America's Reasonably Effective System of Higher Education Finance

Moneybox
A blog about business and economics.
June 14 2012 5:07 PM

America's Reasonably Effective System of Higher Education Finance

I have a lot of issues with Luigi Zingales' proposed reforms to America's system of higher education finance, but rather than delve into the details I think it's worth questioning his premises, which seem to be widely shared.

There's a widespread belief in the United States right now that American higher education is in some sense badly broken. People on the left tend to emphasize the fact that a falling rate of subsidy relative to price has left students more-indebted than they were in the past, while people on the right argue that the existence of subsidy has rendered the whole sector bloated and overpriced. But normally when you see a badly mismanaged sector with bloated costs, what you see is that it becomes uncompetitive on the international stage. This is one of the reasons why export-oriented economic development plays such an important role in catch-up growth success stories. Every poor country wants to launch some brilliant industrial policy scheme. But one of the only ways to tell if your industrial policy is actually working rather than simply serving the well-connected is to see if foreigners who aren't invested in your development scheme will buy your products. We know that Samsung isn't just living on political rents because they're selling phones at a profit in North America.

Advertisement

Back to higher education.

It's logistically difficult to export higher education services. But America manages to do it! And by all accounts we'd be exporting even more higher education services if our immigration policy was more cooperative. These students aren't coming to the United States to suck at the teat of federal subsidies. They're coming because people think the American education experience is worth paying for. Now admittedly, a fair share of this is that people are paying for a consumption experience (i.e., college is fun) rather than to build human capital. Perhaps that's a problem. But entertainment and hospitality services are a legitimate form of economic undertaking. The point is that whatever it is exactly that American colleges are selling, if it's as bloated and overpriced as people say it should be impossible to export. Yet it's not. People are clamoring for more.

If there's a legitimate grip with American higher education it would have to be that the product is too high quality, involving a bundle of too much fun stuff when really students should be studying in grim conditions rather than enjoying themselves. But that's a very different argument from the idea that status quo college is inefficient or a bad deal.

Matthew Yglesias is the executive editor of Vox and author of The Rent Is Too Damn High.

TODAY IN SLATE

Culturebox

The End of Pregnancy

And the inevitable rise of the artificial womb.

Doctor Tests Positive for Ebola in New York City

How a Company You’ve Never Heard of Took Control of the Entire Porn Industry

The Hot New Strategy for Desperate Democrats

Blame China for everything.

The Questions That Michael Brown’s Autopsies Can’t Answer

Foreigners

Kiev Used to Be an Easygoing Place

Now it’s descending into madness.

Technology

Don’t Just Sit There

How to be more productive during your commute.

There Has Never Been a Comic Book Character Like John Constantine

Which Came First, the Word Chicken or the Word Egg?

  News & Politics
The World
Oct. 23 2014 1:51 PM Is This the ISIS Backlash We've Been Waiting For?
  Business
Moneybox
Oct. 23 2014 5:53 PM Amazon Investors Suddenly Bearish on Losing Money
  Life
Outward
Oct. 23 2014 5:08 PM Why Is an Obscure 1968 Documentary in the Opening Credits of Transparent?
  Double X
The XX Factor
Oct. 23 2014 11:33 AM Watch Little Princesses Curse for the Feminist Cause
  Slate Plus
Working
Oct. 23 2014 11:28 AM Slate’s Working Podcast: Episode 2 Transcript Read what David Plotz asked Dr. Meri Kolbrener about her workday.
  Arts
Brow Beat
Oct. 23 2014 6:55 PM A Goodfellas Actor Sued The Simpsons for Stealing His Likeness. Does He Have a Case?
  Technology
Technology
Oct. 23 2014 11:45 AM The United States of Reddit  How social media is redrawing our borders. 
  Health & Science
Science
Oct. 23 2014 5:42 PM Seriously, Evolution: WTF? Why I love the most awkward, absurd, hacked-together species.
  Sports
Sports Nut
Oct. 20 2014 5:09 PM Keepaway, on Three. Ready—Break! On his record-breaking touchdown pass, Peyton Manning couldn’t even leave the celebration to chance.