Friday, October 2, 2015

Free Tuition?

Recently Canadian Green Party leader Elizabeth May echoed American Presidential candidate Bernie Sanders in calling for an end to tuition. The NDP have taken the more "moderate" position of interest free student loans.  They are not alone, Brazil, Sri Lanka, France, Malta, Germany and Scotland also offer a university education gratis.  Not surprisingly this scheme is supported heavily by both students and faculty but there are some reasons to be skeptical about it.

The Canadian federal government already owes their creditors six hundred billion dollars; how precisely will this bonanza be financed?  Would May sabotage our economy by raising taxes ? Would she cause inflation by printing the money? There is no such thing as a free lunch.  And why should the cost of an education fall on anyone aside from the student who receives it? What our country needs is an aggressive program of tax and spending cuts not massive new entitlement programs.

There are already too many people going to university. Why shouldn't a prospective student have to rationalize their educational plan with a financial institution while applying for a loan? Or, heaven forbid, actually work their way through college. The cheaper something is the more of it will be purchased. Dropping tuition charges to 0 (or some nominal fee for books) will mean that more people leave the work force and enroll in university.  More students will also mean more faculty members as well as support staff, and all of this will exacerbate the burden on the remaining taxpayers. If this program is extended to foreign students then this problem becomes even greater.

There is a finite pool of loanable funds.  When the state guarantees student loans, and makes them accessible to virtually anyone, this lowers the supply of capital available for other financial activities and thus increases the cost of borrowing. Scarce resources are redirected away from where they would have the greatest benefit to consumers towards unnecessary post secondary education. Scarcity exists. It is crucial to consider both the initial impacts of a policy as well as the other unintended consequences, or as Bastiat put it, the seen and the unseen.

Nor are universities entirely benign; much of what is taught, in particular concerning the social sciences, is simply not true. When professors teach that capitalism is evil or that government intervention in the economy is critical to our long term prosperity they are not only incorrect but they are actively making things much worse.  Ideas both good and bad are extremely powerful.  Our beliefs and philosophies shape the future. If every sociology professor resigned tomorrow and began flipping burgers the world would be a much better place.

In the days of old, the the task of rationalizing the state's rule was delegated to the clergy.  Priests would convince the people that the King was anointed by God and must be obeyed; in exchange they enjoyed their share of the royal plunder.  In Oriental Despotism the King actually was God. Of course today we live in an enlightened society and so secular intellectuals have supplanted this role, and like the church of yesteryear they too justify the rule of the state and they too share in the take. They not only have a pecuniary interest in etatist policies, the continuation of the socialist / interventionist regime is critical to their well being as there is little demand for their "talents" on the free market.

Rather than gifting free tuition to all, it would be much better to stop subsidizing education all together. A lot of post secondary education is vital but there will always be a demand for vocational or professional training absent the massive program of subsidization which exists today. By eliminating the subsidies to universities and colleges which exist today the taxpayer will no longer be soaked to pay for utterly unnecessary programs and courses and can be allowed to keep a little more of their hard earned money.

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