Thoughts on economics and liberty

Has government subsidisation of universities led to over-education?

It is natural for anything that is subsidised to be supplied in a quantity larger than what it would be, otherwise.

Bryan Caplan has  made a strong case against subsidisation of higher education

There seems to be further evidence that this is an increasing problem:

“We have 115,000 janitors in the United States with bachelors degrees — about 8000 with a masters degree,” he says, arguing that about half of the US’s 1.8 million new graduates end up in low-skilled jobs. Employment rates of graduates in Australia have fallen from 79 per cent in 2009 to 71 per cent last year, with almost as large a fall for masters students. 

[ Richard] Vedder, who has written a book about US unemployment in the 20th century, will tell the US Senate next week that it has overinvested in higher education at the expense of basic literacy and numeracy. “Sure, there is a wider benefit to an educated society, but let’s be frank — a lot of this money is a subsidy to getting drunk and partying for students who shouldn’t really be there in the first place. “We’re seeing rampant credential inflation". [Source]

This post is a placeholder for me to investigate this issue further, as time permits.

My gut sense is that the public good (positive externality) from higher education is much lower than from school education, and therefore there is no case for subsidising higher education. The SKC agenda contains a very small (interest) subsidy for higher education, and I'd stick with that approach unless proven otherwise.


Overqualified and Underemployed: The Job Market Waiting for Graduates

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Sanjeev Sabhlok

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