Tuition by Major

A task force convened by Florida Governor Rick Scott has recommended changes in tuition subsidies according to job market demand:

Tuition would be lower for students pursuing degrees most needed for Florida’s job market, including ones in science, technology, engineering and math, collectively known as the STEM fields.

The committee is recommending no tuition increases for them in the next three years.

But to pay for that, students in fields such as psychology, political science, anthropology, and performing arts could pay more because they have fewer job prospects in the state.

“The purpose would not be to exterminate programs or keep students from pursuing them. There will always be a need for them,” said Dale Brill, who chairs the task force. “But you better really want to do it, because you may have to pay more.”

The task force has the right idea but the right way to target subsidies is not to the job market per se (let alone Florida’s job market), wages already reflect job market needs. Subsidies instead should be targeted to fields where education has the greatest positive spillovers, benefits that spill over wages and flow to the public at large. Overall, this likely means subsidizing the STEM fields more than anthropology which is why the taskforce has the right idea. If the task force wants to explain the idea, however, they should make it clear that the goal is to focus subsidies on those fields where education most benefits the taxpayer.


A step in the right direction. Lenders should be able to price risk into student loans based on the field of study as well. This would allow the market to better match skill development with skill demand.

Consider that student loans cannot be offloaded through bankruptcies, I don't think the lenders should have this right. If they reverse the lobbying and make student loans like every other type of debt, then by all means.

Plus, to say that, say, anthropology majors will earn less (because the only job they can get is in retail at Antrhopologie), and therefore be less able to pay their debt, so therefore their rates should be higher and their debt even more, well that's a strangely cyclical and cynical mechanism.

Really, anybody who cannot afford to pay on their own, via scholarships or otherwise, whose heart is set on a "riskier" area of study, should opt to go to a state school or other less financially onerous institution. Of course, there are a number of problems with this. Most of the time students choose their school before their area of study (and I'd say most of the exceptions are going in dedicated to STEM fields). Of course, most also have their student loans set up prior to choosing a major as well... so the variable rate won't work, either, unless it resets, say, after 2 years. And the final issue is that selection bias will favor those that get their sociology degrees from Harvard over those that got it from SUNY, so it will be even less likely that these students will meet with financial success.

There is nothing strange or cynical about pricing debt based on the borrower's expected ability to pay it back in the future. That is the way normal loan markets operate.

Would it be "cyclical"? i.e. would this student loan pricing cause people who were already headed for debt trouble to be in even more debt trouble? If so, it is an odd move pin the blame on the lender, who is merely offering a service at a competitive market rate, rather than the borrower, who chose to borrow a large sum of money and then invest it in something that has little or no return.

However, I do not think it would be cyclical, at least not in a systemic sense. The current system has the effect of subsidizing non-productive college majors, which causes more people to go into those programs than otherwise would. Furthermore, the current system reinforces the dominant narrative that getting a college degree--any degree--is what truly matters, rather than getting equipped with useful skills and expertise. Also, student loan rates that varied by subject would also force people to confront the economic consequences of their choice of major earlier on, which might lead to some people making wiser choices.


I apologize for not being clear; I absolutely agree that the lenders should bear the risk of the loan as well. My position is that the market should not be manipulated by government backing. The involved parties (bank and student) should own the full risk of the transaction and it should be priced accordingly.

Dan1111: Well put.

Erik: Your comments have an equity slant, postulating what is "fair". I make no such effort. I would hope that allowing the market to work would allocate the resources we have in play in a more efficient manner.
Your comments about an Anthropology major make me think that you are missing the point of the suggestion. (I have the pleasure of having a wonderful wife with a few degrees in Anthropology and the six figure debt that comes with it, so those folks have my empathy.) The point is not to make people who study the subject worse off because they will face higher prices; it is to deter them from studying the subject entirely.

One could argue that higher education in subjects like Anthropology, to continue the familiar example and unduely continue the abuse of Anthropologists ;) is a luxury because the demand is easily met, which by the way is what allows for the discrimination you speack of with respect to signals).

Removing the federal backing will make banks 'care' because they would bear the risk of the loan. This may lead to them educating their clients (students) on outcomes associated with the degrees through counseling, interest rates and denials of loans. This would result in more people studing topics that are socially productive, therefore increasing overall prosperity for the society.


Yes. Banks as guidance counselors.

Why not stop the cycle of subsidies and rising tuition fees, and instead offer higher education for free?

Cool. How do I sign up for your bursary?

In some countries (that is: outside of the US), people think education should be a public good and paid for by the state.

Of course, this is leading to nasty outcomes. Sweden and Germany are on the brink of de-industrialization and suffer from high unemployment, because all young people want to study useless things like economics, art history and political science. Am I right?

Of course, as I'm sure you're aware, many countries (in Europe and elsewhere) have moved away in recent decades from free or near-free university education, as university study becomes less the preserve of an elite and more of a mass phenomenon (and therefore unaffordable), and governments realise that world class institutions cost more than can be legitimately charged to taxpayers.

Germany has managed to keep university free or near-free largely because of its multi-track school system which doesn't have the at least notional goal (unlike English-speaking countries) of preparing everyone for university, and also in part due to the fact that German universities are not very good (see Germany's industrial success has little to do with its universities, a lot more to do with the Mittelstand and the high quality of technical education (America could learn a lot from that, IMO). But if you look at the global rankings (Times (UK) Education Supplement, QS etc.), the best institutions are overwhelmingly fee-paying ones.

kiwi dave, thanks for your comment (as opposed to the strange conversation that followed thereafter..). I don't think that many countries in Europe move away from free university education. Except for the UK, I'm not really aware of any major case. Germany tried it, and the experiment failed (at least politically). In addition, the apprenticeship-system might be a substitute for university education in Germany, but I think that's not the case for Scandinavia, is it?

I wonder whether these global rankings are really a useful way to compare university systems. On the one hand, does a good score in these ranking mean that a university contributes a lot more to the wealth of a nation than a less well ranked? On the other hand, it is questionable whether a highly stratified system with a few world-class institutions and a lot of not-so-great unversities is the more efficient system.

Furthermore, what's the overall cost of a system that creates a lot of highly ranked universities? The amount of debt that students (or their parents) in the US have piled up is staggering compared to Europe. Is this really an efficient outcome? I think it's fine if private universities charge whatever they deem appropriate, but public universities? This system doesn't look sustainable to me.

Some people in some countries are deeply confused about the difference between a public good and a publicly provided private good. It appears these same people are also deeply confused about the difference between a public good and a good with positive externalities. This confusion is the main reason why education subsidies go horribly wrong.

Some people in this thread are deeply confused about the equivocal nature of the phrase "public good," which can refer to something like 'a non excludable, non rivalrous commodity' (public goods) or to something like 'the common good' or 'the public interest' (the public good), which can easily comprehend the provision of "private goods," "common goods," "club goods," or "public goods," depending upon the will of a democratic polity.

Anyone who isn't completely dense would pick up on the intended use of the term by the use of the word "should," ("education should be a public good"), which implies a normative statement about what should or shouldn't fall into an artificial category, not a descriptive statement about what essential attributes something has.

The equivocal nature of the term "public goods" comes from morons like you who either use it for political effect or are used for political effect. Case in point, health care - a private good.

Public good has a rather precise definition although not all goods fit neatly into a public/private good dichotomy. The relative position on the continuum gives us an indication of efficiency conditions.

In other words, your deliberate choice to misuse a term or your illiterate misunderstanding of a term does not alter the definition, but it clouds discourse. Another example is talking about how much a tax cut "costs." Taxes cost (for goods with no negative externalities) Tax cuts reduce costs. Not all spending is "investment" nor is it all "stimulus." You're only making a case for proficiency in deceit and the perpetuation of ignorance.

Watch the latest incarnation of Star Trek - even Vulcans know what a public good is.


Economists have a very precise definition of a public good which is not the non economist's definition of the public good.

The non economists definition of the public good as a measure of the general well-being of the individuals in a society is the more commonly held definition among the population as a whole, and predates the technical definition economists have given it.

GiT rightly pointed out this fact as a likely cause of some of the confusion in the debate on this comment section.

You, good sir, are the moron.

I just checked with Willem of Occam. He tells me that Political Scientist is prolly unclear on what a 'public good' is.

Non-economists should refrain to referring to some outcome that they like as a 'public good'. That is all.


Ignorance does not become you.

Public good, as a technical economic term: coined in 1954 by Paul Samuelson.

Now, let's look at "the public good."

Here's an example - Journal of the House of Lords, 1620 - "employ all the power and favor which he had in His Majesty's Service for the public Good of the Kingdom"

From the early 1600s, by the political writer Edward Forset - "the sovereign doth incessantly care and labor for the public good"

Let's maybe look to legal history. Here's a familiar term: pro bono - short for pro bono publico, i.e., for the public good. Such a duty was established in England in the first statute of Westminster in 1275. Such duties were discussed in the colonies in the mid 1600s. And, of course, the term dates back to the practices of Roman jurisconsults.

But then "bonum publicum" was a common topic of Roman legal and political discourse, despite their lack of a Paul Samuelson.

But please, continue to make a fool of yourself.


Judging by the general level of intelligence you display in your comments, as opposed to the lameness of your arguments on this topic, I predict you will cease and desist along these lines once it occurs to you that there is quite a bit of difference between 'a public good' (a term of art in economics and the expression used by Political Scientist) and 'the public good' (a concept with an august history, as you illustrate.)

And I close without any name-calling, capturing the moral high ground along with the argument on its merits. Yay for me!


Judging by the reasonably intelligent level of your general commentary, as opposed to your lame arguments here, I am confident you will cease and desist along these lines once it occurs to you that there is quite a bit of difference between 'a public good' (a term of art in economics, and the expression Political Scientist used and meant) and 'the public good' (a concept with an august history, as you illustrate.)

In closing, I refrain from name-calling, capturing both the moral high ground and the argument itself in a rout. Yay for me!

Brian - I don't know how you get from the statement by "Political Scientist" that "people think education should be a public good" to the inference that Political Scientist thinks education is a non-rivalrous, non-excludable good.

I don't see any grounds, other than a lack of interpretive charity (stretching, further, to interpretive malice), for interpreting his use of the phrase "public good" as an attempt to use the economic term. He's saying that education is in the public's interest, and that's why it should be free. One can argue with the normative claim, but he's not misusing the term "public good."

Political Scientist, as his or her name implies, prolly has a fuzzy idea that there's this thing called 'a public good', and he observes, in conversations among economists, that if all agree that something is 'a public good', then it's pretty much unanimous that "Yeah, we should do that."

So, if he can slap this label on this thing he favors and make it stick, he's home free.

You, on the other hand, know better. So you reach into the annals for the much more contentious and subjective notion of "the public good". I'm beginning to believe that this is truly how you read PS's comment in the first place- it not occurring to you that PS might not be aware that the concept of 'a public good' is not as malleable as he or she thinks it is.

But surely you can reread PS's comment now, with this perspective, and grok the view of me and Occam.

As I think on it, there may be a strong temptation for people to advance what they consider "the public good" by finessing the proposal as "a public good". I'ma watch for that.

I think PoliticalScientist, as a political scientist, probably has a rather concrete notion of what "the public good" is, which reflects a millennium or two of use within political philosophy. I doubt he was trying to sneakily deceive people through some sort of amphibole.

Further, the tendency (insofar as it exists) to ascribe non-rivalry and non-exclusion to anything called "public good" is a fault caused by the ignorance of someone like Willitts (well displayed by his accusations of misuse, misunderstanding, illiteracy, deceit, and, funnily enough, ignorance), not someone using a word in what is still probably its primary usage to talk about state/public/democratic/collective interests.

We are not talking about "the public good" and whatever you mean by that term merely justifies whatever the Hell you want, and what you want is to be paid for by other people.

The closest analog in the economics lexicon to "the public good" is social welfare. Maximization of social welfare is a central part of the theories of public and private goods, positive and negative externalities, and other forms of market failure.

Whereas social welfare is a concrete representation of an abstract idea, you cling to the abstract and justify whatever you want with amorphous and vague generalities. Your concept of the public good doesn't acknowledge social tradeoffs or optimality conditions. Rather, it is a subjective notion that what you value most highly is what is in everyone else's best interest.

The only confusion in this debate is caused by people who regularly engage in equivocation and other logical fallacies. That would be you.

Actually, Willitts, PS introduced the use of the phrase "public good" into the thread, so we're talking about whatever he is talking about, which is pretty clearly not "public goods" in their technical sense in economics.

As to "my" concept of the public good, it's not "my" concept. It's the concept of hundreds of years of history and political thought. Some words have constantly contested definitions (freedom, democracy, justice... public good). Democracy will never be reducible to how a quantitative political scientist constructs their "index of democracy" and "the public good" will never be reducible to how Sen, Arrow, Samuelson, Rawls, Nash, or whoever the hell else defines their social welfare function (wait, what's that, disagreement over what 'social welfare' is? well I never!)

Deal with it, you mewling infant.

Damn you, GiT! How dare you use words in a way that Willitts disapproves of! When Willitts looks up a word in a dictionary and sees multiple definitions, he corrects that situation by ELIMINATING ALL NON-WILLITTS APPROVED DEFINITIONS. Once that happens, it is no longer acceptable to use the proscribed definitions. Those who violate his rule will be condescended to WITH EXTREME PREJUDICE.

Ha! Thanks.

I can just imagine his copy of the OED. Which, unfortunately, does not even define public good in line with the technical usage under its "economic" definition. His copy probably would probably look like this:

public good n. (also †good public) [compare classical Latin bonum pūblicum, Middle French, French bien public (second half of the 14th cent.)] (a) the welfare of the community as a whole, public interest; (b) a commodity held in common (usu. in pl.); (Econ.) a commodity or service provided, without profit, to all members of a society (whether by the government or privately). Then, scribbled in the margins: "goods which all enjoy in common in the sense that each individual's consumption of such a good leads to no subtractions from any other individual's consumption of that good" (Samuelson, 1954), because I said so!

(Hopefully strikethrough and italics worked on that...)

The funny thing here is that if you actually look at the genesis of the word "public good" as a technical term in economics in Paul Samuelson's 1955 paper, it only happens because of a bunch of sloppy, confused, and ultimately pseudo-ideological moves by Samuelson.

A "theory of public expenditure" leads to a theorization of "collective consumption goods." Then, the novelty of the "collective consumption good" leads to a tacit normative claim that the optimal government would *only* make public expenditures upon "collective consumption goods."

To make a neat pairing, in discussing a theory of *government expenditure*, the public/private (state/market) dichotomy is then mapped on to the properties of the goods Samuelson thinks each *ought* to strictly provide. Private consumption goods become private goods, and collective consumption goods become public consumption goods, which then become public goods (yay abbreviation!)

In the process, the fact that "public good" was only shorthand for "collective consumption goods provided by the public authority" is lost.

Debate over what are goods unique in virtue of their collective consumption starts getting talked about as if what defined them was their "publicness" - that is, their relation to "public" (read government/state) expenditures, despite the fact that this relationship is a matter of contingency. (And in fact, as we all know, plenty of Libertarians like to argue that even so called public goods should not be provided by the state).

So what is better thought of as a problem of all commonly held goods, regardless of they are held in common in virtue of state ownership, and what is a problem in common holding in virtue of a problem in consumption and the signalling of a demand to consume, gets reduced first to a statement simply about goods held in common related to specifically political forms of ownership (common -> public), and second to a statement about goods related, again, to the public, without any mention of the joint-supply issue (consumption drops out).

In this way, what was an apolitical analysis of a certain kind of good (collective consumption goods), becomes a tool in an ideological fight about conceptions of "the public good," all due to what are likely completely benign acts of abbreviation by Paul Samuelson, insofar as CCGs became PCGs became PGs and hence, by implicit suggestion, a claim about the appropriate scope, and definition, of the state's pursuit of "the public good."

In other words, the people responsible for misuse, misunderstanding, and a general confusion about the term are... surprise surprise... economists.


There already aren't enough jobs for STEM majors and you think it's a good idea to subsidize more?

Why do you think this? I recently graduated and while I was looking for a job (which I had no trouble finding an ideal job since I had the proper skills) I attended several career fairs and the such. There are so many more STEM jobs that they actually have separate career fairs for only STEM (and accounting). Many Universities career fairs are split up, one day for all majors and one day for STEM+Accounting. The job market is excellent for STEM majors.

But the entire STEM acronym is garbage. There's probably jobs out there for Engineering majors but notice STEM also includes Science and Math. There's legions on unemployed biology and chemistry majors floating around, math majors too. It's really just Engineering so they shouldn't be subsidizing pure science education if they want to go this direction.

That's true. Maybe they just added the "S" to make it catchy. And does STEM include IT majors? A lot of time that type of major is through the school's business side and not though eng or science. These are secondary questions to the main points people are making but it would still be good to know how they chose what "STEM" majors are.

No, it should be just Engineering majors. Employers don't generally hire math, chemistry, biology, etc.
So drop the S,M and probably the T too. But of course every department will horn in on the subsidy - and like I say most of these "STEM" fields aren't very successful at getting their grads hired to begin with.

This suggests the idea that it's just engineering is incorrect. It really should be STEM, not just E. E is better than ST and M, but all of STEM are substantially better than all of non-STEM, financially speaking.

I note this is broad based, so it says more about the normal case than it does about the Harvard grad going to Goldman with his BA. But the average STEM person makes a _lot_ more than the average non-STEM person over the course of their lifetime. It's not some blip on graduation as is sometimes alleged.

If there are "legions of unemployed ... math majors" out there, they should notice the opportunities available in statistics, particularly related to predictive analytics and "big data". In particular, since stat often involves relating the math to the user with a problem, there is a premium on communication skills -- meaning many of these jobs are hard to outsource -- particularly beyond the entry level.

CBBB notes (below) employers don't generally hire math. I don't know about that, but they do hire stat.

I came from an STEM major. Many of my non-STEM (mostly psych, poli-sci, econ) friends are un-employed or under-employed. None of my physics, math, or certainly engineering friends are under-employed. Sure, some of the physics and math people don't have jobs in physics & pure math, but they are all pulling down serious money doing work that interests them.

Bio appears to kind of be an outlier. The barrier to entry for a good bio job seems to be fairly high. I'm not sure why this is. My guess, based on the people that I've met in the field, is that bio tends to attract the same sorts of people as the softer sciences. I know plenty of normal people that graduated in Bio/BioE, but all of the physics and math people I know were very much "hard-core nerds". Perhaps we should be discussing "STEM ex Bio"?

The worry here would be about the externalities. State universities, by and large, have the best facilities for science and technology degrees already. They already attract the bulk of students seeking STEM degrees in most states I'd bet. The goal of the idea is to get more students into STEM programs overall, obviously, but it may also drive still more liberal arts students away from public universities. If this happens, an idea that was supposed to be more or less financially neutral may end up costing public universities at the revenue end.

Only if the increased cost at a public university made the price higher than at a private university.

Wouldn't the STEM fields have the highest positive spillover? Highest earnings->most taxes paid in the future.

Dearth Panels.

From an efficiency point of view, I can see Alex's point. But from a fairness perspective, I've got problems with it.

Some students are born with little ability to learn math and science, and won't be good candidates for a STEM field. People like that already start out a rung down on the career ladder. Should they also be forced to take more student loans so that they can become English teachers or psychologists?

Yeah, it's a little bit backwards.

People who can't make it in STEM should probably consider not going to college at all, getting, say, an HVAC certification instead of an English Literature degree.

Alternately, the state schools could simply devote fewer resources to them. They already do this to some extent. For example, they don't have labs, and the engineering building is typically only rivaled by the graduate business school building. But they could go much further by cutting tenured positions, teaching more via graduate students, increasing class sizes, making the degree programs three years instead of four, etc.

Hang on, do you really believe that all languages academics should be able to do calculus? Who would hold such a belief for reasons other than mood affiliation?

Huh? Was that intended to be in reply to my post? I don't follow.

I certainly don't think it's necessary that language academics learn calculus. However, I think if you can't (as in you are insufficiently smart to) learn calculus that's a pretty good litmus test for whether you ought to go to college. I.e., if you are smart enough that calculus would be pretty easy for you, college might make sense whether or not you plan to pursue STEM.

I think that if people applied that test broadly (to themselves), it would greatly reduce the number of non-STEM graduates, and generally increase people's well-being.

FWIW, I also think STEM graduates ought to be able to write coherently.

Maybe it should be the other way around: if you don't have the intellectual firepower to learn another language you have no business going to college (and pursuing a career in math).

I don't know. Everybody can learn another language (even a second language) if you hit them at the right time, so it doesn't seem to be a great gauge of smartness. Think of how many stupid multilingual people you find in places where the native language is not a very useful one.

At today's prices (not just tuition, but human capital ROI), an Anthropology degree is a luxury good. Consumers should respond appropriately.

Regardless of subsidies, shouldn't courses in subjects with higher capital costs be more expensive?

How much does laboratories, supplies, etc. used for research and training in engineering and sciences cost in addition to the lecture halls, professors, TAs, etc.

Compare that to the relatively sparse resources needed for a degree in, say, english literature.

Isn't it a market failure that all degrees cost the same?

Humanities degrees costing less may not help with getting more people into STEM, but it would at least help create a cost / benefit correlation with cost of education and expected salary after graduation.

The state / federal government can then choose to subsidize whatever degrees it finds desirable.

Maybe I am overestimating the additional cost of practical engineering / science courses, does anyone have a source of data?

I am very glad somebody made this point. It costs far less in terms of materials to obtain a degree in mathematics, history, music or software engineering than it does for chemistry, electrical engineering or even architecture. This is simply by virtue of the requirements.

I handled procurement for an undergraduate biochemistry lab for a term; the amount that we spent on basic equipment and chemicals to supply the students was astounding. Our spending rate was roughly $10k a week to support three classes of students. Roughly 1/3 was for basic maintenance and glassware, another 1/3 was for basic chemicals like media, and the last bit was on very expensive reagents like GFP or essential equipment like centrifuges or incubators. Those few lab supply companies out there gouge you like crazy.

For other types majors, all you ultimately need is a classroom and your only cost is labor and administrative overhead.

Anything with a lab should cost more. Anything with research on physical phenomena required should cost more. I shudder to think of how much a plasma physics degree ought to cost.

If the students break glassware, you charge them. If they don't, you use the glassware again. Ordinary lab glassware shouldn't be much of a recurrent cost. Still, your general point holds - the non-holiday-camp subjects cost more to teach.

Cost is only loosely connected to price.

There is a great deal of demand for softer college degrees, perhaps inexplicably, but it's there. They cost less to produce, so they're more profitable, so it's in the colleges interest to supply more of them. The demand is so high partially because the loans are not correctly priced, because of subsidies. And, of course, because there are so many more people who can make it through a history degree than an electrical engineering degree. If the loans were priced by default risk, the real costs of softer degrees would be apparent. Those costs do not fall on the schools, they fall on the students and the government, and hence taxpayers.

It's not in the country's interest to supply a great excess of softer degree graduates, hence people argue that state schools should behave differently.

The demand for soft degrees is driven primarily from subsidized student loans and subsidies to the higher education system in general.

I'm sorry, but I don't have the time to discuss Nietzsche with my barrista in the morning.

Our tax code even subsidizes worthless degrees. The student loan interest deduction phases out as income rises. In effect, we tax those who create the most value from their degrees and subsidize those who wasted four years of time and money for a degree that is less useful and less valuable than a wall calendar.

Just how much do you think 20 oscilloscopes that last several years cost when spread over 100 EE students a year?

I remember feeling bad for blowing out a few DAC chips that cost $10 apiece on a project, but in retrospect that's peanuts.

A university dean called the head of the physics department into his office. "Why does your department need so much money?" he asked. "The budget's tight, and you're always looking to buy all this expensive equipment. Why can't you be more like the math department? All they ask for is pencils, paper, and erasers. Or the philosophy department--all they ask for is pencils and paper!"

Oldie, but a goody.

US Universities are *nearly* perfectly price discriminating monopolies. Price has ver little to do with cost in their case.

For goodness sakes, they ask you for you and your parent's incomes and net liquid wealth before they decide how much to charge you. Furthermore, you don't know the exact amount you are going to pay before you sign up.


The FAFSA application process is really a head-scratcher.

It also makes sense that professors for disciplines with higher paying professional jobs would get paid more (opportunity cost and whatnot), which is also the case as is seen in this survey: (tables on page 23 through 25)

Quite a large variation in average professor salaries between disciplines which generally seeps down through more expensive associate / assistant professors and instructors as well.

The "classical" example; Engineering professors on average earn about 45% more than English Lit professors, and it is roughly the same for Assistant / associate profs and instructors.

There's nothing inherently wrong with that, if you look at countries with free higher education, where universities are awarded x money per student from the government, you generally see natural science students worth more, because they cost more to educate. But when we're talking about subsidizing those education further, it seems somewhat unfair when they are already being subsidized by the students of the disciplines with worse job prospects.

This seems very likely to produce unwanted side effects. Just thinking on the top of my head here, but here goes. Two things that appear to be destroying our society: finance and government. However, both are extremely lucrative to the individuals that operate within those sectors. Because they are not helpful to society, we will make it harder for lower classes to enter either lucrative sector, allowing the wealthy classes to remain in power while contributing very little to the rest of society and encouraging lower classes to contribute to society while making very little money.

I live in Florida and I can tell you this will end up being enacted in a very sloppy manner. You left out the part where the committee designated business degrees as one that should be subsidized. When you read the actual report, it is nowhere close to this grand idea you claim it is. On top of that, we're already near the bottom in Florida in regards to the funding of higher ed. If they do impose a freeze on tuition and don't increase our funding, expect younger faculty to speed up the already-begun process of jumping ship to other states. Since those are most likely the younger, more productive professors this report should give you more reason to pause than praise, Alex.

This is interesting. One of the most common mistakes bloggers and other commentators make when discussing higher ed policy is in assuming that students are studying either traditional liberal arts subjects or STEM. About 1/3 of new graduates majored in business or finance, and more than half of new graduates do not major in either traditional liberal arts subjects or STEM. Among the most popular majors are education, nursing and communications.

Why single out liberal arts majors for ridicule when they constitute a fairly small portion of the student population? I suspect most commentators do this because they went to colleges and universities with traditional academic programs that did not offer the more consumer-focused programs of large, modern colleges and universities, making them unaware of what college actually looks like for most students.

The problem is not too many English majors. The problem is too many "practical" programs in business, homeland security and whatever else colleges and universities offer to get marginal students to enroll.

One thing that would save a lot of money, heartache, and pain, is to identify those people who take STEM programs for a few years before failing down to a non-STEM program _before_ they enter a particular school and either directing them to an easier STEM program or easier school, an HVAC certification, or even a non-STEM program from the start.

The requisite future-prediction technology could be put to far better uses than that.

Related question: everyone invested in the stock market has time machines. Solve for the equilibrium.

I suspect you could do it with the SAT and be mostly right. This is only a guess on my part.

I was being a bit tongue in cheek; sorry if it came off the wrong way.

Actually that is an interesting idea: different admission requirements based on field of study. That actually happens in certain programs (doctors and lawyers, for example).

In my experience, though, most of the people who took a step down did so because they didn't want to work hard (or didn't work hard and fell too far behind), rather than lack of ability. That is why my first reaction was to consider it impossible to predict.

Thanks, no offense taken.

It would be nice if there was an SAT for long-term dedication to goals.

"Actually that is an interesting idea: different admission requirements based on field of study. "

Also a head-scratcher for me, looking back on it. My entry into a CS degree was largely based on my grades in English, History, and social sciences. Almost no correlation in performance.

Another mistake many make is not recognizing that math and science ARE liberal arts.
Others here have already made the point that from a facilities point of view, many STEM majors are already subsidized. Something else to be considered is: why do I want to subsidize a C-student in engineering or math over an A student in literature, history, or political science?

In WA state, the STEM majors are UW are completely oversubscribed and are turning way students every year. Stimulating demand would be pointless as the programs are capacity limited. The University and the legislature are trying to address capacity limits -- fund raising, and the legislature has redirected funds from liberal arts programs to engineering.

The tuition discussion here has been completely opposite the Florida case. A differential tuition proposal, charging higher fees for STEM degrees, has been approved and the University is considering. The justification is the unfilled demand, and the higher cost of STEM programs (labs, etc). As I understand it, the differential tuition proposal is on hold, due to legal challenges. I am not sure of the exact claims of the opposition, but I know those parents who purchased prepaid GET tuition vouchers have some legitimate concerns -- which programs do these vouchers cover?

It is surprising and interesting that the issues are that different between WA and FL

Not surprising to me. There are significant reputational differences in STEM between UW and the FL state schools. Supply/demand works it magic as usual.

Does anybody pretend to know the relevant value of externalities by major? That is very different than wages, and not captured simply by tax revenue.Value to society not capture by private wages? Petroleum engineering could have negative externalities, for all I know. By that criteria, it may make sense to heavily subsidize social work majors.


Most of the research I've seen demonstrates that positive externalities from education vanish BEFORE college begins, i.e. all of the benefits of a college education are private.

So far in this post I've seen people confuse positive externalities with public goods, publicly provided private goods, and pecuniary externalities. I'm more surprised to see Alex suggest without evidence the existence of positive externalities to "taxpayers." I expect better from a distinguished economist. Education leading to higher incomes leading to higher tax collections is not a positive externality.

If government perfectly provided the optimal level of public goods, and greater tax revenues permitted a greater number of positive NPV projects, one would still have to offset the gain in social welfare from public goods with the increased excess burden of taxation. By no means is government an optimal provider of public goods. Public goods and positive externalities appear similar, but they are distinct. Externalities are costs or benefits imposed on a third party from production or consumption activity. Public goods are collectively provided and jointly consumed, hence there is no "third party" within the electorate. You could correctly say that the American public good of national defense confers positive (or negative as the case may be) externalities on Canadians.

My consumption of the benefits from your STEM degree is likely paid for through my voluntary purchases. That is a pecuniary or false externality.

It's hard to discuss the merits of public policy when the discussants are not using the correct (or same) definitions of relevant terms. It's particularly difficult to discuss economic analysis when there is equivocation on terms.

"criteria" is plural, Professor.

"Subsidies instead should be targeted to fields where education has the greatest positive spillovers, benefits that spill over wages and flow to the public at large."

And how on earth are they to know that about the future? In fact, how can they be confident of any positive spillovers in future?

Any libertarians complaining about nanny state.

How is this supposed to work. Make STEM feilds attractive by producing a glut and depressing wages.

I don't know about the value of producing more STEM majors.

I suspect it would be good for the country to produce fewer non-STEM majors by reducing their subsidies. Libertarians could agree with that.

As others have pointed out above. It is the non-STEM majors who are subsidizing the STEM majors.

They are both subsidized. Is it your belief that non-STEM majors would exist in anything like their current form without subsidy? I acknowledge you can debate whether STEM or non-STEM receives more subsidy and what constitutes a subsidy. But surely you'd agree non-STEM majors receive subsidy?

Anyway, engineers require more equipment. They also bring in more corporate money. I hypothesize, based on things like this, which shows the magnitude of the shocking engineering lifetime earnings advantage, that they default less on their loans and pay more taxes.

I think the "expensive lab equipment" argument is a red herring.

Some anecdata regarding STEM funding, tuition, and educational costs at Research-1 universities*:
The broad fields of Computer Science and Electrical Engineering between them subsidize most of the rest of the university through the overhead percentage that the University's administration charges on their research contracts (whether with government or industry). This isn't the part of the overhead that pays for the researcher's benefits and space and power, and so on (or even for the administration of their department) -- that comes out of overhead charges that stay within their administrative unit (e.g., department, school, whatever). Rather, this is overhead that flows to the *rest* of the university overall; it supports not only University-wide administration (the President, the Provost, fund raising, etc.) but also the day-to-day operations of those parts of the university that lack substantial outside funding.

At many of these schools (failure to name specific institutions is intentional), the broader institution's revenue from these overhead charges exceeds their revenue from all undergraduate tuition, combined. At the University I'm most familiar with, the university's share of overhead from the School of Computer Science alone exceeds revenue from all undergraduate tuition. And then the EE department and other STEM departments wind up kicking in yet more.

Another way to look at this: At Research-1 schools, money flows FROM the STEM departments TO the rest of the University. Not the other way around.

*"Research-1 universities are the US's premier research schools. Examples include MIT, CalTech, Stanford, Berkeley, and Carnegie Mellon among many others. These schools generally value their research activities above undergraduate education, although they like to claim that undergraduate education is "very important to us." (My cynicism may be showing here...)

Other anecdata: at some universities, indirect cost recovery is insufficient to cover the costs incurred by research, and humanities and social sciences generate more in tuition than they take in in funding, while the sciences do the opposite.

Humanities and social sciences subsidize the sciences, because their students don't pay for all the resources they use and the professors don't get enough grant money to cover all the research they do.

Much of that research money is government money, too. You can argue whether it's a purchase or a subsidy. I think I'd call a lot of it a subsidy.

But this doesn't matter for my argument. Both STEM and non-STEM are subsidized by the government, and it's not important whether there's also some subsidy leakage one way or the other. The government pays into both through tax advantages, grants, favorable treatment of student loans, lax regulation, etc, to let them do what they do. The argument is that they should be subsidized less. The argument is stronger for non-STEM fields where we're subsidizing the waste of lives that would otherwise be (more) productive and where there's less argument for positive externalities. But I'd be fine if both were subsidized less.

I was under the impression that whole reason we have fully-subsidized primary education but not higher education is that the benefits of primary education accrue mostly to society-at-large, where many of the benefits of higher education are captured by the learner (the whole wage differential). If so, it would seem to make sense to do the opposite, and subsidize degree plans in lucrative career fields even less, because the benefit of studying is largely captured by the person going on to earn a lot of money in a stable, safe line of work. If you're just thinking the whole country benefits from a robust science and technology sector, devote more public funding to research and development, not tuition assistance.

That's related to Alex's point, but you're missing what he's saying I think, though I could be wrong.

He's saying that the subsidies should be based on what accrues the most to society-at-large. Are you perhaps saying that you think that the proper level should be based on some attempt to measure the different between the benefits to society at large and the wages paid?

Adam is saying, correctly, that marginal external benefits of education diminish with more education and almost completely vanish at the college level. So the "accrual" to society at large is near zero and there should be no subsidies at all.

In general, yes, the amount of any subsidy for a good with positive externalities is based on the marginal external benefit function. Marginal social benefit equals marginal private benefit plus marginal external benefit. Marginal benefit functions are downward sloping, so marginal private benefit approaches marginal social benefit as quantity increases.

Subsidies have administrative costs. All taxes other than lump sum taxes have deadweight loss. So there are lots of measurements that have to take place to determine the optimum subsidy. I submit that these costs (as well as measurement error) make subsidies of higher education a net detractor from social welfare.

A futures market for wages might improve market efficiency, but even that scheme has some problems with moral hazard and adverse selection. Systematic risk is also very high and would have to be priced in.

Probably the main reason primary education is subsidized is that if you have a desire to subsidize education in general, you will start at the beginning. It would make no sense, for example, to subsidize high school yet make people pay their own way to get to the high school level.

That's my understanding too, Adam.

Positive externalities of a college education are not zero, but they are so small as to make any subsidy not worth its administrative costs much less the excess burden of distortionary taxes.

No, thats the post hoc explanation. The theory of externalities didn't exist at the time the full subsidy started. The reason it was subsidized, in the 1800'ds Austria (where the modern US system is from), was so the state could take over and make men into good soldiers and women into good soldiers' wives.

Without disputing your proposition of why we have subsidized education, I contend that people can generally understand an economic concept long before that concept has been rigorously defined and analyzed.

No one disputes that education exhibits qualities of jointness of supply and positive externalities at some levels of output. Even if the externalities are indisputable, measuring the amount of external benefits and providing the optimal summary is tricky business. The concept of "government failure" includes instances when government makes an allocation decision that is inferior to the market solution despite the presence of a market failure.

One of the first myths we dispel in economics is that while more is often unambiguously better, the benefits of more are not always justified by the additional cost. And those additional costs could, instead, be used for other valuable purposes.

This sort of approach would be more nuanced than the current approach, which is an all or nothing deal for subsidies for different majors and courses of study. Public universities don't offer every possible major. When considering the alternatives, people should remember that there isn't a choice of subsidizing everything; what we're talking about here is whether some things should be subsidized at a middle level.

Of course, I would also expect this to weaken the signals given by some of the hardest existing majors, since students would try to move into them and they'd have to be accommodated. We shouldn't assume that such a plan would leave the majors alone; it would be gamed.

Is there a good theory of why such subsidization is even necessary? Shouldn't better returns to STEM majors induce more students to go into these fields? If there is really a shortage of STEM graduates, aren't students leaving gains on the table by majoring in other fields? Is "high discount rates" the best explanation we have?

While I'm not at all sure this is the case, we could explain this if there were a finite supply of people who can make it through STEM programs and careers. I.e., if there were nothing (short of having more kids) we could do to materially increase the number of STEM graduates, then the high return to that career path wouldn't shift people.

I don't think this is the only explanation, but a softer version of this has got to be part of it. Many, many people are in non-STEM fields not because they always wanted to be, but because engineering was just too much for them.

Many years ago I read that another country--New Zealand I think--had a policy similar to the one outlined in this post. There's was substantially different however, in that they charged a higher interest rate for government loans obtained by students with majors deemed less useful to society. That's my memory of it anyway. You'll have to do the research yourself to verify.

Too many College Graduates these days have no skills or knowledge which would make them useful to any employer paying more than ten dollars per hour.
Even so, they often owe many tens of thousands of dollars in student loans which they really have no way of paying back.

It's clear to me that the student loan industry has become a racket.

By the way, was there ever an Old Zealand? Just a thought.

If you get a free minute, take a look at my model for a Twenty Eighth Amendment to the U.S. Constitution. Politicians are at the root of every problem our Government has caused. The Amendment I'm proposing would make them truly accountable for the first time. It would be a game changer to say the least....and it's doable!!

You can find it here

Let me know what you think.

There is indeed an Old Zealand, and in fact still is, although it's just called "Zeeland" (and, you'll notice, spelled a little differently). Zeeland is a Dutch province; New Zealand was discovered by a Dutch explorer named Abel Tasman somewhere around the 17th century. And yes, Tasmania is named after him, although he actually called it something completely different.

I'm not sure if Anthropology is the right major to pick on. I've known several people who went on to have successful economics careers from an Anthro major.

I can't believe this idea has gotten support, in any form, on this usually intelligent blog. Please think for a moment about the consequences of making political footballs out of individual majors. Do you really want Democratic politicians promising lower tuition for education majors and higher tuition for finance majors, while Republican governors promise the opposite?

It's always easier to see the public choice problems inherent in the policies you *don't* like. So we get Alex Tabarrok, a really smart guy who is very sensitive to the problems of big government, arguing that the best way to deal with an excessive subsidy is to make the process by which it is granted more political and subjective.

I would argue that the problem is mainly mood affiliation: a policy that makes tough choices and hurts moochers and rewards math nerds *feels* right to him, just like it *feels* wrong to a mooshy, liberal, history-major-law-school grad like me. But I think you're absolutely right that the point isn't whether more heavily subsidizing STEMS majors and less heavily subsidizing liberal arts majors is right or wrong in the abstract, it's that this policy knocks over a pretty strong social norm (everyone pays the same for undergrad tuition) and replaces it with a mad, rent-seeking free for all.

Isn't the price differential already built in, in the expected income? I mean, a fine arts major *knows* he's not going to make as a ChemE major. This is not a secret. The ChemE major is well aware that his degree is more valuable and, if the tuition for both is the same, the ChemE degree is already a better deal (on a purely economic calculus) than the fine arts degree. This isn't rocket science.

I mean, why stop at major? A 4.0 is worth way more than a 2.0, maybe you should be charged on a sliding scale depending on GPA. (I guess this is already done, to an extent, with scholarships).

We should be highly skeptical of the idea that government can pick winners and losers between majors, any more than they can between companies or industries. Financial aid and other government support should let the free market (and the free will of the students) decide their field of studies without trying to tilt the incentives.

Yes, more engineers. But will this actually ameliorate the situation? Colleges graduate the same number of engineers as they did 30 years ago. If the problem was simply too many liberal arts grad price discrimination might be effective but isn't the correlary too few engineers?

I advocate getting rid of university departments which would be extinct but for state support . However, as Ayn Rand says we need philosophy teachers to train the future generation of thinkers and this applies to the humanities as a whole. The money saved by winding up most of the humanities departments can be used by the state to support a handful of humanities programmes run by the outstanding scholars . There are a few centres of excellence in the humanities in India and they justify support by the state for research in subjects like literature, economics, history, philosophy, political science and sociology. A dozen such centres give value for public money while the others are a criminal waste of financial resources . The same may be the case in America

Maybe somebody has made this point already (I haven't read all 90 comments), but aren't STEM majors already massively subsidized by public universities just by virtue of having equal tuition? STEM students have labs, equipment, and so forth that all costs money (not to mention often smaller upper-division classes at major public universities), whereas the costs to educate a social science student are pretty much faculty plus overhead.

If I said:
Product A will cost you $40,000. It will cost me $80,000 and it will net you $5 million in lifetime earnings.
Product B will cost you $40,000. It will cost me $40,000 and will net you $2.5 million in lifetime earnings.

Wouldn't you say that product A was the one that was currently more subsidized? While obviously the specific numbers are fictitious, the general dynamic holds. STEM students pay the same amount for a more expensive product that is more valuable; sounds like they're already getting a subsidy.

Now, the opposite argument, which I have heard from sitting on budgetary committees at a major research university, is that STEM departments also bring in far more money in the form of grants; upwards of $1 million per professor at a good school, so that would certainly suggest that they are subsidizing other departments, but it is my recollection that such funds generally kept in the research and graduate programs and aren't seen by undergraduates.

I've read some stuff critical of the "research grants bring in extra cash to subsidize teaching" line, but I can't find the specific pieces right now.

I did, however, trawl up this:

"On the other hand, a typical university strains to charge twice direct labor costs. Many fail at that, but the underlying cost structure — the real costs — of commercial and academic research organizations are basically identical. There is a widespread but absolutely false assumption that underlying academic research costs are lower because universities have all those smart professors just waiting to charge their time to government contracts. The gap between what universities charge and what sponsors are willing to pay commercial outfits is the difference between making a profit and losing a lot of money. Just like intercollegiate athletics, sponsored research programs tend to lose money by the fistful."

Here's another one:

"Another fundamental problem with the hope that extramural funding can compensate for lost state funding is the fact that sponsored research is usually a net drain on university budgets. This is obviously the case when matching funds are required, but the indirect burden of extramurally funded research on personnel systems, energy usage, building maintenance, regulatory compliance, libraries, and so on is often forgotten. Federal agencies generally reimburse what they believe is the full indirect cost of research, though with a cap for administrative costs. This reimbursement is less than what universities think is appropriate, so, at best, federally funded research is a break-even proposition. Since private industry and foundations typically do not fully reimburse indirect costs, such research is carried out at a loss. State agencies often provide the worst indirect-cost recovery rates, reasoning that the state is already covering indirect costs through core appropriations to the public universities (this is less true with each passing budget cycle)."

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STEM? Seriously?

As long as the Federal Government's policy is to let tons of H1B visa holders in, leading to a 16% unemployment rate in IT workers, nobody will want to study STEM.

The problem with students not studying STEM subjects is not tuition cost, it is the LACK OF JOBS AFTER GRADUATION.

Libertarian talking about "green" subsidies or auto bailout: "Government shouldn't pick winners and losers!!!"

Libertarian talking about government charging different tuition for majors, based on politicians decisions about what's valuable: "Yayyyyyy!!!!"

I think that the task force is more right than wrong but also since most grade in inflation is in the non-stem fields they should also attempt to make the stem fields easier and the other fields harder. They should provide fewer non stem spots and more stem spots.

Whats funny is that MP3 downloads are clearly public goods. (non rivalrous and non-excludable) Yet, the market provides them admirably and manages to charge for them.
I suspect that the theory of public goods is just a lot of baloney.

How silly.

This is easily accounted for by existing theories of public goods. See: hegemonic stability theory. The underlying logic holds, potentially, for mp3s just as well as hegemons.

(The underlying logic: (Both provide: 3,3) (A provides, B shirks: 2, 4) (A shirks, B provides: 4, 1) (Neither provides: 1,2). One can also make this symmetric with two Nash equiilbria and no dominant strategy: 3,3; 2,4; 4,2; 1,1)

Do the same majors deserve the same treatment under both standards (labor market outcome standard and public spillover standard)?

For ex, political science majors have worse employment outcomes than STEM folks (hence Tabarrok's citation of Scott accordingly). Perhaps they are more likely to work in fields where there are positive spillovers. The work of many people in "public service" (as well as those who actually do political science - understanding/explaining the wacky system in which we live) is likely to create positive spillovers.

Rather than have the state attempt to predict (in advance) those occupations needed in the job market of the future, why not price tuition as a function of demand for a given major? Aren't some majors in higher demand than others? Yet, the price of tuition is generally the same. Upon graduation, some majors prove to be more lucrative than others. For instance, some of the engineering majors pay six-figure incomes upon graduation. Therapy majors (physical, occupational and speech pathology) pay very well. Why not try to extract a larger portion of future earnings in the form of higher tuition for these majors? Some instructors have more lucrative opportunities than teaching. Schools should be able to charge higher tuition in some fields to compensate for higher wages paid to instructors. An example of this is advanced practice nurses who work in academia. A PhD nurse practitioner probably earns half -- maybe two-thirds -- of what a private practice would pay them.

I cant help but think that just giving cash would be easier than reduced tuition.
Students aren't able to make long-term rational choices about their financial situation.
If they received $500 for every semester they were a declared engineering major, I think they would sign up in droves.

what about all those "valuable" business degrees?

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