A Stitch in Haste

Richard Posner is stealing my material again. ;-)

He writes this evening:

But the "externalities" argument for subsidizing college education depends not only on how many kids would not attend college without the federal subsidy, but also on the cost of the subsidy to the taxpayer. I have no strong sense that the net external benefits are positive. If they are positive, it is very unlikely that they are large, considering the indirectness of this method of subsidizing education.

I wrote back in October:

But please don't waste my time with any "positive externality" nonsense along the lines of "by subsidizing higher education today, we will have a more productive workforce tomorrow that will have higher paying jobs, which will in turn mean greater tax revenue." Such reasoning has some serious flaws...

Posner makes several other very good points, especially on the non-dischargeability of student loans in bankruptcy. Give the whole thing a read.

One additional flaw in the system that Posner overlooks is when good money is thrown at bad schools, such as "diploma mill" colleges (and even law schools) as well as for-profit vocational schools that do not help their graduates find jobs (and occasionally find themselves mired in scandal).

The current federal student loan program -- indeed the entire federal student aid program -- is a contorted amalgam of policies and programs that, in toto, make little sense from any policy or political perspective. They are often ineffective and occasional mutually inconsistent. They often create agency and moral hazard problems.

Again, as I blogged previously:

Private citizen wants X, private citizen can't afford X, private citizen finances X with a lending institution. What exactly is the logic in the government getting involved in that calculus? Whether "X" a house, a car, a share of stock, a Snickers bar or a college education, the consumption is by a private person and should be privately financed. If the consumer wants it, then let the consumer pay for it.

As for Becker's side of the exchange, he writes:

[L]enders cannot take ownership of the human capital they finance since that means taking ownership of the individuals receiving the education, and no modern country allows people or institutions to own other individuals.

Yet further down in the post he contradicts himself by (correctly) pointing out that courts are more than willing, either ab initio (e.g., alimony or child support), or as a consequence of an uncollected judgment, to "take ownership" of one's productive capacity in the form of a wage garnishment. Seizing one's tax refunds or lottery winnings is another option already in place for uncollected debts. Defaulted student loan balances can and should be no different.

Related Posts:
Why Subsidize Student Loans?
Why Subsidize Law School, Especially Bad Law School?
Affirmative Action versus Law School Tuition
Selling Law Classes
Can Women Sue A College to Prevent Admitting Men?