Matt Yglesias Is Not A Left-Winger

Because if he were, he’d argue that the proper response to overpaid college professors is to drop tuition costs at public universities.

Here’s the argument in a nutshell:

- Competition in the higher education market is not driving down costs. Rather, elite schools compete to capture the most valuable segment of the market – the highest potential future donors – and do not compete on price but on quality of services. Prices escalate inexorably, and a big chunk of this is captured by employees – especially professors. Lower-tier institutions must raise their salaries to compete for talent, and so must raise their tuitions. All of this is what you would expect in a market with relatively inelastic supply and rising – indeed, subsidized, through Pell grants and such – demand.

- In such a market, a slashing of tuitions at public institutions of higher education, combined with a public subsidy of said institutions to offset the lost revenue, would change the price dynamic. Similar-quality private institutions would need to figure out how to compete at the lower price point. This could involve eliminating frills or cutting salaries or pushing for higher productivity from existing employees. However they got there, they’d have to drive costs down somehow. And this pressure to control costs would ripple through the system more generally, eventually reaching the elite institutions.

- Ergo, the solution to “overpaid” university employees is not to reduce public subsidies of universities, but to increase such subsidies, while demanding offsetting reductions in tuition (and, as well, to reduce or eliminate subsidies that go directly to students – if demand is outstripping inelastic supply, then subsidies to consumers only drive prices up).

That’s the argument, anyway. It’s premised, of course, on the notion that such cost-reductions are indeed available – particularly, that there are ways to increase productivity in the higher education sector. I don’t know if that’s the case. If it isn’t, then the result of lowering tuition at public universities would be to reduce supply, as marginal providers of higher education went out of business, unable to compete at the lower price point with public universities, and unable to compete on “quality” with higher-tier private academic institutions.

Although I’m sympathetic to the argument that, inasmuch as we are interested in making college affordable for the indigent, we should shift from subsidizing demand to subsidizing supply, I’m not really trying to argue that point. Rather, I just wanted to highlight that this position – provide the services directly if you want them to be cheaper – is an old-school left-wing position to take. Indeed, it’s the rationale behind the NHS, which, lo and behold, has lower costs than pretty much any other industrialized country’s health-care sector, and more supply bottlenecks – more queuing for tests and procedures – than its Dutch, French or American competitors as well.

UPDATE: I should have posted this link, a very good rundown of the above argument, tackling education subsidies but also wage subsidies, a topic of interest to various TAS alumni.