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<p>My fundamental issue with neoclassical economics - and hence with ‘market’-based solutions - is that economics readily discusses long-run market equilibrium points but has nary a word to say about how much time it would take to arrive at that equilibrium. Maybe it is true that the market in the long run will correct itself, but during the interim period - which could run for decades - people will continue to have to needlessly expend resources on unnecessary college degrees solely to pay the costly labor-market signal to remain competitive for decent employment. As Keynes famously declared: “In the long run, we’re all dead.” </p>
<p>As long as employers never have to pay a dime towards college tuitions of the people they employ, they will continue to demand that job applicants hold degrees. It’s not their money, so why not? They have therefore managed to ingeniously and deviously offloaded the costs of employment screening to the students. </p>
<p>Furthermore, neoclassical economists almost always neglect the fundamentally political nature of many societal outcomes. Rather than the market ultimately correcting itself if tuition outpaces inflation thereby reducing the number of college students, I suspect that the more likely outcome is that students (and especially their parents) will then vote in politicians who will provide larger educational subsidies. Hence, the cost of education will be socialized to the taxpayers at large. One should never underestimate the ability of a small but politically favored minority to extract benefits from the government. {Medicare, as an example, is probably fundamentally untameable and indeed continues to expand (i.e. Medicare Part D), because senior citizens are a politically favored class that has brilliantly leveraged their clout to extract government benefits.} </p>
<p>But for those who continue to object to my notion of schools not charging tuition to students who don’t graduate, then how about another proposal. The government will provide university funding - whether that be research funding, Pell grants, or, yes, even university tax exemptions, on a sliding scale according to the percentage of students they graduate - the highest graduation rate would receive maximum funding. To reduce the impact of year-to-year fluctuations, we could calculate the funding based on a X-year graduation rate moving average. </p>
<p>Now, granted, I am well aware of the counterargument that colleges might then simply reduce their standards. But as I said before: that’s already happening anyway. Right now, many (probably most) schools offer creampuff majors where students can pocket an easy degree for knowing and learning little and treat their college experience as a 4-year vacation. Yet nobody seems interested in fixing that problem.</p>