Merit Good - health and education in society

Higher Education Case Study
Introduction:
The introduction of tuition fees at £9000 per annum for university study could be an area of discussion on this years econ 1 paper.

Basic merit good arguments apply (see the last post on healthcare) but here the state is moving away from free provision towards charging individuals for their study.

It is felt there are clear merit good arguments for education to 16 (or indeed 18 with legislation to be phased in over the next couple of years) thus making it a legal requirement and providing it free makes sure the "right" quantity of education is consumed.  National Curriculum and inspection by OFSTEAD works on quality within this framework.

Higher education provision is not so clear cut - the government feels the benefits are more private in nature thus students should make more of a contribution to the cost.

There are  equity issues here in that it maybe only those from above average incomes may take the risk of investing in degrees.  Thus the government has built in some means-testing and suggested a quota system or positive discrimination to support children from lower socio-economic groups.

The impact of the introduction of tuition fees will only be known in the longer term.  The rise in youth unemployment may be enough to encourage more students into education as a way of dealing with a lack of job opportunity although many graduates are now struggling to find work.

Will we see the death of the liberal arts degree as students seek a greater return on their investment from more technical subjects??

Highly skilled and flexible workers are the key to sustainable growth in a competitive global environment - clear positive externalities of higher education exist in this sense.

Basic Analysis:

NHS Case Study
Introduction:
The central provision of healthcare since WWII under the NHS follows the themes of:

• equity - where every individual has the right to a certain level of care regardless on income
• merit good - where the state deals with failures in the form of information issues related to externalities and an underestimation of private benefit
• asymmetric information: doctor have all the information thus may make decisions motivated by financial goals
• moral hazard: insurance markets have difficulty dealing with the unique challenge of affordable healthcare cover.
• economies of scale - bigger is better for unit cost

Analysis:

Policy:

• subsidy

• zero price provision

Conclusion:
the NHS has delivered effective care for the UK population for over 60 years but is facing a triple threat:

• increased demand from an ageing population
• increasing costs from ever more complex drugs, technology and procedures
• austerity challenging total expenditure in the face of the above two issues

Efficiency gains through reorganisation and the use of private sector providers on partnership with the public sector is seen as a model to provide healthcare for the 21 century but is proving difficult to achieve both practically and politically. other resources: health care:
http://www.oheschools.org/ohe.pdf

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