From: NY Time's Economix Blog
Privatizing education is one of those issues that is constantly in my face as a student, but which mostly gets lumped in with every other budgetary concern. Every year, state funding for public university education is slashed, and public institutions are forced to look for funding elsewhere. This burden is most often pushed onto students through higher tuition. To combat this, universities have begun cutting costs across the board and admitting more out-of-state students that generally pay higher fees.
There is a fundamental problem with this. It is the same problem that arises in healthcare, food, water, and any other good that is a necessity or a public "good" (meaning it is better for a society if their citizens have college degrees). For example, I benefit from other people being educated because their unemployment rate is 1/3 that of those with only a high school education. I also benefit because those with college educations tend to be able to afford their own healthcare, food, clothes, and water. The list goes on. But these positive aspects of education do not factor into firms' goals to maximize their own profit. In most every case, this means setting the price above what some people can afford to pay. In a sense, what happens is that while firms maximize their own profit, they push this unaccounted cost onto you and me. And every funding decrease to public universities forces them to act more like a firm and less like a public institution.
From: Maxine Udall-Girl Economist
As an economics student, this is another one of those issues that I face on a daily basis. The UCB economics department is renowned for its mathematical approach. But applying mathematics to a social science requires you to forget any sense of rationality with assumptions like "non-satiation," meaning that people always want to consume more of a good, and its seemingly contradictory counterpart on a macro-scale, "desired consumption=actual consumption," meaning people always consume exactly what they want. The problem is that these models are used to draw conclusions like "optimal social welfare." In my first economics course, I was lucky enough to have a great graduate student instructor who explained to me after several weeks of complaining that these models are only useful to describe trivial markets. He gave me a more advanced economics book that explained such crazy scenarios like how these models work when people have different income levels (answer: they don't work), or what if a society values other things (like the lives of other people) more than buying more goods. These models are often rejected because they require supposed economic scientists to make additional value judgments.
But in my opinion, the consequences of ignoring these factors is much more dangerous. As Maxine argues, it leads to easy to understand, but ill-conceived rhetoric, like the mainstream argument that big government inhibits economic growth. Another example is all the talk of the deficit, as if tomorrow the world is going to explode.
Another consequence is the emphasis on efficiency. This concept is probably the most dangerous concept in economics, yet it is thrown about as the always desired goal. The reality is that the only reason economists love efficiency is because they can measure it. But because of the assumptions necessary to find efficient or optimal outcomes, these results will always tend to favor: 1. Those start with the most wealth, 2. Those with the least regard for the livelihood of others. The consequences of this are readily apparent:
"We as a profession benefited from it with higher salaries and consulting fees. Meanwhile, the “tragic consequences” of our failure include a country that inefficiently spends twice as much as any other developed country on health while leaving roughly 20% of the population with no cover, a 10% unemployment rate, and a growing home mortgage foreclosure rate, all while providing single-payer credit default insurance, financed by low and middle income taxpayers, to the richest portion of the population, the guys who ran us into the ditch; the guys who cannot be taxed for fear they will cease to provide us with the dubious benefits of their financial expertise and acumen."
Also for what it's worth, the worst offender so far that I have seen is the Fed Chair himself, Ben Bernanke. His textbook doesn't even bother to state the assumptions, nor explain the consequences of his conclusions. I also have a less-interested graduate student whose answer to everything is that "these assumptions are necessary for the model." And these are the people who are guiding economic policy now and in the future. And the beat goes on...
No comments:
Post a Comment