Socially Desirable Merit Goods: Analysis of Primary Education in the UK

By Maria Sanchez

1. Introduction


Socially desirable merit goods are “goods that society deems so valuable that everyone should have them” (Frischmann, 2012, p.45). There are two basic characteristics of merit goods: the value of the good is not usually fully appreciated at the time of consumption, and consumption of merit goods has positive effects to other individuals (Economics Online, 2014).

This report represents a brief assessment of various aspects of primary education in the UK as an important merit good. The report starts with assessing the role of the UK government in providing primary education and this is followed by analysis of possibilities for private sector to provide primary education.

Moreover, the report includes discussions of positive externalities of primary education and assesses the possibilities of market failure if the provision of primary education was left to provide to free market.


2. The Role of Government in Providing Primary Education

Merit goods can be explained as “a product that the government believes consumers undervalue and under-consume” (Riley, 2004, p.160). Examples of merit goods include, but not limited to healthcare, education, and others. Merit goods are perceived to be beneficial for people.

Demerit goods, on the contrary, are considered to be ‘harmful’ to people and they include alcohol, tobacco products and a wide range of drugs.  Governments usually do not leave the trading of demerit goods to free market, because it can led to over-consumption of demerit goods with negative implications for the government and its citizens.

Investopedia (2014, online) defines externalities as “a consequence of an economic activity that is experienced by unrelated third parties”. Externalities can be positive or negative. Examples of positive externalities may relate to highly educated and healthy people contributing to the state of national economy for many years. Negative externalities, on the other hand, include negative impacts of toxic gas to non-smokers in public places, damage to the environment by industrial pollution etc.

This report focuses on primary education in particular as an important merit good.

Traditionally, the UK government has played an important role in providing primary education. Primary education is funded by the government as a direct provision. In other words, the UK government provides primary education free of charge to citizens funded by taxpayers’ money.


3. Private Sector as Provider of Primary Education

Government is not the sole provider of primary education in the UK and primary education services are offered by private sector organisations as well. Arguably, advantages of private primary schools over public primary schools include better facilities, more individualistic approach to each child because of less numbers of children in each class, and consequently, better performances of pupils (Murray, 2012).

However, private schools do have certain disadvantages as well. First of all, expensive tuition fees represent the major disadvantage associated with private primary schools. It has been argued that some private primary schools charge astronomical amount of money as tuition fees which is disproportionate to the quality of education they are offering (Aldrich, 2012).

Moreover, private primary schools have been criticised for being over-protective of pupils in terms of facing various social challenges in school settings such as minor playground conflicts, social interactions etc. In simple terms, schools need to be able to prepare pupils to the real life. However, artificial environment created in some primary schools can be criticised for ill preparation of pupils to the problems they are going to face later in life.

Exclusion of pupils from private primary schools with high levels of ease for a wide range of reasons can be mentioned as an additional substantial issue associated with private primary schools.


4. Positive Externalities of Primary Education

Positive externalities of education can be effectively explained by referring to the following figure:

Socially Desirable Merit Goods

In figure above, if the primary education was left to be regulated by free market, by the forces of supply and demand alone, the market would have supplied Q1 quantity of education for the price of P1. However, adding external benefit to this situation is going to increase the quantity of education from Q1 to Q2, at the same time increasing the level of benefits.

In other words, it is evident from the figure above, that Marginal Social Benefits of education are greater than its Marginal Private Benefits. Therefore, education can be rightly considered as a positive externality. Positive externalities of education can also be linked to macroeconomic advantages to the society generated as a result of an individual’s education.

Moreover, apart from the positive externalities illustrated above, primary education in the UK has important implications in many other levels and these can be divided into the following groups:

Firstly, the quality of primary education has direct implications on the quality of life of individuals. In simple terms, those individuals that receive quality primary education can continue their education in other institutions, consequently securing high-paying jobs. Similarly, individuals that receive no or low quality of primary education are most likely to be employed in low-paying manual jobs with low income in the future.

Secondly, primary education affects the overall level of competitiveness of the UK in international market. The level of competition in international market has increased significantly during the last few decades as a result of the impact of globalisation. Therefore, nowadays employees at all levels need to be highly competent so that companies they are working for can compete in international markets.

Thirdly, the quality of primary education is related to the solution of a wide range of social, technological, ecological and other problems in the UK. The solution of serious challenges of today and the future such as global warming, global economic crises, and finding cues for such diseases as AIDS and cancer relies on in-depth knowledge of relevant issues on behalf of specialists. From this perspective, primary education has a viral role in terms of developing highly qualified specialists of tomorrow in various fields.


5. Provision of Primary Education by free Market and Possibility of Market Failure

Market failure can be defined as “inability of a system to provide certain goods either at all or at the most desirable or ‘optimal’ level” (Ghai and Gupta, 2002, p.228). If primary education is entirely left to private sector market failure may occur as a result of imperfect information, social exclusion and a set of other reasons.

Imperfect information as a reason for market failure relates to the idea that people might not have adequate knowledge about an appropriate level of primary education their children must receive. People might unnecessarily ‘purchase’ too much primary education for their children as a result of marketing campaigns, or they might wrongly think that a couple of years of primary education would suffice for their children.

Market failure as a result of social exclusion in primary education may occur when specific population segment can not afford tuition fees of primary education for their children, contributing to the formation of disadvantaged population segment in the future.

Moorever, regulation of primary education in the UK by free market alone is going to cause market failure because some people may not appreciate the true value of primary education for their children, and therefore they may decide not to send their children to primary schools.

There are certain ways the UK government can prevent, or at least minimise market failures discussed above, if the primary education is left entirely to the private sector. These ways include setting primary education standards for education providers and providing various subsidies and grants for low-income families that cannot afford primary education.


6. Conclusions and Recommendations

It is undisputed fact that social benefits of primary education in the UK, as well as, any other country are far more important than economic benefits. Neglecting the importance of primary education can compromise the levels of professional competency of future employees, and this would undermine the position of the UK in the global market.

To summarise discussions, the importance of primary education in the UK is great in many levels, and therefore facilitation of primary education requires direct and close involvement of the government. Leaving primary education to be governed by free market by the forces of supply and demand alone can have highly negative social implications and therefore this situation needs to be avoided.

The current pattern of provision of primary education in the UK where the primary education is offered by both, the government, as well as, private sector organisations can be specified as the most optimal strategy, and therefore this strategy needs to be continued.

It is important to note that there is no better, alternative method for the UK government in the provision of primary education merit good. Therefore, the UK government is recommended not to be experimenting and continue with the present version of primary education where the primary education is offered by both, the government and private educational institutions at the same time.


  1. Aldrich, R. (2012) “Public or Private Education? Lessons from History” Routledge
  2. Externality (2014) Investopedia, Available at:
  3. Frischmann, B.M. (2012) “Infrastructure: The Social Value of Shared Resources” Oxford University Press
  4. Ghai, R. & Gupta, M.R. (2002) “Microeconomics: Theory and Applications” Sarup & Sons
  5. Merit Goods (2014) Economics Online, Available at:
  6. Murray, J. (2012) “Why I sent my child to a private school” The Guardian, Available at:
  7. Riley, G. (2005) “Business Economics and the Distribution of Income” A2 Economics Course Companion 2005

Category: Economics