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Education Costs

According to the WSJ article “Why Is Tuition So High?”, college tuition has risen three times as fast as the CPI, and twice as fast as medical care. In the article, the WSJ interviews three different economists to discuss the issue.

Rudy Fichtenbaum, a professor at Wright State University, attributes the high costs to the decline in state support for higher education, as well as the bloated salaries of university administrators. Richard Vedder, the director of the Center for College Affordability and Productivity in DC, adds that tenured professors can be costly. He claims that as some professors reach tenure, they also acquire low teaching loads, thus universities must pay adjunct professors to pick up the slack. Dr. Vedder also notes that rising federal financial aid programs are driving up costs, a theory known as the “Bennett hypothesis”. Lastly, Katharine Lyall, former president of the University of Wisconsin System claims that the IT boom in universities is largely to blame for the cost issue.

In terms of how to reduce costs, Dr. Vedder argues for a reduction of federal presence in financial aid. In doing so, he claims that enrollment would fall slightly, therefore lowering the ability of colleges to raise prices, and forcing them to economize. Additionally, he claims that states should subsidize students instead of universities, in order to bolster competition. Dr. Lyall proposes that we must shift our view of higher education as a subsidized public good to a competitive market good. Essentially, Lyall wants to remove all regulations and requirements that universities face from the government, and allow them to manage their resources and capital. Finally, Dr. Fichtenbaum claims to “partially agree with Lyall”, but does not want to give up education being a subsidized public good, as he finds this will heighten the already growing inequality issues in our society.




  1. Christian von Hassell Christian von Hassell

    I think within our lifetimes we will see a market driven collapse of tuition prices. As college becomes less and less needed for the transmission of information, its real offering becomes a “campus model.” Undoubtedly, a college eduction offers benefits besides information – status, networking, etc.. However, will these extras be worth such a steep price when you can learn unlearnable quantities of physics, economics, and history for free on the internet?

  2. Education is labor intensive (despite all the hoopla over MOOCs), and as real wages rise for those with the skills and tenacity to obtain a PhD, so must the salary component of universities rise — which means they will rise higher than inflation. The same thing has been true over the long haul for healthcare. So it’s best not to single out education, but rather examine services in general.

  3. HeeJu HeeJu

    I am a little terrified by Dr. Vedder’s argument to turn education into a competitive market good. It is too evident that children born into poverty are going to lose this game. Rich parents have enough income to invest in their children’s education. If we are to subsidize children in stead of schools, students from well-off families will have so much advantage in this competition for subsidy (be it higher SAT score or better college essay). children from impoverished families have been already lagging behind the rising trend of college entrance rate. Therefore, I absolutely agree with Dr. Fichtenbaum in that will only result in worsening the current level of inequality in the U.S?

  4. Stephen Moore Stephen Moore

    I agree with HeeJu’s point that subsidizing students will benefit wealthy families more than poor families. Maybe there could be a way to fix the need-based financial aid system? Merit-based scholarships, another popular form of subsidizing students, tend to help wealthier families who have access to better schools and teachers growing up. Another area of interest is also the quickly rising prices of college textbooks in the United States.

  5. deplautt deplautt

    I am also concerned about the rising prices and that some potential plans to fix this will add to the already massive inequality in the United States. Many countries in Europe have essentially free college at public universities. In relation to what Professor Smitka has said about examining services in general many also have universal healthcare. How can we model the systems we already have in order to incorporate opportunities for those in poverty for healthcare as well as higher education? Dr. Lyall’s suggestion may makes sense in terms of a free market economy but the market has failures which will include leaving behind those already without access to sufficient opportunities.

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