http://www.nytimes.com/2012/06/14/opinion/the-college-graduate-as-collateral.html?_r=2&nl=todaysheadlines&emc=edit_th_20120614
The author is discussing economics of college education in the US. In place of financing this with debt, he has proposed a novel market solution to enable investors to finance the education in return for future potential payoff. So instead of paying off the debt the student will later on in life pay more in taxes part of which will go to the investors who took the risk to finance earlier on. This way the student remains free of debt burden in return for the agreement to contribute part of the earnings differential (due to education) towards the investment pay back.
Thinking more about this it actually makes a lot of sense to have a market mechanism in place to evaluate risks and returns for particular lines of education..individual students may or may not be able to make an informed decision and the wrong turn could lead to debt burden down the road without pay off if the line of education they went in goes out of favor with the job market..but the collective market may be able to better evaluate the longer term potentials for various fields of study and accordingly set the pricing and financing..credit derivatives markets exist to evaluate and swap credit risks..similarly these could be education derivatives which the investors could bet on based on their project of the direction of economy..
The author is discussing economics of college education in the US. In place of financing this with debt, he has proposed a novel market solution to enable investors to finance the education in return for future potential payoff. So instead of paying off the debt the student will later on in life pay more in taxes part of which will go to the investors who took the risk to finance earlier on. This way the student remains free of debt burden in return for the agreement to contribute part of the earnings differential (due to education) towards the investment pay back.
Thinking more about this it actually makes a lot of sense to have a market mechanism in place to evaluate risks and returns for particular lines of education..individual students may or may not be able to make an informed decision and the wrong turn could lead to debt burden down the road without pay off if the line of education they went in goes out of favor with the job market..but the collective market may be able to better evaluate the longer term potentials for various fields of study and accordingly set the pricing and financing..credit derivatives markets exist to evaluate and swap credit risks..similarly these could be education derivatives which the investors could bet on based on their project of the direction of economy..
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