Higher-than-inflation challenge

Glenn Reynolds had a nice piece about student loans in the Wall Street Journal yesterday. These two paragraphs reminded me of an observation (that I will turn into a challenge) I’ve had for a while:

Why do students have so much debt? According to a recent study by Mark Perry, a professor of economics and finance at the University of Michigan at Flint, between 1978 and 2011 college tuition in the U.S. increased at an annual rate of 7.45%, vastly exceeding the rate of inflation and the almost-stagnant rate of growth in family incomes.

The difference has been made up by more and more debt. With costs above $60,000 a year for many private schools, and out-of-state costs at many state schools exceeding $40,000, some young people are graduating with student loan debts of $100,000 or more, sometimes much more. A study released last month by Fidelity Investments found that 70% of the class of 2013 is graduating with college-related debt—averaging $35,200.

Yep.

Here’s the observation/challenge:

Name a sector of the economy where prices have consistently grown at rates higher than overall inflation and that does not have government involved to a heavy extent. 

Education (K-12 and college) and health care are two common examples where cost increases have consistently outpaced inflation and both have government — Federal, State and Local — heavily involved.

In sectors of the economy without a great deal of government involvement, we generally enjoy more innovation and lower costs, or at least costs that do not rise faster than inflation consistently.

About these ads

Comments

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s