The following is not a bad letter to the local newspaper here in Baton Rouge, but analyzing its limitations are very useful. First, the letter:
Gov. Bobby Jindal is being vilified for imposing necessary cuts to higher education, but most of the governor’s critics have added little to the public dialogue on the important issue of how to fund our colleges and universities.
One writer recently claimed on these pages that Jindal’s actions will raise the cost of higher education. Such arguments are poorly informed.
The governor does not control the (aggregate) cost of higher education, nor would his “draconian” budget increase those costs. It would, however, SHIFT certain costs of higher education from taxpayers to students (or their parents) — a distinction with a difference.
Nobody likes higher prices, but let’s try changing the focus on higher education from entitlement to investment. Higher education is an individual investment as well as a public good, which means its benefits are both private and public.
Consumers of educational services benefit directly by receiving higher lifetime incomes and favored social status. Society benefits because more educated citizens mean higher tax revenue and a lower crime rate.
But neither the benefits nor the costs are divided equally. Louisiana students pay about 60 percent of the cost of higher education, while the state pays the rest. The question no one is asking is whether this 60/40 split is arbitrary or justified.
What is the proper allocation of costs?
In 2006, people with bachelor’s degrees earned 1.86 times that of high-school graduates, a difference that bestows a lifetime advantage of more than $1 million upon the college graduate. At the same time, the average cost of a four-year degree at a public university was less than $43,000. Simple math yields a “naïve” benefit-cost ratio of approximately 23-to-1. The actual ratio will vary for each individual because some of the benefits and costs are highly subjective.
Adding the time value of money and the opportunity costs of forgone wages will likely push the ratio down. But there is a huge cushion in these numbers. They leave us with the impression that higher education is a high-return individual investment; and probably would be even if its entire cost were borne by students.
Budget considerations notwithstanding, the real calamity in Louisiana is not that future students may have to pay more college tuition, but that the state spends more than twice as much per capita on prison inmates than it does on college students.
[name redacted; it's available at the above link]
Now the analysis of the limitations. First, there's no discussion of context: in Louisiana the repeal of the income tax provisions of the Stelly Plan, which hurt state revenues, and the recession, which also hurt state revenues as sales taxes are more volatile than income taxes.
Second, as readers here will know, I defend a political view of higher education: preparation of the next generation of citizens. There is no necessary conflict with a vocational view. The problem with the economistic letter above is that it can’t articulate what’s at stake in the political view, because of its atomistic presuppositions about what constitutes public and private goods, and, perversely enough, its inability to distinguish populations and individuals.
To concentrate on the last point: the author correctly states that the average payout of a college degree is larger than the average payout of a high school diploma. (We should of course be providing a strong safety net [aka a "social wage"] to make sure non-college-degree holders enjoy a decent standard of living, but that's another story.) But decreasing state aid and increasing tuition and fees concentrates risks at the individual level (taking on debt to pay for tuition, fees, and living expenses, which may not pay off in the individual case.) Thus poor students have to weigh their individual chances, which may or may not reach the average. (A real question here is the distribution around the average.) So the more tuition rises – and the more volatile the job market becomes for skills obtained at college – the more irrational the choice becomes for poor kids to take on debt for college.
To return to the political question: taking on debt leads to more pressure on vocational choice of major in hopes of paying off the debt quickly. But that puts pressure on liberal arts courses that are seen only as hurdles, rather than as citizenship training (critical thought, historical breadth and depth, and moral sensitivity – think here of Nussbaum on literary study for the last point). An analogy here is with proposals to reduce medical school costs to encourage young physicians entering general medicine, which has much greater public health effects than lucrative specialties.
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