I know for this particular example the problem is tightly related to California's state budget problems, but the astronomical increase in the cost of a college education over the past generation drives me nuts.
It seems like this is one area where market forces can't do their job, because almost no one seems willing to forgo paying the exorbitant price of a college education, so there seem to be no pressures for prices to decline or remain stable. Instead we've changed the culture so most of this generation starts their working lives with tens of thousands of dollars in debt. If you're not willing to put up with this, you could very well be shutting yourself out of the middle class. It's not right.
I'm not exactly Mr. Free Market, but as far as I can tell the market appears to be functioning as intended.
People place a very high value on what they perceive to be a good college education, and this value is typically how much student debt they can acquire. There are well-known ways to significantly cut the cost of your college education: going to in-state schools, and conducting the first two years of your education at a community college. Despite this many people shun in-state institutions (unless they're in a state like California which has numerous highly regarded public universities, but then again they're all hard to get into), and even more laugh the the notion of Jr. College, determining it only fit for misfits teens and continuing adult education Note: I don't agree with that assessment, but it serves to illustrate the fact that college has become so closely tied to social status, making pricey schools all the more desirable.
As for what's driving tuition upwards, it's probably the fact that the modern University has become a luxury resort. They've got an array of clinics, career councilors, psychologists, paid tutors, entire buildings designated for non-athletic student recreation, bike and jogging paths, numerous social groups, reasonably well-maintained facilities and immaculately manicured campuses.
Further driving costs upward, besides state budget shortfalls for public universities, is the fact that they are very aggressive at handing out scholarships to attract top-notch students, along with the significant amount of marketing that is conducted to get everyone else to shell out big-bucks for their undergraduate programs.
And when you look at study after study that shows you're going to earn significantly more over your lifetime if you get a college education, is it any surprise people are willing to eat the high upfront costs? Paying $50,000 to a student loan for an additional $10K+/year in earnings potential seems like a bargain to me. Granted, it's not always going to work out for the best, but hey you gotta take risks to get ahead.
Another possible reason for tuition increases is Baumol's Cost Disease ( http://en.wikipedia.org/wiki/Baumols_cost_disease ), in which the relative cost of providing a service grows rapidly because it hasn't had productivity improvements. When the amount of time needed to teach someone how to compose an essay hasn't changed since before 1960, it's not surprising that it's gotten more expensive compared to the price of microwave ovens.
Since most of our economic activities experience greater productivity growth than we've seen in education, it's not surprising that educational expenditures are growing faster than inflation. I'm hopeful that this will change as web-based education goes mainstream.
the cost of college is also highly subsidized. That's not exactly a functioning market, although the market part of the system is responding to those non-market incentives. That's probably why college has turned into a luxury resort. If you aren't paying the full price, why not go to the school with free rock concerts and a yoga room?
I think a possible solution might be to require that if a college gets government subsidies, it must make it's services separable. That means students get the option to not pay for (and not participate in) student activities. Of course, there should be no government subsidies for non-essential services.
Once again, this is where government intervention into the market is causing adverse side effects. If there wasn't a student loan system, their would be no way for students to finance their education and thus colleges would have to cut costs to become affordable. When students can borrow and pay whatever exorbitant prices prices will continue to inflate as everyone bids up the price.
Additionally, we are seeing the costs of goods that are produced in America increase (education, healthcare, housing) because they do not have the returns to scale as other industries.
And on the flip side, having a college degree isn't any kind of guarantee of good pay or job stability, so college students are getting screwed on both sides. In another 10-15 years people are going to start seeing just how bad a bargain this has been for their overall prosperity and the education bubble is going to burst painfully.
The price of college will keep "correcting" itself upward as people continue to see it as necessary for non-labor employment. College isn't a prerequisite for competence. Once people come to their senses about this, it will drop back down. Until then, the price will continue to go up -- people see a decade of debt as being worth the price of perceived employment opportunities.
In a sense, you're not buying an education so much as the prestige of the institution that grants your degree, so it makes perfect sense that higher-priced universities are perceived as a superior 'product'. I'm sure most university presidents see it that way - hence the emphasis on research, rather than instruction.
Ravenstahl is an idiot. It's like someone told him "hey, hospitals and students are really important to Pittsburgh and they don't pay very man taxes" and he decided the answer was to start taxing students.
I'm not a lawyer, but I don't think this tax is legal and neither do the universities. If this goes through, Ravenstahl is going to waste a lot of money defending himself from the inevitable court battle.
I found fault in the student protests even though these fees are going to affect me quite a bit next semester. It seems the money being raised is being spent to keep all the engineering, business, economics, and law professors around while the other majors are likely going to suffer severe cuts or flat out closure. I know for the Hacker News crowd those previous majors are likely the ones that matter most. Unfortunately, Berkeley offers a great deal of interesting classes where the professors will either leave or they will be cut. Linguistics and history to name a few personal favorites (Disclosure: I am a history major) are going to be two such classes. As much as people like to see a degree in terms of economic potential, of how much money a person can make with a degree, in the end it is about knowledge no matter what field you study. In my experience while I felt that computer science taught me a whole lot about computers, studying history has taught me a lot more about life.
I am not blaming the administration for the fee increases. They might be large and bureaucratic, but they nonetheless have higher ups that they are responsible to. The real blame goes to the people of California and its legislature. All tax increases in the assembly have to be voted by a 2/3 majority while a tax decreases do not. This is near impossible as the assemblymen and assemblywomen tend to be along hardcore party lines. Further, adding Prop 13 (http://en.wikipedia.org/wiki/California_Proposition_13_(1978...) has not helped at all making it near impossible. Ending Prop 13 would give the state quite a bit in revenue to continue funding higher education and fund many of the chronic deficits California faces. Unfortunately, even though the California public views higher education as an important goal they also want low taxes at the same time which is impossible to sustain (if 8 years of Bush have taught us anything). Those are opposing goals!
Professor Lakoff is attempting to propose a ballot which will change the tax initiatives to majority rules. It simply reads, "All legislative actions on revenue and budget must be determined by a majority vote." It is called the California Democracy Act (http://www.californiademocracyact.com)
> Ending Prop 13 would give the state quite a bit in revenue to continue funding higher education and fund many of the chronic deficits California faces.
No it wouldn't because local property taxes don't fund higher education and never have; higher ed has always been funded at the state level.
> Ending Prop 13 would give the state quite a bit in revenue to continue funding higher education and fund many of the chronic deficits California faces.
You're assuming that CA has a revenue problem. It doesn't. It spends gobs more than most other states (per capita).
CA has a spending problem. That can't be solved with more revenues.
> . Unfortunately, even though the California public views higher education as an important goal they also want low taxes at the same time which is impossible to sustain (if 8 years of Bush have taught us anything). Those are opposing goals!
The US govt also has a spending problem.
It is possible to not have a spending problem. Texas (among others) manages to have decent schools and low taxes.
> Unfortunately, even though the California public views higher education as an important goal they also want low taxes at the same time which is impossible to sustain
California:
-Highest personal income tax in USA
-Highest corporate income tax in USA
-Top 5 in sales tax
-Highest minimum corporate taxes per year
-Generally high fees for doing anything related to the government
That these rates are very low is no surprise: The rate of property tax increase has been pinned by Prop 13 since the 1970s, such that these tax rates tend to lag the rate of inflation (let alone the rate of housing price inflation) over decades. [1] The side effect is to gradually push the tax burden toward income and sales taxes.
As for "overall revenues from taxes": That bullet point is meaningless, since CA has the highest state population by far -- 50% higher than the second-most populous state, Texas. "Tax yields per citizen" is better (although it would certainly be nice to see a number: do you have one, with a citation, and a table of numbers for other states?) but also needs qualification: Despite its huge population, California ranks eleventh in GDP per capita (http://en.wikipedia.org/wiki/List_of_U.S._states_by_GDP_per_...) which is to say that Californians on average create more wealth than 80% of Americans, so naturally they can afford to spend more. And, of course, "tax yield per citizen" is a big sloppy average over everyone in the state, glossing over the shape of the tax brackets and of the income distribution. The income distribution in California is not exactly flat. And (to use a cartoon example) a hypothetical county consisting of twenty people making $50,000 per year and one millionaire will have an unusually high-looking "tax yield per citizen".
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[1] I believe they might, eventually, keep up with inflation, but in a very weird way: They only reset fully with a change in property ownership. My understanding is that if you don't move out of your house your taxes stay low, but when the house is sold it can be reassessed. So property taxes do go up at some rate, but in the same way that Monterey is gradually moving farther away from Fresno: very little for many years, but with a big jump every now and then. It makes buying and selling property very exciting, and I'm sure it provides work for accountants.
Of course, I'm not sure how this applies to corporations. Given that corporations can "live" forever, it might be that real property taxes are in fact destined to shrink over time.
> I see you conveniently left out California's low property taxes
California's property percentages, if memory serves, are about normal. They're artificially low because of the housing boom, not because CA assess low taxes on property.
How it works: Property taxes in CA are reassessed when a home is sold. My understanding is that the argument for that is that people's property taxes don't go up each year without anything changing on their part - for instance, an elderly person who bought their home in 1990 hasn't seen their property taxes triple/quadruple as housing prices did. But California by no means is trying to have low average property taxes, it only happened as a side effect of the explosion in housing prices.
> As for "overall revenues from taxes": That bullet point is meaningless, since CA has the highest state population by far -- 50% higher than the second-most populous state, Texas.
It's just one bullet point among many, but that's correct.
> "Tax yields per citizen" is better (although it would certainly be nice to see a number: do you have one, with a citation, and a table of numbers for other states?)
Read it before, didn't find it on a quick Google, so I did by hand:
CA total revenue: $249,057,158,000
CA population 2008: 36,756,666
$6,775.83 per person (includes children, elderly, unworking people, etc).
So yeah, California doesn't have low taxes, and that's not the reason there's budget problems in CA. Whenever you spend more than what you take in, you're going to have budget problems, regardless of how much you take in.
Long term, higher education is screwed. There's no real way to improve the efficiency of 1prof:10-100 students. Most attempts just result in an inferior product. Increasing productivity in all other areas means that professor and the resulting education gets more and more expensive (everything else gets cheaper in comparison).
Long term, haircutting is screwed. There's no real way to improve the efficiency of 1hairstylist:10-100 clients. Most attempts just result in an inferior product. Increasing productivity in all other areas means that the hairstylist and the resulting haircut get more and more expensive (everything else gets cheaper in comparison).
It would be interesting if, over time, more and more private schools' endowments allowed them to eliminate tuition, so that in the end public schools were the more expensive choice.
I wish you were joking but my xgf went to a private liberal arts college in the mid-atlantic. I chose the state school route because it would be cheaper, I was told. Even though we were similar economically and academically, her tuition bill was far lower than mine, class sizes were smaller and more focused, and she got far more help in practically everything.
Unlike my school her school was basically the same size over the last 5 decades (no new buildings, no new mortgages, no new tuition increases). Mine went on a building spree of new dorms, cafeterias, renovating the stadiums, new recreation center, and a hotel. When the shit hit the fan they stuck the students, who weren't even asked about it, with the bill. They were told the alumni donors and state would pay for it. But donors and the state can stop paying when they don't feel like it. The students don't have that luxury.
> But donors and the state can stop paying when they don't feel like it. The students don't have that luxury.
Sure they do - it's called transferring. And for potential students, it's called going elsewhere.
Yes, students have higher transaction costs, but that's just another way of saying that they should investigate more before making an initial decision.
To put it another way, did you really think that the free lunch would continue, that all of the spiffy stuff didn't have costs that you might have to pay?
Decisions have consequences, even for college students.
It wouldn't have mattered. All the tax increase ballot propositions went down by over a million votes.
Furthermore, because of the way California is gerrymandered, I would be amazed if any students live in districts that aren't over 60% democratic.
Isn't it grand? You can't vote anybody out, and unless you have over 2/3 of the districts, you can't do anything worth a damn either, because the parties live in separate realities.
Here's to the rising tide lifting our boats out this mess...
It seems like this is one area where market forces can't do their job, because almost no one seems willing to forgo paying the exorbitant price of a college education, so there seem to be no pressures for prices to decline or remain stable. Instead we've changed the culture so most of this generation starts their working lives with tens of thousands of dollars in debt. If you're not willing to put up with this, you could very well be shutting yourself out of the middle class. It's not right.