Mostly summarized from Gregory Mankiw’s Principles of Economics, 5th Ed.
PART 4 The Economics of the Public
Sector
Chapter 10 of 36 Externalities
Section 7 of 19
…
Figure 3 - Education and the Social Optimum
In the case of a positive externality
· the social value of the good exceeds the private value of
the good
· the optimal quantity Qoptimum
is larger than the equilibrium quantity Qmarket
…
Some activities such as pollution create external costs on
third parties.
Other activities create the opposite: external benefits.
The benefit of education is largely private.
The consumer of education becomes a more productive worker
and reaps benefits including higher wages.
Education also creates positive externalities.
A more educated population leads to
· increased employment and wealth for society at large
· development and dissemination of technological advances
· lower crime rates
· more informed voters and better government
…
In Figure 3 the lower private value demand curve with Qmarket
amount of education supplied does not include external benefit of education to society.
The optimal quantity of education is found where
· the social-value demand curve and the supply curve
· intersect at optimum equilibrium
After evaluation the planner decides the amount of education
supplied and consumed should be Qoptimum, with government
tax revenues from higher taxes paying for the difference in price.
This results in the upper social value demand curve.
… …
benefit of education
kyōiku no onkei
教育の恩恵
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