The Nordic Model - Embracing globalization and sharing risks

tail end. Vouchers are allowed to be used for expenses incurred by
a family that cares for its own and for private attendants. Both are
laudable options, because they give consumers a choice.
We do not have statistics for child care, but anecdotal evidence
suggests that the same pattern prevails. Private childcare is
available, but since the 1970s the public sector (mainly through
local governments) has established a very dominant position. This
might be efficient if there were concerns about quality or if parents
could not be trusted to choose proper care. Since there seems to
be little evidence that this is the case, childcare but also elderly
care are areas in which there is scope for substantially increased
private sector involvement.
Economists like vouchers, because they have good efficiency
properties both in terms of determining individual levels of service
consumption as well as the allocation of services across providers.
For the same reason, they like fees for publicly provided services.
A service that is free will be over-consumed or be inefficiently paid
through rationing and queues. However, the public is much more
accepting of co-payments for private services than they are of fees
for publicly provided services. There may be a presumption that
private services can cost money, but public services should be free,
because they have already been paid for through taxes. A more
sinister interpretation is that low fees foster higher use of public
services at the expense of private services. The benevolent interpretation
is that some services should be available for everybody
at no cost, because it is equitable – service provision is part of the
collective insurance system. This is a defensible position if one is
careful about which services deserve such heavy subsidies. Health
care and primary schooling are good candidates, because they are
essential for all. But providing higher education for free seems like
a very costly, even unfair subsidy, in a case where consumers clearly
have very different preferences. A public good argument also works
much better for primary than tertiary schooling.
Our intention is not to argue strongly for or against fees for
particular services. Our point is simply that low or no fees for
public services, in an economy where half of GDP is spent on the
public sector are unlikely to be optimal or easy to defend on equity
grounds. This is an issue that should not be shunned or treated
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