New Tune, Same Stupid Key

October 7, 2009 | Blog

Well, it had to happen sometime. Faced with a thoughtful, responsive piece of federal legislation to reform the financial aid system, some ideologue had to come forward with a proposal to end federal student aid entirely. Yep, you heard me right– get rid of financial aid. Throw out the baby with the bathwater.

The Chronicle is reporting that a director of the Cato Institute’s Center for Education Freedom — aka the freedom not to be helped by the government– is purporting that “student aid explains the pain” of rising tuition. This “higher education expert” (honestly, some people are way too kind) argues that phasing out aid will make colleges more responsive to people who pay “with their own money.”

Too bad this expert, Neal McCluskey, didn’t bother to do his homework. If he’d cracked a book, he would’ve learned–fast– how wrong he is. Not to mention unoriginal. Back in 1987 then-Secretary of Education Bill Bennett made the same argument in a New York Times op-ed titled “Our Greedy Colleges.” And economists including Ron Ehrenberg, Caroline Hoxby, and Sandy Baum flatly rejected it–on empirical grounds– as simplistic and ideologically convenient (much as Kevin Carey apparently did today). Since that time, plenty of studies have tested the hypothesis. As one (real) expert, Harvard’s Bridget Terry Long, puts it, “Of the many studies that have tried to identify whether colleges react to federal financial aid, most find little to no response. While several studies do find a college price response, their overall results are mixed and often contradictory. In summary, none of the numerous studies on the subject have found a “smoking gun” in terms of college pricing behavior….the fact that these two trends (rising tuition and rising aid) move in similar directions does not mean that one caused the other.” Heck, even Rich Vedder’s shop has moved past the simplicity of the idea, instead developing a (somewhat) more nuanced twist in which aid contributes to rising spending, not rising tuition (the latter could occur, but isn’t inevitable).

Yet the Bennett hypothesis keeps on rearing its ugly head. I think after more than 20 years of this nonsense it’s time to call the idea what it is– just plain stupid– and stop giving ink to the people who repeat it.

3 Comments

  1. Reply

    Anonymous

    October 7, 2009

    Whenever you subsidize a product or service the price is driven up. This is common sense and not some "outmoded" idea.

    I suspect it draws such a visceral reaction because (to use the venacular of the left) it is an "inconvienient truth".

  2. Reply

    Scheevel

    October 8, 2009

    "Stupid?" "Nonsense?" The Bennett thesis is economics 101, subsidies inflate costs. It's interesting that the CATO post and CCAP post provide valid explanations with pointers to actual metrics. All I see in this post is name calling, some supporting data might be more constuctive.

  3. Reply

    Malcolm Kirkpatrick

    October 8, 2009

    Neal McClusky addressed these objections here. I would add a few comments on the language used in this discussion.
    1) You call educational freedom " the freedom not to be helped by the government".

    "Political power grows out of the barrel of a gun"--Mao Tse Tung

    Eduardo Zambrano
    "Formal Models of Authority: Introduction and Political Economy Applications"
    __Rationality and Society__, May 1999; 11: 115 - 138.

    "Aside from the important issue of how it is that a ruler may economize on communication, contracting and coercion costs, this leads to an interpretation of the state that cannot be contractarian in nature: citizens would not empower a ruler to solve collective action problems in any of the models discussed, for the ruler would always be redundant and costly. The results support a view of the state that is eminently predatory, (the ? MK.) case in which whether the collective actions problems are solved by the state or not depends on upon whether this is consistent with the objectives and opportunities of those with the (natural) monopoly of violence in society. This conclusion is also reached in a model of a predatory state by Moselle and Polak (1997). How the theory of economic policy changes in light of this interpretation is an important question left for further work."

    The government of a locality is the largest dealer in interpersonal violence in that locality (definition). The State (government, generally) cannot subsidize education without a definition of "education", but then students, teachers, and taxpayers are bound by the State's definition. Tax-supported tuition "help" comes at great cost, in money, in time (e.g., the expansion of required core curricula, the proliferation of classroom-required occupational licensure), and in the opportunity cost to society of the lost innovation which a competitive market in education services would generate.

    2) "Ideological" is an uncomplimentary way to say "systematic" (the antonym is "scatter-brained").

    3) "Simplistic" is academicese for "stupid". William of Occam cautioned long ago against unnecessary complications. To people of an instrumental bent, simplicity is usually a virtue.


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