A few months ago, administrators at the University of California asked about 7,000 students who had been admitted to the prestigious UC Berkeley and UCLA campuses to defer enrollment. To save money, students were asked to enroll at a California community college for 2 years and then apply for a guaranteed transfer to the Berkeley or UCLA campuses.
The San Francisco Gate news site reports (click here) that only about 1,000 students took the offer. I don’t know whether this is good or bad, except to note that the students are probably the best judges of whether it’s better to immediately attend another college or take the UC offer. The Gate article notes that many went to very expensive private schools, suggesting that budget shortfalls could have been recouped with a price increase.
The problem this incident highlights is how the political process interferes with market mechanisms. Once the political decision to educate a certain segment of the population has been made, administrators should view a surplus of customers as a signal that the market can bear some price increases. Instead, California legislators tend to fight tuition increases because they might exclude low income students. This is truly a bad tactic because one can simply lower the price for low income students through grants and financial aid, which is what happens at many universities. Price hikes for the wealthy and subsidies for the needy is surely a better policy than arbitrary price ceilings and the exclusion of many who are able and willing to pay.