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Government-guaranteed loans are a fantastic way to force prices to spiral out of control. The way student loans were before income-based repayment, we'd have expected college cost to rise until it meets the lifetime expected benefit of college discounted to the present.

With income-based repayment, where your loan balance is forgiven after 20 years, there is no limit to how high it can go.

Government-subsidized mortages and mortgage interest deductions have a similarly terrible effect on housing, a basic good that government policy should try to make as cheap as possible. Instead, government policy is to make it as expensive as possible.

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The way student loans were before...

No.

Tuition went up to compensate for the removal of state subsidizing tuition. Almost 1:1. In fact, with the removal of state support, we're merely seeing the true costs of school for the first time.

Loans got nutty because of unnecessary privatization and deregulation. But rent seeking, so it was inevitable, right?

Once tuitions were nutty, parents demanded value for their dollar, begatting grade inflation and transmuting dorms into resort hotels, fueling continued rising costs.

Source: Worked in higher ed. This is common knowledge.

(I don't know enough to explain the textbook racket. Collusion?)

mortgage interest deductions have a similarly terrible effect on housing...

No.

Scarcity caused by NIMBY land use policy is driving up housing costs. The fix is aggressive upzoning.

Source: Help friends who work on affordable housing policy. This is common knowledge.

In conclusion, yes, simplistic Freedom Markets (tm) explanations are seductive. But they're also mostly wrong. Tuition and loans went bonkers when government pulled out of the business, allowing the predators to take over.

You're missing the forest for the trees. What are ''the true costs of school''? Someone who loves to teach sitting in a classroom teaching. It can be dirt cheap or it can be very expensive. Supply and demand sorts out the details. As more money flowed into the system, administration bloated and became its own entrenched interest group, with very little connection to actual education.[1] Does the UC system need 500 administrators making >$500k year each?[2] As it stands, college for most of my friends was a 4 year social safari interrupted by infrequent periods of intense cramming in between high school and joining the work force. Do you think the average 18-21 year old at a state school is a scholar passionately indulging their love of learning? Almost all education is self education at the end of the day. As soon as we solve for the credentialing/pedigree/signaling problem, online education will destroy a huge amount of offline education and rightly so.

As for the mortgage interest deduction, how wouldn't it boost housing prices? It effectively lowers the mortage rate by your marginal tax bracket which is close to 50% in California. So instead of a 3.5% 30 year rate I'm now below 2%. Cheaper money stimulates borrowing. It doesn't matter how low NIMBYism pushes supply in the face of overwhelming demand, each individual still has a maximum price they can pay, and subsidized interest rates raise that price point.

[1] http://reclaimuc.blogspot.com/2011/09/senior-administrators-...

[2] http://www.latimes.com/local/education/la-me-uc-spending-201...

> As it stands, college for most of my friends was a 4 year social safari

And that's what costs money, insofar as it raises people's social class and gives them connections. Learning is a trivial cost in comparison, and can be ignored in the calculation; it's something you effectively get "for free" with the price of admission to the social-class-higher-than-yours practicum that is university.

Note that community colleges, which have just as much "learning" but no potential for class-raising, don't have spiralling costs. Community college costs what learning costs.

And yet, despite more and more people getting an education, class stratification getting worse in one of the common talking points. How do you explain that?

The people who are now "getting a [university] education" who previously weren't, are people already in the social upper-middle class, going to upper-middle class universities where they just end up enculturating further to the class they're already in.

People in the upper-middle class will only experience social-class mobility by going to an upper-class university (e.g. one of the Ivies, and even then only certain programs that haven't already been flooded by other upper-middle class entrants.)

Meanwhile, very few people in the lower-middle class go to university; they "get an education" by going to a trade-school or to community college, thus also avoiding enculturation. And people truly in the lower class (e.g. immigrant agricultural workers) don't even consider higher education to be an option, despite government student loan programs being aimed at them (with the explicit goal of enculturation!) more than anyone else.

Generally, though, mobility between any two classes becomes more difficult as the size-ratio between the source and destination class increases, because every place an individual could go to attempt to immerse themselves in the destination class, is already full of other people of the source class attempting the same thing. The previous mobility from lower-middle to upper-middle class has created a bulging upper-middle, which has killed the ability for people to become upper class. (Though it's easier than ever to enculturate to the upper-middle class, this being basically what happens by default when anyone with a lower-middle-class background finds themselves spending a lot of time on the internet—the internet [outside of own-class-reflecting echo chambers like Facebook] being a universally-accessible upper-middle-class microcosm.)

Have you written a book or research publications on this topic? I've always wanted an update to Fussell's 'Class' for the internet generations, and this post is as close to that as I've seen. If you know others who have written on the topic, please list them here. Thank you.

Thank you for posting this - it more or less summed up my thoughts exactly. It should also be noted, however, that these "upper-class universities" are increasingly trying to court the "lower-middle class" by offering extremely generous financial aid (usually full rides) to those who have a household income less than 60-80k/yr–though these students make up the vast minority of those in attendance, though a higher amount than upper-middle class students. The result is a sort of unofficial idea of "If you're not already in the 1%, you soon will be."

Columbia University, for example, has its current tuition at around $70k/yr, which is over 2.5 times the average American individual of $26k/yr. Columbia and its peer institutions rarely offer merit based financial awards, thus incentivizing the wealthy who can afford it and the poor who it's essentially free for, while avoiding a large part of the American middle-class altogether.

Another group of schools, besides the Ivies, that primarily serve the upper class are the prestigious small liberal arts colleges, such as Williams, Pomona, Amherst, Middlebury, etc. These are some of the smallest schools in the country, yet have the largest endowments per capita (Pomona's has the fourth largest endowment per student in the country, for example, at $1.5 million / student, which is above both Princeton and Harvard). Taken in conjunction with ~$65-70k/yr tuitions (and increasing at an average of 5% a year!), the results are institutions that cater primarily toward the upper class yet put forward the idea they server everybody by enrolling a token amount of lower class students (as many admitted students unfortunately discover they cannot afford to attend).

Source: I studied this topic at, yes, one of these very institutions. I believe the entire university system–financing especially–needs vast reform.

Harvard also released an [infographic](http://features.thecrimson.com/2015/senior-survey/) on their graduating class of 2015 "by the numbers"–notably, 2% of the nation earns $250k+/yr, but at Harvard they made up 30% of the class. That statistic is increasing, not decreasing.

It should also be noted that international students are generally not eligible for any financial aid whatsoever through FAFSA (and the "need-blind" admissions process available to domestic students in which these institutions cannot see your financial status in the application process is not available to international students), thus the international students that do attend these institutions are more often than not within the top socioeconomic bracket of their respective country.

(This is a set of notes for future reference, not something anyone should read, ever) my apologies.

Intuitively I agree - but what struck me was what do we mean by "class"?

I can sniff some circular reasoning here.

If we say class is culture - and it's easier to hold a certain set of views (liberal market based, empirical lead?) if one is independnatly wealthy and educated in the above market/science combo.

Then upper middle class is probably the "top" of the tree.

Economic is easy - the UK aristocracy is generally marked out by independant wealth - certainly a number of titles gambled their way out of the aristocracy whereas a title is not needed to be considered upper class (see Branson etc). Perhaps a better term is "establishment"

The upper middle class perhaps is those in the 1% still who must work for income. Doctors perhaps?

I would suggest anyone who has seen their wages increase in real terms in past thirty years gets to stay middle class after that and those stagnating can be "working" class. (Quotes are sarcastic)

If I then suggest that the existence of a billionaire is a symptom of a market failure somewhere, then I am probably arguing that the "upper class" is now a fiction created by market failures - that we can and should erode it till the top of the tree is upper middle class.

For example - is a daughter of the revolution, with a Park Avenue address or two upper class? Or is Barack Obama?

I would argue that a new driver for social mobility would then be the compulsory draft - military or civilian.

I think the best viewpoint I've encountered on what people mean by "class" is this:

Two families are of the same social class if a marriage between them would be unsurprising. Money is a sideshow.

Fussell's 'Class' book, although dated, is a useful guide for many of these questions. And a hilarious read.

Class stratification (social mobility) is becoming worse in the United states. This is not a global first world problem although education has been following similar trends in other first world countries (most notably the UK and Australia)

Supply and demand sorts out the details.

Maybe.

I place more weight on incentives. Design of the markets. Checks and balances. Transparency and accountability.

need 500 administrators...?

The insufferable waste I witnessed in higher ed is no different than any where else I've worked. Biggest factors are scale and bureaucracies.

As terrible as higher ed is, I'm certain I don't want it to become more business like, assembly line efficient. Whatever magic is to be found in higher ed is because its weird, chaotic, diverse.

As for the mortgage interest deduction, how wouldn't it boost housing prices?

Second order effect.

And one of the most magical things about US higher ed is that it just swallowed 400,000 loans funded by taxpayers without as much as a burp.

Spot on. It's becoming increasingly clear that the student debt bubble will blow up, no differently than the housing bubble.

And just like the housing bubble, the clever ones are going to end up getting Uncle Sugar to pay off their loans, while a large majority will end up 'doing the right thing' to their own disadvantage. Of course, the big banks and financial entities that own these loans will come out just fine.

Then we can move on to the next staple to financialize, perhaps unborn generations since there's not much left.

Higher ed already got their money. The banks got stuffed.

According to you second link, the UC system has a budget of $27 billion. You could fire all those administrators making over $500k and you wouldn't even save 1% of the annual budget. Is administrative bloat a problem? Sure. But blaming it for the tuition increases we have seen is like blaming the national debt on inefficiencies in the EPA.

That particular statistic is used for effect, and the article admits it's not the biggest problem:

> While big paychecks for those in UC's senior management group — including the president, the chancellors and other top administrators — attract the most attention, they comprise less than 1% of the $27-billion budget, officials say.

> It is the next layer of well-paid administrators that has grown most significantly over the last two decades. From 2004 to 2014, the management and senior professionals ranks swelled by 60%, to about 10,000, UC data show.

There are indirectly related tidbits all over the article and I couldn't find what I'd really like to see: a histogram of administration salaries and another of faculty salaries.

Anyway, here's another unrelated but interesting tidbit from that article:

> Efficiency experts brought in to assess the UC Berkeley bureaucracy a few years ago concluded it was top-heavy. Bain & Co. consultants tallied 11 layers of management between the chancellor and front-line employees, suggesting that the organization had too many bosses. More than half of all managers — about 1,000 — had three or fewer direct reports, and 471 were in charge of exactly one person each.

Isn't it funny that they had to hire top-dollar big-name consultants to find out they have way too many middle managers ... some of these managers should have the time to figure out how many layers of management there are and how silly some of them are. But then again, of course they didn't: more managers results in more politics results in less effective management.

Bloat increasing is natural for any growing bureaucracy and the UC system is certainly growing. The article cites enrollment has grown by 77,000 students over the last 15 years. That works out to almost a 50% growth rate (although it was a longer time period than the admin growth rate used). So a 60% growth in middle managers doesn't seem completely unreasonable. I am sure there is plenty of waste there, but once again it isn't nearly enough to explain the type of tuition increases that have happened over recent decades.

> senior professionals

Do they mean medical professionals? If you actually look at the highest-paid (and $100k+, for that matter) staff lists, there are really a tremendous amount of doctors. That should not be surprising at all, since UCSF, UCLA and UC Davis operate huge hospitals.

It's wildly inappropriate to lump the "senior professionals" in with management. The hospital system, with the exception of the training it provides for the medical schools, is effectively orthogonal to the educational mission of most of the UC system.

> Does the UC system need 500 administrators making >$500k year each?

This statistic is incorrect. In 2014, there were 445 UC employees making >$500K/year each. This includes everybody, not just administrators.

You can get a list of them all here [1]. I didn't go through the whole list, but from sampling a few random pages, I'd guess that there are <20 administrators making >$500K. They are mostly medical school professors, some athletic coaches, and, e.g., the Chief Investment Officer. There are also some CFOs and Executive Deans, and maybe I missed something, so feel free to correct me.

[1] https://ucannualwage.ucop.edu/wage/

I think UC would still do well to publicly announce a pay cap. Maybe $1M and say nobody makes above that amount.

Once the superstars are limited to $1M, I think others will fall in line as well. Don't like it? Quit.

just stay in new jersey. we don't want our schools losing more professors to USC and Stanford.

I'm sorry but there's no other way. The cost of education has to come down and that means professors, coaches, and administrators have to pay themselves less.

We're already cutting cost at the lower end of the spectrum with adjuncts. Why not do the same at the top? On second thought $1M is actually too high. It should be lower. Probably a cap of $750k is fairer.

Professors already make less in academia than they would typically make in the industry. I don't think the best of them would stick around if they were handed a 20% pay cut.

Similarly for administrators and coaches, meaningful pay cuts would just push many of them out the door to greener pastures.

The cure for high tuition is unlikely to come just from cutting salaries.

Not just from cutting salaries but cutting salaries shows they are serious about it. I stand by it.

I've hinted at this elsewhere. There is no reason that anyone should be making more than 100x the minimum a full time worker should be making. I'd propose increasing the marginal rate to something obscene like 90% on income above that point. I stand by it as well.

If we are to make college education free of cost, we have to make them cheaper. I draw parallels here between higher education and healthcare. Yes, customer service will become worse in the process. However, I think if we manage expectations, we can do some serious cost-cutting while maintaining a certain minimum standard. This is true in both education and health care. Anyone who aevocates single payer without conceding that the list of options patient/student shrinks is probably not being honest. But this shrinking is OK.

First thing that should shrink is the obnoxious attachment to collegiate athletics. Even if it were true that college athletics is a net positive for a university's balance sheets, I don't think it is a university's place. This is a part of the overall "remove bling" from education. Other efforts could be trying to find ways to make housing less expensive and not as fancy.

Second thing that should shrink is the myriad of regulations from dozens of sources imposed on universities. I didn't know how many things they have to comply to. This is insane.

But coming to point, professors won't quit if wages go down. If they do, that's fine. There are other professors.

I think you're focused on really superficial stuff that isn't going to do much. "Remove bling"? This isn't a fiscal policy. You just don't like athletics, which I guess is fine, but also not very relevant. I personally am not athletic and so those programs did not appeal to me when I was a student, but collegiate athletics have a long history and serve useful purposes.

For the dorms, I don't know where you went to school, but my dorms were pretty basic. When I visited friends at other universities, their dorms were also pretty basic. When I studied abroad in Germany, the student housing was actually nicer than what we have in the US. Could we spend less on dorms? Probably. Would it make a meaningful change in cost? Probably not.

And again, coming back to the idea of cutting salaries, I don't know why you think there is an endless line of potential professors waiting to take jobs for no money. Good professors are valuable and would command high salaries in industry. If the end result of cutting tuition is that education quality declines proportionally, it's probably not worth it.

I also don't know why you're so hung up on the few people who are extremely highly paid. Bloated salaries or not, that group is not large and it's not a major factor in overall cost. Additionally, very few if any professors are in that group.

Not true. This assumption only works when one decides that all professors are equally employable both in colleges and private industry. It also assumes an unlimited number of jobs.

Worse for college professors they have no choice in having their salaries come down because it won't be a decade before college education done online becomes the main alternative. With the pay scales differences across the world being what they are the fact is you will likely have may opportunities for professors in India and elsewhere teach course with the same expertise.

People are quick to bitch and bemoan medical costs from pills to services and pointing overseas "SEE SEE SEE" about how their costs are lower.

Well guess what, education will be even cheaper because the student doesn't have to travel to get the world class education. All that needs to change is regulations which will prevent it.

> Not true. This assumption only works when one decides that all professors are equally employable both in colleges and private industry. It also assumes an unlimited number of jobs.

For highly-paid professors, it's generally true that they are equally employable in private industry. Similarly, for highly-paid professors, there are plenty of available jobs in industry, hence the high pay.

If you disagree, I'd be interested in hearing what professors you believe are simultaneously overpaid in academia and would face difficultly finding industry work with equivalent pay.

> Worse for college professors they have no choice in having their salaries come down because it won't be a decade before college education done online becomes the main alternative. With the pay scales differences across the world being what they are the fact is you will likely have may opportunities for professors in India and elsewhere teach course with the same expertise.

I seriously doubt this is actually going to happen. There are plenty of accredited online universities already and enrollment in traditional universities has not dropped. Online courses mostly provide an option for people who would otherwise be unable to attend. Sure, some people will choose online studies even if they would be able to attend a traditional university, but I expect them to be in the minority.

Also, I don't expect lower professor pay to be a significant cost reduction for online courses. Employing Indian professors instead of American ones will probably not drop the cost to produce an online course significantly, because the costs can be spread across so many students. If anything, I think online courses might strongly favor native speakers because the language barrier is reduced at such a low cost.

The UC system should be paying exactly $0 to football coaches and investment officers. It's an education system. The NFL and Wall Street are perfectly capable of taking care of football and investments without the UC's help.

I don't know about UC, but it's my understanding that in many universities, the football programs pay for themselves and then some.

As for the investment officers, someone has to manage the universities' endowments. Certainly, they could just liquidate their endowments and spend it immediately on, say, urgent needs and tuition reduction. But then when they need to, e.g., renovate a dorm, they will lack the money to do so.

At any decent team this is the case (that football pays for itself, plus the other sports programs). Shit even at my alma mater which was awful (at football), this was still the case, and the head coach brought in like $1m/yr. Lot of money there.

Not enough to pay for that fancy new stadium though...

The fancy new stadium was likely paid for almost entirely with donations, though. Those don't tend to be paid for by the universities.

> This statistic is incorrect. In 2014, there were 445 UC employees making >$500K/year each. This includes everybody, not everybody, not just administrators.

Not the OP, but what you're saying just proves him/her right. You're basically saying that he/she had provided a number with only 10% margin of error (which on the Internets is not bad) and then went all semantics on him/her, I'm talking about the part with the people not being "administrators". For better or for worse you can call a person earning >$500k a janitor on her/his employment papers, but I'm still 99.99% sure that person is still doing highly administrative tasks (like setting up golf matches in his/her google calendar) and not mopping the floors.

And the part where you say that artificially subsidizing a finite product (in this case houses) does not cause its price to go up makes me wish that you're not in any way related to the economics discipline. Because if you were then I'd say that the future does not look bright for students of economics.

There is a vast, non-semantic difference between having 500 rich administrators/functionaries and having 445 employees. How exactly do you hire someone capable of instructing surgeons without paying them like a surgeon? Once you take out the highly skilled/specialist doctors, it's not a very damning list for a vast school system.

I stand corrected. I actually visited https://ucannualwage.ucop.edu/wage/ and played with the search settings a little and found out that out of the 445 employees with earnings >$500k about 380 or so have "prof" in their title, so I guess you're right.

Fact is that the cost of university is still too damn high. If it's not the teachers' salaries then what might the reason be?

Mind you, I'm not directly involved in this as I live half a globe away from the States and I'm a former college dropout now in my mid-30s, I'm just thinking that there are huge opportunity costs that we might pay, as a species, for not letting the brightest people attend University based on intellectual merits alone. I know that there are countless "help-the-poor-attend-university" programs, but, as far as I can tell, in order to be part of one you need make no mistakes, as in you need to pass all the exams in order for the financial help to keep coming (I might be wrong on this). Plus, there's all the bright lower-middle-class people whose parents are "too rich" for their kids to receive any financial help but too poor to afford to pay their kids' university. You risk losing these people's minds big time.

As a solution I would impose only having access to University if you pass an entry exam, and everything to be subsidized by the State. It doesn't matter if your dad is the President of America or the CIA chief, it doesn't matter if your dad has paid $100 million to the University, it doesn't matter if you're white, black, yellow or purple-colored. Only your intellectual ability should count.

Pretty much spot on I think.

There is a mentality I see in a lot of young people that they think they need someone to teach them. If people can get over this and use something like an interactive and visual web page they can learn much faster and easier than through a lecture or through books.

What about private tuition? Also, every other source, other than your common sense, seems to find the opposite of what you think.

https://fee.org/articles/student-loan-subsidies-cause-almost...

http://www.theatlantic.com/education/archive/2015/05/the-rea...

http://www.forbes.com/sites/timworstall/2015/08/03/increased...

I agree that land use decisions are also an important contributor to the problems in the mortgage market, especially in places like the peninsula. But without federal loan support, the market could not have reached the heights that is has since ultimately people can only afford to pay so much per month. If interest rates are much lower, then you can afford a higher principle amount for the same monthly payment. In a housing market with shortages, this allows prices to be bid higher.

But of course those land use policies are also exactly the kind of first-order thinking about government policy that I decried in my post above.

re The Real Cost of College

Scanned article, will parse it later.

From the hip: Direct != indirect subsidizes and shouldn't be conflated. Direct subsidizes lowers the retail cost.

Outsiders need to understand that, just like business, higher ed has been reducing costs aggressively. Most faculty and staff have been taking it in the teeth. Meanwhile, admins and coaches and select faculty have been getting outsized compensation. No different than any where else.

Edit: If I had to guess, tuition at private institutions went up because it could. Charge what the market will bear. Maintain appearance of a premium quality product. Differentiate oneself from the plebes.

Edit 2: Chewed on the other two articles. Tim Worstall confuses cause and effect. Both he and Alex Tabarrok ignore that tuition costs were just fine before state subsidies (to the institutions) were removed. Drives me nuts. Further, why the American-centric exceptionalism? There are plenty of other nations with a variety of systems. A god-given natural experiment. So we can compare and contrast. Why are their costs and outcomes ignored?

If interest rates are much lower...

Changing access and cost of capital won't free up land to be redeveloped, therefore increasing supply.

You are using the arguments of supply and demand and free market economics where it is convenient, and saying the market fails higher education in other posts where it is convenient. Which is it?

Your post is economically illiterate and no economist in their right mind would claim that school tuition spike is the result of privatization and deregulation. Car loans are privatized too. That didn't drive up the prices for cars because the "predators" control the industry.

In fact, economists show that government backed loans have driven up tuition prices[1]

[1] http://www.nber.org/chapters/c13711.pdf

"As column 4 demonstrates, the demand shocks- which consist mostly of changes in nancial aid-account for the lion's share of the higher tuition. Specifically, with demand shocks alone, equilibrium tuition rises by 102%, almost fully matching the 106% from the benchmark. By contrast, with all factors present except the demand shocks (column 7), net tuition only rises by 16%."

"mortgage interest deductions have a similarly terrible effect on housing...

No.

Scarcity caused by NIMBY land use policy is driving up housing costs. The fix is aggressive upzoning.

Source: Help friends who work on affordable housing policy. This is common knowledge."

Genuine question - do you mean for this to apply to municipalities that are not San Fransisco? While downtowns are getting more dense across the U.S., not every city is quite so opposed to new construction. San Fransisco is a weird corner-case in terms of housing.

CA State Legislature thought the problem common enough to make a comprehensive report. Seattle and Vancouver BC are similarly afflicted.

I just read an opinion piece, which now I can't find (grrr), that argued the land-use issue needs to be solved at the state level. Their tweak to the law, which I guess is common, is to permit multi-family redevelopment every where, thereby letting the (re)developers (and the fabled market) decide. If I find the article, I'll update this comment.

As for me, I'm content with everyone properly identifying cause and effect, then acting accordingly. I don't care if SF or Seattle fixes their messes. Because if it gets too bad, people and companies will go somewhere else. So ultimately its a self-correcting problem. Alas, the lag in adjustment is painful. For instance, finding suitable housing for so many homeless. Well, okay, I guess I'm conflicted. I know I'll be fine. I have options. But for those less fortunate, ya, aggressive upzoning everywhere as needed, so should be fast tracked.

Interesting that you want blame everything except the actual major source of expanding costs at colleges: an explosion in the number of administrators and administrative departments. Rising tuition is being spent on bringing more and more aspects of students' lives under the control of college administrators. Scandalously, almost none of the new money has gone to hiring more professors. Something is rotten in the state of higher education and it's the bureaucrats running the colleges, set free from financial reality by heavily-subsidized student loans.

> Scarcity caused by NIMBY land use policy is driving up housing costs. The fix is aggressive upzoning.

> Source: Help friends who work on affordable housing policy. This is common knowledge.

Affordable housing policy advocates are not an unbiased source for this "common knowledge".

There are piles of cash to be made in affordable housing, in the form of outright grants, tax credits, zoning variances, etc, all in exchange for the creation of a small percentage of permanent rental units that the developer will turn a profit on, indefinitely. Any loss is mitigated by increasing the price of non-affordable units.

This incentivizes government-backed arbitrage opportunities, e.g., by allowing developers to buy land for a lower price based on current zoning, and then (in partnership with the local housing authority) appeal to local planning authorities for variances.

This unsurprisingly a revolving door between government housing entities, local planning boards, development companies, affordable housing tax credit brokerages, and the lobbyists for the above.

Here, for example, the local housing authority is trying to push through a high-density upzoning variance, for a project represented by a former housing authority executive, financially backed by an out-of-state firm specializing in tax credit financing that is one of the primary lobbyists against tax credit reforms that would eliminate their value extracting brokerage position in Missouri:

http://www.stltoday.com/business/local/is-missouri-s-costly-...

Upzoning in high-demand areas increases land value. Period. This raises market entrance costs to a level in which only large development companies can build. They build rental units. The government provides them grants and variances that private home buyers could only dream of. Housing becomes less affordable, not more, and fewer people are able to build up equity.

No contest.

I've met my share of wishful thinkers still pushing for set asides and subsidies. And we also have our share of cheaters. The irony is when those well intentioned set asides get perverted for profit.

But I like to think we're seeing a sea change on the topic. Better data. Broad coalitions. Commitment to finding win/win solutions.

Let's check back together in two years. See if my optimism was rewarded.

Yeah I'd also add that the mortgage system has been in existence since the New Deal and housing prices across America tracked inflation until recently.

With both education and housing there's a fear of missing out involved, where people see the door to the traditional definition of middle class America slamming shut. So demand ends up being incredibly inelastic because if you don't get in now you're Literally Fucked Forever.

When my boomer parents where young you went to college if you wanted to be an academic or a professional, and if you didn't you'd get a job and buy a reasonably-priced house with a 15 year mortgage in one of the thousands of economically successful towns that dotted this country.

So what do you think is the solution to bringing prices back down to reasonable amounts?

Doesn't matter, the objective of bringing prices back down is politically untenable in most developed countries, so the means to accomplish it are never discussed.

If it happens by market crash, well, it's another matter. This requires no planned political action, just continuation of status quo.

Similar skepticism of the "Freedom Markets (tm)" (Can I license your trademark :)). That said, can't one make the argument that the government providing lots of financing without adequately using the leverage that financing gave to bargain down prices distorted things?

Belated response. US Govt forfeited their leverage. They made two big changes. First, they subsidized higher ed, tuition was set mostly by fiat. Second, they stopped handling student loans, allowed banks to raise interest rates, excluded student loans from bankruptcy, moving all the risks of lending onto the borrower.

Said another way, we used to treat education as a public good and mostly paid for it. Now its a racket for Wall St to bind students in usury.

There are so many other examples in our society. Privatizing prisons. The school to prison pipeline. Privatizing water. War profiteering.

It's just goofball Reaganomics run amok, aka Freedom Markets (tm).

> Source: Worked in higher ed. This is common knowledge.

> Source: Help friends who work on affordable housing policy. This is common knowledge.

You might be surprised how much of what's common knowledge isn't even vaguely related to the truth.

The tuition rise is no where even closely explained by states providing less funding. the simplest explanation is that the near freedom of money allows many unqualified people to enter college with no hope of completing the courses and colleges are not held to any standard with regards to them actually getting the degree.

The simplest solution. Treat it like the government treats medicade and medicare. Pay a set amount of dollars per course hour determined by course. Higher rates are set based on the needs of the course and degree, meaning you are likely to have an easier time getting a loan to be a teacher than if you wanted to study art. Set maximum costs on course materials as well.

I am quite certain a very large number of colleges would come up with degree programs to fit under the rules to continue to be able to accept students with federal loans.

This, a thousand times.

What a lot of people do not understand, is that when demand for an asset goes down, prices come down and adjust to market (although in real-estate, the process takes a bit longer).

The best way to promote home ownership is to make sure people can get decent paying jobs. Promote economic growth and stop outsourcing jobs.

Also, stop subsidizing low interest rates and the mortgage interest tax deduction. These are further distortions in the housing market.

Absolutely.

Many of my friends look at me as if I just lost my mind - "but, but... low interest rates are good for everybody, right?".

It is an uphill battle, but I keep at it :-)

By low interest rates, do you mean Federal Funds, or the bond market?

My impression is that mortgage rates tend to track the 10 year bond rate, given most people refi/sell before then. These and long term rates have been on a multi-decade decline. I'm not sure how much influence recent policy has had.

Federal GSEs (Fannie, Freddie, FHA) and the Federal Reserve's QE activities (artificially propping up housing).

People who are against outsourcing of jobs because it hurts workers have what appears to me to be a small view of the set of humanity that matters. I don't see any particular reason why workers in the US are more entitled to good jobs than workers in other countries. There is no force more powerful for improving the quality of life and well-being of _billions_ of people than economic development, of which foreign investment is one of the best sources.

I want to see a world where there aren't poor countries and rich countries, but rather a global economy where someone born in (e.g.) Africa has opportunity and education similar to someone born in the US. Once this is accomplished (and the challenges in front of us for doing so are enormous!), outsourced jobs won't be a problem.

Rather than being opposed to trade and globalization (which are, frankly, unstoppable) we should be focused on mitigating losses for those affected. Erecting barriers to trade will only make US industry uncompetitive, our economy smaller, and those same workers, ultimately, worse off.

You are arguing against Last Place Aversion [0] and even if your argument makes sense, I think it simply will not succeed.

If you imagine everyone in the world has a "quality of life" score and this is distributed normally, then outsourcing jobs tends to help people in the bottom quartile, at the expense of people in the second quartile.

It is like pinching up a little bit of the probability mass living way out in the left tail, and folding it over into the second quartile region. Some of the people in the second quartile have to be displaced (in an ordinal sense) to the left, thus losing status.

We'd like to pretend like material well-being of, say, impoverished third-worlders, matters more than social pecking order status of poor-but-mostly-OK first worlders. Would you like to go first? Would you like to ensure your children have no access to decent education or a college with a social network that could raise their social status? Yeah, sure, you'll have acceptable food and someone will throw you some afterthough scraps in terms of feigned medical care. You'll have a middling life, mostly unpleasant, lots of mental health issues and lots of risk to you and your family of getting caught up in substance abuse or drugs, but you'll live into your 60s or 70s before you die.

Status really impacts health. Status affects your attitude about your own health, your willingness and access to seek help. It's not solely about material resource.

So I certainly sympathize. Why aren't we extracting wealth from the top quartile as a means for delivering aid to third world workers? Why instead are we extracting wealth from the second quartile to pay for the first quartile?

In this sense, your comment comes off as a little bit naive and insensitive. I'm sure down to brass tacks that people living in the second quartile understand what you are saying and feel compassion for people who have it even worse.

But how can you ask them to lay down and agree to be the lowest status group willingly? Yes, please outsource my already-degrading-and-menial job, reducing me into the bottom quartile of a slightly right-translated distribution. We're all slightly better off in absolute material terms, but now I'm worse off in relative status terms (which really, physically, affects my health and opportunity).

It's ... complicated.

[0] < http://www.nber.org/papers/w17234 >

That's the small view of humanity again. Nobody in the US is in the bottom quartile. You also see this as a zero-sum game: a process of extracting wealth from someone and handing it to someone else. Trade increases the overall amount of wealth. It's important for policy to recognize, as I said, that there are winners and losers and mitigate the negative effects for the losers. But this can come from the new wealth generated by the trade. Remember: this is new wealth, created entirely from nothing, that did not exist before.

> Nobody in the US is in the bottom quartile.

Did you read my comment? I said they are in the second quartile, and they foot the bill for a lot of the ways that wealth improvement reaches people in the first quartile.

Although, across the part of the country where I am from, Appalachia, there actually are people in the bottom quartile, especially after you take addiction-related QALY metrics into account. I'd argue your knee-jerk "just cause they are inside America's borders means they don't have it comparably bad" attitude, which sounds like you're just regurgitating some Giving What We Can blog post or something, is more of the small view.

> You also see this as a zero-sum game: a process of extracting wealth from someone and handing it to someone else. Trade increases the overall amount of wealth.

You really did not read my comment. I said that we translate the whole distribution to the right (that is the part about making everyone materially better off) but by doing so we shuffle some people from the second quartile into the first quartile, or at least shuffle them to lowered status within the second quartile.

In terms of ordinal status, it is, by definition, a zero-sum game. If, no matter how much total wealth there is, the thing people care about is where they rank in wealth, then it is zero sum. You can't manufacture more ranks. And, the evidence (which you don't seem interested in) really does suggest that it is the rank that people care about (especially when you are ranked second-to-last), even if preserving your rank means denying yourself better overall conditions from a material point of view.

But people don't only care about rank in wealth. I think you're focusing too much on that one aspect. A rising tide lifting all boats has a lot more impact to how nice it is to live in the world than a short-term shuffling of social status.

I think relative to the kinds of wealth increases the bottom 50% of the world is permitted to realize (e.g. access to ad-drenched web services and internet devices, entertainment consumables, heavily processed food, clearly-second-class medical care), the loss in status matters more.

People might be willing to accept a lessened station in life if the offsetting overall increases in wealth that they get to see are significant in their lives. The fact that at least 50% of the population is more concerned with rank than with overall well-being is, for me, a shameful indictment of how little we actually use societal wealth to improve impoverished lives to any degree, let alone a degree that would justify setting aside primal Last Place Aversion.

I agree with your assessment of how it moves the area around, and people's reluctance for them to be the ones to 'distribute' their wealth as opposed to the next guy up,but I just want to point out that even though there is a lot of press against how little (percent-wise) the top quartile pay in taxes (1%-ers), the top 5% paid 57% of all tax revenue in 2011. The top 1% paid 35% of all tax revenue in 2011.

Disclaimer: I am very, very far from the top 25%!

I don't see why these figures are considered useful in this context. The total amount of tax revenue needs to be larger (and more efficiently distributed), and that increase in tax revenue needs to come about almost exclusively through increased taxation of those hoarding wealth.

"The top 5% paid 57% ..." makes it sound like they are doing more than their fair share, but that's a gross mistake. It doesn't matter what the raw percentage is without also looking at how much of the income the op 5% took. If they take 99% of the total income, but only pay 57% of the tax revenue, it still amounts to a deep unfairness. (I'm not saying that tax revenue paid has to be 1:1 with income, only that taking 99% income while paying for 57% of the tax revenue is deeply unfair in favor of that wealthy 5%).

> I don't see any particular reason why workers in the US are more entitled to good jobs than workers in other countries.

There are things you can only do in the presence of inequality because inequality is necessary for specialization. If we require everyone in the world to have the same education then it averages out to something less than a high school education, which means we have no scientists or engineers or doctors.

Once you allow specialization it becomes advantageous to have geographic concentrations. This happens naturally -- Silicon Valley (computers), Detroit (cars), New York (finance), etc.

Exporting jobs increases inefficiency. People working on the same projects have to contend with timezone differences, people waste more time traveling, it's harder for the engineers to talk to the factory workers, etc.

The thing that makes more sense is to give US citizenship to promising engineers in other countries and let them move here, and let other countries specialize in other things (like agriculture or mining).

...let other countries specialize in other things (like agriculture or mining).

What if USA has more comparative advantage in agriculture and mineral resource extraction than in the industries you favor? Everywhere I go in Asia, restaurants brag about beef from USA, and many commodities are exported. Saudi is more concerned about frackers on the Great Plains than about the state oil ministries of Russia or Venezuela, which is why they crashed the petro market last year rather than e.g. five years ago.

If exporting jobs is inefficient, let people try to do it and fail - of course they will get outcompeted by the people who aren't exporting jobs, right?

Your comment gives an extremely weak argument in favor of regulation - paraphrased, it seems like you're saying "companies are stupid and don't know how to make money, so we should regulate them to force them to be more profitable". It's hard to say that sentence with a straight face :-)

Businesses, in particular corporations, only operate in the context of some government.

Plenty of folks who think competition is the best and that competition brings out the best in everything still believe that you still have to first organize markets and make sure they are competitive, i.e. It is not the natural state of things in each and every realm of life. We do not force companies to be profitable, we force them to play by a set of rules that we agree allows society to extract the most value from the companies rather than the other way around.

> If exporting jobs is inefficient, let people try to do it and fail - of course they will get outcompeted by the people who aren't exporting jobs, right?

Not if China manipulates currency to overcome the effect.

Fine - let them give the US cheap shit. They're subsidizing American consumers. By the way, the sentence you quoted was rhetorical - I don't actually believe that doing all manufacturing in America is actually productive, profitable, useful or desirable.

Go back and read the first post. Think about what happens if all the manufacturing happens in China.

If they get to the point where they can start designing things there then they have the advantage.

What America should be doing is highly promoting domestic automated manufacturing. Even if it created exactly zero manufacturing jobs, having the factory here would provide a local advantage. Local mills would have a cost advantage because the materials wouldn't have to be shipped halfway across the world and back. Product designers could actually see how their products are being made and improve the process without international air travel, etc.

>People who are against outsourcing of jobs because it hurts workers have what appears to me to be a small view of the set of humanity that matters.

Then get rid of nation states, allow complete freedom of movement, eliminate all the world's militaries, and use the money saved to improve living and working conditions for everyone on the planet.

>There is no force more powerful for improving the quality of life and well-being of _billions_ of people than economic development

And no force more likely to destroy quality of life and well-being of everyone than predatory nationalist capitalism.

You can't have this one both ways.

Oh - and the US economy is already incredibly uncompetitive, with vast surplus capacity. Why is moving that capacity to China and India better than using the full economic capacities of both China, India, and the US?

> People who are against outsourcing of jobs because it hurts workers have what appears to me to be a small view of the set of humanity that matters.

Or, alternatively, they have a right-sized vision of what the size of their stewardship is. While I certainly think a state as powerful as the US should consider the impacts of its actions elsewhere carefully, and even act benevolently outside its borders where it can, on principle the idea that societies focus on managing general welfare within seems like a pretty good one.

> I want to see a world where there aren't poor countries and rich countries, but rather a global economy where someone born in (e.g.) Africa has opportunity and education similar to someone born in the US.

I'm interested in that too. Whether barrier-free global-focus trade is the way doesn't seem to me to be a settled question.

https://books.google.com/books?id=xEmKBAAAQBAJ&pg=PA192&lpg=...

> Rather than being opposed to trade and globalization

Almost nobody is "opposed to trade." Some people may be in favor limits on trade (if you don't believe that there should be assassination markets, you're one of them). Similarly, when it comes to globalization, few people want to make any border entirely non-porous (except as a weapon, as the US has with Cuba), but there's arguments such as Schweitzer's that are compelling.

> (which are, frankly, unstoppable)

It's certainly not possible to absolutely ban any activity humans might want to engage in for any reason. It's entirely possible to discourage many things substantially enough that the scope/frequency becomes limited.

> we should be focused on mitigating losses for those affected.

This is a grand idea.

> Erecting barriers to trade will only make US industry uncompetitive, our economy smaller, and those same workers, ultimately, worse off.

Any barrier? Or just some?

Frankly, to a representative elected by a certain set of humanity, only one set of humanity should matter.

Not if that set of humanity's interests extend to the rest of humanity. A politician elected by a country consisting of purely rational altruists should be very interested in global trade, because it serves the interests of his constituents.

> I don't see any particular reason why workers in the US are more entitled to good jobs than workers in other countries.

They aren't. But the primary concern of U.S. government policy should be the well-being of U.S. citizens. Otherwise why have a country?

In the same vein: citizens of other countries are just as entitled to health care as U.S. citizens. That doesn't mean the U.S. government should expand Medicaid/Medicare to non-citizens.

Demand is a function of price. Prices for a good or service only go down reliably as a result of decreases in demand if supply is constant. If supply isn't constant, then the change in price is a function of the fixed versus variable costs of production, and the price elasticity of demand for the product. If fixed costs dominate the equation, prices will go down so producers can recoup their capital investment; on the other hand, if variable costs dominate the equation and the price elasticity of demand for the product is low, the price may not change, or may even increase.

I think you mean 'offshoring.' Eliminating outsourcing would close down every software consultancy, independent accounting firm and outside counsel firm.

As far as 'offshoring' -- I can't afford to pay onshore engineers $200+ and hour by hiring a consultancy for a short term project. So that project would never happen. With offshoring, I can afford to pay to get the project built. Once the project is built and actually generating revenue, then I can afford to hire onshore employees for the long term.

Don't be so quick to dismiss offshoring as a 'job killer' because there's a good chance that if it couldn't be done cheaply, it just wouldn't be done at all. Those things that are built by offshore teams-- those are going to result in dozens of eventual salespeople, marketing people as well as money for infrastructure and future development. All the the goes to zero if I can't use a lower cost offshore team at the outset. Most of us building software products don't have the luxury of a VC cousin in the incestuous circle jerk that is Silicon Valley venture capital. Some of us build companies using money we saved.

That concept certainly pisses off the Bernie and Trump voters who think labor protectionism is a good thing, but we don't live in the 1950s where creating a business involved having a factory and 'workers.' Creating a business should be easy and do By things like restricting offshoring is pretty close to the $15 minimum wage in sheer economic stupidity. If I can't offshore, then I will just do nothing. That capital just sits on the sidelines when it could be actually creating wealth. People seem to think jobs are created by huge companies with million dollar CEOs. That isn't the case. It's the small business owner that does most of the job creating -- not the big companies and not the government. It's the man or woman that puts their capital at risk to try to build something. We should be making that process easier. Start fast, fail fast. Yet when people talk about eliminating outsourcing and offshoring, they really don't think about that. They see business as some 'Dr. Evil' entity. The see the economy like fatalist Marxists: finite classes of workers and "the rich." The 'rich' are only looking to exploit people and keep then oppressed. That's bullshit 19th century thinking.

We need to make offshoring even easier! That will spur economic growth.

Slightly tangential, but a good eye opener for me was the Cash for Clunkers program...

To perform an average rebate of $4000 per car, cost the taxpayers and industry $24,000 per car.

Anything the government gets into, with some notable exceptions (e.g., highway construction in the 60s), ends up with little net gains and usually a 5x overrun in costs.

Citation for this because the analysis I read says that gap was ~$2000 per car but about $0.10 per job saved.

http://web.archive.org/web/20090927101631/http://www.freep.c...

https://www.google.com/webhp?sourceid=chrome-instant&ion=1&e...

http://www.brookings.edu/research/papers/2013/10/cash-for-cl...

"Almost anything would have been better stimulus than 'Cash for Clunkers'."

"Cash for Clunkers a near-total failure."

"Obama's Cash for Clunkers harmed the industry it was meant to help."

You have to take the overall effect into it.

But that might not be the best of examples. I would have rather mentioned a more touchy subject (the ACA), but that has not gone well for me in the past here.

Interesting quotations you included - where did they come from? I didn't find them in the report you cited. The following is from the conclusion of the Brookings report you cited,

"The evidence suggests that the program did indeed incentivize the sale of more fuel efficient vehicles by pulling sales forward from the near-term future. This resulted in a small and short-lived increase in production, GDP, and job creation. However, the implied cost per job created was much higher than alternative fiscal stimulus policies. ... The CARS program led to a slight improvement in fuel economy and some reduction in carbon emissions. The cost per ton of carbon dioxide reduced from the program suggests that the program was not a cost-effective way to reduce emissions, although was more cost effective than some other environmental policies, such as the tax subsidy for electric vehicles or the tax credit for ethanol."

They aren't saying it was great, but they are not saying it was a failure or that it harmed the industry.

The first link provided above is a Google search URL for the terms "cash for clunkers cost".

Those are article quotes from the front page results.

On the one hand a detailed report and the other a bunch of random quotes.

I think I'll trust Brookings.

Those quotes have details behind them. Such as that sales where mostly all shifted in from the future, less cars where sold overall (hurting the industry), the fuel economy savings resulted in mere single-digit days of gasoline saved over the lifetime of the vehicles sold, and a bunch of other not so great things.

Either way, the Brookings report ends with this quote - "In the event of a future economic recession, we would not recommend repeating the CARS program."

There is a reason for that.

The $24,000 is per "stimulated" car, the 125,000 sales that Edmunds.com decided were added by the program, not per rebated car.

The actual spend on the 690,000 rebated vehicles was much closer to $4,000 per.

I fail to understand the logic behind all of this. Why not give the money to the universities directly? It seems super inefficient to create a whole industry around funding university education. Even more so when this system needs to be backed by government bailout guarantees.

With 'efficient' I mean converting a large percentage of high school kids into university degrees / or better a highly skilled work force. Handing >$10^6 in debt to these kids doesn't seem appealing at all. One might argue that the economic pressure of the debt increases the overall productivity of a workforce. However, doesn't it rather create a predominantly sad workforce?

> The way student loans were before income-based repayment, we'd have expected college cost to rise until it meets the lifetime expected benefit of college discounted to the present.

Given zero competition, maybe. With multiple schools all competing to be the ones to take your money, and also competing to get the most lucrative future alumni, you have a complex market where there exists downward price pressure. In the end, given two relatively equivalent schools the cheaper school will have a better pick of students.

Market forces will intervene eventually, but in the subsidized-student-loan regime, that has been some time coming. ISTM the impasse won't be broken by cheaper colleges, but rather by private firms providing rigorous standardized testing. If a MOOC student feels her 18 months of online study is equivalent to a four-year degree, and has the test results that prove it, smart employers will embrace the future.

I can't wait until somebody comes up with a lifetime subscription for higher education, observing where business everywhere is going...

On the other hand, government guarantees expand the available credit to consumers who would be just as likely to be shut out of homeownership (for example) by higher interest rates, save for a thunderous government program to ensure housing for every citizen. With the exception of the subprime mortgage crisis, it is usually a good way to help people become homeowners without too much taxpayer burden or onerous bureaucratic micromanagement.

That's exactly the sort of thinking that leads to this sort of problem. When you consider only first-order effects, many very bad ideas seem like a good idea. When you consider that all policy choices have second-order effects and unintended consequences, you can make more intelligent policy decisions.

Any policy can result in negative n-order effects as time passes.

Postwar housing policy mostly worked well (if you were white). The global population was smaller and the devastation of Europe and Japan made America the sole economic superpower. So what makes sense (and actually gets hammered out by perennially bickering politicians) in the 50s might make sense today, it might not. But nothing in politics is correct forever.

Just saying "consider second-order effects" without concrete evidence or a plan to mitigate changes in technology/laws/markets/social norms doesn't really add value.

You're making my point for me :-)

It is vital to consider higher-order effects and unintended consequences if you want to make good public policy. And not just "prove there are negative consequences:" it is incumbent on policy makers to understand these effects before enacting policy.

Consider price controls, such as rent control. Problem: prices are too high. Solution: legislate lower prices. First-order effect: prices go down. Hooray! Second-order effect: shortages. Third-order effect: decline in investment and maintenance. End result after many years can be disastrous. You get Venezuela.

In a scope of logic alone, yes, you are absolutely correct.

An example I like to raise regularly is the farm subsidies put in place by the Roosevelt Administration to prevent overproduction. Was there a better way for farms to stay in business and for food to be affordable to consumers? Maybe. But this way worked to solve problems created by the Great Depression.

Now I'm sure as you know, farm subsidies now are sweeter than high fructose corn syrup. There is even sitting republican senator who makes millions from the federal government paying him to not plant cotton. Few can argue this policy still works as intended, but it so politically locked-in that it's almost impossible to shake out. Same with the tons of unnecessary military hardware and property sitting around solely because representatives in those districts want to be re-elected by their core constituencies.

To me the problem isn't about getting it right the first time, it's about changing something that has outlived its usefulness when powerful beneficiaries fight to keep the wasteful status quo.

A metaphor: bandages are useful for flesh wounds, but after the wound has healed the bandage must be removed and the skin must be cleaned or it will rot.

It seems we are in violent agreement :-)

How so? As far as I can tell, the mortgage interest tax deduction only "benefits" those buying houses expensive enough for the interest to exceed the standard deduction (or who itemize for other reasons).

And it doesn't even benefit them, because all buyers in the market can afford x% "more house" and hence the housing gets bid up by exactly that amount.

That doesn't account for the access driven by the decrease in the price of housing that comes from removing the artificial credit subsidy. What you might call a "second-order" effect, though because it's an effect of "doing nothing" it's both more natural and more efficient.

If anything, driving up prices(by subsidizing credit) such that houses can only be bought on credit and not outright does the most to increase housing inequities! Cuz we all know how that shit works :/

while what you say makes intuitive sense, at least for the schools I want to go to? Tuition is extremely cheap for what it is.

http://financialaid.stanford.edu/undergrad/budget/

Seriously, $50K/yr tuition for Stanford? my undergrad would cost less than two Teslas. And while I've never owned a Tesla (or a college degree) I do imagine an undergrad from Stanford would be more fun than two Teslas, and it would certainly impress people more.

If you are an area computer nerd, even one without any degree at all, two teslas is a reasonable thing to own on what you can expect to get paid.

Berkeley? If you are an Engineer with no business ambitions, it's very nearly as good as Stanford (and some would argue better, but the majority view seems to be 'very nearly as good but not quite') Berkeley is under $15K/yr

http://financialaid.berkeley.edu/cost-attendance

I would be super happy to pay twice that, if they'd let me in.

That's the thing, I don't qualify for either of those institutions; and I can't imagine anyone who could compete with me job wise having a hard time paying for either one.

Of course, I understand that economics are vastly different outside of the computer industry, but I can't really speak to that, because I've never lived in that world.

I also think that the balance gets way different as you move down the rankings; I think that most of the colleges that would accept someone like me aren't worth the opportunity cost of the time I'd spend not working, at least if we're talking about economics. People are going to be way more impressed by four years at google or facebook than they will be impressed by a degree from a mid to low end school.

"Seriously, $50K/yr tuition for Stanford? my undergrad would cost less than two Teslas."

This might be a nitpick, but this is a bad analogy. If you have $50k * 4 years sitting around to pay for it, sure, it's probably worth it. That's not how it works, though.

You have a giant pool of 17-18 year old kids with 0 assets and minimal skills. These kids, in general, need to borrow to go to school. If they have to borrow $50k/year for 4 years, that's $200k in loans, plus they graduate with accumulated interest over those 4 years.

The better analogy would be selling an 18 year old kid getting a loan for a $200k car that they get in 4 years. Where this isn't accurate is that after 4 years, you can repossess the car if they don't make payments. With a college degree, there is no tangible asset. If the kid decides after 4 years that he wants a bicycle, he can turn in the car. If after 4 years at Stanford, a person decides to do something that doesn't pay the bills, now what do you do?

And, since the loan is up-front, all of this risk has to be accounted for. Right now it means saying that the loans can't (easily) be discharged. To me this seems somewhat fair, with the argument being that nobody forced the kid to go to Stanford (pay $200k for the Porsche), they could have gone to some state school (the used honda civic).

My point is that it's extraordinarily cheap compared to what I'd expect to pay for a "best in the world" anything else, not that it's affordable.

It would be crazy, I think, to expect a 'best in the world' education without it costing a substantial amount of money.

I'm not saying it's fair to a kid making that decision, and personally, I think that bankruptcy laws are central to civilization. I'm just saying that it's amazing how cheap a 'best in the world' education is.

Certainly, I don't oppose the government just paying for colleges; after all, that's a big part of why Berkeley is so cheaper. I'm just saying that running a good school takes money, and the fact that the best in the world schools (at least by my perception) are so cheap is a counterpoint to this idea that costs are spiraling out of control.

Costs have increased a ton, so unless the quality has also increased a ton, it doesn't seem crazy to expect a "best in the world" education for substantially less money.

And the whole non-computer world matters a lot, here. Most people go their entire lives without ever having the means to buy two high-end cars. Start paying that when you're 18 and the cost of financing goes up substantially, too.

Well, by definition, very few people are best in the world. And we still want most of the rest to get a college education. Not to mention "the best in the world" schools tend to attract students from very wealthy families, who don't need tuition support as much.

>Well, by definition, very few people are best in the world. And we still want most of the rest to get a college education.

Why is that? speaking as someone who doesn't have a college education, I'm fairly certain I would be less wealthy, by a good bit, had I gone to a mediocre school rather than no school at all. I mean, there are non-monetary benefits to school, too, and while I'm looking to go to college now - I just wasn't ready at 17.

It seems to me like the problem is the number of jobs that look for a degree even though college is little more than a class filter for them.

>You have a giant pool of 17-18 year old kids with 0 assets and minimal skills.

No you don't. People who get charged $50k for Stanford (and other top-ranked schools) have enormous family income/wealth, and for better or worse the social contract of our system is that parents contribute to their children's education commensurate to their ability to pay. The only people stuck borrowing the full amount are those whose parents could pay but refuse to.

You do get stuck borrowing that kind of money if you go to an expensive but not very good private school (how much help is available to middle-class kids scales with quality). A middle-class kid borrowing through a state flagship school (who generally gets no assistance) is more like $100k.

Great, but how is that a positive? Stanford is a top level university, but it's simply out of reach for those who cannot afford it. University admissions should be purely merit based in my opinion.

Many elite schools practice need-blind admissions - Harvard, Yale, Princeton, etc. Financial standing has no merit on admissions, and if you can get in, you get to attend regardless of the financial support you require.

Its a great system, but it unfortunately falls apart for the less-elite schools which don't have massive endowments to rely on.

University admissions are need-blind when you're playing at this level, and qualified students from families who can't afford it are given aid packages that make it free or nearly free.

Compared to many other institutions, Stanford does a good job of dealing with that issue. 85% of students receive some form of financial aid. There is no family financial burden for incomes $60k/year and lower.

Stanford is not a fantastic example. It is very rare that a Stanford degree or UCB degree doesn't pay off

Stanford also heavily reduces total cost of attendance for people that make middle class salaries.

Stanford (or other big name schools) are probably a bad example, because if you get accepted, they'll ensure that you can attend regardless of your financial situation. Most "big name" schools have instituted programs in the last couple of years whereby they'll cover your tuition without (or with very minimal) student loans. For example https://nobarriers.uchicago.edu/

The problem is the the rest of the schools out there - 50K might be on the high end, but 20-30K is quite common, and having attended those, you might end up with a huge loan and a worthless degree.

That's exactly right: https://collegescorecard.ed.gov/school/?243744-Stanford-Univ...

Expand the "Costs" section and you can see that if your family income is less than $100K, you're probably going to pay a small fraction of $50K.

If your parents make a lot of money but won't pay for college, you get stuck with the full bill. One of the many big wholes in the financial aid game.

Anytime a pervasive worldwide, nationwide, or statewide problem has been reduced to a fairly rare intra-family problem, that's still a great thing.

Is it fairly rare? I know a lot of upper middle class friends who's parents had 0 savings and could not help at all with college, but by income guidelines they were expected to contribute a lot.

I have no data on how rare it is. My anecdotes suggest that it's more a matter of how the family prioritizes and allocates the income they have. There is a very tight spot in the curve where you make a "good income" but your associated lifestyle expenses are such that all of that income is allocated before any is earmarked for college. I still view that as a choice, though.

Oh it's a choice.. but it is a choice of the parent screwing the kid.

College is one of the first real things you do as an adult. i.e. you may sign up for giant loans you owe the rest of your life. Silly that the kid is responsible for the loan side, but if he has irresponsible parents he gets no financial aid.

If the alternative was every kid got money just based on the parents saying they wouldn't pay, it would take me less than one clock cycle to conclude I wouldn't pay for my kids either...

It's just not that impressive. If you want to work at a startup in SF, your output and immediate impact are most important.

Why would I want to work late hours to take some kid out of college under my wing and clean up his mess?

OR I can take the guy with open source, who can demonstrate his coding chops in a pairing session, that will have an immediate impact to the project?

If you think the prestige of an A-List school is going to get you on the fast track to a job, save your 200K, start contributing to some major open projects, and build a real portfolio.

> It's just not that impressive. If you want to work at a startup in SF, your output and immediate impact are most important.

First, my experience is that startups are good for 'entry level work' - they pay a lot less than the big companies do. Unless you are at the very top (and in that case, a degree from an elite school matters a lot to VC, I am told) you are better off at a larger company, unless you don't care about money. And SF is... well, it's SF. Especially if you are like me, an unstylish, overweight nerd[1], you are much more of a 'cultural fit' in the valley. (it's stupid that sort of thing matters, but it does.)

Next? at least at the big companies, while a degree in general doesn't make all that much difference (I don't have a degree myself, and I'm at google right now, though I'm a contractor. I don't think a degree from a easy to get into school would make any difference to my pay rate) - a degree from Stanford or Berkeley is a different sort of thing. Half the big companies in the valley came out of Stanford, and we still use little bits of BSD every day. Lots of people at the big companies were educated at those schools, but almost none of them are down with the marginal folks, the contractors like me. (to be clear, I'm only marginal at one of the top-tier big companies like google. At Yahoo, for instance, I was pretty good. Not the best of the best, certainly, but well out of the marginal category I am in now. I suspect I might be good enough to be an employee at Facebook or Linkedin, even, though that has yet to be tested. Everything is relative, especially standards.)

[1]https://prgmr.com/~lsc/images/luke_at_2972.png

It's misleading to quote only the tuition number. Most people will have to pay for lodging, food, and other necessities, so those numbers are the better ones to use.

If you didn't go to college for those 4-ish years, you'd still have to pay for lodging, food, and other necessities, so it depends on what you're trying to analyze which number is better to use.

Okay, but if you didn't go to college those 4 years, you'd have a full-time job to pay for those things. For most people, 4 years of college implies 4 years of not working, or 4 years of low paying part time jobs.

A lot of people cover those costs with student loan money, so they're relevant to a conversation about student loans.

Agreed, but IMO they're not relevant to a more general "cost of college is less than 2 Teslas" conversation, which is why there are two different treatments that are reasonable.

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