Subsidizing STEM Education

== Rebuttal==R1: Selective SubsidizationMy system would have this feature too. See C1 and C4 from Round 2. R2: Importance of STEM JobsFood is important. Cars are important. Clothes are important. But “we should subsidize X” doesn’t follow from “X is important.” We allocate resources among all the different important things in the economy through the price system, which is driven by consumer demand. Resources are allocated to different areas in proportion to how important they are to consumers. To argue that the market allocation isn’t enough, and something should be subsidized, then you need to prove market failure. Market failure, broadly defined, is when individual rationality leads to group irrationality. In the case of positive externalities, for example, the market fails because the social benefits of something are higher than the private benefits, so the market produces less than society would want if it could act collectively. To show that something has positive externalities, you can’t just show that it’s good or “important”—you need to show that it has extra benefits to society in addition to the benefits to the buyer of that product. If there isn’t any positive externality (or, rather, if education has negative externalities, as I argue), then it doesn’t matter how great STEM jobs are. Taxing everyone to subsidize these majors doesn’t have net benefits unless the positive effect of the subsidy is greater than the negative effect of the taxes, which is only the case when we have positive externalities. Since bluesteel has failed to prove positive externalities, and failed to rebut my claim that education is a negative externality, we must conclude that education subsidies are a net negative for society.R3: Looming Shortage of STEM MajorsSee C1 and C4 from Round 2.Again, I contend that claiming that a free market has a shortage of anything, absent positive externalities, is incoherent. In a free market, the allocation of resources in different areas is driven by consumer demand. The allocation of resources into STEM fields is determined by consumer demand. If you say that that allocation is wrong, and we need more resources devoted to STEM fields, you are saying that you know better what’s best and everyone else is wrong—that consumers’ decisions are wrong and you know better than them what they should buy.R4: Foreign WorkersEducating foreigners is only a bad investment for us if we subsidize their education. If we had a free market, and everyone paid for their own education, that wouldn’t be a problem—they’d get all the benefits, but they’d pay all the costs too.Many engineering jobs are going to immigrants, but I fail to see how this is a problem. I don’t have anything against people that happened to be born far away from where I was born, and I don’t see why anyone else would. ==My Case==C1: Human Capital Markets1. Voters should note that this isn’t actually an argument, bluesteel is just quoting Reich’s conclusions. If bluesteel would like to cite the evidence Reich uses in his book, that would be fine, but simply saying, “hey look some guy wrote a book that says you’re wrong” doesn’t cut it.Bluesteel’s point is that markets aren’t perfect. But I never said they were. See my C3 about market failure in education. 2. We should care more about American workers than foreign ones? Why? How is this different from saying that us white people should focus on helping white workers, and white prosperity depends on increasing the purchasing power and human capital of white people?And even if you do care about Americans more than foreigners, the idea that this implies that we should subsidize education is nonsense. It’s no different from protectionists trying to protect “our” steel or car industries with tariffs and subsidies. The reason we want engineers is so that we can have the products that need to be made by engineers. If foreigners have a comparative advantage at making engineers, then we should just use theirs to make the products we want to buy.C2: Market DistortionsLet’s tweak bluesteel’s argument slightly. 'Under the current system, demand for steel is projected to rapidly outpace supply over the next 10 years (creating a 1 million shortfall in steel). This will drive up the price. Since steel users would theoretically like to subsidize steel production, but each user could only have a marginal impact individually, this leads to a collective action problem, which is one reason that free markets fail.'Obviously this is a load of crap. If the price is going to rise in the future, markets will allocate resources to that sector to reap the profits resulting from the price rise. See C1 from Round 2 for an explanation of how this would work in education, and C4 from Round 2 for why there aren’t ‘enough’ engineers now. If they don’t, then it means that there was an even better opportunity to allocate capital elsewhere. An engineering shortage is not “a collective action problem” anymore than the steel shortage in the above paragraph is. The problem is that the steel buyers wouldn’t benefit from subsidizing steel production themselves, and want everyone else to be forced to chip in. “We want everyone in the country to pay for stuff we buy” is not a market failure.Labor demand doesn’t influence tuition costs under the current system. It would under my system—see C1 from Round 2. The fact that China subsidizes STEM majors doesn’t imply that we need to. 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 FailureIt’s impossible to quantify to quantify what percentage of one’s income is signaling? I don’t see why. One study found that 40% of the income differential between college graduates and non-graduates is explained by IQ alone. [1] Other traits that college degrees signal, like conscientiousness, could also be measured and controlled for. Perhaps someone could design an econometric study that measures productivity and income across workers in the economy, and uses a differences-in-differences approach to measure the difference between the gains to productivity and income from college degrees. I don’t know enough about econometrics to run the numbers myself, but I don’t see why this study, or a similar one, would be impossible. Bluesteel argues that our proposals are not mutually exclusive—but this makes no sense. You can’t subsidize the part of the degree that’s useful and tax the part that isn’t, because the two are inseparable. Try to imagine a college program that teaches skills that add to productivity, but that doesn’t also have an element of signaling. It would have to be the case that the people who went into such a program were a random selection of the population—they weren’t any smarter or better workers than anyone else. What sort of engineering program is populated by such people?Of course, one could object that it’s wrong to tax some people to give to others, even if it promotes economic efficiency, but then I suppose we can’t do bluesteel’s plan either.C4: Not enough engineersHere, bluesteel misunderstands my point. I wasn’t arguing that “we shouldn’t subsidize everything else,” I was arguing that the fact that we currently subsidize all college majors equally distorts the market. In a free market, STEM majors would get much better deals on loans than liberal arts majors, which would incentivize smart people to go into engineering rather than philosophy. The fact that it doesn’t work like this, and every major gets the same loan, helps explain the engineering shortage—the price equalization drives smart people into useless majors.[1] http://www.jstor.org...