Monday, September 28, 2015

The magic of markets

This is Joseph

Dean Dad on buying shares in students:
Of course, Salerno elides entirely issues of equity and inclusion.  For example, nationally, white students graduate at higher rates than African-American or Latino students.  Should the market respond accordingly?  High-income students graduate at higher rates than low-income students.  Should the market respond accordingly?  Assuming that investors act to maximize returns, we should expect to see the student body get much smaller, richer, and whiter than it is now.  The market has spoken!  
 This is just one of the many reasons that this approach is a bad idea.  Markets do poorly when they are being used to provide public goods and the issues with higher education are not exclusively a lack of economic incentives.

Nor does this even touch on how you would police such an agreement.  How do you make sure that a student who doesn't succeed (but owes a percentage of income for life) doesn't hide out in a cash business?  Or leaves the country?

The idea doesn't seem great once the practical pieces get thought about.

1 comment:

  1. Not to mention that this scheme is just a modernized variant of indentured servitude. Of course, you could say that this is also true of the current educational loan system.

    We shouldn't be looking for ways to make educational debt easier to repay. We should be eradicating educational debt altogether. A college education ought to be available at little or no cost to all students, as it was only a few decades ago, when tuition was low enough to pay for with a summer job and scholarships were the dominant form of financial aid.

    It is the collective responsibility of the older generations to educate their offspring! It's time to live up to that.