HOET presentation notes.docx - "Smith's policies on...

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"Smith's policies on education should be adopted, with particular reference to Exeter University." Discuss. Presentation notes Subsidising Adam Smith suggested in the Wealth of Nations that fees could be subsidised “so that even a common labourer can afford it” with “the master being partly, but not wholly, paid by the public.” (Wealth of Nations, Book 5, Chapter 1, Part III). Deadweight loss - A subsidy would cause the supply curve to shift downward by an amount shown by the arrow. Without subsidy: Consumer surplus: A+B Producer surplus: C+D With subsidy: Consumer surplus: A+B+C+F+G Producer surplus: B+C+D+E Deadweight loss: H Subsidising also contributes to a smaller budget surplus/bigger budget deficit and has a huge opportunity cost. Government must pay: B+C+E+F+G+H Furthermore, education for everyone (through subsidising) will stunt economic growth in the short run due to a shortage of labour shifting the short run aggregate supply curve to the left reducing the total output of the economy from Y1 to Y2.
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