Essay on Merit Goods By Richard Musgrave

1911 Words Mar 30th, 2016 8 Pages
Merit goods are controversial subject among many scholars, and is a concept that is a serious influence on many justifications for state intervention. The concept of Merit goods was first introduced by Richard Musgrave in 1957, and has been the center of many academics work since then. The concept of merit goods helps to explain why people consume the way they do, and gives a model to help states ,such as the New Zealand Government, intervene in order to maximize the true benefits for the consumer, and society as whole. Merit goods are goods that are considered worthy of being consumed by all, regardless of consumer’s willingness or ability to pay (Musgrave, 1959). Consumers receive a strong benefit from merit goods, whether or not they recognize this benefit. There are several reasons that a consumer could fail to see the correct worth of a good, whether through lack of complete information, distorted preferences due to advertising, or overvaluing the short term costs compared to long term benefits. Musgrave believed that “there may arise a distortion in the preference structure that needs to be counteracted” (Musgrave, 1959), mainly through government intervention, in the form of full or partial subsidy and legislation. An example of merit goods mentioned in Article 26 of the Universal Declaration of Human rights is Education. Many consider education to be a merit good, as it creates many benefits for those who consume it beyond the obvious ones of greater employability…

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