The affordability theory that Nelson identifies in her article points to the existent of a market failure that the government may need to intervene in to remedy. She argues that childcare quality is under-demanded in the market. She posits that three factors lead to this market failure: externalities, information failures, and liquidity constraints. In general, she claims that parents may not be demanding the appropriate amount of childcare because they do not have access to all the information they need to make the best possible choices and because they may be wary of the quality of childcare because it is not something that can be easily measured. Parental payments on their own, then, will lead to a less than optimal quantity of childcare.
