21.7.03

HARVESTING THOSE GAINS FROM TRADE. Arg Max looks at recent tuition increases among some well-known state-located universities. (These used to be state-supported, and for some time state-tolerated, but the correlation of forces has shifted.) As state universities are notorious sources of subsidy to upper-middle-class residents, advocates of horizontal equity ought to be pleased. To the extent that a degree is simply a signal ("credential," for those of you in Palm Beach County), a signal that is more costly to acquire might be more accurate.

UPDATE. Public reaction to California's tuition increases garners some scorn from SCSU Scholars. Apparently politicians still have trouble with the rationing function of prices. There is one component of the California plan that bears further scrutiny. The University of California has proposed a surcharge for rich undergraduate students. The way in which it is being introduced is clumsy. Higher education already operates in the spirit of Adam Gimbel: nobody pays list price. The way in which the special discounts operates is cumbersome: everybody sees the same base price, then a special committee evaluates "need" and works out a price cut in the form of financial aid, or a subsidized loan. The formula by which this magic takes place is only slightly less convoluted than the PHRF rating system for keelboats (you can be first to Mackinac Light and not win the race) but it conceals the surcharge to richer families (their students don't get any financial aid.) Although the surcharge is isomorphic to the existing system, its transparency works against it. The universities might better have copied the airlines, where everyone confronts the same base price, but depending on when you book and a number of other things, you get a special discount. There are surcharged services, called first class or business class, but those surcharges provide the payer with a wider seat, beverage service during boarding (d**n suits delay the loading almost as much as the pack rats who attempt to schlep all their goods aboard) and first crack at the storage bins.

I sometimes present classes with a hypothetical tariff including a Custom Class option (for an extra $2000 per course payable to me, the student gets the right to ring me at home, something that I discourage in a number of ways.) Other features include higher rates for enrollments in excess of 25, enrollments on the first day of class, enrollments after the first day of class, and enrollments the day before the final. (Am I selling a crash course too cheaply at $1x10^6?)

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