Bernie Sanders (I-VT) recently introduced a bill that would have the government pay for tuition and some fees at public 4-year universities. Setting aside whether this would be a good or bad thing, there is something in the bill itself that is confusing to me, as an economist:
STATE ELIGIBILITY REQUIREMENTS:
—In order to be eligible to receive an allotment [from the federal government to help recoup the cost of tuition and fees] under this section for a fiscal year, a State shall— (1) ensure that public institutions of higher education in the State maintain per-pupil expenditures on instruction at levels that meet or exceed the expenditures for the previous fiscal year…
(Page 4, Lines 7-12)
So, in order to remain eligible for government subsidies, states must continue to spend more per pupil. This is confusing to me because the purpose of economics is to find ways to achieve the same or better product using less resources, not more. In fact, as this bill is written, it is economically wasteful. It focuses entirely on costs, but not benefits.
As its written, the bill actually creates an incentive for education to become more expensive with potentially no additional benefit to the product (the student).
Here we see in action one of the great insights of Public Choice Economics (which is a personal interest of mine), namely that, because they do not feel the same costs of their actions, political choices tend to be inefficient. Bernie Sanders doesn’t face the cost of college: he’s not spending his own money. He’s spending other people’s. Therefore, there is no incentive for him to look for efficiencies, there’s no reason for him to look for ways to save (in fact, as we discussed above, he promotes inefficiency).
In a future post, I’ll discuss the implications of such a bill (where I will be judging whether it is a good or bad bill).