Michael Hurd

Clearly, government intervention has done for the higher educational marketplace what it did for the real estate marketplace a decade back. Politicians in both parties decided that it would be nice for everyone to own a house. As a result, regulations and incentives were initiated by the government to ensure that home loans were cheap and easy to get. This created the biggest real estate bubble in human history. Who got the blame? The private lenders and “lack of regulation,” even though it was regulation (i.e. manipulation of the marketplace for political ends) that gave us the bubble. (For one of the best books on this subject, see Cato Institute president and former BB&T CEO John Allison’s The Financial Crisis and the Free Market Cure: Why Pure Capitalism is the World Economy’s Only Hope.)

It’s the same dynamic in education. Government “does everything possible to ensure every young American gets a college education.” What could be wrong with that? In practice, it means government does everything possible to make it easier for people to get college educations, thereby driving up demand relative to the limited supply. This inevitably breeds inflation. The more you try to make something free or cheap, the more demand you will create for it. The result will either be shortages or inflation. There’s no getting around it!

Politicians such as Barack Obama, Elizabeth Warren and others maintain that college tuition inflation is the fault of the private sector and mean people who won’t allow “more” funding. But what does “more funding” actually consist of? The national debt cannot be paid off for decades or centuries, and it’s growing exponentially even without more student aid. More loans? But tampering with the loan marketplace, artificially stimulating demand, only creates a bubble, as we saw with real estate and now with education.