Why do people always reach for central control, when we have the ultimate mechanism of price control as a core part of our society (competition).
What happens when the government tries to provide for us: they gaurantee home loans: Financial crisis, they gaurantee drug costs: Skyrocketing drug costs, they gaurantee your student loan: Skyrocketing cost of school
By it's nature, anything the government subsidizes is going to be taken advantage of. You either have to take full central control (lets not go there) or let the free market actually work. You can't layer the two.
And it ain't because of cost control. Every time we loosen the reins a bit and let the 'free market' take the wheels, we see things get a lot worse for Americans as a whole. Especially when you have giant companies controlling the market entirely, like with ISPs.
Sure, but you did not enumerate a single free market. I'd wager the US healthcare industry is far and away the most regulated market in the entire world. We know that regulation protects the big players at the expense of their would be competition and drives up profits. Colleges are hardly any better, and ISPs are nearly all monopolies granted by municipalities in exchange for kick backs of various sorts. The government has interfered with every industry in this list via direct/indirect regulation, grants, guaranteed loans, or tax incentives. Lets go ahead and throw in housing in our list, too.
In other countries, regulated/public healthcare works better and is more efficient than your system, it's hard to deny it... I don't see how doubling down on cutting regulations would solve anything.
In a way it reminds me of the gun control issue: the idea that deregulating gun ownership and carrying will make everybody safer seems so absurd from abroad... I guess it's cultural.
Europeans do not have cheap healthcare as a result of price controls on private medical practices (regulation), but as a result of redistribution and subsidy (spending).
You can find the price lists here:
* https://www.ameli.fr/paris/medecin/exercice-liberal/facturat... * https://www.ameli.fr/paris/medecin/exercice-liberal/facturat...
We have something similar, I've been appointed consultations only to be asked how I felt.
Edit: you can go directly to a specialist or not follow the « health path », you will just get less reimbursed. Some specialist can be seen without referral (gyn, psy...)
You're supposed to have a private health insurance (it's now mandatory for all employees) that reimburses the remaining 30% and all extra costs. That includes some dental and optical work, but also stuff like single-bed rooms in the hospital. Your additional private insurance also covers doctors charging more than the "official" price.
Public housing is a public service; rent control is regulation.
Public transit is a public service; fuel efficiency standards are regulation.
Medicare is a public service; the medical licensing regime is regulation.
Also, you combine "works better" and efficiency: This is slightly unheplful, as although (let's say) the NHS is very cost efficient is - however - not anywhere near as impressive when it comes to patient outcomes. I am not well-versed in the topic to provide a well thought out counterexample however I believe that the Swiss system would be a suitable example?
Comparing the deregulation of businesses with guns is fallacious if not ridiculous: However, being British etc, I do share your fears as to healthcare deregulation.
Europeans can spend such a huge amount (16% of govt budget vs 10% in the US) partially because the US is subsidizing their defense.
The US will eventually go to socialized medicine and then you will see the pace of medical advancement slow. Unfortunately it will be impossible to see because it is unknowable what would have been invented with a capitalist system.
This in-between fairyland with artificial barriers to entry on the frontend but no control on the back end is what's creating these captive markets where old companies to do almost anything because new companies can't join the market.
In the US there is the Surgery Center of Oklahoma which does something similar; I believe there are doctors in Oregon who do the same as well.
You're describing poorly thought out or outright captured regulation.
Regulation is not defacto bad. There are plenty of regulations from the last 100 years all over the world that are demonstrably positive.
1. Is there a place that is deregulated enough that it can be used as an example?
2. If so, does that place significantly outperform all others?
3. If so, what holds back the people in more regulated areas from adopting that type of system?
Things like healthcare networks were illegal before the Supreme Court redefined monopoly, and are now swallowing up healthcare delivery.
CVS essentially controls drug distribution.
The AMA is a trade guild that restricts the supply of doctors. A radiologist makes $1M a year because there are only a limited number of new ones minted each year.
ISPs are dangerous but nothing close to as awful as healthcare.
Technically the supply of doctors is throttled by residency programs, the numbers of which are determined by an incredibly weird dance between Congress and hospitals.
Your point stands, but just noting that simple monopolistic graft would be far more rational than how this actually works.
It’s not irrational, but an example of how a series of government interventions, each seemingly rational on its own and aimed at reducing costs, can end up creating a systematic problem.
Sure, we can slice off portions of this process and explain the decisions of individuals, but there are so many players with motivations independent of the outcome it's not a clean line.
At least in Australia, this is going to go one of two ways - either a user pays system or workers will have to contribute dramatically more tax (it's currently a flat 1%) to the healthcare system to look after people who are no longer working but costing the system a lot. I favour the latter, but the "fuck you, got mine" mentality is insidious and increasingly pervasive.
> Imagine that in 2019 someone invents a perfect artificial heart, which has zero risks or complications, reliably giving 5 or 10 extra years of life to typical elderly patients with heart issues. The downside is that it has to be made out of a giant diamond and so it costs $100 million. How do we decide who gets one?
The point is that somewhere down the line, as our opportunities to spend money on medicine grow and grow (which by itself is a good thing!), we have to come up with some way to draw the "user pays" line. It might be that people with a "fuck you got mine" attitude want to draw the line a lot lower than everyone else, but that's not the same thing as believing that the line exists at all.
Of course there are issues with it. Government inefficiency, people taking up GP time when they don't need to, over-prescription pushed by drug reps as the government pays for it etc. But comparatively I think it's a small cost to pay for avoiding poor people dying because they can't afford to go to the hospital.
Now, it turns out that the difference in productivity between people is so great (think the old 10x-100x programmer) that allocating resources according to contribution creates so much surplus stuff that everybody wins, even the unproductive. And, as a side benefit, everyone has an incentive to be productive.
The flip side is that Government is made up of ordinary people who often ask "what about fairness and status?", and likes to interfere to reallocate from productive people to unproductive people. In mild cases you get a healthy level of support for the disadvantaged, in extreme cases you get Venezuela. But in all cases, since the productive people are given less, they create less and there is less available to distribute. In theory this triggers the laws of supply-and-demand, reduces supply and prices increase.
The flip side is if the productive people consume their wealth instead of producing with it then we probably could tax them without any ill effects, but I think that is rarer than most people think.
Defining people in baskets like 'productive' and 'unproductive' is a fairly cold and callous way of looking at the plight of many Americans ranging from the poor to the elderly.
edit: Also to add onto my point: We've seen in America that people over time have grown more productive, yet wages have stagnated. If your theory was correct that productive Americans are allocated more resources, then presumably we should've seen the economy adjust accordingly.
But the question wasn't what America is doing wrong, the question was why government intervention always leads to price increases.
When the market says that one person is 1000x more productive than another, I'd take that with a 1000 kilo grain of salt unless I know the particular market sector to be sane by some other measure.
... it's a question of ephemeral facts. In a given area, companies who employ software developers, able to retain personnel who perform to those companies' subjective satisfaction, by paying them $X; and analogously for private schools in the same area it is $Y for first-grade teachers. How does $X compare with $Y, today, yesterday, and in all the millions of possible tomorrows?
In other words: the beauty of the free market is that we don't have to answer those questions normatively/prescriptively in any one central place.
Oh, but it is. Quality of education is clearly valued by parents. And depending on which school-district you live in, your property tax rate varies, and the quality of the local public schools correlates rather strongly.
While I don't have personal experience with this situation ... I can easily imagine that a good private school's elevator pitch would be something to the effect of "you and we are both located in $D1, which has cheap property taxes and questionable public schools; by living here you will pay less property tax over your adult life than you would by living in $D2; however, not only can our school make your kids smarter than $D2's acclaimed public-schools can, but we can do that without costing you more tuition than that lifetime-difference in property taxes."
> Capitalism only values something insofar as it can be directly exploited for personal profit.
Personal profit is precisely the best way to motivate humans to do anything that is valuable to society.
If someone is doing something of value without profiting personally, the next question about that activity is "what info am I missing about how they profit?".
Also: "If someone is doing something of value without profiting personally, the next question about that activity is "what info am I missing about how they profit?".
As someone else mentioned, this is frighteningly sociopathic. But it's also ideologically blinkered. It's an elementary fact of anthropology that human societies for most of history have lived on a communal basis without property. People act from personal profit because of the structure and cultural sediment of capitalism, not because humans are inherently selfish.
Interesting. I've assumed that primitive communities were run from the top down with the alpha male effectively owning everything.
I found this:
https://en.wikipedia.org/wiki/Primitive_communism
But it states:
> There is also no agreement among later scholars, including Marxists, on the historical extent, or longevity, of primitive communism.
That is a sociopathic statement that ignores all of human morality, denies any human feeling of empathy or acts of kindness, and pretends culture does not exist. It is certainly the logic of modern capitalism though.
If you saw a child about to fall into a well, and nobody else was around, would you help her? Of course you would. When you are eating thanksgiving with your family, does the strongest member of the family steal the turkey and then charge everyone for pieces of it? What you are saying is patently ridiculous.
Are you comparing poor adults to children about to fall into a well?
This is a sadistic logic. People dying because they can't afford healthcare. "Everybody wins". Living precariously from wageslip to wageslip. "Everybody wins". Internalising the toxic logic that one's worth is directly proportional to one's market value. "Everybody wins". Etcetera.
Several things:
1. If this were so it's strange how so many widely different forms of economic organisation, across the past and present - from post-war fordism in France to the state-owned enterprises in China today - have achieved remarkable levels of growth, stability and innovation. Economies are incredibly historically, sociologically and culturally varied and complex things. They cannot be reduced to a universal and parsimonious law.
2. What is of market value is not what is of social value. Even the most gooey-eyed neoclassical economist admits that a huge number of inefficiencies and distortions separate the two. Many thinkers - Rousseau, Marx, even Rawls - took them to be very far apart. A system in which the majority of people hate their job, have no bargaining power, have no say in their workplace, and are told by society that they aren't worth anything and to be grateful for the Promethean achievements of the rich, is not maximising social value. It's socially and culturally crippling.
3. You are naturalising a contingent and defeasible fact: that people need gratuitously large paychecks to have sufficient incentive to work. It's proven that above £28,000, increased income has no effect on quality of life. People want more money than that because capitalism, like any social system, functionally reproduces itself ideologically; and humans can be extraordinarily sensitive as to their social status and how others perceive them.
At some point everyone dies, and we know somewhere we run up against physical limits of what we can achieve. You'll need o be more specific about what your issue is here.
> Living precariously from wageslip to wageslip.
I've met people on $150,000 who manage to live paycheck to paycheck because they spend all their money in one go. You are probably referring to a real problem, but again maybe be more specific about what the actual problem is.
> Internalising the toxic logic that one's worth is directly proportional to one's market value.
It is impossible for everyone to simultaneously be 10x more productive than average, so I would _strongly_ advise anyone who thinks like this to pick a more achievable standard for measuring their self worth. But the choice of economic system does not determine anyone's mindset.
Several things 1)
Seems reasonable.
Several things 2)
> A system in which the majority of people hate their job, have no bargaining power, have no say in their workplace, and are told by society that they aren't worth anything
I mean realistically this is a value judgment so there is nothing to disagree on, but there are a lot of aspects here that are very negative. Clearly these workers are worth something, being humans, and nobody is seriously going to tell them otherwise. A lot of people are happy in their job, and realistically what is the actual problem with modern jobs? That workers have to turn up on time? That they have to be nice to people even if they don't feel like it? There are some horror stories that come out of retail, but they are caused by bad behavior of customers, not by the economic system.
I've seen a lot of people with lousy jobs who really struggle through life, but often the actual problem is something that is strictly in their personal life. I'm not sympathetic to the idea that somehow because workers don't understand the importance of what they do that they are therefore wasting time.
Several things 3)
> It's proven that above £28,000, increased income has no effect on quality of life
I'm not really familiar with the income and expense situation in the UK so I'll not try to talk about it. I would suggest that once you get beyond lifestyle expenses there are a lot of things that the wealthy do with their money that have nothing to do with their short term quality of life (like investment, or supporting family members or close friends).
Prescription drugs. The FDA has a "no existing alternative first" policy - they work on approving drugs for conditions where no current treatment works before they even start considering competitors to existing drugs. This sounds quite logical, but the effect of it is that every new drug is granted a monopoly for a long period of time before any competitor can even legally sell their alternative, so the drug company can literally charge whatever they want.
Building codes. In my grandparents' day, it was still possible to construct your own house: you bought a plot of land, hired a concrete mixer to come pour the foundation, bought a lot of 2x4s, and spent a bunch of time hammering & sawing. Now, you have to conform to all of the local building codes (which in the Bay Area, I've heard, is an 800-page tome), and you need to get approval for every feature of the design from the city building inspector, who has the power to completely block your construction if you get on his shit list. As a result, the only people who can build housing are ones who have good relationships with the city and the know-how to adhere closely to all the building codes.
Zoning. Even if you have that know-how and relationships, there are some things you just can't do with housing. Own a 1/4 acre with a single family home and want to convert it to a 4-plex? Too bad, it's not zoned for that.
And you can see the economic impact of all of these by looking at situations where they're absent. Consider generic drugs: once a generic has been approved, the price of a drug can fall by 90% or more. Or compare housing in the Houston metro area, where you can get a 3BR2BA for under $200K, to the Bay Area, where the same house will set you back $2M.
It still is. And here in rural Alabama, I have the electrical wiring to show for it.
You think that's government control? Most countries have the government negotiating prices on behalf of it's citizens in a very "take it or leave it" manner. Pharmacists also have to offer a generic if it's available, regardless of what the doctor prescribes.
Those much stronger government controls produce better (cheaper and universal) outcomes.
> Pharmacists also have to offer a generic if it's available, regardless of what the doctor prescribes.
I believe in the US it's actually illegal for a pharmacist to recommend a generic, if the doc didn't check the right box. Maybe just decriminalizing it would have a nice impact :p
EpiPens aren't really medical devices, it's just a drug with a specialized route of administration. it's not any different from an inhaler, a nasal spray bottle, an eyedrop bottle, etc., from a dispensing point of view.
EDIT: it's true that pharmacists aren't always allowed to tell patients when they could save money by buying a generic and paying out of pocket rather than buying a more expensive name brand and paying their share of the full price with insurance. that may be what you heard.
Accreditation is also related to government and can require colleges spend money on things they might not have 50 years ago.
I suspect the biggest cost driver is federally-backed student loans though. When you’re paying with what seems like free money it’s a lot harder to control costs. If students run out of money and drop out of your school, that’s a bigger driver to keep costs down.
Insurance pays for healthcare -> patients care less about how much it costs -> healthcare costs mysteriously rise
Government/lenders pay for school -> students care less about how much it costs -> education costs mysteriously rise
https://www.forbes.com/sites/timworstall/2016/08/31/union-wa...
Besides, isn't this terribly cherry picked? Sewage is a government issue and you don't talk about runaway costs there.
But yes, if you look for the absolute worst 0.05% you will find problems.
Because I promise you, "government" behaves very differently in these two situations.
https://www.vox.com/policy-and-politics/2018/7/31/17629526/m...
How are you quantifying American Healthcare as being one of the least free markets? And how does it compare to other countries? I don't see anyone ever actually quantify how 'free' a market is; people only ever argue that if a market is not working therefore it's not free enough, which means we must make it free.
At what point are we going to stop and realize sometimes it just doesn't work? Especially for issues that result in the death of Americans?
With the exisitng and prevalaent fee-for-service healthcare this 'fee' is not the price. It's different even functionally, where the 'price' is what's expected to be advertized upfront, the 'fee' is what gets billed afterwards. Has anyone tried to ask a doctor's office or a hospital if they could refer you to a price-list for the range of services they provide? If you're lucky, you'd be referred to Medicare regulated pricing, yet it's not even a baseline. I'm not even going into the 'flavors' of the fees formuated to different insurers, ??patients.
While there're rationalizations for such pricing approach, by itself it limits consumer's ability to be an active agent in free market. In healthcare the consumer is treated more like a resource.
1) We don’t pay our own healthcare bills, we pay for our healthcare through insurance. As a result, there isn’t a pricing system in place, much like there is for other critical goods and services with price-inelastic demand like food and housing. This is caused by regulations that require employers to provide health insurance for their employees, and most recently the mandate that requires individuals to purchase insurance. We’ve essentially forced a world in which insurance is the only way one can pay for healthcare.
2) Our healthcare supply is artificially limited, which forces higher up prices. The MRI “certificate of need” is one such example, there are countless others. Medical licensure, in general, drives up the price to see just a primary care physician. In the US, just becoming a basic physician that prescribes antibiotics takes at least 8 years of expensive schooling. As a result, doctors in America earn more than their counterparts in every other country (adjusted for PPP)[1].
There are a couple solutions that the market can bring about. One of them is to get rid of the employer mandate. The fact that I have to worry about losing my insurance if I get fired or leave my job is totally bonkers. I don’t have to worry about that at all with my car insurance, it’s a cheap monthly premium that adds on to my cost of living, just like my monthly food expenses or my shelter expenses (read: rent). The reason why non-employer provided healthcare is more expensive is that the pool of people buying that type of insurance is much smaller than the pool of people that are happily receiving their employer-provided health insurance. If every single one of these employees participated in the same insurance market as those that are either unemployed or self-employed, premiums can come down.
The other solution is cut out insurance for most healthcare. We don’t use car insurance to pay for oil changes and servicing, we only use it to pay for catastrophic accidents. Absent the regulations we have today, the market might look the same for healthcare: you pay out of pocket for basic healthcare like going to the doctor when you’re sick or other preventative care (sort of like an oil change for your body). Insurance might kick in when you get cancer or heart disease. I come from India, where it costs about Rs. 500 out of pocket to see a good doctor that has an MBBS. This is the price of a movie ticket, in India. The concept of using insurance to pay for such care is unheard of. In America, paying for a general checkup, without insurance, can cost $300 out of pocket - absolutely absurd.
Singapore is a great example of a country that has a largely market driven healthcare system. Unless you’re poor, you pay out of pocket for all healthcare, in a private market. The government steps in and pays for healthcare for poor people, and for catastrophic care (think: universal high deductible healthcare plans).
[1] https://economix.blogs.nytimes.com/2009/07/15/how-much-do-do...
Well, the public insurance is a percentage of your income. The private one is based on many opaque factors. Private cheaper than public would be a more than a stretch without appropriate qualifiers.
Treating any serious illness (think heart attack, cancer, diabeties, etc.) is either insanely expensive or not covered at all by private insurers, so public health care is your only chance here.
What happens is that no one visits the doctor for preventative care, with the result that many cases were not diagnosed until it was very expensive to treat. (Have you had your blood pressure checked recently?)
In practice, Erlichmann was right about HMOs.
A great example of such an issue is one where it was literally impossible for my parents to get any sort of healthcare because it was deemed that they had a pre-existing condition. No insurance provider would bother with them.
And for a lot of Americans paying anything for out of pocket care is impossible. My parents couldn't afford a movie ticket due to the poverty they're in, let alone the price of generic drugs for the myriad of medical issues they're going through. You keep bringing up the example of Singapore which works...but they also have a public option. We're not even to that point yet and making some of these radical changes without care to the poorest of Americans will lead to disaster.
Think of this: Companies take advantage when no other company is around to out compete them. This is why it's so important not to erect high barriers to entry around a market.
Instead, we have a lack of competition in health care in detail, throughout the whole industry. The reasons have to do with history. Its more important to see the general principles first.
Principle: If you would like to regulate a market to "fix" something about it, there will be down stream ramifications that will later necessitate the regulating of something else - as various entities react to the original regulation so as to maximize their own well being.
Case in point: price and wage controls in WW2 induced companies to start adding incentives instead of salary raises for workers. Which incentives? Health insurance was a big one. Companies needed to step up production. The government errected wage controls "for the war effort" - so companies enticed employees to work more via other means.
Immediate consequence: Separation of payer and receiver of healthcare services. (I am assuming this is clear enough - the insurance pays for the service, the sick person receives the service, the doctor or other provider provides the service. Now there are 3 actors where before there were 2)
Long term effect: Healthcare is expensive because the person receiving the service and the entity paying for it have been separated since the widespread adoption of health insurance "for everything" in the later 20th century. This distorts the perceived costs, allowing health care provider to increase costs without driving down demand directly. Instead, the insurance company is on the hook, and "I" can go to the doctor with greater frequency without commensurate increase in my expenditures. Cue the expansion of the healthcare industry, and a general rise in the _price_ of health care over time.
Long_term_response: health insurance companies hedge their bets and get into bed with "big medicine" and "big pharma". The health care industrial complex is born.
Longer_term_response: Long term rising costs finally induce broad measures to reduce the quality of service and make it more difficult to obtain service. Doctors are exchanged for nurse practitioners. Large companies make their health plans less and less attractive every year. The health care market enters a malaise.*
Summary thesis: Without clear price signals, a market becomes more and more distorted over time. People looking at "a snapshot" in time see a malfunctioning market, and ask for more regulation since "clearly, something is wrong". This tends to induce further distortions, and further calls for top down fixes. The few (the industry titans, and the doctors) benefit at the expense of the many in this system. To unwind this system, there is great risk of making things worse, as predatory situations will appear as the regulations are relaxed in an environment that has been specially adapted for them - people are vulnerable since the market is not functioning and a regulatory decrease is an exogenous step.
Importantly, It's not that I, or free market people in general don't sympathize with people caught up in this situation. (We are caught up in it too! Most people are not tycoons) The (a) problem is that free market people sometimes call for immediate cuts in regulation - which are quite often unsafe. A general understanding of the situation is needed. -What is needed is a free market system, but a return to that system must be done in a smooth and safe manner. Unfortunately politicians have no incentive to pave the way to this in dollars. Instead, "the right" will cut regulation where it aids the medico-industrial complex, while quietly ensuring their asses are covered and their regulatory capture will reamin quasi-permanent, and the left will regulate to "fix that via a safety net for those on the bottom". In the end, the high and mighty will continue winning, since the tycoons are safe thanks to regulatory capture, especially with the masses placated with a safety net. And the malaise will only grow worse, and more confusing.
Side points: -Some responses might be perceived as bad or good, but they are just responses - intelligent actors responding to a situation. In any economic situation, action and reaction, history and future - all must be considered in order to pass an intelligent value judgement. Hasty proclamations motivated by emotion are likely to miss important aspects of an economic trajectory - of economic dynamics.
-There is a duality in your argument, as in all things in economics. If you don't see this, then the politicians will have you.
-About the call for a "an actual quantifier of how much of a 'free market' something is": What kind of quantifier do you want? An objective measure? But surely you must know that any particular measure must be invariant to various kinds of hidden change in order to be objective - and nobody knows how to produce an economic measure that is really objective. This is why econometrics contains so much bickering over ad-hoc modeling and so many statistically based papers (across empirical fields which measure human subjects) have results that are hard to re-produce. I am sure some clever quantifiers have been invented, but when you do not even know the basic interplay of the dynamics, over-focus on some number -even if it is a good measure- is not helpful - since you cannot understand how good it really is unless you have the underlying processes well understood. If you argue that a different process is actually more important, then perhaps your "good number" may actually be bad.
https://www.nytimes.com/2017/10/02/upshot/what-makes-singapo...
> Initially, Singapore let hospitals compete more, believing that the free market would bring down costs. But when hospitals competed, they did so by buying new technology, offering expensive services, paying more for doctors, decreasing services to lower-class wards, and focusing more on A-class wards. This led to increased spending.
They actually have public and private options competing for benefits, regulating salaries and hospitals and more. If you were to argue for a public option to health insurance or more regulations against hospitals, you'd be called a crazy socialist here.
The USA has 4,000+ colleges, most of which do compete aggressively for students. Huge marketing departments with regional and national reach. Radio ads. Television ads. Print ads. Marketing networks with college counselors. Salespeople who spend many months attending college fairs. Fancy dorms and other amenities. Carefully crafted discount rates applied in a way that tickles the applicant's ego in just the right way. Beautifully crafted websites. Massive landscaping budgets, the bulk of which is spent during recruiting season. Expensive logos and mottos crafted by marketing firms that spend a lot of time with study groups. And so on. Higher ed marketing is a big industry in the USA.
Competition alone does not drive prices down.
> What happens when the government tries to provide for us... they gaurantee your student loan: Skyrocketing cost of school
Well, maybe the government should actually provide education instead of providing financial products...
On that note, both European higher ed and US K12 would like to have a word...
IMO the problem in health and education is that we can't stomach the massive inequalities that show up in free markets (healthcare: let people die; education: only the rich and a few lower-risk borrowers get higher ed), but also can't commit to just socializing the whole damned enterprise. We need to abandon our morality or abandon our aversion to socialism; until we choose one, we'll be stuck with these extremely suboptimal public/private "solutions".
The endless supply of students with a government guaranteed loan is why they are not going down, why would they? It completely violates the most basic element of our economy.
Fully socializing those things is a solution better than what we have now, but that is the point where those things stagnate (US K12) which is why I prefer the free market solution and still think it is perfectly capable of producing exponentially more opportunity than the car without an engine (socialism).
The view that free markets are some sort of magical panacea for education or especially healthcare strikes me as an extraordinarily anti-empirical -- if admittedly hyper-rationalist -- position.
The outcome is the desired one: banks own hundreds of billions of dollars more debt than they used to.
Presto. Watch education prices drop like a rock, when lenders raise rates to accommodate future earnings potential, instead of counting on federal guarantees.
> Presto. Watch education prices drop like a rock
Why would raising the limit have that effect?
The limit for federally guaranteed loans (which are also, for nearly a decade, exclusively federal direct loans) is already $57,500 total for undergraduate education, and the maximim per year limit (it is lower for dependent students) is $9,500 for first-year students, $10,500 for second-year students, and $12,500 per year thereafter.
https://studentaid.ed.gov/sa/types/loans/subsidized-unsubsid...
Shifted back to the school, not the lender? Or are you assuming that the school is the lender?
I.e., our institutions of higher education should be forced to bail out our banks when the banks issue risky loans that don't pan out. This is definitely good idea because divorcing banks from the downsides of their risky loans has worked out so well this century /s
I agree with the idea that higher ed should have "skin in the game", which is I think what you're trying to find mechanisms to achieve?
But I think the best way to achieve our overall goals (affordable and appropriately accessible higher education) is to force it to be democratically accountable by publicly funding nearly all higher education (maybe except $300 or $500 a semester just to force some "skin in the game" from students).
The "appropriately accessible" part is what makes this so difficult. The highly educated and deservedly successful petite bourgeoisie is going to have a tough time hearing that their second child who needed multiple tries to make it through "College" Algebra and could never make it through even a ridiculously watered-down Calc I course don't belong in universities at all...
Yes, the vast majority of that is federal debt or federally-guaranteed debt originating before the issuance of federally-guaranteed debt was restricted tomthe federal government, but the $15k annual limit proposed is above the limit for such debt.
> I thought that student debt was in a special class, where it could not be easily discharged
There is a higher bar for discharging student debt than other unsecured debt in bankruptcy, yes.
But debt subject to that but not subject to the limit on federally guaranteed loans isn't a big share of the problem (nonfederal private student loan debt is less than 5% of outstanding student debt—$64 billion compared to $1.5 trillion in federal/federally-guaranteed student loan debt [0]), so there's not a lot of reason to believe a policy change that would limit the applicability of the restriction against discharge to a level higher than the limit on federally guaranteed loans would have a noticeable effect on the overall problem. It would further push private lenders out of the student loan market, but they aren't a big factor anyway.
> (and was backed by government guarantees).
Yes, most student debt is backed by government guarantees, but isn't in excess of $15k/student-year for undergraduate education.
[0] https://www.nerdwallet.com/blog/loans/student-loans/student-...
Because competition and central control optimise for different "ideal" outcomes: we often reach for central control when the market fails to optimise for the desired "ideal".
This ideal is different in each case, but is usually largely differentiated on the basis of income inequality. Even a perfect market can't bring about perfect wealth distribution, and central control of education aims for universal access. Market-based price control will produce lower education costs, but only to include an income bracket that provides optimum profits, rather than universal accessibility.
> By it's nature, anything the government subsidizes is going to be taken advantage of.
This isn't entirely true: only unregulated subsidy has this flaw. The problem with many purported small-government advocates is they lobby for removal of regulation without removal of subsidy. One requires the other.
> Schleicher at the OECD. “It’s the inevitable outcome of an unregulated fee structure.”
In this particular quote, Schleicher seems to advocate for central control via regulation, rather than removal of subsidy.
If nothing but the free market can work, how do tax-funded government services for healthcare and education work just fine across much of the world? There are 10+ other countries with socialized healthcare and free or subsidized education. The "free market" argument is equivalent to closing your eyes and pretending these counterexamples don't exist at all.
Competition & free markets doesn't work in all markets. Medicine is a prime example of an inelastic product that allows companies to abuse the consumer. There's endless examples and research on this if you feel skeptical. Education less so but it seems to still be there.
And I think it needs to be recognised because central control in education of USA working, doesnt mean central control doesn't work. In Australia we have good systems for universal heath and an excellent system to control the price of medicine (called PBS if you want to read more). Our university system while not perfect seems much better run than USA - its called 'HELP' if you want to read more. Or Germany & finland seems to have gold star education systems.
These days people seem to increasingly worship 'free market' or 'socialised markets' wholistically. The reality to me seems each suits different market categories and many markets need a hybrid approach.
If we stop preaching political preference and look around the world for the many examples of where markets are set up well I suspect we'd improve things greatly. And stop aligning one market category with the if it works well here it must in every category.
PBS: https://en.wikipedia.org/wiki/Pharmaceutical_Benefits_Scheme
HELP: https://en.wikipedia.org/wiki/Tertiary_education_fees_in_Aus...
In Montreal we have heavily government funded universities, tuition is less than 4k a year. It works great, we're building leadership in AI right now.
Drug costs also have little to with government subsidies since they are set by negotiation between private drug companies and private insurers. Medicare and Medicaid must pay those (privately set) prices.
MRIs in the US are very cheap. However people are dumb and freely choose to pay much more than they should.
This company cheapimaging.com was founded by a teacher as a part time project. They have contracts for MRI imaging throughout the entire US, at fixed, reasonable, cash-only price. Some states you can get an MRI for $265.
Or you can go to the exact same facility naively and pay $10,000 or more for the same scan.
Most likely you don't care, because your insurance is covering it. And your insurance company doesn't care because they'll just raise their rates. And other customers won't care because most they don't actually choose their health insurance; they just get whatever their employer offers.
A free market depends on competition and consumer awareness to keep prices under control. Central planning depends on the government allocating resources efficiently. The US health care system has neither, and the results are exactly what you'd expect.
This is not a hard problem and it's vastly different than central planning with respect to prices of toilet paper or other stuff that shouldn't be centrally planned. Don't conflate these contexts and assume that they're all the same with respect to price regulations, because they're not. It's either lazy or intentionally disingenuous on your part to do so.
Fostering competition while ensuring that students are not taken advantage of is equally as complex if not more so than centralized cost regulation in the form of restrictions for institutions that accept federal loan monies. That's something I often see unaddressed with comments like yours. Unregulated competition is not a magic wand that solves all problems. Treating it as such is ignorant.
So the government pays, but each student pays a different rate.
Because not everyone thinks the free market is a solution to all our problems.
Because it will be plausibly working.
Why do we need institutional competition over facts of STEM?
Universities have become corporate job training centers, not places of higher learning.
They teach what industry seeks, and thus industry is subsidized through government expenditure and private debt.
This forum is remarkably ignorant of practical reality. Instead leaning into what are at this point banal and debunked myths
Anyone wants a shot at an economically comfortable life it comes with serious strings. And no guarantee the education or 401k will be worth squat in a decade
The other kicker is that they bake BIG subsidies for low-income students into tuition, which I found rather counter-intuitive. We're gonna raise tuition... to help students who can't afford tuition... pay for tuition that they can't afford... because we keep raising tuition to help students who can't afford tuition.
As bizarre as it sounds, I think if you stripped subsidies and the effect of near-universal availability of student loans out of the equation tuition (at least for state schools) would be downright reasonable. It certainly was when I was in school around the turn of the century. I was paying somewhere in the neighborhood of $2-3K per sememster (increasing over time, naturally) to go to a well-regarded state university. Now I see it's about 3x that. Yeesh.
It's part of what the article called "being entrepreneural". There are some companies that compete with lower prices for all, but it's not the most common strategy.
I'm ok with that but which half of the current cohort gets booted?
We aren’t Europeans.
What makes you think it would work with our culture?
And if it can work then let’s get a state or two to prove it.
California easily could and has the most left-leaning culture.
The problem is it's easily accessible debt to people who have no concept of what tens of thousands of dollars is really worth. You see the amount you're borrowing on the form and it's really nothing more than a number.
As far as pricing went, it worked out to about $9/meal. Kind of high, but also unlimited spinach/quinoa/berries/fruits/yogurts vs. burgers and panda express.
I heard they nerfed some of the benefits, but as a "student supervisor" I got $9/hr and 15 meals/week for working 15 hours/week.
They're not good.
You could find better deals in nice parts of San Francisco or Manhattan.
It's about the same price as a median studio in SF,($2490 vs. $2461), but the SF studio is about the same size without the kind of shared kitchen, restroom, and living spaces outside the unit that are included, and without the convenience to the core campus. You can save rent by living off campis instead of on campus—in fact, you'll be forced to other than your first year by the woefully inadequate supply of on campus housing. On campus housing is a guaranteed-but-premium option provided for first year freshman and transfers, and which may be available to other students subject to availability, not a baseline requirement.
People always say that, but I have my doubts. I did some Googling to try to find costs for some well known schools over time and was only able to find historical tuition data for Stanford.
Stanford's tuition has been increasing faster than inflation as far back as the data goes (1920), almost linearly on a log scale [1]. There doesn't seem to be any big change in growth starting when loans became readily available.
Research would disagree. Student loans definitely have had an effect. That the Atlantic ignores that completely calls into question their potential bias. Student loans are a sacred cow for those on the left and center-left, so it isn’t surprising that the Atlantic ignores even a potential causal relationship in the story.
Add on administration overhead for dorms, etc.
Proximity to classes, extra-curricular access, living with your peers... If you're going to move out of your parents' house, $15k per year doesn't sound that bad.
Living expenses like dorms/meals are also why so many kids end up taking out student loans and have so much debt. How is that productive for society? It seems like Americans have a very weird attitude towards certain fundamental things like healthcare and education where they prefer to privatize those commodities rather than make them cheaper for all to benefit from. I think it’s bad for society for people to be putting 17 year olds into debt for degrees and then ripping people off for 20-40% of their incomes for healthcare. It would be a major stimulus for the economy if Americans paid what Europeans do for education and healthcare. I don’t understand the conservative argument at all. We get worse results for higher prices. The only people who benefit from our system are the ultra rich.
As for the requirement piece, it definitely sucks if it's not an expense you can take on without debt and there's no other options in the area. If there are other options, though, then people who can't or won't pay that can just go somewhere else. School's have worse requirements (BYU comes to mind) that people can opt out of by choosing to go somewhere else.
You could definitely save money by living off campus and cooking your own meals, but probably not as much as you would like. It also means you have a commute to campus, which is a drag.
100% this.
If you want to have an affordable college education, you can have one.
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1. I'm from Florida and the best school in the state is (arguably) the University of Florida. In-state tuition is $3,191 per semester, so $25k for four years. And that's the amount if your GPA/SAT/ACT doesn't qualify for the relatively easy 75% Bright Futures state scholarships or more-difficult-but-still-common 100% scholarships.
2. I went to Brigham Young University (private school) in Utah which is $5,620 per semester, so $45k for four years. And that's assuming your GPA/SAT/ACT doesn't qualify for the easy 50% scholarships or the hard 100% scholarship.
Text book are pricey, but there are ways to avoid paying the bulk of the costs. E.g. rentals, buying used. UF's libraries have text books with 3hr checkout times.
A three-month $10/hr 40hr/wk summer job is $5k pre-tax. A nine-month $10/hr 10hr/wk part-time job is another $4k. Plus, the IRS will give you $2.5k per year via the American Opportunity Credit.
Naturally, there's also food, rent, and transportation, but those exist regardless of college attendance. (Though finding cheap shared living is far easier in college towns.)
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Coming out of a undergrad with $50k+ in student loans is not done because you have to. It is done because you choose to. Given the availability of student loans, lots of people choose to.
Either we have lots of young people making bad decisions, or a college degree is incredibly valuable.
It's not like the terms of student loans are exceptionally great for the students.
Looking at the amount of debt that my peers have taken on, however, has made me reconsider the wisdom of my decision. It's likely that political campaigns in the next few years will promise some form of student debt relief. Whether delivery of those promises is possible or not remains to be seen.
I took the other path, and am left trying to throw off the burden while I can still take youthful risks, and carpe the damn diem. The window is closing fast on me.
If I had enough in hand to pay off my loans, there's no way I'd elect to waste even more of my life waiting to see if some currently unimaginable fit of political productivity might let me off the hook.
Going to college and getting an education (and especially a good university) makes you so much more money in the future, that it's worth paying a lot. Prices could go to $500K and it'd be worth it. Everyone knows this implicitly. That's why immigrant parents nail their kids so hard on grades and to get into a good school. Is it because they want their kids to get a bunch of debt and become unemployed? Come on. You are way way more likely to get a job with benefits, to spend your life doing something more meaningful (however you want to define it).
It's only us who already went to college, got good careers, who are now saying "well college makes you end up in debt, jobless, with a worthless degree. go into the trades. work for the post office." Why don't more people on Hacker News go into trades? Do some unpleasant, strenuous work in dangerous conditions, for about 10 years hustling day and night before your body gives out for $50K/year? Everyone actually doing a trade is encouraging their kids to go to college.
This really isn't that complicated, and I think most people here are overthinking things. A college degree GREATLY greatly increases the chance you're going to have a more fulfilling career easily that makes you back all the tuition money and opportunity costs, and more.
And as with medical care, the response to price increases has been to shovel more money.
>Ultimately, college is expensive in the U.S. for the same reason MRIs are expensive: There is no central mechanism to control price increases. “Universities extract money from students because they can,”
Let me rephrase - There is no mechanism of any kind to control price increases.
Before guaranteed loans students had to be verified based off their merritt to get a loan. Lenders took a real risk and had incentives in the person being successful so they would have hopes of the loan being paid back. This was near perfect as schools could not not charge more than lenders would risk.
Thes solution in this case is to remove the government guarantee, and let the free market work.
This system is also near perfect as lenders would evaluate their risk and have incentives in the person being successful. This works very well, as we saw from how mortgage lenders and credit rating agencies worked 10 years ago.
>let the free market work.
Education (and healthcare for that matter) are NOT free markets. Free markets don't guarantee every buyer gets matched to a seller, in which case that buyer does without. Which is not acceptable for education or healthcare.
Maybe that's fine in some circles but a modern wealthy superpower should be able to do better than throw some percentage of its own citizens in the trash because they can't afford education.
Also, way back when college was "affordable", states actually funded higher education through taxes.
So you are going to force loaners to loan to people that can simply discharge it?
I am not sure you understand how a loan works. Somebody risk their money for the chance to get the original amount back plus some. If the institutes making loans can't recoup at what they put in then they too will also go bankrupt. And if they can't make any profit then there is no incentive to loan the money.
> Education (and healthcare for that matter) are NOT free markets.
They most cerentety are. And them being part of a free market where people can make money has also allowed it to give humanity some of the best healthcare ever.
> Which is not acceptable for education or healthcare.
You are right, education is free, pick up a book at your local library. There is nothing stopping the masses from learning the same subjects today. On the other hand attending private institute that offers assistance in learning is not a right. Every time these free collages ideas come about it irks me so much because you have every right and means to educate yourself on a topic.
> Maybe that's fine in some circles but a modern wealthy superpower should be able to do better than throw some percentage of its own citizens in the trash because they can't afford education.
No, instead we can just trash the entire country because of feels.
In any case, put your money where your mouth is. Let me pick at random somebody applying for a loan today and let me fund their schooling with your money. If this person becomes successful they will pay you back. If they find it is too much of a burden, or they don't finish school you lose your money and never see it again.
Why is that not acceptable?
If companies only hired for the skillset they actually required a huge number of people would happily drop out of higher education.
I’d say the majority would.
That would be removing the government guarantee -- and letting the free market work.
Education (and healthcare for that matter) are NOT free markets. Free markets don't guarantee every buyer gets matched to a seller, in which case that buyer does without.
Or vice versa. Sometimes there are leftover bread rolls at the end of the day -- the seller produced a surplus. Sometimes there's empty seats in a class room. Doesn't sound so bad, that way.
And the fact that student loans aren't dischargeable via bankruptcy.
https://www.bls.gov/careeroutlook/2018/data-on-display/mobil...
This argument is really disingenuous.
Edit: Also I believe Sodexo only runs things like the franchised Taco Bell and not dining commons but I don't know that for sure.
About 20 years ago I had met a retired math professor that believed the cost of college went up as a result of the anti-war protests in the 1970s.
Regardless of CA, it's a lot everywhere else. Especially when they're bunking three in a room at that rate. The markup (for all of it) is the real atrocity here.
Of course, the commute to UC Davis campus would be longer from SF.
Considering UC Davis is bear Sacramento, that’s an understatement.
The direct consequence of the government guaranteeing the loan and making it undischargeable for life is to transfer the expected monetary value of the education away from the students and to the operators of colleges with a nice cut diverted to bankers along the way.
The students are reduced to being sharecroppers of their own minds, spending a lifetime working the education that someone else owns.
The price of a TRIPLE occupancy dorm + 7 day meal access is $14,813.29/YEAR at UC Davis. The "meals", if they haven't changed in the last decade, are Sodexo garbage. And don't forget a "year" doesn't count the summer, or winter break.