# May cooler heads prevail **URL:** \ **Category:** Politics & Elections\ **Created:** [April 26, 2012, 3:03am UTC](https://boards.straightdope.com/t/may-cooler-heads-prevail/619983 "2012-04-26T03:03:11Z")\ **Posts on this page:** 20\ **Page:** 3
**Author:** ![Sam\_Stone](https://avatars.discourse-cdn.com/v4/letter/s/ecccb3/32.png) [@Sam\_Stone](https://boards.straightdope.com/u/Sam_Stone)\ **Post date:** [April 28, 2012, 12:54am UTC](https://boards.straightdope.com/t/may-cooler-heads-prevail/619983/41 "2012-04-28T00:54:54Z")
I’ll be happy to make the argument against cheap student loans, Pell Grants, and other subsidies of students that have nothing to do with their intelligence or work ethic. It goes like this: - Without subsidies or cheap student loans, students are forced to study subjects that lead to gainful employment and good salaries. That is, they study subjects that society has deemed valuable. But if you throw money at students in the form of grants or student loans with long deferment periods and low interest rates, you disconnect education more from the need to find employment. - The above would be okay, but the result is that you get a flood of students into the ‘easy’ faculties and away from difficult but more valued subjects. The U.S. graduates the same number of Computer Science grads as it did in the 1980’s. But it’s graduating far more students in fine arts, journalism, English, and other ‘soft’ subjects. - The influx of students into these faculties diverts resources away from the harder faculties, and the pressure of a newer, broader class of students means coursework is watered down. This lowers the ‘signaling’ value of a liberal arts education, and makes all these new grads even less employable. - Colleges respond to increased demand and free-flowing money by raising tuition and increasing the size of administration, and they attempt to attract this easy money by providing nicer facilities and luxury accomodations. This rent-seeking behavior absorbs the increase in money. - The increase in tuition makes it harder for students to self-finance, and increases their dependency on student loans and the government. This saddles more people with debt. Couple that with the shift of students away from the most necessary and job-worthy disciplines into the easier faculties, and you get what we have today - decreasing value of college educations coupled with over a trillion dollars in student loan debt. Anyone who thinks the students benefit from this in the end should read the chapter in _Freakonomics_ that talks about Starbucks. When Starbucks became immensely popular, you’d think the franchise purchasers were making a fortune. But they weren’t. The people who made money from the Starbucks boom were generally the people who owned the real estate that the Starbucks’ franchises built on. At first, people made a killing selling $3.00 coffees. But once the landowners realized how profitable the franchises were, they knew they could raise their rents to the point where there was still profit to be had, but only enough to keep the franchise as a tenant. All the rest went to the landowner. And so it goes in education. When you bring in a new grant or subsidy for students, the first round of them may see an advantage. But the colleges rapidly realize that the increased demand and easy access to money means they can raise their tuitions, and they do. So a new normal emerges in which the colleges absorb all the money and the students get left with the debt. If you want to fix this situation, the answer isn’t to give the students even more money. It’s to attack the supply side - stimulate competition, help to create alternative education streams, work on new models of apprenticeship financing, produce open-source textbooks, whatever. Open up competition in education, encourage for-profit universities and online education. Then prices will fall and you won’t need as much subsidy. ---
**Author:** ![WillFarnaby](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/willfarnaby/32/514_2.png) [@WillFarnaby](https://boards.straightdope.com/u/WillFarnaby)\ **Post date:** [April 28, 2012, 1:00am UTC](https://boards.straightdope.com/t/may-cooler-heads-prevail/619983/42 "2012-04-28T01:00:06Z")
> [@ladyfoxfyre](#): > > So your solution to increased government intervention in the form of subsidized education is increased government intervention in the form of only subsidizing certain degree programs? Where did you get that? Is that the default reaction to any perceived problem? No. Stop subsidizing student loans. The banks can decide whether or not you can get a loan based on whatever criteria they set. ---
**Author:** ![Measure\_for\_Measure](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/measure_for_measure/32/557_2.png) [@Measure\_for\_Measure](https://boards.straightdope.com/u/Measure_for_Measure)\ **Post date:** [April 28, 2012, 3:56am UTC](https://boards.straightdope.com/t/may-cooler-heads-prevail/619983/43 "2012-04-28T03:56:15Z")
Good to see you back Sam. > [@Sam\_Stone](#): > > - Without subsidies or cheap student loans, students are forced to study subjects that lead to gainful employment and good salaries. That is, they study subjects that society has deemed valuable. But if you throw money at students in the form of grants or student loans with long deferment periods and low interest rates, you disconnect education more from the need to find employment. > > - The above would be okay, but the result is that you get a flood of students into the ‘easy’ faculties and away from difficult but more valued subjects. The U.S. graduates the same number of Computer Science grads as it did in the 1980’s. But it’s graduating far more students in fine arts, journalism, English, and other ‘soft’ subjects. > > - The influx of students into these faculties diverts resources away from the harder faculties, and the pressure of a newer, broader class of students means coursework is watered down. This lowers the ‘signaling’ value of a liberal arts education, and makes all these new grads even less employable. > > - Colleges respond to increased demand and free-flowing money by raising tuition and increasing the size of administration, and they attempt to attract this easy money by providing nicer facilities and luxury accomodations. This rent-seeking behavior absorbs the increase in money. > > - The increase in tuition makes it harder for students to self-finance, and increases their dependency on student loans and the government. This saddles more people with debt. Couple that with the shift of students away from the most necessary and job-worthy disciplines into the easier faculties, and you get what we have today - decreasing value of college educations coupled with over a trillion dollars in student loan debt. All these claims were provided without empirical substantiation and should therefore, as a general rule, be taken with a grain of salt. Setting aside the conjecture posing as fact, the point about tuition is valid: college costs have been rising faster than inflation, at least as calculated before financial aid is factored in. (And incidentally, Sam’s arguments aren’t unique to government: they seem to apply to _any_ form of means-based financial aid. So he’s basically taking on the entire Ivy League, as well as any top 50 college in the US.) There are some testable propositions above. But I am unaware of evidence for them. > [@](#): > > If you want to fix this situation, the answer isn’t to give the students even more money. The US provides the best college education in the world. I’m wary of tampering with it. Compare European Universities or Japanese ones to those in the US, and you will find the latter to be far more student-centered. This is a good thing as our secondary education is weak. Admittedly, I don’t know much about Canada’s efforts. I suspect though that government policy is more tilted to aid than loans. And I’m AFAIK McGill et al are fine places to study. > [@](#): > > It’s to attack the supply side - stimulate competition, help to create alternative education streams, work on new models of apprenticeship financing, produce open-source textbooks, whatever. Open up competition in education, encourage for-profit universities and online education. Then prices will fall and you won’t need as much subsidy. Why bother? The free market will do all that anyway, right? Seriously, there’s nothing in current public policy that discourages that. Artsy fartsy english majors can go online just as easily as hard-nosed material scientists. Though frankly, let’s remember that Hollywood is a huge exporter. And the point stands: if you want to reform education, then reform education. Don’t just cut students off at the knees and call it policy. Incidentally, the Republicans have come around. But they want to finance lower rates via cuts in aid to pregnant women and pre-natal care. The Democrats would prefer to lower distortionary tax breaks for the energy sector. This sounds like caricature, [but this is the world we live in](http://www.npr.org/templates/story/story.php?storyId=151502046): Democrats invest in human capital while Republicans distort the free market by pouring money into politically favored industries. Neither party should appeal to a principled purist libertarian. * * * Summary: Smart readers will note Sam’s lucid treatment of rent seeking behavior: he really is a fine wordsmith with a solid grasp of standard micro-economics. But like too many libertarian leaners, his arguments can be longish on conjecture and thinnish on facts. Still, as usual it’s an above average SDMB post. ---
**Author:** ![Chronos](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/chronos/32/134_2.png) [@Chronos](https://boards.straightdope.com/u/Chronos)\ **Post date:** [April 28, 2012, 7:31am UTC](https://boards.straightdope.com/t/may-cooler-heads-prevail/619983/44 "2012-04-28T07:31:01Z")
**Sam** , are you seriously arguing that the easier majors are the ones that pay less, and the harder majors are the ones that pay more? Because a business degree is a heck of a lot easier than a math or physics degree, and will probably pay more. If anything, students caring more about their bottom line should drive more students into the easy majors. ---
**Author:** ![gamerunknown](https://avatars.discourse-cdn.com/v4/letter/g/6bbea6/32.png) [@gamerunknown](https://boards.straightdope.com/u/gamerunknown)\ **Post date:** [April 28, 2012, 10:09am UTC](https://boards.straightdope.com/t/may-cooler-heads-prevail/619983/45 "2012-04-28T10:09:16Z")
> [@Measure for Measure](#): > > The US provides the best college education in the world. Well, an English university provides the [best tertiary education](http://www.topuniversities.com/university-rankings/world-university-rankings/2011) in the world, but it does look like more US universities make the top 10. ---
**Author:** ![InterestedObserver](https://avatars.discourse-cdn.com/v4/letter/i/838e76/32.png) [@InterestedObserver](https://boards.straightdope.com/u/InterestedObserver)\ **Post date:** [April 28, 2012, 10:24pm UTC](https://boards.straightdope.com/t/may-cooler-heads-prevail/619983/46 "2012-04-28T22:24:27Z")
> [@WillFarnaby](#): > > You don’t fix a down turn through economic stimulus, you prolong it. Huh. That must explain the 4.1 million private sector jobs created in 25 straight months of private sector job growth since Obama took office/implemented stimulus spending on multiple fronts. I mean, we lost about 8.8 million jobs in the last year of the Bush administration and in the immediate aftermath…this after two terms of supply-side economic policies…I’m sure if we’d simply kept on doing the same thing, we’d have gained back ALL those jobs by now (or more!) That seems to be the Republican argument; that if we’d just have STAYED with their policies or if we just go BACK to their policies (you know, the ones that CAUSED the economic downturn to begin with, just as they did in the 12 years of Republican rule leading up to the Great Depression) we would be experiencing even GREATER economic and job growth. :dubious: Of course, they refuse to even acknowledge that we are experiencing ANY growth…their mantra is that things are “WORSE” now than ever. :rolleyes: In my view, 4 more years of staying the course (preferably giving Obama a Democratic Congress to work with to boot…it is astounding how much he has managed to accomplish thus far given the obstruction he has faced :eek:) should just about do it. p.s. “do it” being shorthand for “get us back to where we were before the idiots voted Bush in twice.” ---
**Author:** ![Sam\_Stone](https://avatars.discourse-cdn.com/v4/letter/s/ecccb3/32.png) [@Sam\_Stone](https://boards.straightdope.com/u/Sam_Stone)\ **Post date:** [April 29, 2012, 8:07pm UTC](https://boards.straightdope.com/t/may-cooler-heads-prevail/619983/47 "2012-04-29T20:07:55Z")
> [@Measure\_for\_Measure](#): > > Good to see you back Sam. All these claims were provided without empirical substantiation and should therefore, as a general rule, be taken with a grain of salt. Absolutely true - as should the claims that cranking up student loans will not have these kinds of effects. The question is, where does the burden of proof lie? With those who want to interfere with the market through subsidies, or those who believe that the subsidies will distort the market in negative ways? It seems to me that the effect of subsidies on industries with constricted supply are pretty well known. Rental subsidies have increased the cost of rent. Home subsidies helped create the housing boom - in this case supply wasn’t constrained, so it grew out of control. Since I believe that subsidies or other positive demand shocks lead to supply and/or cost increases, and that this is fairly well established economics, it’s your side that has to show that for some reason education is immune to these effects. Then we have the empirical evidence that tuition is in fact increasing faster than inflation, which is what you’d expect from classical economic theory, and it seems to be a very reasonable conclusion that the effect of increasing student subsidies is in part an increase in tuition. > [@](#): > > Setting aside the conjecture posing as fact, the point about tuition is valid: college costs have been rising faster than inflation, at least as calculated before financial aid is factored in. (And incidentally, Sam’s arguments aren’t unique to government: they seem to apply to _any_ form of means-based financial aid. So he’s basically taking on the entire Ivy League, as well as any top 50 college in the US.) It’s interesting that the Ivy League is absolutely supply constrained (they don’t just pop up new Ivy League schools when demand goes up), and it’s the Ivy League schools that are seeing the biggest increases in tuition. Now, that may just mean that demand is going up, or that the people who go to those schools tend to be wealthier, or that more scholarships to Ivy League schools are being created by private philanthropists. Hell, it could even be good advertising. Demand can increase for many reasons. But in any event, it’s an interesting piece of evidence that tuition is increasing fastest in an area of education least able to increase supply. > [@](#): > > There are some testable propositions above. But I am unaware of evidence for them. The US provides the best college education in the world. I’m wary of tampering with it. Compare European Universities or Japanese ones to those in the US, and you will find the latter to be far more student-centered. This is a good thing as our secondary education is weak. ‘Student centered’ how? By providing great sports facilities, luxury-class dorm rooms, beautiful buildings and lots of extra-curricular activities? If that’s what you mean, then I’d argue that this is exactly the negative effect I’m talking about - it’s raining money, so to attract those dollars institutions are coddling students and giving them extra-curricular incentives to go there. If you mean the students have better access to professors and teaching aids, I’m not so sure. When I was in college as an undergrad, it was almost impossible to even talk to some professors - they were wrapped up in their research and isolated themselves with a barrier of T/A’s. > [@](#): > > Admittedly, I don’t know much about Canada’s efforts. I suspect though that government policy is more tilted to aid than loans. When I went to college in the 80’s, student loans were only available to low-income students. If your parents made over a certain, not-very-hiigh income, they were expected to contribute. Student loans did not have to be repayed until six months after graduation, at which point you had to go to a bank and ‘consolidate’ your loan for a traditional bank loan at normal interest rates. You could also apply for ‘remission’, and get a portion of your student loan paid for if you met certain conditions. At first, it was 40% of the loan in your first year, and 20% for each year thereafter. But that was quickly lowered to 10-20%. There were a number of conditions on remission. > [@](#): > > And I’m AFAIK McGill et al are fine places to study. Why bother? The free market will do all that anyway, right? Seriously, there’s nothing in current public policy that discourages that. Yeah, there is. The big colleges are heavily subsidized. Many are on land that was granted to them by the government. The Obama administration is cracking down on ‘for-profit’ universities while leaving public universities alone despite them engaging in similar practices. But this is an area were I actually think pro-active government would be a big help. I think education needs not just a bit of reform, but radical reform. I think the entire model of education, where 18 year olds commit to a lifetime career and consider themselves ‘educated’ after four years of study is fatally flawed in an economy where people change careers multiple times in their lives and the pace of technological and economic change is such that careers you trained for may not even exist within a few years. We need a new model of education that is more granular, more self-financing, more tuned towards lifetime learning. This is a hard thing to achieve because the current system is so entrenched, which is why government could be a help here. This is a huge topic, and I’d be happy to discuss it, but it’s a bit of a hijack from the current discussion. > [@](#): > > Artsy fartsy english majors can go online just as easily as hard-nosed material scientists. Though frankly, let’s remember that Hollywood is a huge exporter. I’m not sure I understand this point. What I’ve been saying is that in the past, the kids that went to college tended to be the smartest ones, or the ones highly motivated to study a certain field. That meant the colleges could make the curriculum more difficult, and resources went more to areas where there was definite need. The kids who studied French Literature or Art tended to be kids from wealthy families who could afford four years to ‘find themselves’ or to get a broad education that would help them climb the ladder in daddy’s business. Today, we’ve decided that all kids should go to college. So we lower standards so the average IQs can get in, and we pump money into the system through the students so that even the poor can go. The problem with that is that poor people cannot afford the luxury of ‘bettering themselves’ with a liberal arts education, because the day they graduate they will be on their own and they will have to find work. Without a support system or connections, they’re unlikely to walk into those white-collar entry level positions of old. Rather, they’re more likely to land back in unsatisfying jobs at low pay, except now saddled with huge amounts of debt and a feeling that they are working below their educational level. In addition, the fact that so many people graduate from college means that a liberal arts degree no longer has the signalling value it used to. People used to hire people with liberal arts degrees to starter positions in the management track not because they needed skills in interpreting pointillist paintings, but because the fact that you had a degree at all meant you were above-average in intelligence, that you had stuck it out through a difficult four year program, that you got good grades in high school, etc. But if everyone has that degree, it’s useless. This leads to what you see today: Kids going to school on borrowed money, studying subjects that will not help them earn a better income, then coming out of school deep in debt and trapped in jobs they hate because they have no options left. That sucks. We should not subsidize or encourage that behavior. > [@](#): > > And the point stands: if you want to reform education, then reform education. Don’t just cut students off at the knees and call it policy. I wouldn’t cut them off at the knees. I would make slow, incremental reforms that make the system better and more cost effective. For example, the government could sponsor prizes for ‘The Great Science Textbooks’ for intro science classes, then take the winning texts and put them in the public domain, and tie student aid to colleges that are willing to use those textbooks. That would cut the cost of the textbooks for kids to zero, and help break the textbook racket. I would encourage new models of education. Online education, distributed campuses, new degree forms that can be built up piecemeal over years, apprenticeship programs, etc. Hell, the government could put up an online program or sponsor one with prizes, then offer it free to students who cannot qualify for student loans. Student loans could also be tied to faculties that teach skills we need. We have shortages of computer scientists and engineers, so provide student loans to people willing to go into those faculties. I would personally not prefer to meddle at that level, but it would be better than the shotgun approach that’s used now. > [@](#): > > Incidentally, the Republicans have come around. But they want to finance lower rates via cuts in aid to pregnant women and pre-natal care. The Democrats would prefer to lower distortionary tax breaks for the energy sector. This sounds like caricature, [but this is the world we live in](http://www.npr.org/templates/story/story.php?storyId=151502046): Democrats invest in human capital while Republicans distort the free market by pouring money into politically favored industries. Neither party should appeal to a principled purist libertarian. This sounds like an exaggeration, or cherry picking some small changes because they match your ideological alignment. But overall, I agree. The Republicans have plenty of their own faults. I’m not sure why you’re turning this into a partisan issue - let’s stay in the realm of educational theory and ideas, rather than poisoning the discussion with partisanship which will only cause each side to harden its position and make debate more difficult. > [@](#): > > Summary: Smart readers will note Sam’s lucid treatment of rent seeking behavior: he really is a fine wordsmith with a solid grasp of standard micro-economics. But like too many libertarian leaners, his arguments can be longish on conjecture and thinnish on facts. Still, as usual it’s an above average SDMB post. Well, thanks for the nice words - a discussion like this is necessarily ‘high on conjecture’ unless we can find hard studies for every single assertion. The problem I have is that you seem to be assuming that it’s only my side that’s engaging in conjecture. It seems to me that the belief that you can increase student subsidies with no effect on tuition or the quality of education is also conjecture - and that at least I have classical economic theory on my side. But we need to be careful here, because the real answer is likely to be far more complex. It could well be that student loans do raise tuition, but not by as much as the value of the loan, so it still helps the student. Then we need to talk about what happens to the students without the loans, and whether the higher prices they might have to pay are worth the cost. ---
**Author:** ![CaptMurdock](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/captmurdock/32/11736_2.png) [@CaptMurdock](https://boards.straightdope.com/u/CaptMurdock)\ **Post date:** [April 29, 2012, 8:11pm UTC](https://boards.straightdope.com/t/may-cooler-heads-prevail/619983/48 "2012-04-29T20:11:34Z")
> [@WillFarnaby](#): > > You don’t fix a down turn through economic stimulus, you prolong it. So how _do_ you fix an economic downturn, _specifically?_ And please don’t beat that dead “the free market will fix itself” horse again… ---
**Author:** ![Measure\_for\_Measure](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/measure_for_measure/32/557_2.png) [@Measure\_for\_Measure](https://boards.straightdope.com/u/Measure_for_Measure)\ **Post date:** [April 29, 2012, 11:51pm UTC](https://boards.straightdope.com/t/may-cooler-heads-prevail/619983/49 "2012-04-29T23:51:14Z")
> [@Sam\_Stone](#): > > Absolutely true - as should the claims that cranking up student loans will not have these kinds of effects. > > The question is, where does the burden of proof lie? With those who want to interfere with the market through subsidies, or those who believe that the subsidies will distort the market in negative ways? > > It seems to me that the effect of subsidies on industries with constricted supply are pretty well known. … We’re speaking at cross-purposes. The rent-seeking fork I conceded (and indeed I think it plays a role - a _quantifiable_ role). I suspect that if I dug enough I could find a paper. It was the stuff about students irrationally choosing bad majors, and this being caused by big guv subsidies, that I rolled my eyes at. Sociological arguments like that require evidence. That stuff read like a warmed-over WSJ editorial page article. I’ll do the remainder in bullet points: [ul] [li]The Canadian system you described sounds a lot like the US system. Subsidized loans are need-based in the US.[/li][li] Radical educational reform is extra-topical to this thread. [/li][li] Hijack! Radical education reform -really a form of industrial policy- should start with experiments. Again, the US’s system is the best in the world, or so I opine.[/li][/ul] > [@](#): > > ‘Student centered’ how? By providing great sports facilities, luxury-class dorm rooms, beautiful buildings and lots of extra-curricular activities? No. And furthermore they have that crap in foreign lands as well. Student centered means having a midterm and a final during each semester, in addition to quizzes and problem sets - all of which count for the grade. Contrast that to a single examination _at the end of the entire year_, plus some optional problem sets. That’s the sort of thing they do in jolly England. Now the English system places a much lower burden on professors and graduate students. But I wouldn’t call it “Student Centered”. In Japan (and France) students bust their chops in high school in order to get admitted into a good college. (Depending upon your social strata, a similar thing occurs in the US). But once in college, French and Japanese students tend to kick back. In Japan they even call it a second childhood. > [@](#): > > I’m not sure why you’re turning this into a partisan issue - let’s stay in the realm of educational theory and ideas, rather than poisoning the discussion with partisanship which will only cause each side to harden its position and make debate more difficult. The hell with that - this is an election thread. And I think my characterization is accurate. During the Obama administration, the Republicans pursued a strategy of economic sabotage. Ignoring that would be immoral. There is a time and place to discuss educational reform, and this isn’t it. > [@](#): > > If you mean the students have better access to professors and teaching aids, I’m not so sure. When I was in college as an undergrad, it was almost impossible to even talk to some professors - they were wrapped up in their research and isolated themselves with a barrier of T/A’s. Er- did you go to school in the US? Not that this doesn’t happen here- it does. But in most cases Professors hold weekly office hours, which admittedly 95% of the undergrads never attend. > [@](#): > > But we need to be careful here, because the real answer is likely to be far more complex. It could well be that student loans do raise tuition, but not by as much as the value of the loan, so it still helps the student. Then we need to talk about what happens to the students without the loans, and whether the higher prices they might have to pay are worth the cost. Yeah, this is what I had in mind- a serious investigation is needed. I’m not saying we could do that here. But we could link to it or at least label conjecture appropriately. Again though, I labeled the educational quality fork as pure conjecture, while the rent seeking stuff I agreed with. > [@](#): > > It’s interesting that the Ivy League is absolutely supply constrained (they don’t just pop up new Ivy League schools when demand goes up), and it’s the Ivy League schools that are seeing the biggest increases in tuition. Well… actually some Ivy Leagues are chewing over setting up satellite schools… and there were substantial increases in student populations during the 1970s, IIRC. And the US university system is far more dynamic than you let on. MIT has a stellar reputation and is not an Ivy League school. Columbia University still retains cache, but NYU has been running circles around that behemoth for the past 40 years. There are lots of schools with a better reputation than Cornell University, which is a (fine) Ivy League school. It’s understood that college students will get more attention from their professors at Yale than at Harvard – though the facilities and business connections at the latter are superior. Of course the real action is below the US News and World Report top 100 list. But we’ve hijacked this thread long enough. > [@gamerununknown](#): > > Well, an English university provides the best tertiary education in the world, but it does look like more US universities make the top 10. That ranking was based upon a long menu of criteria, only some of which involved student education. That’s ok: research is important too. That’s part of the complexity here: student loan subsidies back research to an extent, for better or worse. ---
**Author:** ![Lance\_Turbo](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/lance_turbo/32/6156_2.png) [@Lance\_Turbo](https://boards.straightdope.com/u/Lance_Turbo)\ **Post date:** [April 30, 2012, 11:22am UTC](https://boards.straightdope.com/t/may-cooler-heads-prevail/619983/50 "2012-04-30T11:22:06Z")
> [@Sam\_Stone](#): > > Anyone who thinks the students benefit from this in the end should read the chapter in _Freakonomics_ that talks about Starbucks. I’d like to check that out. Which chapter is that in? ---
**Author:** ![gamerunknown](https://avatars.discourse-cdn.com/v4/letter/g/6bbea6/32.png) [@gamerunknown](https://boards.straightdope.com/u/gamerunknown)\ **Post date:** [April 30, 2012, 2:31pm UTC](https://boards.straightdope.com/t/may-cooler-heads-prevail/619983/51 "2012-04-30T14:31:29Z")
> [@Sam Stone](#): > > We should not subsidize or encourage that behavior. In a dichotomy between pecuniary concerns and knowledge, where should our interests lie? Is there a dollar value attached to every increase in knowledge? Should we actively discourage people from attending college if it does not lead to their personal financial gain? > [@Sam Stone](#): > > it was almost impossible to even talk to some professors - they were wrapped up in their research and isolated themselves with a barrier of T/A’s There’s a reasonable argument posited by Chomsky [here](http://www.youtube.com/watch?v=2HxRUc7BpUI) along the lines that universities adopt TAs rather than adjunct professors as a cost-saving measure. > [@Sam Stone](#): > > So we lower standards so the average IQs can get in… I’m not going to change a dispositional worldview, but I hope I can get you to challenge the notion of using IQ to determine a person’s academic capacity. As far as I’m aware, no university requires an IQ test and for very good reasons: their usefulness was thoroughly debunked in _The Mismeasure of Man_ by Stephen J Gould. ---
**Author:** ![Spoke](https://avatars.discourse-cdn.com/v4/letter/s/a88e57/32.png) [@Spoke](https://boards.straightdope.com/u/Spoke)\ **Post date:** [May 1, 2012, 2:21am UTC](https://boards.straightdope.com/t/may-cooler-heads-prevail/619983/52 "2012-05-01T02:21:28Z")
[Here’s an argument that cheap loans are setting up another debt crisis](http://www.slate.com/blogs/breakingviews/2012/04/30/student_debt_loans_retrace_the_country_s_mortgage_policy_errors_.html). ---
**Author:** ![Try2B\_Comprehensive](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/try2b_comprehensive/32/65_2.png) [@Try2B\_Comprehensive](https://boards.straightdope.com/u/Try2B_Comprehensive)\ **Post date:** [May 18, 2012, 3:46am UTC](https://boards.straightdope.com/t/may-cooler-heads-prevail/619983/53 "2012-05-18T03:46:26Z")
I meant to get back to this sooner, but circumstances have not cooperated. **Spoke** makes a good point that I hadn’t considered when I started the thread. Debt crisis=bad for sure. I think I have cobbled together a good stab at the correct answer. Let’s start with a quote from Foreign Affairs’ [The True Lessons of the Recession](http://www.foreignaffairs.com/articles/134863/raghuram-g-rajan/the-true-lessons-of-the-recession) (an article I found to be very lucid and worth reading through, as there is more to the story on all these points, or if only to give me your critique of it): > [@](#): > > As Americans’ skills have lagged, the gap between the wages of the well educated and the wages of the moderately educated has grown even further. Since the early 1980s, the difference between the incomes of the top ten percent of earners (who typically hold university degrees) and those of the middle (most of whom have only a high school diploma) has grown steadily. By contrast, the difference between median incomes and incomes of the bottom ten percent has barely budged. The top is running away from the middle, and the middle is merging with the bottom. > > The statistics are alarming. In the United States, 35 percent of those aged 25 to 54 with no high school diploma have no job, and high school dropouts are three times as likely to be unemployed as university graduates. What is more, Americans between the ages of 25 and 34 are less likely to have a degree than those between 45 and 54, even though degrees have become more valuable in the labor market. Most troubling, however, is that in recent years, the children of rich parents have been far more likely to get college degrees than were similar children in the past, whereas college completion rates for children in poor households have stayed consistently low. The income divide created by the educational divide is becoming entrenched. Point one: Growing income inequality since the early '80 has its roots in education inequality. More from the same article: > [@](#): > > In the years before the crisis, the everyday reality for middle-class Americans was a paycheck that refused to grow and a job that became less secure every year, even while the upper-middle class and the very rich got richer. Well-paying, low-skilled jobs with good benefits were becoming harder and harder to find, except perhaps in the government. > > Rather than address the underlying reasons for this trend, American politicians opted for easy answers. Their response may be understandable; after all, it is not easy to upgrade workers’ skills quickly. But the resulting fixes did more damage than good. Politicians sought to boost consumption, hoping that if middle-class voters felt like they were keeping up with their richer neighbors – if they could afford a new car every few years and the occasional exotic holiday – they might pay less attention to the fact that their salaries weren’t growing. One easy way to do that was to enhance the public’s access to credit. > > Accordingly, starting in the early 1990s, U.S. leaders encouraged the financial sector to lend more to households, especially lower-middle-class ones. In 1992, Congress passed the Federal Housing Enterprises Financial Safety and Soundness Act, partly to gain more control over Fannie Mae and Freddie Mac, the giant private mortgage agencies, and partly to promote affordable homeownership for low-income groups. > > Such policies helped money flow to lower-middle-class households and raised their spending – so much so that consumption inequality rose much less than income inequality in the years before the crisis. These policies were also politically popular. Unlike when it came to an expansion in government welfare transfers, few groups opposed expanding credit to the lower-middle class – not the politicians who wanted more growth and happy constituents, not the bankers and brokers who profited from the mortgage fees, not the borrowers who could now buy their dream houses with virtually no money down, and not the laissez-faire bank regulators who thought they could pick up the pieces if the housing market collapsed. Cynical as it may seem, easy credit was used as a palliative by successive administrations unable or unwilling to directly address the deeper problems with the economy or the anxieties of the middle class. > > The Federal Reserve abetted these shortsighted policies. In 2001, in response to the dot-com bust, the Fed cut short-term interest rates to the bone. Even though the overstretched corporations that were meant to be stimulated were not interested in investing, artificially low interest rates acted as a tremendous subsidy to the parts of the economy that relied on debt, such as housing and finance. This led to an expansion in housing construction (and related services, such as real estate brokerage and mortgage lending), which created jobs, especially for the unskilled. Progressive economists applauded this process, arguing that the housing boom would lift the economy out of the doldrums. But the Fed-supported bubble proved unsustainable. Many construction workers have lost their jobs and are now in deeper trouble than before, having also borrowed to buy unaffordable houses. > > Bankers obviously deserve a large share of the blame for the crisis. Some of the financial sector’s activities were clearly predatory, if not outright criminal. But the role that the politically induced expansion of credit played cannot be ignored; it is the main reason the usual checks and balances on financial risk taking broke down. And that’s how we got our recent credit bubble crash. First education inequality, which leads to rising income inequality. How to ease the friction of income inequality? Easy credit- everybody keep spending money and don’t pay attention to what you earn. Continued growth, everyone happy right? As it happens that was the easy way out and it all came crashing down when the loans turned out to be worthless. I can utterly dig the fear of wading into another credit bubble. But unfortunately cutting education is not a reasonable option, as inadequate education for too many lies at the heart of the recent credit bubble phenomenon. We’re not just talking about university education- as pointed out above, high-school dropouts experience the worst chronic unemployment. But consider what is happening with public education: [Pittsburgh is considering closing 7 more schools](http://svteach.wikispaces.com/Proposal+calls+for+closing+7+Pittsburgh+city+schools) > [@](#): > > School officials now predict a budget shortfall of $41.2 million next year, having already reduced the gap by about $25 million largely through spending cuts and restoration of $6.6 million in state budget funds, district spokeswoman Ebony Pugh said. > In 2006, the district closed 22 underutilized and low-achieving schools. A year later, it closed six more schools. [Philadelphia may close as many as 64 schools](http://www.nbcphiladelphia.com/news/local/Sweeping-Changes-Proposed-for-Philly-Schools-148709425.html) > [@](#): > > Philadelphia Federation of Teachers president Jerry T. Jordan released the following statement regarding the plan: > > This restructuring plan has nothing to do with raising student achievement. The district provided a business model, not a research-based plan for turning around or supporting schools. > > By closing 64 schools and transferring more and more children out of publicly accountable, neighborhood schools and into charter, cyber-charter and private schools, the School District of Philadelphia is saying it is no longer wants to be in the business of educating children. It would rather manage a ‘portfolio’ than do the hard work my members do every day educating children. > > This is a cynical, right-wing and market-driven plan to privatize public education, to force thousands of economically disadvantaged families to select from an under-funded hodge-podge of EMO- and charter-company-run schools and to convert thousands of professional and family-sustaining positions into low-paying, high-turnover jobs. > > I find it ironic that the district chose Election Day to announce it is dismantling our public school system, which is the foundation of our democracy. Every person who cares about democracy and about educating economically disadvantaged children, children of color, immigrant children and children with special needs should stand up to the SRC and tell them our children and our schools aren’t for sale. These are just two examples with selected quotes, I don’t want to imply that there isn’t more to the story (read the articles) or that everything is about GOP malfeasance. It isn’t. But I want a quote from an expert in education on the topic of the market approach to public services to support the notion that that isn’t the solution, and my proposal is better. My point is: slashing budgets simply cannot provide the answer if the result is worse public education for Americans. Worse education lies at the heart of the economic problems that so many people are hollering about. So what does that leave? For public education it means leaving budgets alone, if not increasing them. The public education system probably has to be reformed to be more relevant to the present reality, which I admit is a colossal can of worms. But again, letting education slide only makes our problems worse in the long run. As for the topic at hand, student loans, what is the solution? Student loans now total more than $1 trillion and the trend does seem to be one that we’ve seen before: keep this up and we are going to end up with another loan-default crisis. Cheap loans encourage more irresponsible borrowing, but expensive loans discourage education and set us up for the exact problem we are already suffering. So what is the solution already? Subsidize higher education. Yup. Don’t give out loans that act as cement shoes and raise the specter of default for every young person who tries to get ahead through education. Pay their tuition- or a part of it, depending on a student’s circumstances, background and performance of course, the details of which could take up its own debate thread, yes. And see what can be done about spiraling college tuition if there is more to it than just supply and demand, of course. But: Have the government. Put its citizens. Through college. Obviously that takes revenue and right now we don’t have any to spare. Of course we need to reverse the Bush tax cuts, perhaps even go a little farther than that (5%?). And of course we need to raise the capital gains tax- an investor’s risk doesn’t rise to the level of ‘life and limb’ like it often does for a laborer, so quit the discrimination against labor. BUT WAIT! There really is an awful lot of revenue to be had besides tax hikes on the wealthy/investors. Please keep in mind the trauma being caused to public education by huge budget cuts while at the same time [Workers’ taxes siphoned off by their bosses](http://www.jimhightower.com/node/7723): > [@](#): > > Good Jobs First, a non-profit, non-partisan research center, has analyzed state programs meant to create jobs, but instead have created some $700 million a year in corporate welfare. This scam starts with the normal practice of corporations withholding from each employee’s monthly check the state income taxes their workers owe. But rather than remitting this money to pay for state services, these 16 states simply allow the corporations to keep the tax payments for themselves! Can you believe what you just read? Corporations collect taxes, and then simply keep them. It is a tax scam meant to attract businesses into one state instead of another. It seems like a horrible problem figuring out how to ban this practice, but that is what needs to happen. I don’t intend to be anti-corporation here, or pro-Federal-Government for its own sake, but rather cause-and-effect. Corporations are directly starving education, effectively manufacturing the next financial crisis, besides ripping off our state governments. Besides this, our military budget by some estimates tops $1.1 trillion dollars per annum. In the 1970s the defense budget was around $300 billion in inflation-adjusted dollars. Obama has refused to return to that level out of fear of a [hollow military](http://www.thenational.ae/thenationalconversation/comment/will-the-world-pay-for-a-slimmed-down-us-military): > [@](#): > > This is the same President Eisenhower who unveiled the so-called “New Look” national security policy, which drastically cut the manpower of the US military and concentrated on building a massive air force designed to drop atomic weapons. He too was convinced that this was the future of warfare. > > The New Look policy was also widely blamed for creating the so-called “hollow military” of the 1970s, a termed coined soon after the then President Jimmy Carter was considering bombing Iran during the hostage crisis. He reportedly asked how many B-52 bombers the Air Force could muster, and was told: four. > > The reason was that while the US had grown a massive air force, it lacked mechanics, support aircraft, supplies and fuel to get them airborne. Today, the “hollow military” or “hollow force” has sprung up in almost every piece of punditry condemning Mr Obama’s planned revamp of the US military, with some justification. and I do not deny that America needs the capacity to defend itself with force. But for crimes’ sake! We could cut the military budget by $500 billion per annum, spend almost 100% more than in the ‘hollow military’ days without repeating the same mistakes, still outspend the rest of the world by a mile, and not only have the ability to fund a truly world-class education system; the savings would be sufficient to pay off the entire national debt in the time it takes a person to pay off a home mortgage. Don’t worry about a ‘hollow military’- here is where your budget cuts are. Considering the consequences, we ought to regard a world-class education level in the populace to be a primary national defense objective anyway, it being the best hope for creating long-term economic growth without resorting to financial smoke and mirrors that will only betray us in the end (and are now played out anyway…), as our recent experience should clearly show. We’re in the elections forum. All this amounts to excellent reasons to vote Obama over Romney. Not for partisan reasons. Because clearly Obama cares about education more than Romney, and education is the long-term solution to our woes. ---
**Author:** ![Measure\_for\_Measure](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/measure_for_measure/32/557_2.png) [@Measure\_for\_Measure](https://boards.straightdope.com/u/Measure_for_Measure)\ **Post date:** [May 18, 2012, 4:17am UTC](https://boards.straightdope.com/t/may-cooler-heads-prevail/619983/54 "2012-05-18T04:17:41Z")
I have not read the article, because I did not feel inclined to register with Foreign Affairs. That said, I found the author’s argument highly dubious, at least as it was presented here. Firstly, it is by no means clear that inequality has been mostly driven by educational effects. I understand that most of it is focused on a slim share of the population -think percentage points and fractions of the same, not quintiles. Secondly, loose fed policy during the 1990s had little to do with the explosion of sub-prime loans, mostly extended by entities _that were not banks_. Now personally, I think our leaders and regulators failed us by not curbing liar loans and the like. But that really had nothing to do with politicians encouraging wider lending. Furthermore, this fundamental misunderstanding has been debunked several times. Now maybe the author addressed such criticisms. If so, then kudos – it might be worth it to drill down at that point. But I’m guessing he’s just regurgitating a story that he finds congenial. > [@Try2B Comprehensive](#): > > Obviously that takes revenue and right now we don’t have any to spare. Well, no. It requires spending, which can be financed via taxes or borrowing. And currently interest rates are at a record low and we have tons of excess capacity. In fact, our economy’s current difficulties are pretty simple: there’s a lack of aggregate demand. A big spending program could fix that forthwith. Unfortunately there are politicians who benefit from economic calamity and supporters who are willing to settle for flacid growth and high unemployment, provided their taxes stay low. So don’t expect applications of textbook macro-economics any time soon. When the economy gets closer to full capacity, then we will face some tradeoffs. Now we don’t. Medium term, educational reform is actually fairly tricky: a big problem is that governmental subsidies tend to be captured by the Universities. This applies whether they are in the form of loan subsidies or direct grants. Now the extent to which this is a socially beneficial indirect subsidy for basic research is unclear to me. I haven’t looked into the matter, though I assume others have. ---
**Author:** ![septimus](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/septimus/32/410_2.png) [@septimus](https://boards.straightdope.com/u/septimus)\ **Post date:** [May 18, 2012, 7:58am UTC](https://boards.straightdope.com/t/may-cooler-heads-prevail/619983/55 "2012-05-18T07:58:21Z")
> [@WillFarnaby](#): > > I think it’s a stupid policy decision to subsidize student debt. To each his own. Maybe a trillion dollars in student debt isn’t a problem with mr. obama. 50% of new graduates unemployed or underemployed are proof that the current policy is a failure. And let’s be clear: Universities _do_ inculcate their victims with liberalism. About 50% of graduates vote Democrat (it used to be less) _and this Democrat percentage is even higher_ among post-grads. It seems pretty clear that this preoccupation with education is part of the left-wing program to weaken America. The liberals don’t even try to hide their Marxist agenda. For example: > [@Try2B\_Comprehensive](#): > > Point one: Growing income inequality since the early '80 has its roots in education inequality. “Educate” our impressionable youth? just say no. ---
**Author:** ![Try2B\_Comprehensive](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/try2b_comprehensive/32/65_2.png) [@Try2B\_Comprehensive](https://boards.straightdope.com/u/Try2B_Comprehensive)\ **Post date:** [May 18, 2012, 2:06pm UTC](https://boards.straightdope.com/t/may-cooler-heads-prevail/619983/56 "2012-05-18T14:06:14Z")
> [@Measure\_for\_Measure](#): > > I have not read the article, because I did not feel inclined to register with Foreign Affairs. Hm, I just googled up the article for cutting and pasting without registering with anything. I think I put “Foreign Affairs The True Lessons of the Recession” into my browser, try that. > [@](#): > > That said, I found the author’s argument highly dubious, at least as it was presented here. Firstly, it is by no means clear that inequality has been mostly driven by educational effects. I understand that most of it is focused on a slim share of the population -think percentage points and fractions of the same, not quintiles. I suppose the question is another debate all its own- I don’t present this stuff as Gospel. The author makes his point with notions like this: > [@](#): > > …the best companies became more meritocratic, and they paid more to attract top talent. The top one percent of households had obtained only 8.9 percent of the total income generated in the United States by 1976, but by 2007 this had increased to nearly 25 percent. Even as the salaries of upper management grew, however, its ranks diversified. Compared with executives in 1980, corporate leaders in the United States in 2001 were younger, more likely to be women, and less likely to have Ivy League degrees (although they had more advanced degrees). It was no longer as important to belong to the right country club to reach the top; what mattered was having a good education and the right skills. And of course they trace trends in the economy going back to the '30s to explain what they think are the forces at work. I can share some more later… anyway, if education inequality isn’t at bottom then what is? > [@](#): > > Secondly, loose fed policy during the 1990s had little to do with the explosion of sub-prime loans, mostly extended by entities _that were not banks_. Now personally, I think our leaders and regulators failed us by not curbing liar loans and the like. But that really had nothing to do with politicians encouraging wider lending. Furthermore, this fundamental misunderstanding has been debunked several times. Now maybe the author addressed such criticisms. If so, then kudos – it might be worth it to drill down at that point. But I’m guessing he’s just regurgitating a story that he finds congenial. The author points to various kinds of de-regulation intended to prod growth going back to the '70s. The gist is that the low-hanging fruit of economic growth had been plucked and the economy was stalling, and what to do? Starting with Carter and going through to the present this and that gets de-regulated. I think W gets more blame for the housing bubble for encouraging low-income people to buy homes that actors in the '90s, but again if you have a better explanation I’m willing to take a look. > [@](#): > > Well, no. It requires spending, which can be financed via taxes or borrowing. And currently interest rates are at a record low and we have tons of excess capacity. In fact, our economy’s current difficulties are pretty simple: there’s a lack of aggregate demand. A big spending program could fix that forthwith. Unfortunately there are politicians who benefit from economic calamity and supporters who are willing to settle for flacid growth and high unemployment, provided their taxes stay low. So don’t expect applications of textbook macro-economics any time soon. Spending, revenue, it is easy for a regular guy like me to swap them out. I get the feeling that Foreign Affairs generally supports the Keynesian approach while also pointing out that 1) some lost faith in it during the stagflation days (read the article or wait for me to come back) and 2) the underlying problem with demand, long term, is that people’s incomes are not growing and that won’t change without better education. But no, I don’t expect a lot out of this congress. > [@septimus](#): > > “Educate” our impressionable youth? just say no. Yah I know, just another crazy, wild-eyed communist suggestion isn’t it? Sometimes I can’t tell if this place is a message board or some kind of zoo for viewing liberals :rolleyes: ---
**Author:** ![Measure\_for\_Measure](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/measure_for_measure/32/557_2.png) [@Measure\_for\_Measure](https://boards.straightdope.com/u/Measure_for_Measure)\ **Post date:** [May 19, 2012, 3:36am UTC](https://boards.straightdope.com/t/may-cooler-heads-prevail/619983/57 "2012-05-19T03:36:14Z")
> [@Try2B\_Comprehensive](#): > > And of course they trace trends in the economy going back to the '30s to explain what they think are the forces at work. I can share some more later… anyway, if education inequality isn’t at bottom then what is? Rewind: > [@](#): > > The top one percent of households had obtained only 8.9 percent of the total income generated in the United States by 1976, but by 2007 this had increased to nearly 25 percent. …younger, more likely to be women, and less likely to have Ivy League degrees… The top 1% has always been well educated. What has changed in the past 20 years is the rise of incentive stock options and the breakdown of certain salary norms at the top of these corporations. It’s not like these bozos have gotten more productive: they’ve just gotten better at clawing in more loot for themselves. Most of the 1% aren’t Bill Gates or Steve Jobs: most are not entrepreneurs but rather managers of existing corporations, hedge fund managers or real estate guys. Education has little to do with any of that. ETA: > [@T2B](#): > > I think W gets more blame for the housing bubble for encouraging low-income people to buy homes that actors in the '90s, but again if you have a better explanation I’m willing to take a look. 2 links, the 2nd by an economist. [http://thinkprogress.org/economy/2011/11/01/358482/bloomberg-mortgage-crisis/](http://thinkprogress.org/economy/2011/11/01/358482/bloomberg-mortgage-crisis/) > **[Did Liberals Cause the Sub-Prime Crisis?](https://prospect.org/article/liberals-cause-sub-prime-crisis/)** > > Conservatives blame the housing crisis on a 1977 law that helps-low income people get mortgages. It's a useful story for them, but it isn't true. > [@](#): > > I get the feeling that Foreign Affairs generally supports the Keynesian approach … Your author is from the University of Chicago: to me it looks like he is blowing smoke. ---
**Author:** ![BrainGlutton](https://avatars.discourse-cdn.com/v4/letter/b/82dd89/32.png) [@BrainGlutton](https://boards.straightdope.com/u/BrainGlutton)\ **Post date:** [May 19, 2012, 4:05am UTC](https://boards.straightdope.com/t/may-cooler-heads-prevail/619983/58 "2012-05-19T04:05:00Z")
[End Student Debt!](http://www.thenation.com/article/167690/end-student-debt) ---
**Author:** ![Try2B\_Comprehensive](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/try2b_comprehensive/32/65_2.png) [@Try2B\_Comprehensive](https://boards.straightdope.com/u/Try2B_Comprehensive)\ **Post date:** [May 19, 2012, 6:12pm UTC](https://boards.straightdope.com/t/may-cooler-heads-prevail/619983/59 "2012-05-19T18:12:19Z")
> [@Measure\_for\_Measure](#): > > Your author is from the University of Chicago: to me it looks like he is blowing smoke. Is it just the notion that the banks aren’t fully responsible for the sub-prime crisis you are objecting to? I would like you to elaborate some more on your criticism if you don’t mind. I don’t know what the issue is with the University of Chicago for one. My argument is drawing more from the author’s sketch of economic trends than shifting blame away from banks for two. I am not clear on what you are rejecting. For example, Noam Chompsky promotes a similar view concerning economic trends since the '70s, from [here](http://www.salon.com/writer/noam_chomsky/): > [@](#): > > Before the 1970s, banks were banks. They did what banks were supposed to do in a state capitalist economy: they took unused funds from your bank account, for example, and transferred them to some potentially useful purpose like helping a family buy a home or send a kid to college. That changed dramatically in the 1970s. Until then, there had been no financial crises since the Great Depression. The 1950s and 1960s had been a period of enormous growth, the highest in American history, maybe in economic history. > > And it was egalitarian. The lowest quintile did about as well as the highest quintile. Lots of people moved into reasonable lifestyles — what’s called the “middle class” here, the “working class” in other countries — but it was real. And the 1960s accelerated it. The activism of those years, after a pretty dismal decade, really civilized the country in lots of ways that are permanent. > > When the 1970s came along, there were sudden and sharp changes: De-industrialization, the off-shoring of production, and the shift to financial institutions, which grew enormously. I should say that, in the 1950s and 1960s, there was also the development of what several decades later became the high-tech economy: Computers, the Internet, the IT Revolution developed substantially in the state sector. > > The developments that took place during the 1970s set off a vicious cycle. It led to the concentration of wealth increasingly in the hands of the financial sector. This doesn’t benefit the economy — it probably harms it and society — but it did lead to a tremendous concentration of wealth. > … > This cycle resulted in a tremendous concentration of wealth, mainly in the top tenth of one percent of the population. Meanwhile, it opened a period of stagnation or even decline for the majority of the population. People got by, but by artificial means such as longer working hours, high rates of borrowing and debt, and reliance on asset inflation like the recent housing bubble. Pretty soon those working hours were much higher in the United States than in other industrial countries like Japan and various places in Europe. So there was a period of stagnation and decline for the majority alongside a period of sharp concentration of wealth. The political system began to dissolve. > > There has always been a gap between public policy and public will, but it just grew astronomically. You can see it right now, in fact. Take a look at the big topic in Washington that everyone concentrates on: The deficit. For the public, correctly, the deficit is not regarded as much of an issue. And it isn’t really much of an issue. The issue is joblessness. There’s a deficit commission but no joblessness commission. As far as the deficit is concerned, the public has opinions. Take a look at the polls. The public overwhelmingly supports higher taxes on the wealthy, which have declined sharply in this period of stagnation and decline, and the preservation of limited social benefits. While in practically the same breath he condemns the motives of banks: > [@](#): > > Take, for example, Citigroup. For decades, Citigroup has been one of the most corrupt of the major investment banking corporations, repeatedly bailed out by the taxpayer, starting in the early Reagan years and now once again. I won’t run through the corruption, but it’s pretty astonishing. > > In 2005, Citigroup came out with a brochure for investors called “Plutonomy: Buying Luxury, Explaining Global Imbalances.” It urged investors to put money into a “plutonomy index.” The brochure says, “The World is dividing into two blocs — the Plutonomy and the rest.” > > Plutonomy refers to the rich, those who buy luxury goods and so on, and that’s where the action is. They claimed that their plutonomy index was way outperforming the stock market. As for the rest, we set them adrift. We don’t really care about them. We don’t really need them. They have to be around to provide a powerful state, which will protect us and bail us out when we get into trouble, but other than that they essentially have no function. These days they’re sometimes called the “precariat” — people who live a precarious existence at the periphery of society. Only it’s not the periphery anymore. It’s becoming a very substantial part of society in the United States and indeed elsewhere. And this is considered a good thing. > > So, for example, Fed Chairman Alan Greenspan, at the time when he was still “Saint Alan” — hailed by the economics profession as one of the greatest economists of all time (this was before the crash for which he was substantially responsible) — was testifying to Congress in the Clinton years, and he explained the wonders of the great economy that he was supervising. He said a lot of its success was based substantially on what he called “growing worker insecurity.” If working people are insecure, if they’re part of the precariat, living precarious existences, they’re not going to make demands, they’re not going to try to get better wages, they won’t get improved benefits. We can kick ’em out, if we don’t need ’em. And that’s what’s called a “healthy” economy, technically speaking. And he was highly praised for this, greatly admired. Long story short, the thumbnail sketch of economic trends that I use to suggest education inequality is ultimately at the root of the country’s economic crisis is not mutually exclusive from the view that the banks are a big part of the problem. I guess it comes down to who do you blame: are banks corrupting the political process, or are politicians inviting the banks in and that naturally leads to a corrupt process? I’m still grappling with all aspects of a big issue here, so to boil it down all the way: can you be more specific about your criticism? ---
**Author:** ![Measure\_for\_Measure](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/measure_for_measure/32/557_2.png) [@Measure\_for\_Measure](https://boards.straightdope.com/u/Measure_for_Measure)\ **Post date:** [May 20, 2012, 12:39am UTC](https://boards.straightdope.com/t/may-cooler-heads-prevail/619983/60 "2012-05-20T00:39:48Z")
Every time I dive into that guy’s .pdf, I get irritated. I know that if I want to dismantle it, I’d have to print it out, take notes and get back to you. I’m not keen on doing that in this thread. (No worries, it’s just that you’re asking for a fairly large amount of effort in practice.) Put it this way: 1. Chompsky doesn’t mention education. 2. The Housing bubble has little to do with pushes for homes for the poor and everything to do with bad practices by financial institutions that were unregulated during the 2000s. 3. There were also bad practices by investment banks involving derivatives. 4. Your author made a lot of impressionistic claims with no charts, no graphs and no statistics. I’ve only skimmed his argument, but it seems to me that he’s throwing up red herrings so as to draw attention away from standard macroeconomic approaches that stimulate aggregate demand, be they monetary or fiscal. Basically, his argument is analagous to [this 1939 effort](http://krugman.blogs.nytimes.com/2012/05/09/a-structural-blast-from-the-past/), except that it’s less honest. [Previous page](https://boards.straightdope.com/t/may-cooler-heads-prevail/619983.md?page=2) [Next page](https://boards.straightdope.com/t/may-cooler-heads-prevail/619983.md?page=4)