Trade-offs

Nice job Joe Gerarden, in the video below, for getting Joe Biden to admit that government subsidies have increased college tuition.  Here I criticized Obama for seeming to be unaware of this fact of basic economics.

I’ll give the Vice President credit for demonstrating a better understanding of basic economics than President Obama.  He admits that government subsidies have increased tuition.

I also agree with Biden that subsidies have increased the number of college students.  That is basic supply and demand.

But, unlike Biden, I’m not confident that’s a good thing.  Too bad Mr. Gerarden didn’t have a counterpoint for that.

How do you convince someone like Biden that more college graduates isn’t necessarily a good thing?

After some discussions about this topic with the “more is better” (MIB) crowd, I’ve been asked, Do you want to be the one to tell Susie she can’t go to college and has to figure something else out?

I think the MIB crowd envisions two outcomes for potential college students:

  • Outcome 1: Allowed to go to college and then you have a better shot at the good life.
  • Outcome 2: Not allowed to go to college and then life will be miserable and a struggle.

I see two problems with this vision.

First, I would not need to tell Susie that she cannot go to college. No one disallows Susie from going to college, except for Susie herself.  It’s her decision.

Just because demand for a college education is lower in a world without government subsidies, doesn’t mean that someone is telling anyone they can’t go to college.

It means fewer people choose college because they view their other options as having more relative value without the government subsidies distorting the picture.

We all make similar economic choices every day without noticing it.  You might pass on your first vacation choice because airfare is too expensive and settle on your second choice and still enjoy yourself.   Or you choose the less expensive cut of meat or the lower priced bottle of wine at the grocery store.

Second, having a college degree isn’t the determining factor between success and failure many people seem to think it is. 

I know statistics say that college graduates have higher lifetime earnings, but remember that statistics can be misinterpreted.  College graduates include a few degree programs that do have high wages (primarily due to artificial constraints on supply) like doctors.  Also, a few business folks do climb to the top of their bureaucratic piles and make a lot of money.  Take just these two groups out of the college crowd and the earnings for the rest begin to look closer to a lot of non-college grads.

Also, remember, the non-college grad group includes a lot of folks that may not spend as much time in the work force because they raise families.

Remove some of the outliers from both groups and college grads and non-college grads start to look a lot more like our friends and family.  I know plenty of both who have done well.

So, nobody is telling Susie that she can’t go to college and she isn’t being consigned to a miserable life. Rather, she’s deciding for herself to pass up on the $100,000 liberal arts degree to start a cupcake catering business in her kitchen that eventually grows into a successful business.

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One thought on “Trade-offs

  1. Also, the statistics showing the earnings advantage of college graduates over non-college people are probably greatly skewed by the fact that more intelligent and gifted people tend to choose college rather than go directly into the work force. If these people had chosen not to go to college, they still would have been a success because of their innate abilities. Attributing their success to college is to mistake cause and effect.

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