Years and years ago, David Mundel used to provoke my interest in public policy as an object of analysis (rather than an occasion to opine) by suggesting out-of-the-box things like: the way to deal with affirmative action and discrimination in college admissions is to require colleges to admit by lottery and have done with it. This appears flatly nuts until you realize that under such a scheme, applicants would have a strong interest in choosing schools whose academic demands matched their abilities, because there’s no point in getting into a place you will just flunk out of as a freshman, and colleges would have an interest in providing the information with which applicants could choose intelligently, because there’s no point in admitting someone who can’t cut it. I’m still not ready to completely sign on to this idea, but it has a lot going for it. It certainly beats the uninformed grasping for prestige that college application season has turned into.

David, IIRC, also favored charging full costs in tuition with an extensive loan program, because all college students are pretty rich on a lifetime income basis no matter what income their families have, and not being able to afford college is simply a capital market failure that should be fixed directly. Tuition subsidy at the University of California, on this model, is a Hood Robin transfer from everyone to the upper third of the income distribution.

This question is not just dinner-table conversation stuff: a lot of my students and colleagues are off to Sacramento Monday to demand that the state fund education, including higher education, sufficiently not only to put an end to the petty and wasteful “economies” we are being subjected to but to reverse the hockey-stick increase in tuition at public colleges and universities. That California is abusing its young people by trashing their educations in K-12 and underproviding it at the college level is my view in spades; I’m torn between rage and despair. This spring I clicker-polled my class and found that the parents of 17% of them had no degrees above high school, and my heart leapt; these are the students I especially get up in the morning and go to work for.

The amount of debt they graduate with, though, even with our current program of no undergraduate tuition for family incomes below $80,000, is really sobering, especially for those who want to go to graduate school. The number of hours a week they work instead of studying is a terrible waste, and so are the extra years many take to graduate. Maybe that’s their own fault for making bad choices and not understanding what a good investment those loans are just from a business perspective, but if they’re not getting everything they should out of the unique college opportunity, it’s little comfort to prove it’s their fault. In any case, it seems pretty lame to operate a system for our best and brightest high school grads that they can’t manage properly.

The larger problem with the “investment in future earnings” model of college costs is its pressure to displace the liberal education version of college with careerism and employability. I think the American idea of liberal education with distribution requirements, a major, opportunities to explore, and the chance to take some risks, not to mention playing a musical instrument or painting or playing a sport, is one of the glories of civilization, and its benefits do not all, maybe even not mostly, accrue to the student. I believe there are big external economies rippling out from everyone who gets a good college education. And not all graduates should go into work that pays the most money. Saddling graduates with a small-mortgage-sized debt has all the wrong incentives.

The diffuse social benefits of an educated (not just job-trained) population convince me that tuition should be heavily subsidized for everyone. As to the rest, that may or may not pay off depending on whether alums follow only market signals of value measured in money pay. I think the Brits have the right idea: tuition should be very low, even for rich kids (and let’s use the income tax to do whatever redistribution is appropriate for their families), but it should entail an extra income tax for three decades after graduation, so the LA plastic surgeons will give back a lot and the community organizers and homeless shelter managers will give back less. I know, this probably can’t work at the state level through an income tax, and there will be leakage even from a national plan when the commodity trader goes off to do his stuff in London. But it’s the best I can come up with. Until we get there, my conscience is OK lobbying for education funding that doesn’t make me ashamed of my fellow-citizens.

[Cross-posted at The Reality-Based Community]

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Michael O'Hare is a Professor of Public Policy at the University of California, Berkeley.