tag:blogger.com,1999:blog-32902056.post7893526555480049804..comments2024-03-19T00:10:09.383-07:00Comments on Paul Goldberg: Prepayments on student tuition feesPaul Goldberghttp://www.blogger.com/profile/10952445127830395305noreply@blogger.comBlogger1125tag:blogger.com,1999:blog-32902056.post-61124771023951821302011-07-12T05:46:19.437-07:002011-07-12T05:46:19.437-07:00This is a classic case of a government department ...This is a classic case of a government department (or two - the Treasury will be in on this one) trying to achieve everything at once. They want their money back eventually, they want to lend at a rate that is higher than the rate at which the Crown can borrow, but they also want to build in progressivity.<br /><br />If you could do everything at once, you might end up with the optimal outcome, given your policy objectives. But you might not, and in any case, when you build more and more objectives into the design of a single policy instrument, they start to interfere with one another (as with welcoming early repayment from some but deterring it from others).<br /><br />So a much more sensible approach is to separate the objectives, and to use separate instruments to achieve them. Make the loan system simply a lending operation, and get progressivity through the income tax system.<br /><br />The overall result is likely to be sub-optimal, although you may achieve optima in lending and in progressivity considered separately. But that is life. It is a big mistake in government not to accept imperfection.Richard Baronhttp://www.rbphilo.comnoreply@blogger.com