Chapter 4.
First treating education as a private good. Parents as consumers, forming utilities based on two commodities, children's human capital as one, and other consumptions as the other. Production of this human capital is simplified as linear on investment by parents, so that price doesn't matter and supply is fixed by demand (schooling outcomes perfectly determined by parents). Then the only problem in this economy is for the parents to decide how much portion of their income to spend on education, so that their utility is maximized. In such a setting there is no link in between economic agents, as even prices are normalized and fixed.
As a next step, interactions between parents are introduced with a majority voting scheme, and equilibrium is achieved when a majority of the parents share in common a preferred tax ratio of their income, which tax will be distributed equally among all children's education, corresponding to the parents' maximum utility. In this setting, voted tax serves as a counterpart of competitive pricing in a market mechanism, and behavioral agents are linked together through group decision rather than exchange.
First treating education as a private good. Parents as consumers, forming utilities based on two commodities, children's human capital as one, and other consumptions as the other. Production of this human capital is simplified as linear on investment by parents, so that price doesn't matter and supply is fixed by demand (schooling outcomes perfectly determined by parents). Then the only problem in this economy is for the parents to decide how much portion of their income to spend on education, so that their utility is maximized. In such a setting there is no link in between economic agents, as even prices are normalized and fixed.
As a next step, interactions between parents are introduced with a majority voting scheme, and equilibrium is achieved when a majority of the parents share in common a preferred tax ratio of their income, which tax will be distributed equally among all children's education, corresponding to the parents' maximum utility. In this setting, voted tax serves as a counterpart of competitive pricing in a market mechanism, and behavioral agents are linked together through group decision rather than exchange.
No comments:
Post a Comment