Subsidizing STEM Education

==Bluesteel's Case==R1: Selective SubsidizationC1 and C4 are not contradictory—C4 is an explanation of why it seems like we don’t have enough engineers now. C3 is the contention with the tax proposal. The amount of STEM workers would be influenced by employer demand in a free market. See the last paragraph of C1 Round 2.I do not think that universities would “float” tuition rates to labor demand. To quote my C1 from Round 2: “Loans would work like corporate loans—the interest rate would be determined by your ability to pay back the loan. Philosophy majors would have high rates, if they got loans at all, and engineering majors would have lower rates.” And C4: “In a free market, engineers would get much lower interest rates than liberal arts majors, incentivizing smart people to go into engineering rather than philosophy.” I should not have to waste my space repeating myself—I’d ask BS to put the same care he puts into writing his wonderful RFDs into reading my arguments.R2: Importance of STEMBS fails to explain how taxing the rest of the country to subsidize STEM has a net benefit. Lawyers have lower unemployment rates and higher wages than everyone else. Therefore, if we tax $10 billion out of the economy and spend $10 billion subsidizing law schools, we will have a net benefit. See how this argument is wrong? It would only have a net benefit if there were positive externalities (see graph below).R3: ShortageSee C4 of Round 2 for why this is.R4: Foreign WorkersForeign engineers don’t need to immigrate here for us to benefit from them. See C2 this round.I’m not going to waste my space responding to BS’s “if we had somewhat less R&D WWIII would break out” argument because he doesn’t have an argument—just an assertion.==My case==C1: Human Capital MarketsReich was saying that, and perhaps he has some evidence and arguments to support that thesis, I don’t know, I haven’t read his book. But if he does, BS has not presented them in this debate. Simply stating that an author agrees with you is not an argument. I realized you were talking about foreign workers going back to their own countries. My criticism still applies—why should we care more about prosperity here than prosperity elsewhere? Foreign engineers can do just as much good as American engineers. And it doesn’t matter how many H1B1 visas we have, we don’t need foreign engineers to live here to benefit from them, we can just import the products they make.C2: Market DistortionsSteel and educated workers are different. But they are both factors of production. Are they so different that different economic laws apply to them? Perhaps there are reasons why this is so, but BS has not provided them.Again, I fail to see why engineering production moving to China is a problem. 1) Even if it does help them at the expense of Americans, why should we care more about American prosperity than Chinese prosperity? And 2) It doesn’t help Chinese people at the expense of Americans—we benefit from Chinese engineers. STEM majors aren’t an end in themselves, science and engineering is valuable because of the valuable products it produces. What difference does it make whether we’re buying computers, medicine, etc made here or in China? I repeat my earlier example: “Imagine if China subsidized STEM majors so much that the price of the products STEM majors produce went down 50%. Chinese tax payers would be subsidizing buyers of those products all over the world. Not a good deal for them, but a great deal for everyone else.”C3: Signaling and Market Failure“The IRS cannot be expected to run a regression analysis for each individual taxpayer to determine that person's tax rate.”Nor can the government run a regression analysis for each individual high school student to determine that person’s subsidy. That’s why you suggest basing the subsidy just on major—my tax would work the same way. “LF never clarifies if this tax is above-and-beyond current taxes.”It doesn’t matter.“He never addresses that it disincentives *anyone* from attending college.”Yes I do! The ENTIRE POINT of the tax is to disincentivize people from going to college—it is a pigovian tax, like carbon taxes.“And it *would* be possible to subsidize someone's education, *then* charge that person more in taxes.”The point of the tax is to reduce the amount of education. A tax that does that cannot be combined with a subsidy that does the opposite.C4: Not Enough Engineers?BS has failed to identify any “collective action problems.” A public good is a collective action problem—it is something the market could not provide at all, since even though it is collectively beneficial, it isn’t individually rational to pay for it, because of the free rider problem. Positive and negative externalities are collective action problems. In exchanges without externalities, the amount of exchange that is voluntary is the optimal amount. Consumers compare the benefits of any given product they buy to the opportunity costs (whatever else they could buy with that money), and buy as much of the product as is optimal. Externalities change this—there are costs or benefits outside of the people participating in the exchange. If there are external costs in an exchange, consumers will buy more of that product than is socially optimal—individuals buy what is optimal for themselves, considering their costs and benefits, without considering the costs to others. If there are external benefits in an exchange, consumers will buy less of that product than is socially optimal—individuals buy what is optimal for themselves, considering their costs and benefits, without considering the benefits to others. C5: Solvency QuestionsA) See C1 in Round 2. B) Abolish all government subsidies and loans, deregulate the loan market to make the kind of financial contracts I describe in C1 Round 2 legal. C) Technically, they don’t need to be abolished, they just need to not subsidize the tuition of their students anymore.D) I don’t know or care. Remember, my plan isn’t about different tuitions for different majors—see R1 this round.E) Labor demand doesn’t need to be “calculated.” The amount of investment in loans for college students is determined by supply and demand in capital markets—same as any other investment. “We” don’t need to calculate the demand for English majors for these markets to work anymore than “we” need to calculate the demand for food for capital markets in agriculture to work.I don’t need an academic paper measuring signaling. I think that the question of how such a number could be found is interesting, and explained how I thought it might work last round, but it isn’t really relevant to this debate. My BOP is to show that we shouldn’t subsidize education—I’ve more than met this if I show that theoretically, the optimum amount of education is produced with some sort of signaling tax. It doesn’t matter if such a tax can’t be calculated.Signals aren’t evil, just socially inefficient—they are a negative externality. There are private benefits—the signaler gets a higher income by signaling positive traits to employers. But this doesn’t raise total income—it just crowds out other people who might have gotten that higher income. This is the negative externality—the costs imposed on 3rd parties in an exchange. Thus, the social benefit of private education is lower than the private benefit, and education will be overproduced in a free market (see the graph C4). Brand name recognition isn’t quite the same thing as signaling, but there’s no room to go into this here—PM me if anyone wants a better explanation. Regardless, it isn’t relevant to this debate.