Friday, December 18, 2015

The college scam

Last week, former host of Dirty Jobs, current host of Somebody's Gotta Do It, and all-around awesome guy Mike Rowe delivered a resounding smack-down to socialist-Democrat folk hero Bernie Sanders.  Rowe, normally the epitome of genial politeness, was left momentarily at a loss for words, and resorted instead to letters - specifically, W, T, and F.

The offending incident was a tweet from Sanders: “At the end of the day, providing a path to go to college is a helluva lot cheaper than putting people on a path to jail.”  The nonsensical implication is that lack of college education puts people at risk for trouble with The Law.  Mike Rowe, in case you didn't know, is a passionate advocate for unglamorous but honorable and vitally imporant jobs, and bristles at the notion that the path to respectability and prosperity necessarily leads through a four-year institution of "higher education."  I'm 100% with him on that.  Welders, mechanics, electricians, plumbers, oilfield workers, and others at the grittier end of the employment spectrum make pretty decent money, and are every bit as respectable as doctors, engineers, and accountants (and probably a lot more respectable than some other fields I could name.)

But that's only the tip of the iceberg of why pushing people, with words and with subsidies, toward college is a bad idea.  Unfortunately it's all too easy for our reasoning to go astray from the path of sound logic and economics.  We observe that college graduates on average earn higher incomes than those without degrees, and from there leap to the conclusion that the way to greater prosperity for more people is to expand access to college.  That leap involves a logical fallacy, known as the fallacy of composition.

It does not follow that because college graduates make more money on average, if everyone goes to college then everyone will make more money.  We might just as well observe that professional athletes make a lot of money, so wouldn't it be great if everyone were trained as a pro athlete?  I hope it's obvious how silly that notion is.  There is, after all, a limit to the demand for pro athletes in the job market.  No matter how many people put their hearts and souls into training for the NBA, only the 300-400 best players are going to find employment.

Similarly, no matter how many people get college degrees, the best doctors, lawyers, and engineers are going to be hired first, and probably at lower salaries than they otherwise might have had, because they have a lot more competition for those jobs.  We can safely assume that subsidizing degrees in, say, engineering, will indeed produce more qualified engineers, but it doesn't increase the demand for engineers.  Instead, it creates a surplus of engineers and a shortage of whatever those people would otherwise have become if left to their own devices.

In fact, that's probably a rosier scenario than what's actually happening.  If we were only getting an unmarketable surplus of doctors, engineers, and computer scientists, that's not great for people in those occupations, nor for the employers who needed people with skills that those surplus grads might have learned had they not been diverted into college.  But hey, at least doctors and engineers are useful.  What we may be getting in greater numbers are graduates with degrees in things such as literature, gender studies, and liberal arts.  Science and math aren't sexy, after all, and as we're frequently reminded, it's simply important that you go to college, not that you carefully choose a field of study with applicability to today's job market.  One can debate the relative intellectual and aesthetic merits of those fields of study, but the hard truth is that there's not a lot of economic demand for them.

To see how pressuring young people to go to college and subsidizing their "education" distorts the market and ultimately harms many more people than it helps, it's necessary to understand how things would work without those things, in a free market.

If people have to pay for college education out of their own pockets, it's a safe bet that colleges would adjust their rates to what their prospective customers could reasonably afford.  In an unregulated market, producers want to sell their product.  Of course they want to make a profit too, but pricing it beyond the reach of customers is not a very effective way to do that.  Thus, making college more "affordable" by making it artificially easier to get supplemental funding, in the form of grants and open-ended student loans, also makes it safe for colleges to jack up their tuitions.  If the average student can only afford to pay $5,000 a year, then it would make sense for most colleges to offer their services for that amount or less.  If it's easy to get $30,000 a year in grants or loans, then of course they're going to adjust their expectations and charge at least $30,000.  Instead of reducing the costs of higher education, subsidies radically increase the cost of educating each student, and then compound that by attracting more students.  It's like the old joke about making a profit by selling below cost but making it up in volume.  Making college "free" is an intellectually dishonest endeavour; the costs are only shifted - and exponentially magnified - not eliminated. 

Also, people tend to take things they pay for themselves a lot more seriously than if they believe (rightly or wrongly) that someone else is footing most or all of the bill.  If I'm paying for a college degree out of my own pocket, it's pretty likely that I'd want to make sure that degree is going to be in demand in the job market.  I'd want to be reasonably sure that it would increase my earning potential enough to compensate me for the use I could have put my money and labor to otherwise.  I'd also want to choose a field in which I believed I could excel.  I wouldn't want to waste my time and money to become a mediocre engineer if I could be a very good plumber, for instance -- any more than I'd want to spend a lot of time and money training to become a basketball player who can't make the cut in the pros.  I might still have delusions about my talents and choose poorly, but at least the incentives make that less likley.

The same applies to lenders.  Private banks and other lending institutions aren't in the business of losing money (unlike government grant and loan organizations.)  Those that offered loans to college students would have a strong incentive to lend only to students pursuing degrees that are in demand.  If engineers are making the big bucks, and English lit majors are flipping burgers, then a lender is going to prefer to lend to students of engineering, and politely decline to finance literature degrees, or at least they would probably offer much better interest rates and repayment terms to would-be engineers.  In fact, such lenders would be a fantastic resource for young people deciding what careers to pursue, who might otherwise have no clue how to figure out what occupations are the best earning potential.  A lender who wants to make profits and avoid losses has a strong incentive to study the market very carefully, and that knowledge is useful to borrowers as well.  By contrast, government programs are designed to provide funds to those deemed in need, without regard for how wisely or frivolously they might be spent. 

When college is subsidized, though, there is less incentive to choose one's fields of study carefully, and less incentive to take it seriously.  The mantra that "If you want a good job, you need a college education" doesn't help either, as it implies that any old degree will assure you of a better job than you'd get without one -- that merely having a degree is more important than any particular skill you might acquire.  The popular perception of college years as a time for partying and socializing, to whatever extent they reflect reality, probably owe a lot to these attempts to make college more accessible.  Even for students serious about learning, there's less incentive to focus on acquiring knowledge which is valued in the job market, and studying whatever tickles their fancies.  Again, I don't have any problem with people studying medieval French literature or the influence of 90s alternative rock music on society and politics, but I can't see much justification for subsidizing them at other people's expense.

In fact, I would go so far as to say that most, if not all, of the lunacy that takes places on college campuses these days - such as the militant fixation on political correctness - can be laid at the feet of government interventions designed to make it more accessible.  It seems unlikely to my mind that a young person seriously pursuing a career in chemical engineering or computer science would have much patience for a school obsessed with superfluous nonsense.  Just as you'd probably pass on a doctor who spent more time and money filling his waiting room with trendy magazines and modern art than on diagnostic equipment and current medical knowledge, so the student would far rather choose a school with a reputation for excellence in the chosen field, period, not one wasting precious resources on policing the sex lives of students or indoctrinating them with leftist politics or the fashionable social crusades of the day.

It's the discipline of the free market that makes a college education most beneficial to those who are truly suited to benefit from it.  Subverting and garbling the signals of the market in a misguided attempt to extend those benefits to everyone else only ends up doing harm, to the public at large, to the people with the personality and ability profile to really make the most of a college education, and most of all to those who end up diverted from other paths for which they were better suited and would have found more fulfilling and more financially rewarding.

Bottom line:  Do we want people to go where their talents and temperaments are most valued and productive, or do we want to funnel everyone through the factory farm of a subsidized university system because we can't get past mindless platitudes?

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