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