Monday, November 28, 2011

Market Failures in Higher Education: Lessons from China

It appears China has actually mandated that College majors which result in limited job prospects will be phased out. The article does not mention which majors they have in mind, but as for the U.S. we can all probably create our own lists which would likely not be far off the mark.

Another telling insight in the article is the distorting effect of Sallie Mae on the cost of education. From a pure microeconomic perspective, a key impact of all that "cheap money" has been to artificially drive up the cost of education. Sound familiar? Much like its cousins Fannie and Freddie in the housing market context, government involvement, while not facially suspect, should be carefully examined. All these programs which were driven by political considerations -- and almost always by the best of intentions -- have resulted in some fairly disastrous consequences overall. Most who follow this closely are anticipating a massive default of student loan debt, estimated to be $1 trillion in the aggregate. Hang on.

http://www.realclearmarkets.com/articles/2011/11/28/the_root_cause_of_market_failure_in_higher_education_99387.html

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