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Comment by habosa | Hacker News Reader

We made very similar mistakes with college education and housing. Both things that we’d like people to have more of, in theory.

In both cases the government provided massive subsidies in the form of loans and tax breaks.

That does wonders for the demand side. However the government didn’t find a way to increase supply (esp of the good stuff) at the same rate nor did they find a way to prevent the excess profits generated from falling into the same few hands.

So what did we get? A seemingly endless cycle of price growth.

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The article makes the opposite claim. Rather than a seemingly endless cycle of price growth, the article claims that the cost of attendance has fallen in constant dollars. However, the nominal cost of attendance, which bears no relationship to the actual cost, because it's offset by pro forma need-blind merit-blind "scholarships", has risen, because the top-line nominal tuition cost is a market sorting mechanism among schools.

The claim of this article that real college prices are not increasing is at odds with the well-known fact that student loan debt at graduation has been rising steadily, especially relative to income: https://educationdata.org/average-student-loan-debt-by-year

There has certainly been more sticker price growth than real price growth due to scholarships/aid but this article is the first I've read to assert that the real price growth isn't there. And I definitely know many people who paid the full sticker price at elite schools (they were lucky to have families who can afford it, so not too much pity necessary).

Here's an older but very good article around why colleges raise prices to levels they know they'll need to subsidize: https://www.conradbastable.com/essays/the-uncharity-of-colle...

I agree, both sets of claims are hard to square with each other.

The rise in student loan debt can alternatively be explained by increasing concentration of wealth in the hands of a few people. In the past (e.g. 40 years ago corresponding to a graduation date ~20 years ago), more families were able to save enough to cover the true cost of 4 years of college. Now many families are living paycheck to paycheck, and cannot create an emergency fund, much less a college fund.

It could be that non-tuition costs have risen, that students have gotten worse at punching pennies through strategies like having lots of room mates and/or that fewer students are using part time jobs to cover living costs.

Absolutely possible. People don't want their standard of living to suffer, and when offered a loan to keep it up, many will take it. I could have accidentally graduated with substantially more debt than I did. I was offered more loan money than I truly needed. I took it all my first year. Wasted it. Realized it. Didn't accept the loans the last three years.

When I was 17 reviewing college financial aid packages, I was still trusting enough in the social contract that I thought I could only be offered loans that the granter expected I could pay back.

Since average debt is still less than the average cost of college, couldn't this just be changes in the availability and utilization of loans?

Great links. Thanks for sharing. But I don't know that they are incompatible.

Indeed. And in fact, from what I hear Stanford would like to expand its student body. Guess what’s stopping it? Yep, Palo Alto NIMBYs.

AKA, the community.

Not the community. A small subset of the wealthiest people in the local area. And keep in mind that if the people in the local area have successfully excluded others, they may have dispersed people with interests elsewhere.

There’s basically no reason they should have a say at all about what someone else wants to do with their own property.

I have trouble sympathizing with either side here. I’m not dialed into the issue, but I imagine that the homeowners in the area are property-tax paying members of the community with just as much voice as anyone else in the community.

It’s also not like there’s nowhere else on earth to put a school campus either. They’d hardly be the first school with multiple campuses that are separated if they didn’t insist on building it where they currently are.

“Insist on building it where they currently are” - telling them they can’t doesn’t mean “oh go build it somewhere else”. It means they have to sell that land, go buy other land (which could take decades), and then have the same fight.

Telling people what they could use their land for (within building code) is only legal in the US because the SCOTUS said it was legal to in order to keep Black people out of neighborhoods. It should be unconstitutional, and would be if not for racism!

I wonder what would happen if they started making plans to move. I know farmer/developers just outside of Des Moines who own several thousand acres they farm now but plan to turn into a suburb in 10 years - they would be glad to sign a 5 year option to buy contract on a large campus for cheap (you can even tell them there is a 99% chance they won't buy, they are going to farm it for a few years and then sell it so they are happy to take a tiny sum). I would be shocked if there were not similar situations a lot closer to their campus.

The idea is to put pressure on the locals - if you don't shape up we will move. A significant number probably like the college nearby overall.

Those other neighbors would say no too. The end.

If the locals don't like the college moving is an option. Not cheap, but you can sell the old campus to get a lot back.

That’s insane. It should not be possible for neighbors to force someone to move their business.

The Silicon Valley tech community.

Sometimes the community is wrong, and needs to be overridden. An example of this is California, New York, and Illinois enacting state laws to prevent local communities from blocking local renewable generation projects (wind and solar), because the justifications were frequently falsehoods and aesthetics reasons. Feelings are not a justification to inhibit responsible, community compatible development and improvements.

Stanford benefits the entire nation, so their community is the entire nation, not just their neighbors.

Stanford is its own city, it could just move entirely somewhere more favorable.

The Stanford campus is not exactly space-constrained

But then why didn't we see this when the USA passed the G.I. Bill? It paid for millions of Americans to attend college, and the government picked up a large portion of the tab. The original G.I. Bill, like its reincarnations over time, is not included when determining if a school receives too much of its funding from them government (90/10 rule).

I'm not asking rhetorically, by the way. I really don't know why "regular" colleges (besides the ones specifically targeting veterans) didn't drastically raise prices to soak up the G.I. Bill money.

> In both cases the government provided massive subsidies in the form of loans and tax breaks.

These subsidies were for sellers of college, not for the buyers of college. In fact, it was the students subsidizing the school and beneficiaries of the school such as the staff and school’s vendors, via the students’ future income, underwritten by US taxpayers.

I have my doubts about that common explanation.

A few years ago I tried to find historical tuition data but only found it online for a couple schools, Stanford and some state school that I don't remember.

For Stanford what I found is that a plot of log(tuition) vs time [1] for the last 100 years is almost linear. I think I got similar results for the state school.

[1] https://imgur.com/fXnjDNn

"A seemingly endless cycle of price growth"

Aka inflation.

seemingly is the key word here.

In other words, it's a market failure. Demand existed but the supply did not match it. According to neoclassical (and most other) economic theory, that shouldn't happen.

You can't blame the market when it's government interference in the market (by providing limitless loans).

No, of course you can. Markets are supposed to adapt to changes in demand (and increase supply if physically possible), regardless of the source or reason for the demand. Otherwise, you're then admitting that markets are extremely brittle.

Let's consider another example. Consider that security situation of your country worsens and the government suddenly needs more grenades. So they start to buy them at expense of something else, like school lunches. Are you claiming that the market supply won't try to match the demand?

If it's true, then screw the free market. It's a bad economic system, if it can't do this. The problem is markets are treated as an article of faith rather than tools, so people don't want to admit their shortcomings.

You're saying the market is a zero sum proposition. It is not, not at all. It is infinite.

The free market is not an article of faith, it has been tested and proved worthy countless times.

> don't want to admit their shortcomings

I do admit the shortcomings of the free market.

> You're saying the market is a zero sum proposition.

No, I don't need to assume that. Although of course short-term, production is a zero sum proposition.

> I do admit the shortcomings of the free market.

Maybe, but you don't admit it in this case (to provide access to university education), otherwise you wouldn't try to blame the government.

What should have government done, if it wanted to allow people get more education, and avoid the market failure?

> Although of course short-term, production is a zero sum proposition

I don't buy that.

> What should have government done, if it wanted to allow people get more education, and avoid the market failure?

Before, say, 1980, the US built the best university system in the world without government subsidy. After then, the universities became dependent on government subsidy, and the government began all sorts of regulations on them in exchange for the subsidy.

Before 1980, college was affordable. A student could pay for it with a full time summer job and a part time job after school. I know this because I did it.

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