4. Why does the government support public education when the private sector also provides this service? Are these reasons the same as those for government providing services such as police protection and the National Weather Service?
5. What is the basic thrust of Keynesian demand-side policies? Why was economic policy based on Keynes' ideas effective in promoting prosperity in the 1960's? Why was this policy less effective in the 1970's?
6. Explain why labor productivity is important but not the only key to improvement in living standards.
Education generates positive externalities, because society in general is better off when people are well educated. They can work more productively make better decisions, and so forth. Because we all live and work together, no person is educated in a vacuum. The private sector, however, doesn't see these benefits. In the free market, each person sees his or her education as solely an investment in their future earnings. They may or may not choose to make this investment, depending on their ability to pay for it. This is especially true in higher education, but applies to primary school as well. Public education ensures that all children get basic skills to succeed. They are less likely to need government support if they master these basic skills. Private education appeals to those who want their kids to learn more than these basic skills, and so to gain a competitive advantage. If the government did not provide free primary education, many children wouldn't be educated at all.
At the university level, the government can bring the level of ...