Saturday, July 2, 2016

Data Illustrates the Destructive Positive Feedback Loop of the Rapid, Unending Rise of College Tuituion

It's always gratifying to see the data illustrate what we've been saying is happening all along.

Also, this creates a positive feedback loop -- subsidies create artificial demand, increasing prices, and after prices increase, you need ever higher subsidies to feed the now-higher tuition prices. Naturally, the prices have been rising by insane levels over time. On top of this, loose government subsidies for college incentivize loose college considerations -- people go to college who should not be going to college, and with so many young people not even finishing the degree they started, or just as bad, if not worse -- finishing degrees they don't end up using for their career. This also creates utterly bizarre and/or useless degrees and studies that contribute little to nothing more to society and economy than the 'Triggly Puffs' of the world and their sad, intellectually dishonest, unproductive, destructive ilk.

This is all while saddling so many with absolutely crushing and lifestyle-debilitating amounts of debt. Debt that you cannot avoid, by the way -- if unsecured private debt isn't paid, it goes on your credit report. If unsecured government debt isn't paid, it still goes on your credit report, but they can also garnish your wages and/or put a levy on your bank account.

It's all a very, very miserable cycle that that hampers society and is primarily there to help wealthy colleges, universities, and academia in general to keep prices and wages at massively artificially inflated levels -- all at the expense of our youth, all while being a massive propaganda mill. The government-subsidized student loan system is a giant racket and should be abolished.

A snippet from the article (original source of the data, here)...

With all factors present, net tuition increases from $6,100 to $12,559. As column 4 demonstrates, the demand shocks — which consist mostly of changes in financial aid — account for the lion’s share of the higher tuition.

Specifically, with demand shocks alone, equilibrium tuition rises by 102%, almost fully matching the 106% from the benchmark. By contrast, with all factors present except the demand shocks (column 7), net tuition only rises by 16%.

These results accord strongly with the Bennett hypothesis, which asserts that colleges respond to expansions of financial aid by increasing tuition.

The 'Bennett Hypothesis' goes back almost three decades (by William J. Bennett, Secretary of Education in 1987) and is the theory that as long as the government ensures the bills will get paid, colleges will raise tuition. The idea that this would happen is, of course, nothing special nor original to libertarians and Austrian School economists -- but pro-regressives and special interests in academia have naturally contended it ever since by playing with the statistics, despite the data and logic showing the contrary again and again. Color me surprised.

It's good to see them eat crow on this, yet again. Let private loans manage it and all of these problems will fix themselves.

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