Wednesday, August 1, 2012

Market Forces Slam Universities

Are schools finally feeling the forces of market economics?  For the first time in many years, ever as far as I can recollect, schools are being forced to drop their tuition rates or at the very least not raise them. This is due to the fact that enrollments are slipping as students can no longer afford the frankly ludicrous tuition being asked for by universities.

Universities had long thought that the demand of their 'education' was enough to offset the negative impacts of ever rising costs that outpaced inflation. It should be no surprise that academics or lifelong administrators of these universities are caught off guard by the increasing sliding enrollment numbers. However, those of us who study basic economics know that the most a person can pay is related to their ability and their prospective pay off. This meant early on in this depression that the enrollment numbers were unaffected by the declining economic conditions. As we see now, not only are recent graduates having difficulties, but Masters and advanced degrees of all stripes as well. There is a lot that causes this, none the least that there is little market incentives limiting universities or financial institutions from lending out money to, quite frankly, bad investment prospects. People shouldn't be surprised when someone takes a degree in surfology or aboriginal studies that there's no economic purpose outside the university system, meaning they are stuck as barristas, which limits their ability to pay back their loans.

Unfortunately, this extremely dampens what would otherwise be good news. Education, quite simply, needs to be cheaper; and the only thing driving university cost as high as they were wasn't education costs, but universities taking out loans for vanity projects for their school; pools, dorms, sculptures and the like. It seems that today every university wanted to be a world class institution regardless if they could actually be one. The big problem today is that students are simply drowning under debt that simply cannot be repaid. And despite now decreasing education costs or the effort by Obama, via shaving percentage points off of student loans, doesn't diminish the fact that we have this bomb sitting within our economy. Short of complete loan forgiveness or allowing loans to be discharges by via general bankruptcy, which no politicians can do, there is nothing that can fix this problem.

Much like winter in westerns, a student debt crisis is coming. It's an unavoidable fact. However, if universities prove to be more amendable to following maker forces, and soon realize the folly of touting education for education's sake, this might limit the impact. Though I am still skeptical that they are learning this lesson.

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Seattle resident whose real name is Kevin Daniels. This blog covers the following topics, libertarian philosophy, realpolitik, western culture, history and the pursuit of truth from the perspective of a libertarian traditionalist.