Eagle Forum Legislative Alerts

Monday, April 27, 2015

The Economics of Free College

Suppose you’ve gone to the theater. You want to be able to see the stage more easily, so you disregard the rules of etiquette and stand up. You can see perfectly. But what if everyone follows your example, and all the other theater-goers stand up too? Now no one can see any better than before, but they’re much less comfortable.

Economists call this the fallacy of composition. Just because an action benefits one person doesn’t mean that everyone will benefit if they take the same action.

President Obama’s plan to make community college free forgets the fallacy of composition. It may benefit one person to get an associate’s degree, but the benefits will all but disappear if everyone gets one.

Roughly 17% of the jobs that will be open in the next seven years will require an associate’s degree. But 28% of our workforce has an associate’s degree, so earning one is already something of a risk. Still, there are enough jobs for the majority of associate’s degree holders to find one, so it makes sense for some people to earn them, especially in fields where the demand is higher.

But what if associate degrees become free? Well, many more people will get them. That means there will be a much higher supply of workers with associate’s degrees, but the demand for workers with this level of education will probably remain the same. Demand does not go up just because we raise the supply. More people with associate degrees means we’ll have more people whose degrees won’t help them get a job. People who have already earned—and paid for—their associate degrees will also be disadvantaged.

And of course, none of these problems will be created for free. Obama’s plan will cost taxpayers $60 billion. The result of this $60 billion expenditure will be to create a worse job market than we’ve already got.

Listen to the radio commentary here:

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