Most economists fail to realize that most simplistic proposals like the one The Chronicle reported need to be prefaced with the words, "In an economically ideal world..." The thing is that very rarely do we find situations that fit the criteria of an economically ideal world.
The professor's claim would only hold true if there are free entry and exit, identical firms, and low transaction costs. In this perfectly competitive market, no single university would be able to determine its tuition, because tuition would be the same at all universities ad infinitum. Actually, tuition would increase, but only due to inflation.
Since higher education is clearly not a perfectly competitive market, the foundation of the professor's proposal crumbles and does not undermine the importance of the Higher Education Act.
He says that public funds are wasted on sports facilities, athletics, and research. While I cannot speak for all public universities, at UC much of the funding for these said activities come from alumni or corporate contributions. Kay is right in saying that the increase in tuition is actually due to the lack of public funding. Funding for student services come mainly from student fees. In the 21st Century, students are shouldering most of the burdens of higher education, then the private sector, and the public sector actually contributes relatively little compared to the other two. In fact, one could argue that due to the unnecessary strain put on the private sector, not increasing public funding for higher education is actually hurting the American economy.
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Conservative Economist Says College is "Overfunded"
The Chronicle reported today on an economics professor at Ohio University that says college is overfunded and opposes the Higher Education Act. In fact Richard K. Vedder founded the deceptively named Center for College Affordability & Productivity that has a mission of seeing how "forces of the market can be used to make higher education more affordable and qualitatively better." In short, they want to cut off public funding to colleges and universities, privatize them, and leave students to pay the price.
I'm not an economist, but this doesn't really make sense to me. There are for-profit colleges, but these colleges don't really provide the same education provided at non-profit universities. I think we'd agree that college tends to be overpriced -- with tuition going up in double-digit percentage points in some recent years, but the reason is to make up for the lack of state funding. If we cut this to zero, student would be taking on the whole of the burden. That'd be fine for people that could afford it, but it would really solidify a class divide in this country.
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The professor's claim would only hold true if there are free entry and exit, identical firms, and low transaction costs. In this perfectly competitive market, no single university would be able to determine its tuition, because tuition would be the same at all universities ad infinitum. Actually, tuition would increase, but only due to inflation.
Since higher education is clearly not a perfectly competitive market, the foundation of the professor's proposal crumbles and does not undermine the importance of the Higher Education Act.
He says that public funds are wasted on sports facilities, athletics, and research. While I cannot speak for all public universities, at UC much of the funding for these said activities come from alumni or corporate contributions. Kay is right in saying that the increase in tuition is actually due to the lack of public funding. Funding for student services come mainly from student fees. In the 21st Century, students are shouldering most of the burdens of higher education, then the private sector, and the public sector actually contributes relatively little compared to the other two. In fact, one could argue that due to the unnecessary strain put on the private sector, not increasing public funding for higher education is actually hurting the American economy.