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The Economics of College (Thomas Sowell)
Townhall.com ^ | April 22, 2008 | Thomas Sowell

Posted on 04/21/2008 9:06:12 PM PDT by jazusamo

A front-page headline in the New York Times captures much of the economic confusion of our time: "Fewer Options Open to Pay for Costs of College."

The whole article is about the increased costs of college, the difficulties parents have in paying those costs, and the difficulties that both students and parents have in trying to borrow the money needed when their current incomes will not cover college costs.

All that is fine for a purely "human interest" story. But making economic policies on the basis of human interest stories -- which is what politicians increasingly do, especially in election years -- has a big down side for those people who do not happen to be in the categories chosen to write human interest stories about.

The general thrust of human interest stories about people with economic problems, whether they are college students or people faced with mortgage foreclosures, is that the government ought to come to their rescue, presumably because the government has so much money and these individuals have so little.

Like most "deep pockets," however, the government's deep pockets come from vast numbers of people with much shallower pockets. In many cases, the average taxpayer has lower income than the people on whom the government lavishes its financial favors.

Costs are not just things for government to help people to pay. Costs are telling us something that is dangerous to ignore.

The inadequacy of resources to produce everything that everyone wants is the fundamental fact of life in every economy -- capitalist, socialist or feudal. This means that the real cost of anything consists of all the other things that could have been produced with those same resources.

Building a bridge means using up resources that could have been used building homes or a hospital. Going to college means using up vast amounts of resources that could be used for all sorts of other things.

Prices force people to economize. Subsidizing prices enables people to take more resources away from other uses without having to weigh the real cost.

Without market prices that convey the real costs of resources denied to alternative users, people waste.

That was the basic reason why Soviet industries used more electricity than American industries to produce a smaller output than American industries produced. That is why they used more steel and cement to produce less than Japan or Germany produced when making things that required steel and cement.

When you pay the full cost -- that is, the full value of the resources in alternative uses -- you tend to economize. When you pay less than that, you tend to waste.

Whether someone goes to college at all, what kind of college, and whether they remain on campus to do postgraduate work, are all questions about how much of the resources that other people want are to be taken away and used by those on whom we have arbitrarily focused in human interest stories.

This is not just a question about robbing Peter to pay Paul. The whole society's standard of living is lower when resources are shifted from higher valued uses to lower valued uses and wasted by those who are subsidized or otherwise allowed to pay less.

The fact that the Soviet economic system allowed industries to use resources wastefully meant that the price was paid not in money but in a far lower standard of living for the Soviet people than the available technology and resources were capable of producing.

The Soviet Union was one of the world's most richly endowed nations in natural resources -- if not the most richly endowed. Yet many of its people lived almost as if they were in the Third World.

How many people would go to college if they had to pay the real cost of all the resources taken from other parts of the economy? Probably a lot fewer people.

Moreover, when paying their own money, there would probably not be nearly as many people parting with hard cash to study feel-good subjects with rap sessions instead of serious study.

There would probably be fewer people lingering on campus for the social scene or as a refuge from adult responsibilities in the real world.

Thomas Sowell is a senior fellow at the Hoover Institute and author of Basic Economics: A Citizen's Guide to the Economy.


TOPICS: Business/Economy; Culture/Society; Editorial
KEYWORDS: college; economics; sowell; thomassowell
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1 posted on 04/21/2008 9:06:12 PM PDT by jazusamo
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To: AbeKrieger; Alia; Amalie; American Quilter; arthurus; awelliott; Bahbah; bamahead; bboop; ...
*PING*
Thomas Sowell

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Recent columns
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Please FReepmail me if you would like to be added to, or removed from, the Thomas Sowell ping list…

2 posted on 04/21/2008 9:07:49 PM PDT by jazusamo (DefendOurMarines.org | DefendOurTroops.org)
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To: jazusamo

“In many cases, the average taxpayer has lower income than the people on whom the government lavishes its financial favors.”

So true! I stopped donating to the local food bank when it struck me that I was showing up to donate food in my 10 year old car, while the people coming to get food were driving cars that were a year or two old.


3 posted on 04/21/2008 9:13:05 PM PDT by anonsquared
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To: jazusamo

I’ve said it before and I’ll say it again. Thomas Sowell for President!


4 posted on 04/21/2008 9:13:46 PM PDT by utherdoul
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To: jazusamo

Sowell BTT. He should know about the value of an education - dropped out of high school, joined the Marine Corps, got a GED afterward, and his academic career went Howard to Harvard (cum laude), Columbia, and University of Chicago. Not bad for a high-school dropout from Harlem.


5 posted on 04/21/2008 9:14:47 PM PDT by Billthedrill
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To: Billthedrill
Not bad for a high-school dropout from Harlem.

You can say that again and he's one of the finest thinkers and writers in the country.

6 posted on 04/21/2008 9:20:19 PM PDT by jazusamo (DefendOurMarines.org | DefendOurTroops.org)
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To: jazusamo

Brilliant piece.


7 posted on 04/21/2008 9:24:55 PM PDT by bolobaby
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To: Billthedrill

I did not know that about this remarkable man. Thanks for posting it.


8 posted on 04/21/2008 9:32:48 PM PDT by Gator113 (Hey Democrats, "I drink your milkshake.")
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To: jazusamo

Semper Fi! to Mr Sowell!


9 posted on 04/21/2008 9:39:14 PM PDT by Keith Brown (Among the other evils being unarmed brings you, it causes you to be despised Machiavelli.)
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To: Gator113

You can start by reading “Visions Of The Annointed”.
Then, maybe “Race and Culture”.
Then “Black Rednecks and White Liberals”.
Then there’s about fifteen or twenty more.
(Haven’t read them all myself)


10 posted on 04/21/2008 9:49:14 PM PDT by gigster
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To: jazusamo

Sowell is relentlessly sane and perceptive. Very calming.


11 posted on 04/21/2008 10:06:49 PM PDT by TChad
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To: Billthedrill

Wow, I had no idea. I just searched and verified the info. The article also stated his birthdate - he’s 77 years old. (I thought he was much younger.)


12 posted on 04/21/2008 10:31:39 PM PDT by Tired of Taxes (Dad, I will always think of you.)
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To: anonsquared

Too bad you didn’t ask to trade radials for bread.


13 posted on 04/21/2008 11:05:29 PM PDT by Gene Eric
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To: Gator113; jazusamo

>> I did not know that about this remarkable man. Thanks for posting it.

Sowell is the seltzer of sober thought.


14 posted on 04/21/2008 11:10:09 PM PDT by Gene Eric
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To: jazusamo

Yes! He and Walter Williams are two of the finest economists.

If the black community followed their leadership instead of the obamas and the jacksons they would be lightyears ahead.


15 posted on 04/21/2008 11:33:23 PM PDT by aquila48
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To: jazusamo
There would probably be fewer people lingering on campus for the social scene or as a refuge from adult responsibilities in the real world.

Would that be a good thing or a bad thing?

16 posted on 04/22/2008 12:53:41 AM PDT by dr_lew
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To: bolobaby
Brilliant piece.
Nope. He's got the right idea, but he's too busy scoring political points to actually explain why college tuition is a socialist scam.

This article from Slate does a much better job of debunking the times.

17 posted on 04/22/2008 1:13:30 AM PDT by ketsu
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To: jazusamo
You can say that again and he's one of the finest thinkers and writers in the country.

I can't think of anyone with his ability to simplify without getting simplistic. He never talks down to his readers, yet manages to make his points clear to all.

If Obama was truly interested in transcending political and social divisions, he'd reach out to Prof. Sowell and other rightist intellectuals who are obviously making their policy prescriptions in good faith.

Sadly, Obama is no new figure of hope. He's just another Marxist, albeit with a great marketing plan.

18 posted on 04/22/2008 3:27:03 AM PDT by SupplySider
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To: jazusamo

The big question is: when will this house of cards called ‘higher education’ fall under its own weight?


19 posted on 04/22/2008 3:43:20 AM PDT by AdaGray
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To: gigster
(Haven’t read them all myself)

I have.

By far his most important work is "Knowledge and Decisions." 50 years from now people are going to be looking at that book the way that modern economists look at "The Wealth of Nations" or "the Road to Serfdom". His other books read better, but that one is the one that will inevitably have the biggest impact IMHO.

20 posted on 04/22/2008 4:00:39 AM PDT by tcostell (MOLON LABE - http://freenj.blogspot.com - RadioFree NJ)
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