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For starters, the gratuitous building and renovation does nothing to improve the quality of the degree, and certainly increases cost of tuition. The university isn't better off, and the students undoubtedly are worse off. If that isn't a market failure I wouldn't know what is.

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Market failure:

Market failure is a concept within economic theory describing when the allocation of goods and services by a free market is not efficient.

Colleges are not operating in a market system. They get money rationed to them by the government in various ways. Therefore it is not a market failure.

Yes, its government failure which is a more inefficient allocation of resources than would occur without the government intervention.

Yes, I agree. That was what I was trying to convey with my comments.

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