"To receive a full scholarship, students must have attended Kalamazoo public schools since kindergarten. The program, unveiled at a November 10, 2005, Kalamazoo Board of Education meeting, is also viewed as an economic development tool for Kalamazoo. Since the Kalamazoo Promise was announced, enrollment in the school district has grown by 16%, test scores have improved, and a greater proportion of high-school graduates are attending college. In 2010 alone, the Kalamazoo Public School district saw enrollment rise 3% to 12,409."
Have to be there K-12 to get full tuition. There's a chart that shows the sliding scale based on your length of attendance. Most interesting part is that if you move in for the tail end of high school you get 0% covered to prevent people from temporarily joining the community just for the tuition.
I once had a conversation with a state legislator where he argued it wasn't the responsibility of government to provide grant and loan opportunities for higher education, and that by doing so, the federal government was disincentivizing saving and investing. Instead, he argued universities should be more market driven (which I will concede might introduce more price competition in the face of rapidly rising tuition rates). He was a firm believer that a university education should be something one works and sacrifices for.
In my elected position with public education at the time, I disagreed (and still disagree) with some of his claims, believing a subsidized higher education experience for a expanded pool of people is a long-term net gain compared to crime/prison costs and the cost of government-funded social safety net programs. (Although, again, college-student families admittedly qualify for most government assistance programs already, but this is hopefully a short-term rather than lifetime dependence.)
I'd love to see the long-term effects on the quality of life, debt, and employment prospects of these students.
I respect your position, and agree with parts of it.
But I am bothered by the vast amounts of grant and loan money that get absorbed directly by colleges, raising the cost for everyone and creating a positive feedback loop that requires endlessly more taxes and debt to sustain.
I feel we've been sold a bill of goods ("opportunity through higher ed -- don't let your kids fall behind in the new global economy, etc etc") that is way past the point of rationality.
Earning enough to pay for 2 kids is almost getting impossible for the middle classes. Whatever you have saved will get "swept" by college when corrected for financial aid. Financial aid levels, in that context turns into an odd-kinda-wierd thing. A hybrid of forced donation to a charity and a stealth tax.
I think its a balancing act - but i guess grants is worse than loans.
Granting "free" money will indeed cause problems, but a loan that is required to be repaid seems like the right way to go in the long term, provided that after the higher education is completed the individual in question is able to actually provide value.
This has it exactly backwards. Consider this simple (and very simplified) example.
The NPV of college is $100k. The marginal student can scrape together $10k to go to college. The marginal cost of a student is less than $10k for the college. How much will the college charge? $10k. What's the benefit to the student? $90k.
What if an $89.9k subsidized grant is available? Now the college can charge $99.9k. What's the benefit to the student? Still $90k.
Now lets say an $89.9k loan is made available. The college can still charge $99.9k. What's the benefit to the student? $.1k. This is actually happening (though it isn't quite so extreme). The existence of loans is allowing colleges to capture more of the value of college from student.
The real world is actually worse than this simplified example in a lot of ways. Many degrees aren't worth it (from a purely monetary perspective), and the result is probabilistic, but student loans can't be discharged in bankruptcy, and payment is up front (w.r.t. a person's career), so the student takes on the risk, but the college gets the reward regardless.
Indeed. Since the colleges control most of the cards here (via accreditation bodies and what not; students are replaceable, loan companies are replaceable, colleges are not) if left unchecked you would expect them to capture all of the value generated through college attendance.
This assumes a thoroughly mercenary/market oriented focus of colleges, and ignores altruistic or societal motives of many if not most colleges/universities/educators and professors.
Lots of educators and professors are great, but they have no say in tuition policies.
Every college and university presents itself as altruistic and socially motivated in its publicity material - but if you judge colleges and universities by their actions instead of their words, which is to say in terms of inflation-adjusted tuition costs, they seem pretty mercenary/market oriented to me. According to [1] the same public college 4 year education rose in cost by more than 300% between 1988 and 2008, while median family income rose by only 90%, and the cost of a new car by just 20%.
I don't blame them for this in a market-driven system - a free market actor maximizing its share of the economic surplus is like a dog humping your leg, it's just being a dog. But I don't think it's wise to deny that it's happening.
True. It's better to build a system which assumes that most people will act nice, knows that incentives can cause them to act worse, and has a fallback mechanism to handle those which don't act nice.
lets assume the cost of educating a student is going to cost X. The colledge is going to get some percentage of X as profit, no matter what policy the gov't decides.
Now, the question is, what party _should_ be covering for the cost X? In the grant scenario, it is society/tax payers who cover the cost of education. In the load scenario, it is the individual being educated that is covering the cost, deferred to the future.
Either way, it is not the case that the college recieves less profit for the service of educating. To me, incentive alignment is critical to the success of a policy, and i feel that a loan tends to incentivize those who works ultra hard to make it, whilst a grant will not. Now, i m not saying all grants are bad, but grants should be based on academic results, as a reward incentive, where as loans should be made available to all who wants an education.
There are two reasons I disagree with you. Let me start with the one that has some chance of changing your mind.
I believe that spending on education is positive sum. That surely isn't always and everywhere true, but I believe that it's true at the margin, considering the conditions in the U.S. The book that originally convinced me of this was _Children as Pawns: The Politics of Educational Reform_, by Hacsi. It details, along with a lot of other evidence, a longitudinal randomized controlled trial (which is very rare in educational policy) which shows a positive benefit from additional education spending (admittedly, of a very specific type, and in one particular context). There's no way to provide a good summary of the evidence in the book, so let me just say that my opinion is that while the evidence is tenuous, the overall weight of the evidence indicates that the gains from education in tax revenue are greater than the costs. If you like, you can check out the book and decide for yourself. If you agree, then government funding of education seems like an obvious solution. And, of course, the overall gains to society are much greater than the increased tax revenue.
I don't mean to say that our educational system is particularly good. In fact, I think it's very inefficient in many ways. That doesn't preclude the previous conclusion, though.
The second reason is that, in the model above, college administrators capture much of the value added by subsidies. Some gain goes to "good" students, and "bad" students are severely penalized. I believe that's apparent from looking at the practical results, and you can see that in the model by adding student ability and graduation rate to the simple model above. You get an even more extreme result if you add types of degrees (hard vs. easy, with hard degrees resulting in more compensation. Typing out the entire "proof" would be tedious, but I can do it, if you disagree with the result of the model, given the premises. But, in the end, this is a philosophical difference. I don't think that we should be subsidizing college administrators (who are already much better off than average) and really good students (who, on average, will do fine in life anyway) at the expense of bad students (who, IMO, could use some help). I understand that a lot of folks would prefer that people are rewarded purely on talent. Having subsidized loans with a random probabilistic outcome magnifies that, so perhaps you think that solution is fair and just. If that's the case, and you're not convinced that spending on education is a net positive, then there's no hope my line of reasoning will convince you, and we'll have to agree to disagree.
I agree that incentive compatible solutions are important, but I don't think that creating a system that's efficient (in the sense that an econ 101 student would use the word) is the only thing we should consider.
P.S. Your original comment has been downvoted, but it wasn't by me. I disagree with your position, but I don't think you're arguing in bad faith or presenting even presenting a fallacious argument, which are the things I would downvote someone for.
Also, considering all college students nationally, a minority of student loan recipients manage to graduate from college. Yet they are required to pay back the loans whether or not they graduated. Let's assume your value is correct, the NPV per graduate is $100k. Let's take a 50% graduation rate nationally for students admitted. Let's consider the college charges $99.9k over 4 years. We also know that students are taking 4-6 years to graduate and 4 year graduations are rare. If your chance of graduating in 4-6 years is 50%, it becomes not a $.1k average pay out, but on average, weighted for actual outcomes, an overall loss.
I agree with the points in your analysis, but putting your example in a competitive marketplace should cause prices to reduce to the marginal costs.
Perhaps some of the local colleges can provide at that price, but we've created a system that values name-brand education, and the artificial scarcity at the top (partly, to protect brand identity) mitigates some of the downward price pressure.
Even still, if marginal costs are a fraction of tuition (and I believe they are, often) why are tuition rates increasing so rapidly?
As a guy who grew up in an impoverished, rural family and received Pell grants and federal loans for my college costs, can someone explain to me why articles like this talk about students not being able to go to college without the donation? Has something changed since 1999 when I, with zero money or savings in my family, was able to go to college on government loans/grants based on the fact that I got in due to good grades/etc? (IF SOMETHING HAS CHANGED, AND POOR KIDS WITH GOOD GRADES ARE UNABLE TO GET FEDERAL LOANS AND GRANTS, THEN I AM GOING TO DO WHATEVER I, AS AN AVERAGE MIDDLE CLASS CITIZEN, CAN DO TO FIX THIS.) I realize that we've had an economic collapse, and I think this is a fantastic program, but statements like those in the article distract from the fact that poor areas of this nation fail not because students can't AFFORD college, but because they can't GET IN, due to substandard educations and (to some degree) bad parenting.
Regarding my comment on bad parenting, before people crucify me for blaming the victim, I assure you that a lot of poor, uneducated parents actively interfere (knowingly or not) with their children's educational chances. They do this mainly through ignorance (leaving TV on at night in child's room, never reading to them when they are young, not helping with homework, putting children to bed too late, etc.) I've watched this happen with most of my friend's growing up.
Has something changed since 1999 when I, with zero money or savings in my family, was able to go to college on government loans/grants based on the fact that I got in due to good grades/etc?
Yes. College tuition costs have been rising way faster than the rate of inflation.
Ramit Sethi argues that the belief that you can't go to college due to a lack of money is largely misplaced, at least in the USA.
I'm sure there are edge cases where it really is impossible to get funding, but I know several people who went to very expensive schools and got it nearly all paid through various scholarships. NB: most of these scholarships were not granted by the college itself, but by an outside agency, whereas most people I know seem to only apply for scholarships through the college.
I wish someone would have told me about all this starting my freshman year of high school. Being from a poor rural family, I had no idea that these opportunities existed and the first thing I looked at was price of school over anything else. So, I only applied to one school which to be honest seemed unreasonably expensive at the time.
I think a huge part of the problem is not so much the resources, but the mentality that surrounds the poor. Having grown up poor, I was focused on being cheap, not on value. Of course, no one every said, "Hey, with your 3.3 GPA maybe you should apply somewhere else".
I also only took the ACT once after having been away at summer camp and only getting 3-4 hours of sleep each night for the past week, and no idea until later that people retook it.
The other aspect, is that in small rural towns it has been my experience, that the guidance counselors who do the college admissions have no idea what to do with a student who doesn't want to go to the traditional schools, which in my case were the 3 nearest community colleges, the University of Nebraska, University of Iowa, or Iowa State.
Ramit, would tell you that just because the information is out there, that isn't enough. In regard to this, it is absolutely true.
Your story is very similar to mine. I too was a poor farmers child growing up. But thanks to Pell Grants, Federal Student Loans, and my parents vision for me, I was able to go to college. My parents greatest vision for me was that I would be able to do better than them. That was the goal that was drilled into me, that I could do better. That I had a blank slate and could make myself whatever I wanted. And they made sure I was keeping up with my grades and not going out and getting in trouble. I believe its very true that a bad or ignorant home life is probably one of the greatest disadvantages a child can have when it comes to education. I don't have the studies or facts handy right now, but from what I've read and seen myself, English as a second language and disengaged parents are far more responsible for poor test scores and student failures than the teachers are. Of course there are bad teachers, just like any other profession, but I would guess that the number of incompetent and bad teachers is far lower than test scores would suggest.
Because the people that wrote the article believed that children were helpless. Intrinsically motivated people will almost always find a way to overcome obstacles. Those extrinsically motivated need help to overcome obstacles. Government school promotes extrinsic motivation (go to school, get a good job. Get that A on that test!).
http://www.finaid.org/savings/tuition-inflation.phtml (those graphs don't really do it justice, but if you know your math you know what a difference being several point ahead of inflation for decades does to the difference in price.)
I'm an optimist. The problem will fix itself thanks to technology. Education in the future is going to be nearly free. I think it is going to happen a lot sooner than people realize. Runaway education inflation will make even the "expensive" solutions look dirt cheap.
There will be some ugly financial realities along the way. Private, public, not for profit, and for profit schools will go belly up along the way. Educators who teach things that can be taught online better will find themselves with no job market. Students whose defaulted $70k loan balloons to $200k because of non-payment will be at a tremendous financial disadvantage over the next generation of students with no debt.
Kalamazoo makes for a warm feeling story. Reality is a lot more sinister. It is giving free weapons to one small group in an arms race. In this case, everyone else is getting killed with debt.
> I'm an optimist. The problem will fix itself thanks to technology. Education in the future is going to be nearly free. I think it is going to happen a lot sooner than people realize. Runaway education inflation will make even the "expensive" solutions look dirt cheap.
You're presupposing that tuition has anything to do with the cost of providing education, and that tuition will go down if the costs go down. It doesn't. Skyrocketing tuition is the product of schools being non-fungible prestige goods. It's how the price of Prada handbags doesn't have anything to do with their manufacturing cost.
College in the US isn't about education. It's about signaling. And the price of desirable signals, like Stanford or U Michigan, isn't going to go down based on competition from cheaper online educational institutions.
College in the US is about education and signaling. Capable people want to learn more after high school, so most of them go to college. It makes sense that the college one attends has become a signal since its so closely coupled with what capable people want to do anyway. In the future, this will not be the case. So many capable people will eschew a traditional college education that alternative signaling methods will arise. For instance, Y Combinator is a more powerful signal than Stanford is. (Stanford graduates don't automatically receive $150k in convertible debt for their endeavors once they graduate.)
> In the future, this will not be the case. So many capable people will eschew a traditional college education that alternative signaling methods will arise.
As long as 99% of employers depend on the traditional signaling methods, very few capable people will eschew a traditional college education. Only in certain segments of software engineering does the idea even have any traction.
> For instance, Y Combinator is a more powerful signal than Stanford is. (Stanford graduates don't automatically receive $150k in convertible debt for their endeavors once they graduate.)
Not really, outside a very specific niche of people doing a very specific type of startup work. If you want to build a web app, yeah, Y Combinator is a valuable signal. If you want to work for Lockheed-Martin or Goldman Sachs, not so much. As for $150k in convertible debt... you can earn that much in bonuses working on Wall Street for a couple of years, with far less risk and far more predictability.
"a subsidized higher education experience for a expanded pool of people is a long-term net gain"
I agree with this. Some of the benefits of an individual's education accrue to society at large. However, the vast majority of the benefits of an individual's education accrue to the individual. Why not split the funding in a similar way? If the benefits aren't worth the cost to the individual, that's a good signal that the benefits may not be worth the cost for society to subsidize.
More market-driven? It's only since people started arguing that colleges should be run like businesses that tuition has exploded.
There are things that shouldn't be market-driven. Look at Germany for an example - no vouchers needed to go to college there because the government simply pays for everybody (even foreigners). And the economy is doing fine.
Germany is a wonderful cherry-picked example, but it is hardly the only country in Europe to pay for higher education - many of the others aren't in such great financial shape.
I would love to see higher education made accessible to everyone with the ability to do so, and would love to see college cost a lot less, even if it is too late for me (6 figures of student loan debt). But just saying 'the government should pay for it look at Germany' is a far too simplistic outlook, especially in the face of crippling yearly deficits that aren't showing any signs of going away under either party's 'leadership'.
Apparently, since there is only one dimension in this particular argument, cobrausn believes there is only one factor in economic results. Today, anyway.
"The Promise was created against a backdrop of recent economic thought that considers investment in education better than nearly every other kind of developmental effort when it comes to promoting economic growth."
That's the kind of thinking that turned east Asia from a place of wretched poverty to a place of wealth in my lifetime.
I want to believe your statement, but could you share some references for it?
I mean, some clue that education has been the driving force in the growth of east asian countries, rather than internal/external factors of other kinds.
I'll quote a few relevant snippets from the article, for anyone who doesn't want to read the whole thing.
Challenging the conventional view, there is actually a striking global correspondence between the world economic slowdown since 1973 and ever-increasing levels of educational spending. Comparisons between countries also confound the idea that more education translates into more growth. For example, South Korea is often given as an example of a country that made education a priority since the 1960s and saw significant economic growth. But as Professor Alison Wolf from King's College London points out, Egypt has also prioritised investing in education, but its growth record has been poor (4). Between 1970 and 1998 Egypt's primary enrolment rates grew to more than 90 per cent, secondary schooling levels went from 32 per cent to 75 per cent, and university education doubled - yet over the same period Egypt moved from being the world's forty-seventh poorest country to being the forty-eighth.
A retort might be that education isn't the sole determinant of growth - other factors may offset its positive economic role - but it remains a necessary one. But this argument doesn't stand up either. The rapid growth of Hong Kong, another of the East Asian tigers, wasn't accompanied by substantial investment in education. Its expansion of secondary and university education came later, as more prosperous Hong Kong parents used some of their newfound wealth to give their children a better education than they had had.
A study for the World Bank came to similar conclusions. In a paper called 'Where has all the education gone?', public policy academic Lant Pritchett couldn't find the positive correlation between education and productivity that underpins so much current international development thinking (5). Economist William Easterly summarised the study:
'African countries with rapid growth in human capital [the fashionable term for people's work abilities, especially levels of education] over the 1960 to 1987 period - countries like Angola, Mozambique, Ghana, Zambia, Madagascar, Sudan, and Senegal - were nevertheless growth disasters. Countries like Japan, with modest growth in human capital, were growth miracles. Other East Asian miracles like Singapore, Korea, China, and Indonesia did have rapid growth in human capital, but equal to or less than that of the African growth disasters. To take one comparison, Zambia had slightly faster expansion in human capital than Korea, but Zambia's growth rate was seven percentage points lower.
There is no silver bullet when it comes to growth. Corruption is probably the largest roadblock to growth, as evidenced by China's relatively slow rise to power compared with the Post WWII wave of Asian economic growth. Infrastructure and Education are necessary, but over investment in either tends to create stagnation. Much like the balancing act between slowing wealth to accumulate and allowing an Aristocracy to form and block progress.
PS: There is plenty of talk about the value of rich people investing in the next waves of technology. However, Moving into the realm of 8+ figure incomes only a tiny fraction of that spending ends up on the type of mass producible goods that lead to economic growth, instead buying things like gardens or Yachts that quickly lose value.
"Corruption is probably the largest roadblock to growth, as evidenced by China's relatively slow rise to power"
China's slow rise to power from 1949 to 1979 wasn't because of corruption, but incompetence and policies, practices & ideology that was incompatible with economic growth, positive reform & capitalism. The anti-capitalist purges in the early 1950s lead to a wave of Shanghaiese & others moving to Hong Kong, to help boost its economy. There were some positive reforms in China to help boost economic growth and living standards, but those are overshadowed by the massively incompetent programs that destroyed the economy and country for thirty years, this after decades of war and civil war.
If anything, the level of corruption has massive increased since the reform period began in 1979. Though that may be the type of corruption has changed, from food, job, marriage, life, location & housing to money as the prime difference in the types of corruption being most prevalent.
this is an example rather than a reference.
(Is it? when did singapore start to invest a lot on education? WolframAlpha believes that the country had high growth since 1965[0], which would be the year of the independence)
I was more looking to something like books, articles, researches that would explain how _investments in education_ in eastern countries have been the most effective on growth, rather than everything else.
Or the opposite, say, the last 20 years of low growth in japan are due to disinvestments in education.
What's fascinating to me is that because it prevented the surrounding communities from growing at the expense of Kalamazoo, those districts invested even more in their schools and education infrastructure to compete with the city with The Promise. I would have predicted the exact opposite. Super interesting.
I went to college there and live one city over (25 minute drive). There are a lot of wealthy people living in the area, multimillionaires in the suburbs, but also a lot of poverty. A _lot_ of poverty. I'm glad to see someone trying something new, even on such a small scale. I was almost tempted to look for housing within the Kzoo city limits because of the Promise, but I don't plan on having children any time soon. We need more such experiments and resultant data.
On the assumption this is a good thing, let's say every town/state rolls such a scheme out. Now every student in the nation is having their tuition paid. It's also costing about the same amount as if the government levied taxes and paid the costs.
A negative, compared to government funding, is that the economy has lost mobility of labour. Getting a full scholarship requires the child to be enrolled from K-12. Loss of mobility might be a good thing, in that it prompts people to improve their local economy, rather than run away. Alternatively, it could lock people into a form of serfdom, unable to move to better their situation.
I'd advocate that a voucher system, whereby the government gives each student a voucher for the degree of their choice, would be preferable to the widespread adoption of "the promise".
Lack of mobility is a key part of the experiment here. It's an economic growth strategy - attract families that value education, get them to set up roots, and the local economy will benefit.
If this were to roll out on a national level then it would be much similar to public school, but rather than K-12, it'd be K-BA. Maybe there'd be vouchers, maybe not.
The point is that this is an experimental model for economic growth and social benefit for the town, not the model for the entire nation.
There's also a kind of inevitability here - that schemes with intended pay-off periods measured in decades are not going to interest politicians who's main (some say "only") job is to be re-elected on 3 or 4 year cycles…
Call me cynical, but if this had been my idea - I would have taken it to potential local wealthy benefactors, and probably would not have bothered pitching it to "the government"…
This is totally interesting point. The experiment has to be seen as the 18 year time-frame. How many Parents can rationally expect 18 years in Job? That type of career is getting further away from the norm, it seems
There are a number of small town jobs where this can be true, even what some might consider 'temp' work like waitstaff or gardener. There are of course the 'professional' careers, like lawyer, doctor, or accountant, and of course civil jobs like police officer, firefighter, clerk.
The interesting bit comes when you're thinking about investing, say to build a gas station or a wallmart, knowing that the population will be relatively stable is an incentive.
They don't constrain where the kids go, they can go to any school that they are accepted to AFAICT from the article. So some schools might recruit them knowing they won't need financial aid.
There's one key limit on the students: they will only pay for tuition at any of Michigan's state colleges or universities.
So no free rides to Harvard... or Ohio State.
Edit: I didn't mean to imply that Michigan has bad schools. Simply noting that this offer requires families to set up roots in the town and it also requires that the students go to college in state. Not saying it's a positive or negative, just a two-fold geographic limitation designed to stimulate the local and state economies.
Not to be too biased (I grew up and attended school in Michigan) but I fail to see this as a significant limitation. Interested in technology? Attend Michigan's top-ten engineering school. Decent student at a less than stellar highschool? Michigan State probably has something you're interested in. Want to be a teacher? Western has you covered.
I never felt needy for options while looking at universities in the state of Michigan.
Hey, one my daughters is going to school in Michigan (Hope College) :-)
More seriously though, since daughter #3 is college shopping, we've been talking about various colleges. Michigan has a lot of great schools, for a variety of students and for a variety of majors. So it's not a 'limit' in any sense of the word.
This explains well why it might be of interest in an area where some seemingly basic jobs are all that is left from the scale-back of traditional industries. Right or wrong as the experiment will tell us, this seems to have some explanatory power. About why it might be a good idea for an increasingly large segment of folks that would otherwise be dis-advantaged by skyrocketing costs of higher ed.
I am curious, would it not mean that paychecks will be slightly lower in the town given that expenditures are lower? Also meaning that families and individuals who choose to be without kids will have a poorer deal hence?
Why would you "advocate" a policy. You can look at data where it was implemented, and compare it to other data. Choose the one that has a higher NPV. Every business is run that way, and so should government. This isn't philosphy, it's management science applied to public policy.
Only now as an adult, having grown up in southwest Michigan, do I appreciate how unusual the region is.
The amount of culture and philanthropy in area is very high considering the population. In Kalamazoo there's the Kalamazoo Area Math and Science Center (thank you Upjohn family), the Gilmore Keyboard Festival (thank you Gilmore family), the philanthropic work of the Stryker family, ... the list goes on and on.
About an hour north of Kalamazoo is Grand Rapids, another major Michigan metro area, which is also defined by philanthropy: Art Prize (thank you DeVos family) and the Fredrick Meijer sculpture park (thank you Meijer family), just to name a few.
What would be the unintended negative consequences of this?
It reminds me of the story of a West African king who went on a pilgrimage to Mecca. On his way to Arabia, the king gifted so much gold to all intervening communities that the price of gold crashed, taking with it the economies of North Africa and Arabia.
Unlike gold which is a scare resource, knowledge is non-rivalous. College tuition acts as an economic exclusion mechanism and thus only allows consumers/students with sufficient means to gain access to it.
By removing the exclusion mechanism for these students, it in effect turns college education into a public good.
As a country, we've deemed that this is so vastly in the public interest that we provide free K-12 education to all students regardless of how much (income/property tax) their family pays.
I'm not very familiar with studies of free college-level educations, but based on the thousands of studies that shows the incredible economic and social benefits to obtaining higher levels of education, I'd wager that any negative consequences will be vastly out weighed by the positive impacts.
Knowledge is non-rivalrous, but it's not settled that the value of a college education comes mostly from added knowledge. If instead it comes from signaling, then it's no longer the case.
Agree with you on the signally aspect. As a nation we've become obsessed with college degrees and college may not be the right choice for everyone. But that's a whole other discussion thread.
Public goods are both non-rivalrous and non-excludable. This is an important distinction. We fund public goods as a society because they are very difficult to fund otherwise since you can't exclude the people who don't pay. Education is easy to fund privately. It should be funded publicly to the extend that society benefits from it. Most of the benefits of an education accrue to the student.
The same as any tuition program or grant: When you separate the cost from the consumer, prices skyrocket. With 100% of their tuition being paid by anonymous donors, why should these kids care how much it costs? And if the kids don't care and have a blank check, why shouldn't the schools raise the price tag?
I'm just using this an example of unintended consequences in this type of stuff. I'm well aware this handful of kids aren't enough to skew tuition prices, that most public institutions (which this program seems to target) have caps on tuition increases, etc... Regardless, disconnecting the consumer from the price of the product have caused tuition prices to rise artificially fast.
As the article notes, most of the recipients use the grant at the community college, which is the least expensive possibility involving an accredited college and real degree.
When you separate the cost from the consumer, prices skyrocket.
Not always. Cost of education in the UK has skyrocketed more since the scrapping of grants in favour of a loans+tuition fees model. Part of this is that when there is a marketplace based on prestige, nobody wants to appear cheap, so price becomes based on the highest price that the market will bear.
This is an iteresting and valid point. the counter example to the uk (20 years ago, in medicine and in university) is the us. In the USA both medicine and college are inflated because between the taxes collected and the end user there are [insert conspiracy theory here] actors of questionable probity. Everyone benefits from the massive opaque flow of cash. Politicans get the clout of collecting tax and the support of the [insurance, university, hospital, dentist, doctor, finance companies]. Then everybody gets "cost+pricing". To "pay their fair share." But the intermediaries skimm the pool and make extraordinary profits on the cost base hollywood accounting style. With a wink and a nod. Its a great system. =D
If there is a limited supply of a good that is highly desired by the richest in society, and if price is used as an indicator of quality for that good, then it is the connection between the cost and the consumer that drives prices upwards.
For things like speedboats and handcrafted watches and personal spaceships, this is all cool, and I don't think that randomly insanely rich people buying toys like this does much harm really on the scale of things and probably does a lot of good if anything. Power tends to follow a power law, no matter what kind of politics you try and squidge in the middle.
However, if it is then thought to cause injury to the society in general for certain goods (such as education and health services, for example) to be priced above people's general means, then the state can lower the cost of that good by regulation or by direct competition by the state. The purchasing power and drug research of the UK's NHS being a good example.
And I don't think there is any massive contradiction in being lassie-faire capitalist with most stuff and socialist with specific areas. It seems to be how places like Finland get along mostly, and they seem to be doing ok.
[edit] Just thought, private spaceships shouldn't be on that list as they follow a different set of economics, as the rich people who want them are directly funding their construction rather than purchasing a consumer good. Posh watches and big speedboats follow this rule though.
The USA is 6x the size of the UK. Thats the trick. The issue we have: who wants to aggregate all of that power in the hands of [insert conspiraciy theory] actors of dubious propriety. With healthcare thats a problem @20pc GDP (70% increase of size of Gov't spend). With schools, it would need to be thought through, but is likely more manageble. The main conflict with schools is they fight for money, for the research (aka, presitige). Alot of that money comes from the Gov't. And alot of the cost base is fancy non-education-related things.
I read your first version and didn't think it was particularly off topic, but then again I can meander all over the place when it comes to discussions.
You can look to Eastern European economies for that, as they still pick up the tab for majority of university education.
1) There's certain stigma attached to blue-collar jobs now that everyone and their pet hamster are proud bearers of a college diploma. Finding a good plumber is next to impossible.
2) There's a subset of people thrown into permanent unemployment. Might be a cultural thing, but second education is a rare beast (as you hang out with students of the same level pretty much throughout the degree, so there's social pressure to be in the same age group as other classmates), and if your first and only degree is not very employable (hi, History majors), it becomes a constant conversation point of how screwed up the society is when a college graduate cannot find a job.
In regards to point #1, I foresee (or at least hope we will see) a swing back in the other direction, as wages for skilled labor skyrocket and scarce supply of skilled labor makes it a laborer's market (pick and choose your hours, etc)
Many people aren't "paying for it" today already - can we judge if they're taking it more or less lightly than they otherwise would have?
Given that we have 20 year olds taking on tens of thousands of dollars in debt, when I don't really think most of them have any perspective at all to judge the seriousness of that, I'm not sure we can say that everyone going to college today is 'paying for it'. We might say that many of them are paying for it (in many senses of the phrase) for years/decades to come.
More people learning stuff doesn't devalue the learning that other people do, it adds to it. The economics of ideas are not the same as the economics of physical commodities.
What would free education do to the labormarket if students no longer had to work part time to make ends meet? What would happen to housing market when students have disposable income not going to tuition?
"No man is an island" is not just a trite old adage, but a very real economic principle.
Heh, I was throwing John Donne about these boards the other day funnily enough.
I suspect that if free education plus a free living allowance were paid for by the state to impoverished students, then you would have the UK until the mid '90s.
And given the levels of unemployment in the US at the moment, it could do a lot worse than paying those who are going to be out of work anyway, to go to school instead of sitting idle.
Also, as the housing market crash was partly triggered by toxic credit, people having more actual money as opposed to relying on debt would have probably reduced this slightly.
[edit] Also, I think it is fair to say that John probably wasn't thinking about keeping people poor to satisfy the demand for cheap labour in an oligarchic plutonomy when he penned those words.
For I am involved in mankind. Therefore, send not to know for whom the bell tolls, it tolls for thee.
Coming from a European country where we still have free university I think it's a good thing. Sadly things are changing. Now there are limitations, first universities where you have to pay and ever since this was introduced you can follow how the rankings fall and fall.
Note for people from the US: College/University is harder to attend to (graduating from high school is harder) and it's also harder to stay in there (or not take long), so it's still not like everyone can attend it which sucks, because the reason may besides personal problems may be the fact that you are not good at something you won't ever need again anyway. Also on personal experience stuff like math is completely different at college anyway, if you study CS.
Note: The above Kalamazoo sheriff is probably not quite as paranoid as the story suggests since Kalamzoo has a murder rate almost 7 times higher than Calgary despite being roughtly 1/14'th the size. If Kalamazoo is that dangerous, it's natural to assume a much bigger city would be even more dangerous. Still, that's one sheriff I wouldn't want to run into in a Kalamazoo park, let alone a dark alley!
For those rare non-calgarians: the stampede is a large local rodeo. It is a very big thing here, about the closest thing possible to a city wide festival. All week businesses provide pancake breakfasts and people wear cowboy hats. There is about a 0% chance that "Have you been to the stampede?" was a euphemism for "Give me all your money, eh".
And now. Whatever you do. No. Whatever. You. Do. Do. NOT. Turn back on this promise. Make it happen. No ifs, ands, or buts. Period.
And colleges. If somehow, something terrible happens, and the money stops coming in. Let those kids finish for free anyway. Anything less is the newest worst thing that could happen to these kids and then adults.
[edit: I am curious about the downvotes. From what I gathered, the people that these donors have chosen to help are the downtrodden of this area. Much of their life may have been spent in a world of people not fulfilling their world. Fathers leaving, etc. The last thing these kids need is for yet another promise to be left unfulfilled, be it by red-tape or just some series of unfortunate events. Despite that, these children need to have the results of the promise fulfilled.]
Re downvotes -- using periods like that for emphasis (in the first line of your post) is like typing your message in all caps for emphasis. It makes your argument harder to read, but it doesn't make it more persuasive. And it makes people not really want to talk with you -- you're signaling that you're not going to engage them intellectually, you're just going to get offended and shout at them if they disagree with you.
The down-votes may be in response to the style of your prose and that your comment is directed to people that (most likely) do not read this forum. If you want to engage with the other forum readers, perhaps you should have said something along the lines of: "I worry that this funding promise will be broken if the donors lose some of their wealth. If that occurs, the children's lives may be worse than if the promise were never made in the first place."
I happen to disagree with that sentiment. I understand that giving and then taking away can be worse than no action, but I doubt that the donors' wealth is so volatile that the funds would run out before a large cohort graduates college.
Forgive me; but, you say you disagree with the sentiment, but you disagree with it on the bounds that the thing you're disagreeing with is unlikely to happen. That doesn't change the damage that could/would happen if the unfortunate thing DID happen; and that shouldn't cause you to disagree with the sentiment, from my understanding. Perhaps I'm understanding you incorrectly?
I read what you said as:
* Taking A away after giving A is worse than never giving A in the first place.
* People giving A are probably not in a position to lose A.
* Therefore, I disagree that losing A would be a bad thing.
That doesn't stop bureaucracy from changing that decision or for the people that are donating to be sent to jail/etc before they can finish their promises.
Put the bong down, and reread this tomorrow.It may not have occurred to you, but the norm in phalinthropy is to establish legal structures at the outset which prevent those sorts of outcomes. You appear to think the money has either been handed over as a lump sum or is being delivered on an ad-hoc basis. Neither is likely.
Ah, I see what you were saying. The "criminal records" there is in reference to the children, not those providing the money. I was concerned about the people providing the money.
I usually let out some man-tears on especially touching movie scenes, book passages, music verses and family occasions, but I'm pretty much sure this is the first time I couldn't hold it while reading an article. At least 5 times.
"The Promise" sounds like some utopian sci-fi plot, and the childrens' thank you notes for their unseen benefactors are more than heartwarming. These kind of investments that empower and multiply their effects are the farthest reaching long-term, and just brilliant.
With every added student, the school district gets another $7,250 from the state.
That's per year, right? That's very close to the $4,200/semester number. So the college payments are almost equivalent to extending education from K12 to K16. That means that this could be done, even without donations, across the country.
There is a substantial difference: the $7,250 from the state doesn't come out of thin air, it comes out of the pockets of the Michigan taxpayers. The $8,400 per year for college comes out of the "Kalamazoo Promise" donation, not out of taxpayers' pockets.
I am not aware of any state that has been able to convince taxpayers to fund the additional four years[1]. The "Kalamazoo Promise" sidesteps that issue via private funding[2].
[1] States typically (heavily) subsidize college tuition for in-state students.
Well of course it's different. I prefer the state paying because it actually scales to all students in the country. So your reminder that the state is already paying part of the bill makes this sound even better; they would only have to pay a small fraction more to provide full educational coverage!
FYI Kalamazoo has three venture capital firms whereas to my knowledge Grand Rapids and Lansing have none. In fact until a few years ago there weren't any VC's in the Detroit city limits.
I don't know about Lansing, but there is a ton of angel / venture activity in Grand Rapids. There is now an engineering school (http://www.gvsu.edu/engineering/), a medical school (http://news.msu.edu/story/8262/), a multi-billion dollar biotech research facility -- which grants PhDs (http://vai.org/) all in downtown GR.
Just yesterday I was at the grand opening of www.startgarden.com in Grand Rapids, they're giving out two $5,000 "experment" investments every single week one of which is ONLY determined by people voting on the net.
I've made the call to found my startup in Grand Rapids, the cost of everything is just so much lower than the valley that you can get a LOT more runway for funding. Plus in your seed round the state will co-invest up to $250k on a dollar for dollar basis.
I am very jealous of these students, I entered my post college life in the hole like many other students. Luckily, the tech world is in a completely different state than the rest of the job world when it comes to looking for a place to practice your profession.
The words "donors" in that wikipedia page have remained unchanged since the original page shell in May 2006. Considering also the NYT article explicitly discusses donor vs. donors, I view the wikipedia characterization more as editorial convenience than evidence.
That said, my common sense tends to agree with you. Is there evidence elsewhere?
The article uses "donors" several times. I think while it's amazing if one person is willing to sponsor, it's even more amazing if there are many out there who believe in a brighter future for them. That actually makes me happier, knowing that it's donors and not a donor.
"When asked how the conversations that led to the Promise unfolded, Brown demurs. “That, and the identity of the donors, are things I just will never talk about,” she says. "
Jeter's net worth is something near $125mm, the Promise campaign has given out over $30mm so far. As nice of a guy as Jeter is, I don't think he's given up 1/4 of his wealth.
Even if their identities aren't as well-hidden as covert espionage informants, that doesn't mean we should broadcast it if they have clearly elected to be quiet about it themselves.
Having grown up in Michigan, this isn't anything particularly new. Kalamazoo has been at this for a while (perhaps the donor), and although it's phenomenal, I'm surprised it's at the top of HN.
"To receive a full scholarship, students must have attended Kalamazoo public schools since kindergarten. The program, unveiled at a November 10, 2005, Kalamazoo Board of Education meeting, is also viewed as an economic development tool for Kalamazoo. Since the Kalamazoo Promise was announced, enrollment in the school district has grown by 16%, test scores have improved, and a greater proportion of high-school graduates are attending college. In 2010 alone, the Kalamazoo Public School district saw enrollment rise 3% to 12,409."
Have to be there K-12 to get full tuition. There's a chart that shows the sliding scale based on your length of attendance. Most interesting part is that if you move in for the tail end of high school you get 0% covered to prevent people from temporarily joining the community just for the tuition.
http://en.wikipedia.org/wiki/Kalamazoo_PromiseEDIT: Added table.