Rethinking the Welfare State: The prospects for ... - e-Library

Rethinking the selfare state 140
Having said that there is a strong rationale for intervention on paternalism grounds, it
is more difficult to define the appropriate contours of that intervention with precision. 8
On the one hand, considerable expertise is required in order to make good decisions
respecting the location and form of schooling that a child will receive and one can argue
that government-appointed experts can make these decisions more effectively than
parents, or, at least, poorly informed parents. On the other hand, the mode of education of
one’s children is one of the most important decisions a parent can make. It is a decision
infused with sometimes widely divergent yet often reasonable preferences and is likely to
be taken very seriously by most (but not all) parents. More than that, while selecting a
good school or program requires some understanding of the virtues of different schools, it
also requires understanding of the child affected, and it is here that parents are likely to
be in the best position to make this choice. Nevertheless, if individual choices are
radically self-destructive in their effects on the very individual who makes them or on
those for whose well-being they are responsible, there is a strong case for some form of
state paternalism.
Equality
Even if parents were strongly inclined to secure the appropriate level and character of
basic education for their children, a role for the state in financing or supplying education
is still implicated as a result of equality concerns. In particular, the concern is that many
parents, particularly those on the margins of society, will not possess the resources to
ensure that their children receive an appropriate education in the absence of government
assistance, and, as a consequence, their children will be deprived of the opportunities for
full and equal participation in society. Although it could be argued that children (or, more
realistically, their parents) should be able to borrow to finance their education against
their future appreciation in human capital, the existence of endemic imperfections in
human capital markets will thwart their ability to do so. Generally speaking, lenders are
reluctant to supply funds secured by human capital because of information asymmetry
problems which preclude a lender from knowing the dedication of, or value of education
to, a potential student borrower ex ante. A related concern is the matter of enforcement—
slavery is illegal in liberal democratic societies. If a lender did make a loan to a student to
finance his or her primary-secondary school education the contract would be entered into
when the student is a minor. Lenders would not be able to collect easily (if at all) in the
event of default because it would be difficult to convince a court that the child had the
capacity to contract at the time of contract formation. Many parents, particularly poorer
parents, are, in the absence of state support for basic education, also likely to face these
human capital market problems in attempting to borrow on their children’s behalf.
Thus, to the extent that some students’ families would not be able to afford to pay for
private primary and secondary education in a pure market system despite the
attractiveness of the investment, a role for government intervention exists for equality
reasons. The minimum governmental role in this regard would be to assist in alleviating
the borrowing constraint imposed by capital market limitations so that all children would
at least potentially have access to primary and secondary education. 9