Of Diplomas and Television Sets

Tuesday, January 21, 2014

Michael Barone considers why so many young voters have grown disenchanted with Barack Obama, after twice helping afflict us with him. I disagree with much about his column, but I found the following analysis of spiraling education costs worthwhile:

[I]t's obvious that the vast sums government-subsidized student loans have pumped into higher education over the last three decades have been largely captured by colleges and universities and transformed into administrative bloat.

Economics blogger Timothy Taylor notes that if you count prices in 1982-84 as 100, the average cost of all items in the consumer price index increased to 231 in September 2012. Energy, housing and transportation all increased about that much.

But college and tuition fees increased to 706 -- seven times the level when the government started pumping money into higher ed. Medical care increased to more than 400.

Some things that young people buy increased much less -- apparel (127), toys (53) and televisions (5, thanks to quality improvement).
I have long suspected that the perverse incentives of government-backed student loans as well as outright government bestowals of loot have caused educational costs to skyrocket. The numeric comparison of this government-distorted industry to part of the relatively free electronics industry is especially instructive.

How on earth did televisions get so much better without the government backing consumer loans or outright footing the bill so that as many people as possible could own them?

-- CAV

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