Monday, April 02, 2012
This week, as I was reading the New York Times, I came across this opinion article by Thomas Edsall regarding education subsidies (it can be accessed by clicking on the title of this post). The author's main claim is that the republican candidates for presidency do not want to fund higher education because those that pursue a college degree are more likely to become democrats. Disregarding the lack of clarity about the sources used to provide such information, I'd like to analyze the idea of subsidizing education based on efficiency grounds rather than political ones.
Higher education is definitely not a public good, since it can be made excludable to the parcel of the population that does to pay for it. Then, the only instance that would justify government intervention would be if higher education was a positive externality. The fact is that education is an interdependence reflected in the labor market through the wage system. If having a college degree increases the marginal productivity of labor, then that will be reflected either through higher wages or lower prices in the market. Either way, there is no positive externality, since the benefits are already internalized by the market. Therefore, based on efficiency grounds alone, it seems that the Republicans candidates might have a better understanding of the economics behind higher education than the author of the article.