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College tuition just obeying the law

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With all the noise being made about tuition hikes, it’s easy to forget that college, like any business, follows the economic law of supply and demand.

And, as we learn, in intro to economics, when demand increases, price increases.

This month students from around the state stormed the Capitol on Rally Day to protest rising tuition prices.
State Senator John Carlson cried for the legislature to “stop balancing the budget on the backs of students.”
Many protesters wore red caps printed with the word “tuition” to display their support for a cap on tuition prices.

After the rally, Travis Johnson, president of the Minnesota State College Student Association, pronounced to a state legislative committee, “We can no longer afford to ask our students, our future, to continue to shoulder more than their fair share.”

I fail to see the logic in Mr. Johnson’s demand.

What, exactly, is a person’s fair share when purchasing a good if not the purchase price of that good?

If I go to the store for a new shirt, I pick out the shirt I like, observe the price of the shirt, weigh the costs and benefits of paying that amount for the shirt, and, if the benefits outweigh the costs to me, I take the shirt to the cashier and make the purchase.

That’s how economics works. I don’t demand that the clothing store foot part of the bill because I don’t want to pay more than my “fair share” for a product that I determined would enrich my life.

My fair share for a shirt is the exact same as my fair share for anything I purchase, whether a shirt, a phone, a box of cereal, or a college education.

My fair share is the market value of the good.

You see, that’s how economics works, in a nutshell.

People offer a resource to the public. That’s called supply. Some members of the public want to possess the previously mentioned resource.

That’s called demand. The issue, though, is that the people offering the resource don’t have infinite quantities of the resource. That is called scarcity.

It applies to every single resource in the world, from t-shirts to TVs to education.

And when demand rises, either the quantity of the scarce resource or the prices of the scarce resources have to rise, otherwise the supply runs out.

Obviously, this is an oversimplification to make a point. There are other solutions to the problem of high tuition costs. But they all have unintended consequences and unforeseen costs, as well.

Everything does.

The boom in college enrollment is also an unintended consequence of government-subsidized education.

Unfortunately, like every boom, this one will have to bust eventually. At some point the market will cease to allow colleges to function in the way they have become accustomed to functioning.

We are seeing the beginnings of this cessation now. In their 2009 commentary for “The Chronicle of Higher Education,” “Will Higher Education Be the Next bubble to Burst?” Joseph Marr Cronin and Howard E. Horton conclude, “Only during a critical moment in economic history can one warn of bubbles and suggest that the day of reckoning for higher education is, in fact, drawing near.”

They are correct. Something must be done about this irrational exuberance. When the bubble pops, it is going to hurt some people.

But if the bubble continues to inflate with artificial reinforcement from state and federal governments, when it pops, it will cause far more damage than we can possibly see today.


2 Responses to “College tuition just obeying the law”

  1. Julie on April 19th, 2011 10:25 am

    Wow, this is incredibly ignorant and sad. It takes a special kind of asshole to talk about how our problem is that we enable too many people to get access to an education.

    It is sad that you see education as nothing more than a commodity that should only be afforded to the people who can pay for it without loans through the Dept. of Education and Pell grants: rich people and their children. It is ignorant because denying educational opportunities to our citizens prevents our country from creating its own pool of highly-skilled workers and thinkers.

  2. James Jenneman on January 3rd, 2013 5:12 pm

    Education, like anything paid for, is a commodity. And a degree, like anything that gives someone a “leg up”, loses value when more people have one. If, then, tuition prices keep rising because more and more people feel entitled to a college education and more and more people hold that it will be a positive thing for them to get one (even if it won’t), AND the real monetary value of a degree continues to fall as more and more people receive degrees, we will continue to see a bubble form until it bursts and either tuition rates are forced to fall, a degree is no longer seen as a necessary thing, or both. This is how all bubbles work. Housing, for instance: The price of houses became far higher than the actual worth of houses. The necessity of homeownership was felt by more and more people. The government-backed banks happily gave these people mortgages against all financial sense. Cheap mortgages continued to cause demand to rise; rising demand caused prices to rise; prices rising didn’t stop politicians from convincing people that homeownership was a necessity. Mortgages continued to be handed out like candy. Then the bubble burst and got us into the mess we’re in today. The exact same thing is currently happening with tuition. College costs far more than it is actually worth, not because the government isn’t putting caps on tuition, but because the politicians are convincing people that it’s a necessity.

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College tuition just obeying the law