Economist Antony Davies argues that the government should stop subsidizing student loans, because it's creating a college bubble. But his argument is inexcusably uninformed.
For one, he says that Fannie Mae and Freddie Mac caused the housing bubble. At best, that statement is controversial.
Second, he says that student loan subsidies caused the large increase in college costs. Good God. It accounts for a little bit of the increase, but mostly it's due to a lot of other things.
He also argues that pure market outcomes would lead to efficient amounts of college loans. Totally false. Even a cursory glance at the relevant literature would reveal that this is not the case. The student loan market suffers from multiple market failures, leading the market to provide too few loans to students.
Fourth, the logic of bubbles doesn't even apply to this situation. The housing bubble was built on the presumption that housing prices would continue to rise indefinitely. There is no analogous assumption in student loans. You can't sell your degree after you get it, so it doesn't matter if the value of a degree rises or falls. There's no good reason to expect hordes of students to suddenly stop paying their student loans. Annie Lowrey explained this well at Slate last year.
Once again I find myself wondering: what led this person to write this? Why are people paying this man's salary? How did this guy get an economics degree?
Oh, for the days when libertarians respected Hayek. Today's libertarians seem to constantly dismiss the complexity of social problems, and suffer from the fatal conceit of uninformed central planning more than any other group I've seen.
The problem I have with how (most) libertarians embrace economics is that they insist on reducing every single issue to "government is bad". Even though I agree with that overall statement, you can't deny that society and the system we live in is way too complex to reduce down to a single notion and then attempt to shoehorn everything into it. Why don't libertarians pay attention to culture, for example? After all, isn't part of the reason so many young people today still go to college despite rising costs because it's part of the culture we live in?
ReplyDelete--The problem I have with how (most) libertarians embrace economics is that they insist on reducing every single issue to "government is bad".--
ReplyDeleteI'm trying to rephrase that to fit my thinking.
The problem I have with how (most) libertarians embrace economics is that they embrace economics-- except when they don't. Economists are obviously full of it-- except for the libertarian ones, those guys are smart. They adopt just enough economic reasoning to justify their prejudices, and to hell with everything else.
I'm not sure what to say about culture.