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The Welfare State as Piggy BankInformation, Risk, Uncertainty, and the Role of the State$
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Nicholas Barr

Print publication date: 2001

Print ISBN-13: 9780199246595

Published to Oxford Scholarship Online: November 2003

DOI: 10.1093/0199246599.001.0001

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Information Problems

Information Problems

(p.171) Chapter 11 Information Problems
The Welfare State as Piggy Bank

Nicholas Barr (Contributor Webpage)

Oxford University Press

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

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