In response to a New York Times story, Fewer options open to pay for costs of college, Thomas Sowell explains the economics: Money spent on college is money that can’t be spent on something else.
How many people would go to college if they had to pay the real cost of all the resources taken from other parts of the economy? Probably a lot fewer people.
Moreover, when paying their own money, there would probably not be nearly as many people parting with hard cash to study feel-good subjects with rap sessions instead of serious study.
There would probably be fewer people lingering on campus for the social scene or as a refuge from adult responsibilities in the real world.
Without tax-funded scholarships, second- and third-tier private colleges would fold — or find ways to lower costs radically. Public universities and community colleges offer so much more for the money.
Update: In part 2, Sowell suggests promising students looking for college money could sell stock in themselves to investors, who’d be paid from post-college earnings. Of course, this would favor future business execs not future teachers.
I can see a home mortgage-like crisis bearing down on the college aid industry, and it’s not a bad thing.
What percentage of the cost of college is borne by taxpayers? I don’t think it’s a very large percentage.
Government-backed college loans cost the taxpayer something, but not nearly as much as the face value of the loan. Besides, taxpayer-backed loans not a large percentage of the total US tuition bill, as far as I can tell.
I’m not sure what Joanne’s definition of second- and third-tier private colleges is. If by that she means colleges that are selective, but not as selective as Stanford and Harvard, then her analysis ignores the fact that right now those colleges’ applicant pools are skyrocketing with the demographic bulge of the high school classes of 2008 and 2009– even though right now those colleges cost a lot more than publics, and government-backed loans don’t come near to making up the difference.
“The cost of college” is complicated. Even when I was a grad student at Stanford, the undergraduate tuition wasn’t that big a part of the university budget (despite sophomoric editorials in the student paper insisting the the undergraduates were “the only reason” for the school to exist). Schools like Stanford get a lot of their operating budgets from government sponsored research, but my feeling is that this money is generally well spent, and at the moment essentially all of the basic research in the U.S. is done at universities. This money pays a part of the salaries for faculty in fields that get grants, and pays for facilities that are used for training students in those fields, as well. I think that it is likely that tuition doesn’t cover all (and maybe less than 3/4’s) of the cost of training in fields like CS, physics, EE, that generate a lot of research money for universities.
College tuition goes up BECAUSE the schools can get away with charging it, and once they get the money, they spend it on dubious things like absurdly fancy gyms and dorms, and this leads to an arms race among schools competing for the USN&WR title, and stupid to NYT’s articles about how we should “help pay” for college, so that schools can still increase tuition by 10-15% a year and pay for stuff that is even more expensive and unnecessary. Pretty soon the only kids going to Harvard or Stanford will be the children of lower middle class families or the children of billionaires; no one else will be able to afford it.
So is Sowell saying money spent on college not worth it? I believe he should check some of the studies on lifetime earnings, college graduates vs. high school graduates.
Of course, given his company on Townhall I’m not surprised he’d prefer a large uneducated populace for the corporations to abuse. And a course he’s a fellow at that bastion of Republican proganda, the Hoover Institute.
Sorry, I DO know how to spell propaganda
“So is Sowell saying money spent on college not worth it?”
No, he is not. I’ll pick an extreme example of what he is saying to illustrate his point more clearly. He is saying that many people would not spend $35K per year (tuition at places like Stanford) of their own money and remove themselves from the workforce for four or five years to get a B.A. in Women’s Studies.
I suspect that he is correct.
Imagine the following thought experiment. Upon graduation from high school we give every graduate $100K. They can then spend it on the degree I mentioned above, or keep the money. How many people getting the degree do you think would take the money for it out of their own savings account?
Obviously, money can be spent on a college education that generates a financial return. But … a lot of money spent on college education does not.
Sowell’s point is that people will be more careful about making these economic decisions when it is their own money rather than someone elses.
“I believe he should check some of the studies on lifetime earnings, college graduates vs. high school graduates.”
And I believe that these studies should break out the earning differences based on:
1) College, and
2) Degree pursued
A four-year engineering degree from MIT is going to be more valuable than a four-year liberal studies degree from Northern South Dakota State.
Interestingly, this breakout *was* done a few decades ago based on school (but not degree). At the time it found that going to a college below the approximately top-300 conferred *no* economic advantage (NOTE: I’m going off a report of the study … but I trust the [politically liberal] reporter].
Sowell’s point is that when you are spending other people’s money, you tend to be a lot less careful about getting value for the money. I have a hard time arguing with this.
-Mark Roulo
Mark,
I agree with your point about spending other people’s money.
Or as Stephen Coonts put it, in his one non-fiction book, “We only truely appreciate that which we have earned”
Mike, your ad hominem attack on Thomas Sowell says much more about your ability or willingness to think than it says about him. Your shallow and dismissive response to his argument strongly suggests that you don’t understand his argument. Did you even read it or try to understand what he’s saying?
To take your logic to its logical conclusion, we should just give everybody medical degrees and everybody will magically be able to live the way doctors live today. The truth of the matter is that there will always be a wide distribution of incomes. When the percentage of college grads gets to a certain point, quite a few of those college grads end up having to take lower-paying jobs which formerly only required high school degrees. Those people end up with an expensive piece of paper, a lot of debts, and moderately paying jobs. That is happening more and more today. We have many people in colleges (because it’s cheap and “expected”) who just aren’t college material (and who are diluting the financial and academic value of degrees).
If you want to assign a financial value to a college education, you can only do so when comparing what everybody in a job market has. If everybody has a bachelor’s degree, it becomes essentially worthless. Employers end up demanding a master’s or a PhD in order to differentiate candidates, even though the people who formerly did those jobs without the advanced degrees did perfectly well without them. When relatively few people had college degrees, a person with a bachelor’s was in demand. They’re so common today that they don’t provide the same advantage that they once did. Of course, this is the simple and obvious economics of supply and demand, but some people overlook it with the notion that everybody can somehow be brought to the same economic standard. That’s irrational fantasy.
But getting to what Sowell’s point actually was, it’s hard to know whether the cost of college is financially worth it or not for students today, because they don’t pay the actual cost. He is saying that if the cost of college weren’t subsidized in various ways, that actual cost might be higher than the additional lifetime earnings from having the degree. I don’t know whether he’s right or not, but it’s an interesting idea. If he’s right, taxpayers might be subsidizing something that has an increasingly poor return for individuals or society as a whole. But when we can’t know the true costs, there’s no way to calculate the truth. (This is why a market economy is so much better than one where costs are hidden, because actual costs allow people to make rational decisions on what’s most important to them.)
I generally disagree strongly with many (maybe even most) of the writers at townhall.com, but I’m not so prejudiced that I can’t evaluate Sowell’s ideas on their merits. If you’ll read some of Sowell’s books, I think you’d find that he is a brilliant economist. Even if you don’t end up agreeing with him, you might learn that not everyone who disagrees with you is simply yearning for an uneducated populace.
BTW, it’s the Hoover Institution, not the Hoover Institute.
David,
Thank you for the correction, I always seem to get that mixed up.
As for Sowell, he equates the idea of states helping to defray the costs of college with the Soviet economy some how. He also calls it “Robbing Peter to pay Paul”
In the end who will be a more valuable member of society, the person trying to better themselves by attending college, or the people who do absolutely nothing to improve their lot in life?
I can have no respect for a website that employs William Bennett, who had the audacity to publish a book called “The Book of Virtues” (which I have read) in which he tries to instill his version of morality, while at the same time he was averaging a quarter mill in gambling losses.
His money, his life but it takes gall to try and pretend you can tell others how to live.
Oh and let’s not forget he founded a company with junk bond king Michael Milliken, who cheated others out of millions of dollars.
You’ll understand my lack of respect for their writings.
re: a place like Stanford or MIT or Cal: hardlyb said:
(Federal Research dollars) pays a part of the salaries for faculty in fields that get grants, and pays for facilities that are used for training students in those fields, as well. I think that it is likely that tuition doesn’t cover all (and maybe less than 3/4’s) of the cost of training in fields like CS, physics, EE, that generate a lot of research money for universities.
You’re right, but you’ve under-assessed. Tuition for undergraduates at MIT covers 50% of the expense of an undergraduate education. the rest is subsidized by the grants, contracts, and other funding sources that MIT has, many of which are federal research dollars, but also include private companies
‘ contracts, grants, individual gifts, etc.
Federal research grant dollars do not just cover tuition or training in those fields. Overhead and other billables in those grant dollars are at set rates, and those rates are figured to cover various unversity expenses, and essentially, 1/3 of all of the dollars spent on liberal arts at UC Berkeley for example, comes from science and engineering research grants.
That said, there’s no science research at Skidmore or Macalester college. They can charge more because of federal student aid, and because of the market rising overall–as more people go to college. But without financial aid, they wouldn’t be able to fill their doors at these prices.
Joanne said:
–Public universities and community colleges offer so much more for the money.
But they don’t offer more SLOTS. They might offer more bang for your buck, but you’d have to get in. Good public universities are desperately trying to find ways to handle their bulging populations. And why are they bulging? in part, because of easy access to financial aid. Community colleges in many places are swelling too. In CA, you don’t even need to maintain a C average to get grant money. Is this really helping students prepare for life? or receive a broad and rigorous education?
this is part of Sowell’s story: because of this mindset that college is for everyone now, everyone takes out loans to go to college whether or not they belong there. The swelling demographics would sort itself out if you had to address your own costs and value of that college education. But now, you don’t. So you can use that time to indulge in as much alcohol and drug use as you want, with basically no consequences. How, exactly, is this helping people?
–In the end who will be a more valuable member of society, the person trying to better themselves by attending college, or the people who do absolutely nothing to improve their lot in life?
But a large fraction of those attending college are doing Absolutely Nothing to improve their lot in life. Many are partying. They live in subsidized dorms where the cops don’t stop them from smoking pot, and their neighbors don’t complain, and no one evicts them. They attend courses on rock music, ecologically sustainable grocery shopping, and lesbian literature themes in modern film.
Removing these people from the scene would problem stop a lot of negative externalities on those who ARE trying to attend college to better themselves.
In the end who will be a more valuable member of society, the person trying to better themselves by attending college, or the people who do absolutely nothing to improve their lot in life?
Higher education does not have a monopoly on people betterment.
I can’t prove it, but if someone could, I would be willing to bet that the average high school graduate without a college degree is a better person than his college-degreed counterpart. I have encountered not a few self-important, arrogant college profs/students in my journey around the block, and I don’t think indoctrination in postmodernism, feminism, queer studies, ethnic studies, and the race-gender-class paradigm will ever produce good human beings.
I would even go so far as to say that the average non-college-degreed stay-at-home mom is probably an infinitely nicer and more decent person than some published university feminist who gets off watching the Vagina Monologues. The former is a vital and integral part of civilization, but who the hell needs the latter?
Mike in Tejas said:
“Sorry, I DO know how to spell propaganda”
Of course you can, Mike, your idiomatic grasp of the language proves it. None but a master could get away with “And a course he’s a fellow”, not to mention “We only truely appreciate that which we have earned”.
“Financial aid” is not the relevant metric, here. Macalester offers financial aid to two thirds of its freshmen, but that has nothing to do with taxpayers; it’s a tuition reduction offered by the college. The relevant number is the amount of total Macalester tuition paid that comes from guaranteed student loans. Is that what’s driving up college costs for selective colleges? I think, instead, what’s driving tuition prices up is that there are more students wanting to attend selective colleges now, but no more spots in selective colleges.
Mike, whether you respect William Bennett or Michael Milliken has nothing to do with what Thomas Sowell wrote. I don’t care whether you respect them or not. They’re not the point here. It’s irrational (and illiberal) to trash Sowell’s ideas because you don’t like other people who might be associated with a particular web site.
As for your other points, you’re confusing issues. The subject is whether the current college system is financially worthwhile (to students or society) and about whether it is possible with our current system for a student to make a rational decision about its value. The question of whether a person will be a “more valuable member of society” is so vague as to be meaningless in this context. Even if I ignore the fact that your standard is elitist (as a business major, in your view, must be a more valuable member of society than a plumber), we don’t have schools who are turning out graduates with solid liberal arts educations in the sense which you imply. Instead, we have colleges who compete to fill their seats with huge numbers of people who aren’t capable of doing what has traditionally been college work. Those students (those who should have never been in college in the first place) are handed pieces of nice parchment paper after four or five years, even though they’re (in many cases) less educated than yesterday’s high school grads.
I’m not sure how Sowell’s point comparing the current payment scheme to the old Soviet system is unclear. A socialist system collapses (in large part) because there is no way to internally value costs or benefits, because there is no true market. That is true of our system of paying for college. Because students are not faced with the true costs of an education, they have no way of knowing whether it is worth the cost in their particular circumstances. That’s because the true costs are shielded from them and others pay those costs (mostly involuntarily). It’s like if stores suddenly started making goods available at artificially low prices. People would storm in to take the “bargains,” regardless of their needs and ignorant of whether the products were worth whatever was paid by those who subsidized them. In that respect, our subsidized college system is very much like a socialist system. That is Sowell’s very rational point.
David,
Thank you for the clarification of what you’re saying.
I am not an elitist, I’ve had to pay a plumber by the hour so I know what their value is.
Sowell’s (and I’m assuming your) view is that colleges are competing for students and admitting unqualified students. Somehow market forces will take care of this?
I may not be an Economics professor with a long list of books and articles to my name but I do know this; education is an investment. Comparing it to buying cheap goods at artificially low prices is comparing two unrelated things. Sowell seems to be missing that point.
“In the end who will be a more valuable member of society, the person trying to better (himself) by attending college, or the people who do absolutely nothing to improve their lot in life?”
I find that absolutely appalling. I would say (many would disagree) that formal education is a small factor to be considered when valuing a person’s station in life. And no lack of education could make me think the government has a right to take a person’s money and give it to ANYone, regardless of what Great Thing he plans to do with it for himself and society.
The older I get, the farther I lean Libertarian.
the comments in this thread are more informative than sowell’s article. his article is free market boilerplate w/ little insight or info specifically about college ed. he must have an autocomplete function on his computer where he just fills in a few blanks. i would probably agree w/ him if he provided some evidence about how public subsidies distort the ed industry in particular. waste of time.
Waste of Shift-Key, Dave.
And no lack of education could make me think the government has a right to take a person’s money and give it to ANYone, regardless of what Great Thing he plans to do with it for himself and society.
Ironic that you would pick today of all days to make this statement, given that it is generally considered Tax Free day, or the day we work till to pay our taxes.
The govt. takes money from us all the time to serve the needs of others, whether its filling up your car or buying items at the store.
> I do know this; education is an investment.
You might want to rethink your metaphor. After all, if it’s an investment it’s subject to measurement and comparison. Not all investments are equally worthwhile and people will naturally flock to the investment that promises the best return. That’s not really what you had in mind, was it? Let me help you out a bit.
This is what you should have written: education is too valuable to be considered a mere investment.
There. See how well that works?
If education’s too valuable to be considered a mere investment then all those dreary monetary considerations can be loftily ignored. Queer studies or MBA, it’s all education and anyone who thinks of it in terms of future earnings isn’t worth noticing.
> The govt. takes money from us all the time to serve the needs of others, whether its filling up your car or buying items at the store.
Yeah, and it’s a net loss for society but a net gain for those who are adroit enough to work the system skillfully.
A couple of points.
IMO, the studies of lifetime earnings of college students vs high school students are irretrievably polluted by the self-selection bias of the two populations. Like it or not differences in ability reflect themselves in lifetime earnings regardless of college attendance. But college attendance also depends on ability. I don’t think there’s a good way to come up with an unbiased data sample.
Second, colleges, indeed any institution, will (indeed must) raise it’s prices if there’s a subsidy for its services. The GI bill and low-interest loans are direct and indirect subsidies. As Sowell says, the true cost is not reflected in the net price charged, so naturally, there is an increased demand. Colleges encourage demand for another reason, as well. A component of the public rankings is the percentage of applicants accepted. The number of applicants refused admission is a direct measure of the excess of demand over the supply of college slots.
It has become accepted practice among most corporations to require a college degree before they will even consider a person as a potential hire. This is true even when the skills for the position do not require college level training. It’s a way to select on intelligence and ability without actually testing for it. Congress and the courts have seen fit to outlaw such testing. Furthermore, the guilded professions (medicine, law, engineering, etc.) all require specialized training in addition to basic college level studies. Anyone with aspirations to work in these fields must go to college. All this serves to increase demand for college positions and is not unrelated to the studies of lifetime earnings. And it allows colleges and universities to raise their prices.
As a society we still have a split view of college. Is it education the whole man, as earlier vision of higher studies have been or is it now advanced job training?
Joanne writes, regarding the idea of students selling stock in themselves, “Of course, this would favor future business execs not future teachers”.
Look however at the present situation: teachers generally comprise the bottom 20% of college graduates. Under any system, that bottom 20% won’t be favored. Maybe that’s not such a bad thing?
“teachers generally comprise the bottom 20% of college graduates.”
This is not true. College students (freshmen, if I recall correctly) who say they intend to be teachers have SAT scores that are over-represented in the bottom quartile and quintile of the college population as a whole. This is *TOTALLY* different from claiming that they “generally comprise the bottom 20% of college graduates.”
For one thing, 25% of college graduates aren’t teachers, so this is mathematically impossible. Not even 12% of college graduates are teachers, so they can’t even be the majority of the bottom quarter.
-Mark Roulo
Actually Mark I think you’re mistaken. It was high school students who said they wanted to be teachers if I remember correctly.
“Actually Mark I think you’re mistaken. It was high school students who said they wanted to be teachers if I remember correctly.”
Could be
I don’t always recall correctly.
The statement that “teachers generally comprise the bottom 20% of college graduates” is still false, however
-Mark Roulo