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Tag Archives | Regulation

Reforming Higher Education-2

Part 1

Tackling the information challenge

Kenneth Arrow’s seminal paper established the existence of information asymmetry in the healthcare sector. Arrow placed the doctor-patient relationship firmly within the ambit of the well known principal-agent problem and argued that government regulation was necessary to protect patients. Arrow’s work remains influential to this day and has provided much of the empirical justification for government regulation of healthcare.

Lately, however, a distinction has been drawn between emergency services and elective procedures. Even if information is freely available, a person suffering from a catastrophic emergency has limited opportunities to research the best available facility or the urgent demands of the illness may prevent access to better institution. Therefore, there is a strong case for government regulation to assure the patient of a minimum standard of care.

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Reforming Higher Education-1

Setting the agenda

The need for government regulation of higher education is the subject of an interesting debate between Abi and Ravikiran Rao. AbiĀ calls for changes in the regulatory structure to keep out ”crooks, politicians, and thugs” and facilitate the entry of large philanthropic institutions. Ravikiran’s response is to point to blogs: Without an external regulator, readers are able to differentiate between ”good” and ”bad” blogs as technology permits readers to avoid blogs which they may find uninteresting. Abi points out, quite persuasively, that the example of blogs would not be applicable to higher education: Students cannot sample different institutions and then decide which one may best fit their interests–the opportunity cost is simply too high.

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