Wednesday, June 18, 2014

Brad DeLong has an interesting approach to the cost of college problem

I don't remember a time when there were more things I wanted to write about. Professor DeLong just added another one to the pile. 

From an individual point of view, the questions are:
1. Could you finish a two-year program that opens doors in three years or less?

2. Could you finish a four-year program in five years or less?

If the answers are "yes", go for it. If the answers are "no", don't. And if you go for it, make sure you do finish: otherwise you will be behind the eight-ball in what looks to be for the foreseeable future a much worse job market, especially for the young, relative to our reasonable expectations than America has ever seen before. 
For public policymakers, the questions are more complicated and subtle. There are six groups: 
1. Those who would finish college whether or not college were made more affordable, who will be windfall gainers from policies to make college more affordable.

2. Those who would not attempt college unless college were made more affordable, but who would complete it if it were--these are the people at whom the policy is directed.

3. Those who would not attempt college unless college were made more affordable, but who would attempt it if it were but would fail to complete it--these are the losers from the policy.

4. Those who would attempt college but not finish it anyway--these are small gainers because more-affordable college reduces their student loan debt.

5. The taxpayers who pay for government policies to make college more affordable.

6. The academic administrators, faculty, entrepreneurs, and businesses who skim off their share from policies that make college more affordable.

We want policies to make college more affordable that maximize the number of and the value for people in group (2), and we are happy at the reduced debt burden on those in group (4).

We are really unhappy if such policies lead to an increase in the number of those in group (3), and we are also unhappy at the existence of groups (1) and (6), for the redistribution of the money of group (5) to them is a societal bad.

How large are the money flows between these six groups, and how large are groups (2) and (3), and how much extra education do groups (2) and (3) get?

Those are the questions that discussions of education policy should focus on. Yet when I look at the literature, those are not questions the answers to which I find readily.

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