David R. Henderson  

Milton Friedman on Raising Tuition

PRINT
Dan Klein on the Econ Professi... Austrian Myside Bias...

In preparing for my two talks on "How Economists Helped End the Draft," to be given at Berry College on September 11 and at Middle Tennessee State University on September 12, I was perusing Milton and Rose Friedman's autobiography, Two Lucky People. Milton, as you probably know, was one of the key figures in making the economists' case against the draft during the 1960s. I came across the following passage that he wrote about his time as a visiting professor at UCLA during the winter quarter of 1967:

One of Governor Reagan's proposals was to raise substantially the tuition at state colleges and universities. That was of course highly unpopular with the students at those institutions and produced a wave of student protests and demonstrations. At UCLA, the Economics Department--or perhaps it was a student economics society--decided to stage a debate on the issue. Professor Michael Intriligator of the economics faculty was designated to argue against the proposed raise in tuition, and I agreed to defend it. Not surprisingly, I was greeted with subdued boos when I walked into the room, and my opponent with hearty cheers. However, he had a weak case, and I a strong one. I told the students that they were objects of charity, that there was no government program that so clearly transferred income from low- to high-income people as government subsidization of higher education [DRH note: my own view is that you can find many--start with subsidies to build sports arenas, although maybe those subsidies didn't exist at the time]: that, to put it dogmatically [DRH note: I think I remember his using the term "demagogically," not "dogmatically," when he told the story elsewhere], the people in Watts were paying the college expenses of the people from Beverly Hills--an image particularly appropriate for a debate conducted in Los Angeles.
This debate made a deep impression on me, because of the reaction of the audience. As the debate proceeded, the atmosphere changed from hostility to support, and, at the end, the audience voted by a large majority in favor of the position I was defending. It was an ironic outcome. Economists generally rely on people to pursue their own self-interest, rather narrowly defined. Yet here I was, an economist, appealing to the students to rise above their own self-interest, and they did so, at least for the time being.


Comments and Sharing





COMMENTS (10 to date)
Ken B writes:

'Demagogically' would be a better word there since he is referring to playing on the emotions of his listeners. Perhaps 'provocatively' would be better still. Just the fact that such niceties are discussed at econlog warms the cockles of my heart though!

In Canada we just had a close provincial election that was likely decided by this issue. Lacking a Milton Friedman to make the case, or perhaps an electorate as comitted to rational debate as his audience to hear the case, the cutters lost.

Tracy W writes:

Students are odd. I remember back when I was studying engineering, our university held a referendum on whether to charge flat fees or vary by subject. Of course, as far as I know all the engineering students voted for flat fees, and most of the science students.

We were very grateful, albeit puzzled, that a majority of humanities students also voted for flat fees. Unfortunately self-interest forbade direct enquiry.

sieben writes:

Would this Friedman speech be found anywhere online?

Ted Levy writes:

I don't mean this dogmatically, demagogically, or provocatively, but did many people in Watts pay state income taxes at that time?

Tim writes:

I really wish I could see this speech. If they allow video recording, the world would be a better place if you recorded and uploaded it.

Brandon Berg writes:

The claim that subsidized tuition acts as an upward income redistribution strikes me as somewhat dubious. The poor don't generally pay enough taxes to cover their own use of government services, so there is not, on net, any redistribution away from them.

It would be more accurate, I suspect, to call it a redistribution from the current upper and professional class to its future members. Or, alternatively, a redistribution from those who use their educations well (and thus will more than repay the subsidy in the future to those who squander their educations (and thus will fail to repay the subsidy).

David R. Henderson writes:

@Ted Levy,
I don't mean this dogmatically, demagogically, or provocatively, but did many people in Watts pay state income taxes at that time?
Good question, Ted. I would bet that very few of them paid much in income tax at the time. Recall that, to handle a state budget deficit of about $500 million, a large number at the time, Reagan imposed a steeper graduation of income tax rates and did not inflation adjust. So although later, with the huge inflation of the late 1960s and 1970s, many low-income people paid state income taxes, probably few did back then. They did pay sales tax, though. I was reporting Friedman’s discussion for its inherent interest, not because I buy the argument.
@Brandon Berg,
I think there’s a lot of distribution going on--from less-schooled high income people to more-schooled high-income people being the main one. But I agree with you that Friedman probably did not get it right.

DW in OC writes:

An article by Armen Alchian of UCLA about this issue was published in the New Individualist Review contemporaneously and can be downloaded free of charge (last I checked). I imagine his and Friedman's takes to be simpatico.

David R. Henderson writes:

@DW in OC,
An article by Armen Alchian of UCLA about this issue was published in the New Individualist Review contemporaneously and can be downloaded free of charge (last I checked). I imagine his and Friedman's takes to be simpatico.
Alchian made a similar, but more-subtle argument. His had to do with the wealth of the student--the present value of future income--rather than the wealth of the student’s family. I posted on it a while back.

Shayne Cook writes:

@Dr. Henderson, Ted Levy, Brandon Berg:

You are correct in noting lower-income folks inherently pay less income tax. But most state budgets rely heavily on property tax (as well as sales tax) to generate revenue for schools. And I don't think lower-income folks escape those as readily.

Comments for this entry have been closed
Return to top