An Interesting Thought on State Universities

Some interestingly counter-intuitive thoughts on the UC student protests against rising tuition from David Henderson of EconLog:

Taxpayer funding of higher education is a forced transfer to the relatively wealthy

Socialist author Robert Kuttner once called Proposition 13, California's 1978 property-tax-cut initiative, the revolt of the haves. The latest opposition by UC students to a 32% increase in tuition is a revolt of the "will-haves."

Milton Friedman used to remark that the California government, with its state funding of higher education, taxed the residents of Watts to pay for the residents of Beverly Hills. I think Friedman exaggerated substantially. Even though the California's tax system relies heavily on sales taxes, which probably makes the state tax system on net somewhat regressive, it's still the case that a given Beverly Hills family pays much more in taxes than a given family in Watts. But Friedman also focused on family income of the student, and that's misleading.

What Friedman could have said, and Armen Alchian did say in a classic 1968 article, is that state subsidies to higher education are a subsidy to the relatively rich.

I don't have strong opinions on this particular instance one way or the other (though with the state of California being close to bankruptcy, I don't see but what they have much choice to get more of the cost of running the UCs from the students) but it does strike me as interesting that providing more subsidies for college level education is often seen as a way of helping the poor and working class. The idea is, of course, that they don't have much money to go to college, so subsidies will allow them to go when they otherwise couldn't, and thus to improve their financial condition later in life.

The potential issue with this, as I see it, is that given that only 40% of those in the US earn a college degree, and given that those with college degrees earn a good deal more (on average) than those without, taxing everyone in order to help those who are able to graduate from college to do so with less personal debt is essentially a wealth transfer from everyone to the people who will make up the top 40% (roughly) in incomes in the long run anyway. So while there are lots of deserving people from low income backgrounds who would benefit from lower college costs, most of the time it would turn out that:

a) If they go to college and do well, they'll make much more money in the long run, and thus be in a position to pay off college debts themselves.

or

b) If they aren't actually able to do well in college, luring them in with lots of encouragement and cheap tuition won't actually achieve much other than landing them with a sense of failure and a costly delay on getting on to doing work which they would be good at.

So while as a "give everyone a chance to succeed" kind of guy, I certainly want to see everyone who needs it get the chance to go to college -- I'm also fairly comfortable with people financing their college educations through student loans, since they are, after all, the ones likely to reap significant earnings benefits from having gone to college.

The alternative, human side to all this, of course, is the plight of those who take out a lot of loans to go to college and then find, for whatever reason, that they don't make very much. The question would seem to be: is this group large enough and/or problematic enough for it to be worth while for society to heavily subsidize university tuition at public colleges, or not?