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Key economic issues: public vs. private benefits; measuring value added; assessing the impact of government subsidies
Further reading: The World's Nicest Holding Pen (from Learning Economics); A Terrible Waste of Taxes; and Subsidies Raise Prices
Favorable Indicators: strong foreign demand for U.S. higher education; salary premium for college graduates
Disturbing Indicators: real cost of tuition nearly doubled in past 30 years; binge drinking; grade inflation; colleges playing games with admissions
If tuition is $24,000 and you take 8 courses a year, then cost is $3000 a course. An adjunct faculty member is paid $3000 a course. 90 students in class means $270,000 in revenue, with only $3000 in labor cost.
Alumni Donations; State Subsidies; Tax Subsidy for Donations
Private benefits have increased--consumption value, salary premium
Professor salaries above opportunity costs; bloated administrations
Goal of subsidies: raise public benefits; increase opportunity for the poor
Impact of subsidies: nicer holding pens; higher rents for professors
Alternative: vouchers directly to low-income students
Challenge: measuring value added; measuring public benefit