Richard Vanden Bergh Comments on Subsidies for Higher Education #throwbackthursday

In 2012, The Janus Forum sponsored a debate entitled “Does Federal Support for Higher Education Make College More or Less Affordable?”  Richard Vedder argued that federal government intervention into higher education has been one important cause of the rapid rise in college tuition.  Vedder’s argument is consistent with an insight from economics that government subsidies cause demand for education to rise which leads to universities charging higher prices. 

There are numerous research studies that provide empirical support for Vedder’s argument.  For example, one study from the Federal Reserve Bank of New York finds that universities pass along federal support in the form of higher tuition and fees.  The study found that tuition and fees increased by about 55 cents for each additional dollar of federal government grant funding, and about 70 cents for each additional dollar of federal subsidized loan. 

 These findings highlight a central tenet of the Janus Forum.  Sometimes government intervention into market processes may have good intentions but actually exacerbate an identified problem.  For me, as a student of both free markets and government decision making, I constantly search for a deeper understanding of the conditions under which government intervention is likely to improve an identified social problem and when it is better for the government to not intervene in free market processes.