Bryan Caplan  

A Bunch of Arguments in Favor of Regressive Tuition

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Florida may start varying tuition by major:
Tuition would be lower for students pursuing degrees most needed for Florida's job market, including ones in science, technology, engineering and math, collectively known as the STEM fields.

The committee is recommending no tuition increases for them in the next three years.

But to pay for that, students in fields such as psychology, political science, anthropology, and performing arts could pay more because they have fewer job prospects in the state.

Alex Tabarrok agrees with the conclusion, but not the official rationale:

The task force has the right idea but the right way to target subsidies is not to the job market per se (let alone Florida's job market), wages already reflect job market needs. Subsidies instead should be targeted to fields where education has the greatest positive spillovers, benefits that spill over wages and flow to the public at large. Overall, this likely means subsidizing the STEM fields more than anthropology which is why the taskforce has the right idea. If the task force wants to explain the idea, however, they should make it clear that the goal is to focus subsidies on those fields where education most benefits the taxpayer.

On reflection, though, Alex's rationale tips the scales in favor of all high-earning majors.  New ideas generated by STEM majors are one kind of positive externality.  But the higher taxes paid by lucrative majors also qualify.  There's a fiscal externality.  The more lucrative your major, the more likely your future taxes are to repay taxpayers for their subsidies.  But the higher the tax rate, the less likely you are to want to pursue a lucrative major.  Cutting tuition for lucrative majors relative to non-lucrative majors is a simple way to correct (or at least mitigate) this externality.

The same goes for employment rates.  Graduates who get jobs pay taxes.  Graduates who don't get jobs consume taxes.  Once again, there's a fiscal externality.  Taxpayers benefit if students focus on majors with high employment rates, and avoid majors with low employment rates.  And by almost all accounts, high-income majors are also high-employment majors.

But wait, there's more.  Alex neglects another important efficiency consideration: signaling.  STEM majors spend a relatively high fraction of their time acquiring real world skills.  Other majors spend a higher fraction simply showing off their intelligence, work ethic, and conformity.  Both are privately rewarding, but the former is far more socially rewarding: Useful skills enrich the world, but signaling mostly just enriches the signaler.

Even if you don't buy the signaling model, you should also consider the fact that STEM majors have relatively absolute standards.  When more students acquire STEM degrees, more people actually understand STEM.  Other fields, in contrast, have heavily diluted their standards to make room for marginal (and submarginal) students.  As a result, taxpayers are more likely to get their money's worth for the former than the latter.

None of this means that I favor government support for STEM or high-earning majors.  The best education policy, as I've often argued, is a genuine free market.  But that doesn't mean that all education subsidies are equally bad.  If any students are going to get taxpayer money, vocational studies should outrank mere navel-gazing.

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COMMENTS (8 to date)
kczat writes:

Interestingly, Washington state is considering having varying tuition as well, but tilted in the other direction: engineering majors would pay more than others.

ryan p writes:

Isn't the fiscal externality argument a sort of reputable second cousin to the pecuniary externality (i.e., not so much an actual externality)? Sure, taxes discourage human capital formation (at least if there's tuition or if the taxes are progressive), but that seems like a generic feature of the efficiency vs. redistribution trade-off that's best approached at that level rather than through education subsidies?

(Yep, I made a point of avoiding the phrase "efficiency vs. equity". Because you're right, it really is silly.)

Glen Smith writes:


That seems logical in the face of the signal model as it may drive out those who would get an engineering degree but should not thus cutting the noise to signal ratio. In terms of a human capital model, given the fact that there is a surplus in engineering graduates, maybe such a plan would steer some of them into better paths. Florida's proposal either increases the noise to signal ratio or increases the surplus inventory of engineering graduates.

Fazal Majid writes:
signaling mostly just enriches the signaler.

Er, no. Signaling enriches the gatekeepers who, mostly by accident of history, control the signaling channel. As you pointed out some time ago, signaling only works when it's expensive, otherwise it would be too easy to fake. That's why the surplus goes to the ones providing the signaling, not the purchasers of signals. Just look at how university tuitions have risen significantly faster than inflation, specially at Ivy League schools.

egd writes:

Why control tuition? Why not simply control salaries of professors. Give professors a salary based on the expected return to their students.

Assuming all students enter with the same potential, the Engineering professor increases the value of his student's earnings by substantially more than the English professor.

If the Engineering professor is providing a greater why should he be paid the same as the English professor?

Floccina writes:

I think that the task force is more right than wrong but also since most grade in inflation has been in the non-stem fields, they should also attempt to make the stem fields easier and the other fields harder. They should also provide fewer non stem spots and more stem spots.

Another thing that could done is to reduce University spending on the less valuable majors. It should be much cheaper to educate a student in history than in engineering.

Keith K. writes:

.....or the state could simply give a lump sum of cash to smart kids to do with whatever they want.

Instead of directing kids into the school system just hand out cash to kids who can do well on the CLEP exams for sciences, or maybe the sciency AP classes.

Incentivizing the smart is the way to make people want to to be smart at the level of state action.

Jason Keuter writes:

The idea of cutting tuition for more lucrative majors may seem attractive until you ask the Thomas Sowell question "and then what?"

First, a glut of students would choose the major - among them would be a large number of students who are in college as they make up their mind about what they want to do. Their lack of seriousness would have an adverse impact on the programs themselves - demoralizing professors, wasting time and resources weeding people out, and most importantly, minimizing the attention serious students get, which in turn, would weaken their abilities and skills upon graduation. Face it, a great many students are there for the wrong reasons, and those students have a very negative impact on the teaching and learning environment of many (if not most) educational institutions. It may very well be worth the cost to have these students floundering around in the gentleman's c majors instead of toxifying the more practical fields, now populated with a very un-frat boy like clientele.

Second, the response of students, faculty, and staff would be a kind of endless war over school resources. Faculty, in particular, would spend most of its intellectual time and energy on winning that war, much less on academic preparation and research. In fact, they would probably spend a great deal of their research time, researching and presenting data that bolsters their self-serving arguments for a greater share of school resources. I can just see a humanities professor saying it's unfair that an engineering school gets a new facility when two of his students pay more tuition than 10 engineering students combined and the engineering professor retorting with some statistical study - most likely drawn up by a math professor who really should be teaching but instead lingers outside his classroom passionately plotting with colleagues their response to what they imagine to be the next missive sent by the classics get the picture.

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