He writes:
"This morning I heard President Obama call for universities to lower
their tuition rates so that “everybody in America can go to college”.
I am virtually certain that the President is not stupid enough to
think that if tuition rates fell to zero, there would magically be
enough room in the colleges for everybody in America. So I’ve got to
believe that he’s purposely saying stupid things in order to appeal to
stupid voters — the sort of voters, in other words, who probably don’t
belong in college."
He goes on to discuss how universities use tailored financial aid packages to effectively price discriminate. Price discrimination (as opposed to being restricted to charging a single price) means that colleges don't have to undersupply seats to maximize their objective (yes, presumably most of these schools aren't for-profit, but they have some objective to achieve and that objective costs money).
Now - I actually found the claim fairly appealing. So we have two options here, according to Steve. I'm either stupid, and the president has to say stupid things to appeal to me and I don't belong in college...
...or maybe the president was talking about the people who find themselves on the demand curve to the right of the intersetion of supply and demand and thus are excluded even if a university is a price discriminating monopolist.
That seems like a more straightforward interpretation of what the president said - that college costs a lot both in terms of what you pay and your opportunity cost - for credit constrained families, than that he was trying to make some point about schools exercising monopoly power.
There's a lot of neat stuff to talk about in economics, like how universities are price discriminators.
I get the desire to share those points. It doesn't seem like you need to call people stupid or distort plain English to share those neat insights.
Here's another guy that put words in the president's mouth on that line. At least Landsburg communicated some economics in the process.
Subscribe to:
Post Comments (Atom)
Posts
Apparently you are interpreting the President to mean anybody should have the ability to go to college while Landsburg is interpreting his words more plausibly to mean that everybody should have the ability to go to college. At least that is how most people will hear it and the people conviced that is possible are idiots.
ReplyDeleteI think Landsburg is talking about the supply... if universities are price discriminating monopolists, they will produce to the point where the elasticity of demand is one, right? This means that any further increase in quantity provided (with the corresponding lower price) will decrease the resources that universities have to teach students, in absolute terms, not to mention per-student terms? Lowering tuition as a policy doesn't do anything to increase college capacity, and Landsburg's claiming that capacity is already full given the nature of a price discriminating monopolist.
ReplyDeleteLandsburg's claiming capacity is already full, and lowering tuition does nothing to change that. I'm not sure what Obama actually said, but if 'lower tuition' was the policy proposal, it's pretty silly. If it was something more complex (which it probably was), like 'subsidize education so that tuition is lower' then the policy has merit, arguably.
Since the federal government doesn't control what tuitions schools charge, I figured he was talking about subsidization - which is how the federal government has always influenced what tuition students pay.
DeleteI understand Landsburg's point, and that's fine. What's funny is that he has to have that lead in about the president.
When you interpret an Obama comment the same way Rick Santorum does, red lights should go off for you, don't you think?
A perfectly price discriminating monopolist does not produce to the point where elasticity of demand is one (I have no idea where you came up with this); he produces to the point where price equals marginal cost.
DeleteCome on people. What the President said is perfectly plain and reasonable unless you are a hack trying to curry favor with the Republican Party (God knows there are over 600 economists who have signed on to that group) or you (incorrectly) fancy yourself some sort of intellectual iconoclast. Not sure which of those two groups Landsburg is in although he could be in both since they are not mutually exclusive.
ReplyDeleteThere are stupid people on both sides of the aisle, and Obama is obviously appealing to the stupid who are more likely to vote D. Another possibility is that he is appealing to unthinking youth.
ReplyDeleteDon't over complicate things!