Are Government Subsidies to Higher "Education" Justified?
By David Henderson
This month’s featured article on Econlib is George Leef’s “Are Government ‘Investments’ in Higher Education Worthwhile?” In his article, Leef points out that one cannot use decades-old data on the private return to spending on higher education to draw conclusions about the current return today. His reason: higher “education” has become watered down and, therefore, little education occurs in many curricula.
Leef points out that a lot of higher education is in pursuit of a credential. Why would a company want to hire someone with a credential when there are more efficient means of testing aptitude? Leef cites economist Lowell Gallaway’s argument about the effect of the Supreme Court’s 1971 Griggs v. Duke Power Company decision, which held that employers can be liable for violating federal equal employment law if they use general aptitude testing that has a “disparate impact” on minority job seekers. This, say Gallaway and Leef, has caused many employers to abandon such tests in favor of using educational credentials. On its face, the Griggs decision seems to argue against credentialism. But read Gallaway’s subtle reasoning to see why the unintended consequence is more credentialism.
Moreover, notes Leef, echoing Armen Alchian’s argument in his 1968 classic, “The Economic and Social Impact of Free Tuition,” subsidies to those who get higher education are a forced transfer of wealth from the relatively poor to the relatively rich.