What would be the unintended negative consequences of this?
It reminds me of the story of a West African king who went on a pilgrimage to Mecca. On his way to Arabia, the king gifted so much gold to all intervening communities that the price of gold crashed, taking with it the economies of North Africa and Arabia.
Unlike gold which is a scare resource, knowledge is non-rivalous. College tuition acts as an economic exclusion mechanism and thus only allows consumers/students with sufficient means to gain access to it.
By removing the exclusion mechanism for these students, it in effect turns college education into a public good.
As a country, we've deemed that this is so vastly in the public interest that we provide free K-12 education to all students regardless of how much (income/property tax) their family pays.
I'm not very familiar with studies of free college-level educations, but based on the thousands of studies that shows the incredible economic and social benefits to obtaining higher levels of education, I'd wager that any negative consequences will be vastly out weighed by the positive impacts.
Knowledge is non-rivalrous, but it's not settled that the value of a college education comes mostly from added knowledge. If instead it comes from signaling, then it's no longer the case.
Agree with you on the signally aspect. As a nation we've become obsessed with college degrees and college may not be the right choice for everyone. But that's a whole other discussion thread.
Public goods are both non-rivalrous and non-excludable. This is an important distinction. We fund public goods as a society because they are very difficult to fund otherwise since you can't exclude the people who don't pay. Education is easy to fund privately. It should be funded publicly to the extend that society benefits from it. Most of the benefits of an education accrue to the student.
The same as any tuition program or grant: When you separate the cost from the consumer, prices skyrocket. With 100% of their tuition being paid by anonymous donors, why should these kids care how much it costs? And if the kids don't care and have a blank check, why shouldn't the schools raise the price tag?
I'm just using this an example of unintended consequences in this type of stuff. I'm well aware this handful of kids aren't enough to skew tuition prices, that most public institutions (which this program seems to target) have caps on tuition increases, etc... Regardless, disconnecting the consumer from the price of the product have caused tuition prices to rise artificially fast.
As the article notes, most of the recipients use the grant at the community college, which is the least expensive possibility involving an accredited college and real degree.
When you separate the cost from the consumer, prices skyrocket.
Not always. Cost of education in the UK has skyrocketed more since the scrapping of grants in favour of a loans+tuition fees model. Part of this is that when there is a marketplace based on prestige, nobody wants to appear cheap, so price becomes based on the highest price that the market will bear.
This is an iteresting and valid point. the counter example to the uk (20 years ago, in medicine and in university) is the us. In the USA both medicine and college are inflated because between the taxes collected and the end user there are [insert conspiracy theory here] actors of questionable probity. Everyone benefits from the massive opaque flow of cash. Politicans get the clout of collecting tax and the support of the [insurance, university, hospital, dentist, doctor, finance companies]. Then everybody gets "cost+pricing". To "pay their fair share." But the intermediaries skimm the pool and make extraordinary profits on the cost base hollywood accounting style. With a wink and a nod. Its a great system. =D
If there is a limited supply of a good that is highly desired by the richest in society, and if price is used as an indicator of quality for that good, then it is the connection between the cost and the consumer that drives prices upwards.
For things like speedboats and handcrafted watches and personal spaceships, this is all cool, and I don't think that randomly insanely rich people buying toys like this does much harm really on the scale of things and probably does a lot of good if anything. Power tends to follow a power law, no matter what kind of politics you try and squidge in the middle.
However, if it is then thought to cause injury to the society in general for certain goods (such as education and health services, for example) to be priced above people's general means, then the state can lower the cost of that good by regulation or by direct competition by the state. The purchasing power and drug research of the UK's NHS being a good example.
And I don't think there is any massive contradiction in being lassie-faire capitalist with most stuff and socialist with specific areas. It seems to be how places like Finland get along mostly, and they seem to be doing ok.
[edit] Just thought, private spaceships shouldn't be on that list as they follow a different set of economics, as the rich people who want them are directly funding their construction rather than purchasing a consumer good. Posh watches and big speedboats follow this rule though.
The USA is 6x the size of the UK. Thats the trick. The issue we have: who wants to aggregate all of that power in the hands of [insert conspiraciy theory] actors of dubious propriety. With healthcare thats a problem @20pc GDP (70% increase of size of Gov't spend). With schools, it would need to be thought through, but is likely more manageble. The main conflict with schools is they fight for money, for the research (aka, presitige). Alot of that money comes from the Gov't. And alot of the cost base is fancy non-education-related things.
I read your first version and didn't think it was particularly off topic, but then again I can meander all over the place when it comes to discussions.
You can look to Eastern European economies for that, as they still pick up the tab for majority of university education.
1) There's certain stigma attached to blue-collar jobs now that everyone and their pet hamster are proud bearers of a college diploma. Finding a good plumber is next to impossible.
2) There's a subset of people thrown into permanent unemployment. Might be a cultural thing, but second education is a rare beast (as you hang out with students of the same level pretty much throughout the degree, so there's social pressure to be in the same age group as other classmates), and if your first and only degree is not very employable (hi, History majors), it becomes a constant conversation point of how screwed up the society is when a college graduate cannot find a job.
In regards to point #1, I foresee (or at least hope we will see) a swing back in the other direction, as wages for skilled labor skyrocket and scarce supply of skilled labor makes it a laborer's market (pick and choose your hours, etc)
Many people aren't "paying for it" today already - can we judge if they're taking it more or less lightly than they otherwise would have?
Given that we have 20 year olds taking on tens of thousands of dollars in debt, when I don't really think most of them have any perspective at all to judge the seriousness of that, I'm not sure we can say that everyone going to college today is 'paying for it'. We might say that many of them are paying for it (in many senses of the phrase) for years/decades to come.
More people learning stuff doesn't devalue the learning that other people do, it adds to it. The economics of ideas are not the same as the economics of physical commodities.
What would free education do to the labormarket if students no longer had to work part time to make ends meet? What would happen to housing market when students have disposable income not going to tuition?
"No man is an island" is not just a trite old adage, but a very real economic principle.
Heh, I was throwing John Donne about these boards the other day funnily enough.
I suspect that if free education plus a free living allowance were paid for by the state to impoverished students, then you would have the UK until the mid '90s.
And given the levels of unemployment in the US at the moment, it could do a lot worse than paying those who are going to be out of work anyway, to go to school instead of sitting idle.
Also, as the housing market crash was partly triggered by toxic credit, people having more actual money as opposed to relying on debt would have probably reduced this slightly.
[edit] Also, I think it is fair to say that John probably wasn't thinking about keeping people poor to satisfy the demand for cheap labour in an oligarchic plutonomy when he penned those words.
For I am involved in mankind. Therefore, send not to know for whom the bell tolls, it tolls for thee.
It reminds me of the story of a West African king who went on a pilgrimage to Mecca. On his way to Arabia, the king gifted so much gold to all intervening communities that the price of gold crashed, taking with it the economies of North Africa and Arabia.