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Profligacy for Austerity?

Summary:
Suppose you strongly desire to drastically increase the amount of education that people consume.  What should you do? The obvious answer: Make education completely free of charge – and have the government pay the the entire cost. I say this obvious answer is obviously right.  As I explain in The Case Against Education, I favor extreme educational austerity, because I think the education system is a waste of time and money.  Nevertheless, given the goal of drastically increasing educational attainment, completely shifting the cost burden from consumers to taxpayers is highly effective. Yes, there is some “crowding out” – when the U.S. government spends an extra billion dollars on education, consumption of education probably rises by less than a billion dollars.

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Suppose you strongly desire to drastically increase the amount of education that people consume.  What should you do?

The obvious answer: Make education completely free of charge – and have the government pay the the entire cost.

I say this obvious answer is obviously right.  As I explain in The Case Against Education, I favor extreme educational austerity, because I think the education system is a waste of time and money.  Nevertheless, given the goal of drastically increasing educational attainment, completely shifting the cost burden from consumers to taxpayers is highly effective.

Yes, there is some “crowding out” – when the U.S. government spends an extra billion dollars on education, consumption of education probably rises by less than a billion dollars.  Still, total U.S. consumption of education has ultimately increased by trillions of dollars as a result of past government subsidies.

This seems undeniable, but Tyler Cowen now suggests that free college is a way to restrain education spending!

7. College free for all: Would wreck the relatively high quality of America’s state-run colleges and universities, which cover about 78 percent of all U.S. students and are the envy of other countries worldwide and furthermore a major source of American soft power.  Makes sense only if you are a Caplanian on higher ed., and furthermore like student debt forgiveness this plan isn’t that egalitarian, as many of the neediest don’t finish high school, do not wish to start college, cannot finish college, or already reject near-free local options for higher education, typically involving community colleges.

Tyler graciously acknowledges that I personally oppose free college.  (Come on, my book even has a section called “The Hidden Wonder of High Tuition and Student Debt”!)  Still, Tyler thinks that one viable way to achieve my austerian goal is to make college free.

I could understand Tyler’s claim if Warren were calling for draconian price controls on tuition.  That would be a wonderful way to shrink the sector, though I’m confident that state and local taxpayers would make up much of the shortfall.

I could understand Tyler’s claim if Warren were calling for educational rationing – to deny access to large swaths of would-be students.  That, too, might shrink the education sector.

Warren’s actual proposal, however, imposes neither price controls nor rationing.  Instead, she offers mountains of money to both students and states.  Students will have extra Pell Grants (not loans!) that pay for not only tuition, but housing, transportation, food, and books.  States that agree to eliminate tuition will receive a further bounty:

Warren’s vision calls for the federal government to partner with states that want to invest more in their public universities and match that state investment. While other plans have been dollar-for-dollar, or a 2-to-1 federal match, Warren wants the federal government to kick in two-thirds of the funding, making it a deal states would be hard-pressed to turn down.

Of course, all these plans have a catch; if states don’t want to take the money, their universities are left out of the equation.

Tyler could protest, “The U.S. has the best colleges in the world, thanks to our combination of public and private support.  Warren’s plan starves many of our best schools.”  This would be a fine argument if Warren proposed eliminating private support while keeping public support constant.  What she’s actually proposing, though, is to increase public spending so much that total education spending rises.  Probably by a lot.

Given budget constraints, I’d expect Warren’s plan to be heavily watered-down if it happens at all.  That hardly shows, however, that the watered-down version will work in the opposite of the original plan’s intended direction.  Worse comes to worse, states will turn down her offer and keep tuition where it is.

I know why I oppose Warren’s plan: I love austerity – and so should you.  Yet anyone who remains convinced that even more kids should go to college should be intrigued by her profligate proposal.

Bryan Caplan
Bryan Caplan is Professor of Economics at George Mason University and Senior Scholar at the Mercatus Center. He has published in the New York Times, the Washington Post, the Wall Street Journal, the American Economic Review, the Economic Journal, the Journal of Law and Economics, and Intelligence, and has appeared on 20/20, FoxNews, and C-SPAN. Bryan Caplan blogs on EconLog.

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