Oh, Good Lord. The lefty in the Oval Office is now calling for free community college. For two years, anyway (if it’s passed, though, it will expand to more; mark my words). It’s not technically “everyone” he wants to give it to — but millions.
TANSTAAFE. (There ain’t no such thing as a free education.)
[I]t’s not clear that a public option would automatically raise student success. Take California’s community colleges, which have the lowest published tuition in the nation – $1,135 in 2011-12 – and are essentially free to many students who qualify for Pell Grants.
A 2012 analysis by the Institute for a Competitive Workforce found that retention and completion rates across California’s community colleges were above the national average. But completion rates were even higher at two-year colleges in Wisconsin and North Dakota, where tuition is two to three times as high and Pell Grant recipients make up a larger percentage of enrollments.
Part of the reason: students work harder when their education isn’t free. The Federal Reserve Bank of New York (official motto: we don’t just interfere with a market economy; we also do research!) published a study in 2004 that came to the following conclusion regarding the effect of subsidies in higher education:
The findings are that subsidizing tuition increases enrollment rates, however it also considerably reduces student effort. This follows from the fact that a high-subsidy, low-tuition policy causes an increase in the ratio of less able and less highly-motivated college graduates. Additionally, and potentially more importantly, all students, even the more highly-motivated ones, respond to lower tuition levels by decreasing their effort levels.
Additionally, any time there is a giant government giveaway, one must remember the lesson of Bastiat’s “Broken Window” parable: the economy consists of the seen and the unseen. We see the people who get free education. What we don’t see is the alternate things that could have been done with the money by those who actually pay for it. Because community college under Obama’s idiotic plan won’t actually be “free” — it will simply be paid for by other people. And the money taken from those people is thereby diverted from other uses, including savings supporting capital investment our market economy.
Finally, there is the “Bennett Hypothesis” — the hypothesis advanced in 1987 by William Bennett that increased subsidies lead to increased tuition. Better yet, the “Bennett Hypothesis 2.0,” a label used by Andrew Gillen, who did his own study in February 2012 and concluded:
As higher financial aid pushes costs higher, it inevitably puts upward pressure on tuition. Higher tuition, of course, reduces college affordability, leading to calls for more financial aid, setting the vicious cycle in motion all over again.
I suppose it could be just a coincidence that increased government subsidies have coincided with increased tuition, just as prices rise in any industry that is subsidized. But this is not merely a case of correlation not meaning causation, because the cause-and-effect relationship is simple, basic economics. Colleges have fairly fixed costs, and have an incentive to charge whatever they can, as extra students increase profits without greatly increasing marginal costs. Subsidies enable large increases, and the worse the problem gets, the more government will subsidize.
This is a disastrous idea on multiple levels.
But given the low level of economic education in the country, including among the media, it seems unlikely that anyone is going to understand this. Expect people beaten down by ridiculous tuition rates to cheer and applaud a policy that will inevitably make the problem worse.