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This premise is also faulty; this isn't the calculus of most consumers of higher education. The calculus is more like "I need a college degree to get where I wa

• crazy1van 12y ago
  > "we" the government, or "we" the individual consumer? I mean the total of all spending. Although I contend that the two really aren't that different as government spending is just the aggregate of individual spending on government itself. > This premise is also faulty You are suggesting that subsidizing something can make the sum total of all spending on that thing go down? I completely disagree with that notion and I think this is the root of our disagreement. At least we found the crux of it. Even if neither side in the debate leaves convinced of the other side's position, I'm convinced it was worthwhile if the debate ends knowing more precisely where you disagree.
  • nmrm 12y ago
    > Although I contend that the two really aren't that different as government spending is just the aggregate of individual spending on government itself. America has a progressive tax system, so this sort of aggregation argument is over-simplistic. > You are suggesting that subsidizing something can make the sum total of all spending on that thing go down? Yes, absolutely. Even operating from your premises, spending more can decrease costs. In the case of no/low-interest loans, as long as the cost of defaults doesn't exceed the amount saved in interest paid to banks, everyone is spending less money on education. Combining no/low-interest loans with increased state funding for education significantly decreases the risk of default. So the "right answer" to minimizing spending is just a matter of simply arithmetic: C_f = Cost of state Funding C_d = Cost of Defaults B_i = Total money saved on interest payments (let's assume 5% rate with 20k load, probably higher if the entire market is unsubsidized) Then we want to maximize B_i - C_d + C_f. Since we have some amount of state funding and some subsidized loans, it's entirely plausible that increasing C_f could decrease C_d, because the loans are smaller and therefore risk of default is lower. Furthermore, decreasing C_d increases B_i since higher-interest unsubsidized loans will meet the new demand. Of course, there's a degenerate optimization: you can always just have zero subsidies. Most first world countries rightly give a shit about educating the non-independently-wealthy. But also: * I don't think "minimize cost" is a wise philosophy wrt education. Nations that do this tend to be sucky places to live/work. * America has a progressive tax system, so the aggregate reasoning of your first response is at least disingenuous.
    • crazy1van 12y ago
      > Then we want to maximize B_i - C_d + C_f. This completely neglects that prices and demand will change as these values also change.
      • nmrm 12y ago
        No, it doesn't. I thought this was clear from context, but: these are not constants. They are functions of many, many variables, many of which are probably shared; and probably also their dynamics are non-trivial. For instance, changes to prices could be perfectly captured because all three variables are functions of price, and each of them probably has at least a first price derivative. I actually talk about this in terms of the model in my post, so I'm not sure where you got the idea that the model can't capture price change. Also, demand for higher education is fairly inelastic compared to other variables within fairly coerce regions, so sacrificing fine-grained analysis of demand in exchange for more important variables isn't the worst exclusion.