In which industries do prices and costs rise fastest? Those in which government is most involved.
The process is no mystery. Regulate supply by limiting entry into the business — to “increase quality,” of course — will raise prices, as producers behave oligopolistically. Government does this with health care providers, and have done so increasingly for the last century. If, at the same time, you subsidize the consumption, that amounts to increasing demand, which also puts upward pressure on prices. This has been accelerated in America since the beginning of Medicare, and with each additional healthcare program.
Typical government intervention double whammy.
Higher education is also not exempt from the play of supply and demand. One policy advocate’s explanation of this, which you can read excerpted, online, at National Review’s site, is worth considering. He explains what happens as vendors rake in profits under a regulated-and-subsidized system: they
sponsor crowd-pleasing sports events on weekends, building public goodwill. Other profits are used to hire professional lobbyists to plead for both more subsidies and more freedom to set prices. You also convince the government to allow you and other incumbent . . . sellers to form a private organization with the authority to decide whether new sellers can become “approved . . . vendors” for the purposes of receiving public subsidies. Unsurprisingly, few new sellers are approved.
Predictably, the analysis is followed by halfway measures that don’t lead to a free market in education at all. That’s just too radical.
Education policy wonks, like educators themselves, seem never to learn . . . economics.
This is Common Sense. I’m Paul Jacob.