Question

Education is often identified as a "club" good whiclh is defined as a good or service that is non-rival in consumption but is excludable. Assuming you agree with this description, provide answers to the following: 1. What would be the likely outcome if government decided to stop providing education and closed all public schools? 2. How could the government get out of the education business but still affect the number of students attending school?

Answer 1

1)

Education being club good implies that those who do not pay for it, can be debarred from its benefits. If government stops providing education and closes all public school, there will be mass exploitation of people by the private education providers.

Those who are living below the poverty line would be debarred from education rights. Society will be divided between rich and poor.

Thus, government must provide such club goods to maintain balance in society.

2)

Following steps can be taken by the government:

• Government must subsidies the education of children. Direct payments can be made to students. In such situation, those who are unable to afford private education, would be able to get enrolled.
• Government can regulate private education providers either by offering subsidies or regulating fee they charge from students.