Economics Article Review


The article ‘The Positive Externalities of Child Care and Market Failure’ explores the issues that arise in the daycare market in the modern day and the parallels that can be traced from the daycare markets to the economics and the concept of a characteristic market failure, which essentially implies the inability of a market to distribute the assets and available resources in an efficient manner. In general, the market of child care creates difficulties for the business and rural economy for the reason that working mothers and fathers are forced to end their employment in order to take care of the children (‘The Positive Externalities of Child Care and Market Failure’, 2014). The insufficient amount of decent daycare centers for children forces the parents to look for other child care centers in other regions, largely contributing to the inability of working mothers and fathers to continue working as usual and provide steady income for their household (‘The Positive Externalities of Child Care and Market Failure’, 2014).

The concept of market failure implies that it can take place both in cases of positive and negative externalities, for example, in cases if the welfares of a product or a service are overflow inside the general population in the first place. As a result, the businesses and the companies that offer a product or a service do not have an ability to charge the client for the welfares that are a direct result of a market spillover (‘The Positive Externalities of Child Care and Market Failure’, 2014). The example of the daycare market is similar to this statement. Daycare market accepts a role of an education for the young children who are not yet ready for school. As a result, those children who are accepted into daycare are more prepared for their future education, which in turn largely contributes to their widely endorsed tax-paying and honest life that benefits the economy of the country and the general population as well (Harbach, 2015). On the other hand, the possible benefits of the daycare centers are rather long-term and can be extended to all members of the general population and not a single household separately.

Spillovers take place in cases when certain prices or welfares of a business contract are not replicated in the contract individually but are expressed to other parties as a substitute, including in the framework of a child care market. From the point of view of the positive externalities, in a case when the market agents are not able to grasp the entire price of a specific asset, they usually are reluctant to pay a price that might be corresponding with its general price. According to the recent research, “those clients who are not willing to “demand or purchase as much of the resource as would be socially optimal, and the market price of the resource doesn’t accurately reflect its full societal benefits” (Harbach, 2015, p. 680). Furthermore, in cases when these larger welfares are not clarified in the market dealings and contracts, an under-allocation of the assets occurs. Individual welfares are different from the public welfares; moreover, the separate market dealings and contracts do not result in the effective consequences with regard to the society in general (‘The Positive Externalities of Child Care and Market Failure’, 2014). Without any doubts, the daycare centers that offer services of the highest contribute to the development of the children, their families, and a household in general. In addition, recent research suggests that high-quality daycare services increase the social capital from various aspects and result in significant financial benefits as well (‘The Positive Externalities of Child Care and Market Failure’, 2014).

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