits of going to school emerge when an individual can seek employment and directly earning a living from their jobs. Individuals who choose to start their businesses experience added productivity from applying whatever expertise they have. These individuals also make better decisions in whatever venture they choose to engage. There are numerous benefits realized because of the spill over effect of education. For instance, educated persons are more likely to elect good leaders based on educated judgments. Studies reveal that regions with high rates of educated populations record very low crime statistics as opposed to areas with high-uneducated individuals. An educated society is more likely to attract investments especially if the job description requires highly skilled and well-educated individuals. An educated society is more likely to have higher employee productivity, translating to better-living standards for all people. Public education assists in general redistribution, as educated families can educate their families as well. An educated society can access finances with ease by way of receiving loans and grants from financial institutions. A famous economist once said: "A stable and democratic society is impossible without a minimum degree of literacy and knowledge on the part of most citizens and widespread acceptance of some common set of values. Education can contribute to both. In consequence, the gain from the education of a child accrues not only to the child but also to other members of the society" (Friedman & Friedman 1962:86) Provision of Secondary Education by Free Market and Possibility of Market Failure Market failure is a situation whereby distribution of resources in a free market set up does not sufficiently give the most desired customer satisfaction. Merit goods create positive externalities. However, the free market system operated by the private sector may cause the underutilization of the merit goods. Underutilization in this case may come about because end users are not aware or neglect the social benefits realized because of consuming the merit good. Market failure in providing secondary school education is caused by two main elements. Market inequalities and information failures. Due to information failures, the public and the society is unaware of the immense gains that come about because of education, especially the future gain of education. To alleviate this problem, the government through its institutions takes action by adopting policies and the general view of what is best for the society (Harris & Haydn 2012). The free market brings about the inequalities when income is not distributed equitably, therefore denying the poor and the less privileged equal opportunities. Privatizing secondary school education would lead to a half-educated society. The dangers of having a large group of individuals who are uneducated are that they would lack the necessary skills for employment, resulting in crime. The economy would be greatly affected, as only a few individuals in the society would be able to pay taxes, resulting in a very big gap between the rich and the poor. Conclusion and Recommendation There are private companies that offer education services on a private platform. These private companies main aim in the market is to make profits and not to maximize on the bigger picture of the external benefits to the society. These companies usually charge a higher rate than most governmental institutions. These prices are unfavourable and many parents are unable to afford especially from underprivileged families. Consequently, the society is unaware of the external benefits of education, choosing to focus on the result of getting a good job after completion of studies. Therefore, the companies that offer education privately in the market appropriate a high price that most individuals are unable to afford. Governments intervention in the provision of merit goods such as education is vital because they create state-owned schools that are affordable to the wider community. The society thus reaps the benefits that come attached to education and other merit goods. Privatizing education would only benefit a few individuals in the society. Merit goods would be underutilized, and the society would be worse off, in the end. It is my recommendation that education be run by the state, as the common good is far much greater to the society than the private benefit realized by the free market economy. Bibliography Connolly, M., Farrell, C., & James, C. (2013). Trends in the Governance of Education in the UK. 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