Information Imperfections: The Achilles' Heel of Entitlement Plans

Abstract

Entitlements have been proposed as a mechanism for financing an expanded national program of postsecondary education (e.g., Levin 1977; Kurland 1977; Nolfi 1977; Barton 1977). In theory, entitlement plans achieve greater economic efficiency and more social equity in access to education than current subsidy arrangements do because they cast suppliers and consumers of educational services in market relationships. That is, instead of giving direct subsidies to postsecondary schools, entitlement plans award vouchers-limited authorizations to spend public funds-to individuals so that they can purchase educational services from competing suppliers. Suppliers accept the vouchers as payment for services rendered, and the issuing agency redeems them for cash.