Wednesday, July 10, 2013

Why is College So Expensive?

The inflation rate for a University education has been growing explosively for decades - far faster than inflation and even medical inflation. Opinions on the shape of the Earth differ, here as elsewhere.

This Forbes guy says it's simple: It's a subsidized good. That inflates demand.

The economic logic has a certain truthiness to it, but it's lacking in the specificity I want. If education is sucking up a lot more money, into what is that money going? Lavish amenities for students and staff? Proliferation of new departments and majors (Asian Transgender Text Analysis, anyone?), big money for faculty and administrators, greedy bankers sucking on the bloating corpse of higher ed? I haven't been able to come up with numbers.

Besides, higher education has been a subsidized public good in the US for well over a century. Why was it still dead cheap 40 or 50 years ago?

It's at least plausible that the explosion in private college costs is mostly decoupled from that of public colleges. In the latter case, there has been a huge retreat in the share of the costs that State governments have been willing to pick up. The case can be made that Ronald Reagan's declaration of war on UC Berkeley was the beginning of the Republican retreat from belief in public education. Reagan and Prop 13 began California's retreat from free education to fee education, but by now capitulation by progressive forces has been complete, as Aaron Bady and Mike Konczal tell the story here.

Subsidized college education played a big role in making the US the economic powerhouse of the world. That economic backbone is now under heavy attack, with cost continuing to increase and return on investment declining.