EXERCISE 12.6 SOLUTIONS TO THE CREDIT CONSTRAINTS PROBLEM The 'asset' acquired by attending a university is a person's knowledge, problem- solving abilities, contacts, gained as a result of higher education. Two ways to turn this asset into collateral (as with a car loan or home mortgage) are described below. Compare and evaluate these solutions to the credit constraints problem from the standpoint of efciency and fairness. 1. One proposed solution to the credit constraints problem is that a company or other organization could select promising secondary school students and offer to pay their entire cost of higher education (the student's degree program chosen by the company) in return for the student's agreement to work for the company for ten years, on terms determined by the company. 2. During the nineteenth century many Europeans wishing to move to North America and lacking the funds and unable to borrow to pay for the trans Atlantic voyage agreed to what is known as an indentured servitude contract. Their prospective North American employer would pay for the voyage, and in return the person would be obligated to work for the employer, perhaps for many years