From p. 179 of Milton and Rose Friedman's Freedom to Choose:
We are told that the nation benefits by having more highly skilled and trained people, that investment in providing such skills is essential for economic growth, that more trained people raise the productivity of the rest of us. These statements are correct. But none is a valid reason for subsidizing higher education. Each statement would be equally correct if made about physicial capital (i.e., machines, factory buildings, etc.), yet hardly anyone would conclude that tax money should be used to subsidize the capital investment of General Motors or General Electric. (1980)
Oh, how the times have changed. Freedom to Choose opens with this quote from former Justice Louis Brandeis:
Experience should teach us to be most on our guard to protect liberty when the Government's purposes are beneficent. Men born to freedom are naturally alert to repel invasion of their liberty by evil-minded rulers. The greatest dangers to liberty lurk in insidious encroachment by men of zeal, well-meaning but without understanding.
Wise words to always keep in mind.
Milton is incorrect on many levels in his argument here, but for now I'll hone in on the biggest purely economic flaw that pops out.
ReplyDeletePhysical capital and education are not comparable. Physical capital is a zero-sum input bounded by output elasticities which diminish as production scales up (diminishing returns). Productivity (R&D, Technology, Human Capital. See: Education) provides constant returns (it's output elasticity is always 1) and is not always a zero sum allocation problem.
http://en.wikipedia.org/wiki/Cobb-Douglas
So much more that looks wrong to me here, but I have too much work to do right now.
Wasn't my point in posting this. Just thought it was interesting that thirty years ago (granted, a Reagan Revolution thirty years ago) it was unthinkable a car manufacturer would be subsidized by taxpayers, whereas today the only reason most people even know GM got bailed out is because their CEO took a private jet to DC in order to attain those funds.
ReplyDeleteOnly included the school part to give the statement some grounding.