fallacies of a market approach to public higher ed

In the wake of big debates about rising tuition, North Carolina’s trusty right-wing blog carries a snide analysis of the rising cost of tuition. The gist:

the market for a college education is highly distorted by government subsidies to the schools, direct student aid, and cheap government loans. These factors artificially inflate demand, and create a sizable wedge between what the consumers (students) pay for the product and the income taken in by the producers of that product (the universities). The inevitable result is skyrocketing prices completely out of line with true consumer demand.

There are lots of reasons the analysis is wrong, including:

  • The consumers of public higher education are not the students, but the public, who pay for having better educated students.
  • The mission of public universities is not just undergraduate education, but the discovery and communication of knowledge.[1] So the blog post’s sniffy attitude toward “duplicative and little-sought after degree programs or “research centers” is certainly inappropriate and misunderstands the character of a university and the value of diverse approaches within it.
  • There is enormous inequality in families’ ability to pay for education, which in turn has enormous effects on future earnings. (It does not follow that this is the principal reason[2] for education, but it is an important effect.) So subjecting undergraduate education to pure market forces would without question make college a mechanism of reproducing and exacerbating economic inequality instead of (however meagerly) mitigating it. Indeed, this is one area that even conservatives should prefer interference in the “market,” since severe economic limits to access would further thwart the possibility of hard work and talent to reap economic rewards in the marketplace.
  • I’m sure there are more fallacies in the approach–add on!

[1]Credit for this formulation goes to Barbara Entwisle, among the most effective advocates I’ve heard for the broad research agenda of the university.

[2]Actually I would argue that higher lifetime wages are not a particularly important goal of public higher education. If that were the primary goal, a more thoroughly debt-based approach to financing education, more like home mortgages, would be in order, since it would allow the beneficiaries to borrow against the future products of current education. But if the primary goal is (as I believe) insuring that the public’s children are exposed to a broad intellectual environment to improve their  performance in all parts of their lives (as citizens, critics, consumers, producers, artists, parents, etc.), the public has an interest in this beyond the provision of classroom slots.

2 Comments

  1. krippendorf
    Posted February 14, 2012 at 8:34 am | Permalink

    This critique is especially ironic in light of the standard (economically) conservative argument about rising income inequality and the college wage premium, i.e., that employer demand for high-skilled, college-educated labor has outstripped the supply of college-educated labor, thereby driving up wages for those who have secured a college degree.

    One can’t help but thinking that the blogger is more concerned about particular types of people earning college degrees than s/he is about too many people earning college degrees.

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  2. Posted February 14, 2012 at 12:57 pm | Permalink

    One issue is “effective demand” which is the combination of need/desire and the resources to pay. Everyone needs housing and food, but not everyone can afford to pay for them. There is a real shortage of affordable housing for people of low means at the same time as the artificial demand for housing as an investment created by the home loan industry inflated prices.

    There is a genuine puzzle about why the rise in college tuition has outstripped the cost of living, and a genuine public issue about how much public money (and undergraduate tuition) ought to go into the kind of basic research and scholarship the universities do.

    But “artificial demand” is the wrong way to think about this issue. Individual students seek college degrees because there are very high individual payoffs for doing so, largely due to the decline in wages for people who don’t have college degrees, not the rise in wages for those with college degrees. It IS impossible EVER to reduce inequality through raising the educational level of everyone, but that is a different issue.

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