(2) Schansberg on Higher-Ed Reform: How Much Does ‘Free’ Cost?
by Eric Schansberg, Ph.D.
In this Great Recession, it is sad to see the ranks of the unemployed crowded with so many youth. I think we can all agree that this is deplorable — and that we should try to find an equitable and efficient method for improving the lives of our young people.
So, I have a proposal: Tuition and books at a public university should be free to all students. Students would attend the public university closest to their home. This would be financed by some combination of local, state and federal taxpayer dollars. And it would be regulated by a similar combination of local, state and federal oversight — university boards, parent-professor associations, state legislators and a new federal program. We will call it “No College Student Left Behind” or NCSLB.
Those who want to attend a private university would still have that option. They would pay taxes to support the public universities and then pay private-school expenses on top of that. A wide variety of private schools — some religious, but mostly secular — would be available to satisfy the demand for various niches in the market for higher-education services.
All government loans and grants would be eliminated, since there would no longer be a financial barrier to obtaining a college education. Students could still borrow money from family, friends or banks to pay for education at a private university — or more affordable online degree courses.
Think about the benefits: First, in the short-term, it would reduce unemployment among the young people (and others) by engaging them in another productive endeavor.
Second, education — a wonderful thing — would be freely accessible to all. In the long-term, at the micro level, we would expect an increase in worker skills, leading to higher pay. At the macro level, we would expect an increase in human capital and technological advances, leading to more economic growth.
Third, jobs would be created throughout higher education — from administrators to professors to staff. Construction at universities would boom, creating an untold number of jobs in the building trades. Publishers would sell more books, office furniture-makers would sell more desks, computer-makers would sell more laptops, and so on.
Of course, there would be complaints.
Private schools would vociferously oppose what they would describe as “unfair” competition, having to operate alongside highly subsidized public schools. But the market they serve is fundamentally different, and one might argue that their preferences should not be allowed to supersede the greater, public good.
Some taxpayers might complain about higher taxes. But how many would notice the difference? With the costs spread over multiple levels of government and across many taxpayers, the per-tax, per-person costs would be modest. In any case, what’s the big deal about those in the middle and upper classes paying additional taxes?
Bureaucrats connected to government grants and loans might lose their jobs. But more bureaucrats would be needed to regulate the growing public-sector efforts in higher education. And those displaced from loans and grants could probably be shuffled to other areas of the education bureaucracy without much impact.
The biggest ruckus would probably be raised by economists. As George Stigler once pointed out, economists are “the premier ‘pourers of cold water’ on proposals for social improvement,” particularly through government activism. Although political supporters and Utopian dreamers focus on the benefits of such proposals, an economist would inevitably ask about its (opportunity) costs as well.
The costs? Resources taken from taxpayers would be diverted from efficient uses to the subsidized area. Some people would have money taken from them through taxation — to support an activity that other people would not value enough to devote their own resources.
Proponents of free higher education would point to its positive ripple effects. But the diverted resources would also have negative ripple effects. On net, we would be merely moving resources from one sector of the economy to another. In a grand shell game, jobs would be gained, but more jobs would be lost.
Economists would also wonder about the impact of reduced property rights and ownership. If one doesn’t pay for something, they are less likely to take it seriously. This is already a concern since higher education is subsidized significantly by the federal and especially state governments. With even less skin in the game, students would be more likely to treat the education casually, reducing its value for all students.
Of course, if you don’t like my proposal, then you should also be opposed to our current provision of K-12 education. Elementary and secondary public schools are free, and students must attend the government-run school in their neighborhood — unless their parents are wealthy enough to attend private schools or resourceful enough to homeschool.
If my proposal is not all that swift for young adults, how can it be the policy of choice for children?
Eric Schansberg, Ph.D., an adjunct scholar of the Indiana Policy Review Foundation, is a professor of economics at Indiana University Southeast.