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Monday, October 31, 2005

Higher education: efficiency or social equity?

While discussing the government's role in higher education, the question arises if government has a place in it. From an efficiency standpoint, government subsidies to higher education are questionable. For efficiency to be achieved, a positive externality must exist. The question then is if these externalities exist, what are they? One could argue that as education increases, so does income, which leads to a reduction in the crime rate. One could also argue that increased education leads to more informed voters and thus, better government. While these may be positive externalities, they are shaky at best. A reduced crime rate can also stem from better policing, while voting choices are made not only on education, but political ideologies and personal/religious beliefs as well. So, from an efficiency perspective, government subsidies to higher education most likely do not lead to efficiency.

But efficiency is only one value judgement. One could argue that funding higher education is not a question of efficiency, but one of social equality. Efficiency is a value judgement of the free market. But, the free market is "perfectly disgusting," meaning the equality and equity are not necessarily considered. But, government funding can level the playing field, meaning those who could not have afforded a higher education previously could find it easier to do so. What we see is more college-educated people who can give more to society as doctors, lawyers, scientists, politicians, economists, etc., etc. The social equality created by the government funding betters society as a whole.

To be sure, this is a very utopian view of a social equity value judgement. I think that government subsidies and funding to higher education lie somewhere in a murky grey area of efficiency and social equity. We see cuts to higher education subsidies, and if coming from an efficiency perspective, then it's a case of "no harm, no foul." Because positive externalities are at best questionable, then government really has no role to play in higher education. But, from a social equality stance, the free market doesn't really allow for that equality, and government cuts to funding can end up hurting a lot people, both directly and indirectly. I for one would chose the social equality value judgement when looking at higher education funding. It may not address the issue of efficiency, but that does not make it "wrong."

Comments:
"I for one would chose the social equality value judgement when looking at higher education funding. It may not address the issue of efficiency, but that does not make it 'wrong.'

Thanks for your post. I agree -- there are other value judgments than economic efficiency. And, I suspect the normative reasons for publicly funded education were originally associated with "equity."

However, I'm not sure equity is a very good foundation for publicly subsidized education today. Public education, especially K-12 education, has substantial monopoly power, and teachers' unions seem to have substantial monopoly power as well as substantial political power. Over time, the effects of both the monopoly power and political power associated with publicly provided and subsidized education seem not to be either efficient nor equitable. And, these inefficient and inequitable consequences come at the expense of significant constraints on individual liberty as well. It is my conclusion that to enhance liberty, efficiency, and social equity, we will need to significantly reduce the monopoly power and political power that now pervades public education.

You also refer to the market as "perfectly disgusting." I think this is a reference to our discussion in class of an asserted weakness of "pareto optimality" as a normative criterion. I think the market is not "perfectly disgusting." I think the "market" is, at the most basic level, voluntary exchange, and it is very difficult for me to conclude that VOLUNTARY exchange can be "disgusting," much less "perfectly disgusting." It seems to me that voluntary exchange is a pervasive part of the human experience.
 
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