Tuesday, April 22, 2008

Thomas Sowell on Subsidizing Education on National Review Online

Like most "deep pockets," however, the government's deep pockets come from vast numbers of people with much shallower pockets. In many cases, the average taxpayer has lower income than the people on whom the government lavishes its financial favors.

Costs are not just things for government to help people to pay. Costs are telling us something that is dangerous to ignore.

The inadequacy of resources to produce everything that everyone wants is the fundamental fact of life in every economy — capitalist, socialist, or feudal. This means that the real cost of anything consists of all the other things that could have been produced with those same resources.

Building a bridge means using up resources that could have been used building homes or a hospital. Going to college means using up vast amounts of resources that could be used for all sorts of other things.

Prices force people to economize. Subsidizing prices enables people to take more resources away from other uses without having to weigh the real cost.

Without market prices that convey the real costs of resources denied to alternative users, people waste. 

Also, government subsidies take away the incentive for market suppliers to become more efficient, and prevents competitors from offering new products that might not be eligible for subsidies.  Even worse, as government subsidies and tax breaks distort the market, the competition shifts to political influence, leading to corruption.

This all plays out with disastrous effects when it comes to education.  Government schools are practically immune from market forces.  The worst thing we could possibly do to universities is to make them more dependent on government funds.  Technology offers many new ways to deliver higher education at lower prices.  It's time we let the market explore those options.

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