Merit goods are basically products which are considered to have some sort of intrinsic value. However, such a broad definition may be inadequate and ambiguous, neglecting the complexities: For instance, what kind of value must it possess for it to be considered a merit good? To what extent must the good be valuable to count as a merit good?
First of all, it is necessary to clarify that the value, or intrinsically desirable quality, of a merit good, is independent of the actual desires or preferences of the consumer himself. This is to say that its value is not based on the amount of utility or satisfaction that accrues to the consumer upon consumption. Rather, its value refers to a quality in the good that makes it desirable to society, that is to say, the consumption of the good may have external benefits, in addition to private ones. Some thus consider education to be an example of a merit good, in view of the fact that a more educated workforce will attract more multi-national corporations and consequently foreign investment, making the society more prosperous (external benefit).
Left to the mechanisms of the free market, the level of consumption of a merit good may therefore be of a sub-optimal level, since external benefits might not be an adequate reason or incentive for the individual consumer to consume. Thus it is in fact held at times that with regards to merit goods, free consumer choice is inappropriate, as an inappropriate quantity of the good is consumed. Succinctly put, there is under-consumption of merit goods in a free market.
[...] However, there is one more consideration. So as to maximise efficiency, the Singapore government should subsidise degree courses to the extent that the marginal benefit is equal to the marginal cost. An argument supporting the viewpoint that such universities as NUS and NTU should set their own fees is that they know the situation best. More specifically, they are the ones who are best informed of the demand of the courses, and the supply of available resources like teachers and support material. [...]
[...] What is meant by merit goods? Merit goods are basically products which are considered to have some sort of intrinsic value. However, such a broad definition may be inadequate and ambiguous, neglecting the complexities: For instance, what kind of must it possess for it to be considered a merit good? To what extent must the good be valuable to count as a merit good? First of all, it is necessary to clarify that the value, or intrinsically desirable quality, of a merit good, is independent of the actual desires or preferences of the consumer himself. [...]
[...] Perhaps one may say that if the fees were not set by the universities themselves, they may be high as well. However, if they are not set by the universities (private sector), then they would probably be set by the government (public sector) and assuming that education (especially such higher-level education) is a merit good, there is reason for the government to set the fees as low as possible. After analysing the above arguments, I have come to the conclusion that there is little reason for NUS/NTU to set their own fees. [...]
[...] Perhaps they should be consulted with regards to the matter, since they know best the situation and its limitations. However, they should not set the fees where issues of efficiency and equity are concerned. Bibliography Sloman, John: Economics, Financial Times Prentice Hall, 2006. [...]
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