As for the mortgage interest deduction, how wouldn't it boost housing prices? It effectively lowers the mortage rate by your marginal tax bracket which is close to 50% in California. So instead of a 3.5% 30 year rate I'm now below 2%. Cheaper money stimulates borrowing. It doesn't matter how low NIMBYism pushes supply in the face of overwhelming demand, each individual still has a maximum price they can pay, and subsidized interest rates raise that price point.

[1] http://reclaimuc.blogspot.com/2011/09/senior-administrators-...

[2] http://www.latimes.com/local/education/la-me-uc-spending-201...

This statistic is incorrect. In 2014, there were 445 UC employees making >$500K/year each. This includes everybody, not just administrators.

You can get a list of them all here [1]. I didn't go through the whole list, but from sampling a few random pages, I'd guess that there are <20 administrators making >$500K. They are mostly medical school professors, some athletic coaches, and, e.g., the Chief Investment Officer. There are also some CFOs and Executive Deans, and maybe I missed something, so feel free to correct me.

[1] https://ucannualwage.ucop.edu/wage/

Not the OP, but what you're saying just proves him/her right. You're basically saying that he/she had provided a number with only 10% margin of error (which on the Internets is not bad) and then went all semantics on him/her, I'm talking about the part with the people not being "administrators". For better or for worse you can call a person earning >$500k a janitor on her/his employment papers, but I'm still 99.99% sure that person is still doing highly administrative tasks (like setting up golf matches in his/her google calendar) and not mopping the floors.

And the part where you say that artificially subsidizing a finite product (in this case houses) does not cause its price to go up makes me wish that you're not in any way related to the economics discipline. Because if you were then I'd say that the future does not look bright for students of economics.

Fact is that the cost of university is still too damn high. If it's not the teachers' salaries then what might the reason be?

Mind you, I'm not directly involved in this as I live half a globe away from the States and I'm a former college dropout now in my mid-30s, I'm just thinking that there are huge opportunity costs that we might pay, as a species, for not letting the brightest people attend University based on intellectual merits alone. I know that there are countless "help-the-poor-attend-university" programs, but, as far as I can tell, in order to be part of one you need make no mistakes, as in you need to pass all the exams in order for the financial help to keep coming (I might be wrong on this). Plus, there's all the bright lower-middle-class people whose parents are "too rich" for their kids to receive any financial help but too poor to afford to pay their kids' university. You risk losing these people's minds big time.

As a solution I would impose only having access to University if you pass an entry exam, and everything to be subsidized by the State. It doesn't matter if your dad is the President of America or the CIA chief, it doesn't matter if your dad has paid $100 million to the University, it doesn't matter if you're white, black, yellow or purple-colored. Only your intellectual ability should count.

As for the investment officers, someone has to manage the universities' endowments. Certainly, they could just liquidate their endowments and spend it immediately on, say, urgent needs and tuition reduction. But then when they need to, e.g., renovate a dorm, they will lack the money to do so.

Not enough to pay for that fancy new stadium though...

Once the superstars are limited to $1M, I think others will fall in line as well. Don't like it? Quit.

We're already cutting cost at the lower end of the spectrum with adjuncts. Why not do the same at the top? On second thought $1M is actually too high. It should be lower. Probably a cap of $750k is fairer.

DJ

Similarly for administrators and coaches, meaningful pay cuts would just push many of them out the door to greener pastures.

The cure for high tuition is unlikely to come just from cutting salaries.

I've hinted at this elsewhere. There is no reason that anyone should be making more than 100x the minimum a full time worker should be making. I'd propose increasing the marginal rate to something obscene like 90% on income above that point. I stand by it as well.

If we are to make college education free of cost, we have to make them cheaper. I draw parallels here between higher education and healthcare. Yes, customer service will become worse in the process. However, I think if we manage expectations, we can do some serious cost-cutting while maintaining a certain minimum standard. This is true in both education and health care. Anyone who aevocates single payer without conceding that the list of options patient/student shrinks is probably not being honest. But this shrinking is OK.

First thing that should shrink is the obnoxious attachment to collegiate athletics. Even if it were true that college athletics is a net positive for a university's balance sheets, I don't think it is a university's place. This is a part of the overall "remove bling" from education. Other efforts could be trying to find ways to make housing less expensive and not as fancy.

Second thing that should shrink is the myriad of regulations from dozens of sources imposed on universities. I didn't know how many things they have to comply to. This is insane.

But coming to point, professors won't quit if wages go down. If they do, that's fine. There are other professors.

For the dorms, I don't know where you went to school, but my dorms were pretty basic. When I visited friends at other universities, their dorms were also pretty basic. When I studied abroad in Germany, the student housing was actually nicer than what we have in the US. Could we spend less on dorms? Probably. Would it make a meaningful change in cost? Probably not.

And again, coming back to the idea of cutting salaries, I don't know why you think there is an endless line of potential professors waiting to take jobs for no money. Good professors are valuable and would command high salaries in industry. If the end result of cutting tuition is that education quality declines proportionally, it's probably not worth it.

I also don't know why you're so hung up on the few people who are extremely highly paid. Bloated salaries or not, that group is not large and it's not a major factor in overall cost. Additionally, very few if any professors are in that group.

Worse for college professors they have no choice in having their salaries come down because it won't be a decade before college education done online becomes the main alternative. With the pay scales differences across the world being what they are the fact is you will likely have may opportunities for professors in India and elsewhere teach course with the same expertise.

People are quick to bitch and bemoan medical costs from pills to services and pointing overseas "SEE SEE SEE" about how their costs are lower.

Well guess what, education will be even cheaper because the student doesn't have to travel to get the world class education. All that needs to change is regulations which will prevent it.

For highly-paid professors, it's generally true that they are equally employable in private industry. Similarly, for highly-paid professors, there are plenty of available jobs in industry, hence the high pay.

If you disagree, I'd be interested in hearing what professors you believe are simultaneously overpaid in academia and would face difficultly finding industry work with equivalent pay.

> Worse for college professors they have no choice in having their salaries come down because it won't be a decade before college education done online becomes the main alternative. With the pay scales differences across the world being what they are the fact is you will likely have may opportunities for professors in India and elsewhere teach course with the same expertise.

I seriously doubt this is actually going to happen. There are plenty of accredited online universities already and enrollment in traditional universities has not dropped. Online courses mostly provide an option for people who would otherwise be unable to attend. Sure, some people will choose online studies even if they would be able to attend a traditional university, but I expect them to be in the minority.

Also, I don't expect lower professor pay to be a significant cost reduction for online courses. Employing Indian professors instead of American ones will probably not drop the cost to produce an online course significantly, because the costs can be spread across so many students. If anything, I think online courses might strongly favor native speakers because the language barrier is reduced at such a low cost.

And that's what costs money, insofar as it raises people's social class and gives them connections. Learning is a trivial cost in comparison, and can be ignored in the calculation; it's something you effectively get "for free" with the price of admission to the social-class-higher-than-yours practicum that is university.

Note that community colleges, which have just as much "learning" but no potential for class-raising, don't have spiralling costs. Community college costs what learning costs.

People in the upper-middle class will only experience social-class mobility by going to an upper-class university (e.g. one of the Ivies, and even then only certain programs that haven't already been flooded by other upper-middle class entrants.)

Meanwhile, very few people in the lower-middle class go to university; they "get an education" by going to a trade-school or to community college, thus also avoiding enculturation. And people truly in the lower class (e.g. immigrant agricultural workers) don't even consider higher education to be an option, despite government student loan programs being aimed at them (with the explicit goal of enculturation!) more than anyone else.

Generally, though, mobility between any two classes becomes more difficult as the size-ratio between the source and destination class increases, because every place an individual could go to attempt to immerse themselves in the destination class, is already full of other people of the source class attempting the same thing. The previous mobility from lower-middle to upper-middle class has created a bulging upper-middle, which has killed the ability for people to become upper class. (Though it's easier than ever to enculturate to the upper-middle class, this being basically what happens by default when anyone with a lower-middle-class background finds themselves spending a lot of time on the internet—the internet [outside of own-class-reflecting echo chambers like Facebook] being a universally-accessible upper-middle-class microcosm.)

Columbia University, for example, has its current tuition at around $70k/yr, which is over 2.5 times the average American individual of $26k/yr. Columbia and its peer institutions rarely offer merit based financial awards, thus incentivizing the wealthy who can afford it and the poor who it's essentially free for, while avoiding a large part of the American middle-class altogether.

Another group of schools, besides the Ivies, that primarily serve the upper class are the prestigious small liberal arts colleges, such as Williams, Pomona, Amherst, Middlebury, etc. These are some of the smallest schools in the country, yet have the largest endowments per capita (Pomona's has the fourth largest endowment per student in the country, for example, at $1.5 million / student, which is above both Princeton and Harvard). Taken in conjunction with ~$65-70k/yr tuitions (and increasing at an average of 5% a year!), the results are institutions that cater primarily toward the upper class yet put forward the idea they server everybody by enrolling a token amount of lower class students (as many admitted students unfortunately discover they cannot afford to attend).

Source: I studied this topic at, yes, one of these very institutions. I believe the entire university system–financing especially–needs vast reform.

Harvard also released an [infographic](http://features.thecrimson.com/2015/senior-survey/) on their graduating class of 2015 "by the numbers"–notably, 2% of the nation earns $250k+/yr, but at Harvard they made up 30% of the class. That statistic is increasing, not decreasing.

Intuitively I agree - but what struck me was what do we mean by "class"?

I can sniff some circular reasoning here.

If we say class is culture - and it's easier to hold a certain set of views (liberal market based, empirical lead?) if one is independnatly wealthy and educated in the above market/science combo.

Then upper middle class is probably the "top" of the tree.

Economic is easy - the UK aristocracy is generally marked out by independant wealth - certainly a number of titles gambled their way out of the aristocracy whereas a title is not needed to be considered upper class (see Branson etc). Perhaps a better term is "establishment"

The upper middle class perhaps is those in the 1% still who must work for income. Doctors perhaps?

I would suggest anyone who has seen their wages increase in real terms in past thirty years gets to stay middle class after that and those stagnating can be "working" class. (Quotes are sarcastic)

If I then suggest that the existence of a billionaire is a symptom of a market failure somewhere, then I am probably arguing that the "upper class" is now a fiction created by market failures - that we can and should erode it till the top of the tree is upper middle class.

For example - is a daughter of the revolution, with a Park Avenue address or two upper class? Or is Barack Obama?

I would argue that a new driver for social mobility would then be the compulsory draft - military or civilian.

Two families are of the same social class if a marriage between them would be unsurprising. Money is a sideshow.

> While big paychecks for those in UC's senior management group — including the president, the chancellors and other top administrators — attract the most attention, they comprise less than 1% of the $27-billion budget, officials say.

> It is the next layer of well-paid administrators that has grown most significantly over the last two decades. From 2004 to 2014, the management and senior professionals ranks swelled by 60%, to about 10,000, UC data show.

There are indirectly related tidbits all over the article and I couldn't find what I'd really like to see: a histogram of administration salaries and another of faculty salaries.

Anyway, here's another unrelated but interesting tidbit from that article:

> Efficiency experts brought in to assess the UC Berkeley bureaucracy a few years ago concluded it was top-heavy. Bain & Co. consultants tallied 11 layers of management between the chancellor and front-line employees, suggesting that the organization had too many bosses. More than half of all managers — about 1,000 — had three or fewer direct reports, and 471 were in charge of exactly one person each.

Isn't it funny that they had to hire top-dollar big-name consultants to find out they have way too many middle managers ... some of these managers should have the time to figure out how many layers of management there are and how silly some of them are. But then again, of course they didn't: more managers results in more politics results in less effective management.

Do they mean medical professionals? If you actually look at the highest-paid (and $100k+, for that matter) staff lists, there are really a tremendous amount of doctors. That should not be surprising at all, since UCSF, UCLA and UC Davis operate huge hospitals.

It's wildly inappropriate to lump the "senior professionals" in with management. The hospital system, with the exception of the training it provides for the medical schools, is effectively orthogonal to the educational mission of most of the UC system.

Maybe.

I place more weight on incentives. Design of the markets. Checks and balances. Transparency and accountability.

need 500 administrators...?

The insufferable waste I witnessed in higher ed is no different than any where else I've worked. Biggest factors are scale and bureaucracies.

As terrible as higher ed is, I'm certain I don't want it to become more business like, assembly line efficient. Whatever magic is to be found in higher ed is because its weird, chaotic, diverse.

As for the mortgage interest deduction, how wouldn't it boost housing prices?

Second order effect.

And just like the housing bubble, the clever ones are going to end up getting Uncle Sugar to pay off their loans, while a large majority will end up 'doing the right thing' to their own disadvantage. Of course, the big banks and financial entities that own these loans will come out just fine.

Then we can move on to the next staple to financialize, perhaps unborn generations since there's not much left.

There is a mentality I see in a lot of young people that they think they need someone to teach them. If people can get over this and use something like an interactive and visual web page they can learn much faster and easier than through a lecture or through books.

https://fee.org/articles/student-loan-subsidies-cause-almost...

http://www.theatlantic.com/education/archive/2015/05/the-rea...

http://www.forbes.com/sites/timworstall/2015/08/03/increased...

I agree that land use decisions are also an important contributor to the problems in the mortgage market, especially in places like the peninsula. But without federal loan support, the market could not have reached the heights that is has since ultimately people can only afford to pay so much per month. If interest rates are much lower, then you can afford a higher principle amount for the same monthly payment. In a housing market with shortages, this allows prices to be bid higher.

But of course those land use policies are also exactly the kind of first-order thinking about government policy that I decried in my post above.

Scanned article, will parse it later.

From the hip: Direct != indirect subsidizes and shouldn't be conflated. Direct subsidizes lowers the retail cost.

Outsiders need to understand that, just like business, higher ed has been reducing costs aggressively. Most faculty and staff have been taking it in the teeth. Meanwhile, admins and coaches and select faculty have been getting outsized compensation. No different than any where else.

Edit: If I had to guess, tuition at private institutions went up because it could. Charge what the market will bear. Maintain appearance of a premium quality product. Differentiate oneself from the plebes.

Edit 2: Chewed on the other two articles. Tim Worstall confuses cause and effect. Both he and Alex Tabarrok ignore that tuition costs were just fine before state subsidies (to the institutions) were removed. Drives me nuts. Further, why the American-centric exceptionalism? There are plenty of other nations with a variety of systems. A god-given natural experiment. So we can compare and contrast. Why are their costs and outcomes ignored?

If interest rates are much lower...

Changing access and cost of capital won't free up land to be redeveloped, therefore increasing supply.

> Source: Help friends who work on affordable housing policy. This is common knowledge.

Affordable housing policy advocates are not an unbiased source for this "common knowledge".

There are piles of cash to be made in affordable housing, in the form of outright grants, tax credits, zoning variances, etc, all in exchange for the creation of a small percentage of permanent rental units that the developer will turn a profit on, indefinitely. Any loss is mitigated by increasing the price of non-affordable units.

This incentivizes government-backed arbitrage opportunities, e.g., by allowing developers to buy land for a lower price based on current zoning, and then (in partnership with the local housing authority) appeal to local planning authorities for variances.

This unsurprisingly a revolving door between government housing entities, local planning boards, development companies, affordable housing tax credit brokerages, and the lobbyists for the above.

Here, for example, the local housing authority is trying to push through a high-density upzoning variance, for a project represented by a former housing authority executive, financially backed by an out-of-state firm specializing in tax credit financing that is one of the primary lobbyists against tax credit reforms that would eliminate their value extracting brokerage position in Missouri:

http://www.stltoday.com/business/local/is-missouri-s-costly-...

Upzoning in high-demand areas increases land value. Period. This raises market entrance costs to a level in which only large development companies can build. They build rental units. The government provides them grants and variances that private home buyers could only dream of. Housing becomes less affordable, not more, and fewer people are able to build up equity.

I've met my share of wishful thinkers still pushing for set asides and subsidies. And we also have our share of cheaters. The irony is when those well intentioned set asides get perverted for profit.

But I like to think we're seeing a sea change on the topic. Better data. Broad coalitions. Commitment to finding win/win solutions.

Let's check back together in two years. See if my optimism was rewarded.

Said another way, we used to treat education as a public good and mostly paid for it. Now its a racket for Wall St to bind students in usury.

There are so many other examples in our society. Privatizing prisons. The school to prison pipeline. Privatizing water. War profiteering.

It's just goofball Reaganomics run amok, aka Freedom Markets (tm).

With both education and housing there's a fear of missing out involved, where people see the door to the traditional definition of middle class America slamming shut. So demand ends up being incredibly inelastic because if you don't get in now you're Literally Fucked Forever.

When my boomer parents where young you went to college if you wanted to be an academic or a professional, and if you didn't you'd get a job and buy a reasonably-priced house with a 15 year mortgage in one of the thousands of economically successful towns that dotted this country.

> Source: Help friends who work on affordable housing policy. This is common knowledge.

You might be surprised how much of what's common knowledge isn't even vaguely related to the truth.

The simplest solution. Treat it like the government treats medicade and medicare. Pay a set amount of dollars per course hour determined by course. Higher rates are set based on the needs of the course and degree, meaning you are likely to have an easier time getting a loan to be a teacher than if you wanted to study art. Set maximum costs on course materials as well.

I am quite certain a very large number of colleges would come up with degree programs to fit under the rules to continue to be able to accept students with federal loans.

No.

Scarcity caused by NIMBY land use policy is driving up housing costs. The fix is aggressive upzoning.

Source: Help friends who work on affordable housing policy. This is common knowledge."

Genuine question - do you mean for this to apply to municipalities that are not San Fransisco? While downtowns are getting more dense across the U.S., not every city is quite so opposed to new construction. San Fransisco is a weird corner-case in terms of housing.

I just read an opinion piece, which now I can't find (grrr), that argued the land-use issue needs to be solved at the state level. Their tweak to the law, which I guess is common, is to permit multi-family redevelopment every where, thereby letting the (re)developers (and the fabled market) decide. If I find the article, I'll update this comment.

As for me, I'm content with everyone properly identifying cause and effect, then acting accordingly. I don't care if SF or Seattle fixes their messes. Because if it gets too bad, people and companies will go somewhere else. So ultimately its a self-correcting problem. Alas, the lag in adjustment is painful. For instance, finding suitable housing for so many homeless. Well, okay, I guess I'm conflicted. I know I'll be fine. I have options. But for those less fortunate, ya, aggressive upzoning everywhere as needed, so should be fast tracked.

If it happens by market crash, well, it's another matter. This requires no planned political action, just continuation of status quo.

In fact, economists show that government backed loans have driven up tuition prices[1]

[1] http://www.nber.org/chapters/c13711.pdf

"As column 4 demonstrates, the demand shocks- which consist mostly of changes in nancial aid-account for the lion's share of the higher tuition. Specifically, with demand shocks alone, equilibrium tuition rises by 102%, almost fully matching the 106% from the benchmark. By contrast, with all factors present except the demand shocks (column 7), net tuition only rises by 16%."