Subsidizing STEM Education

Thanks LF. I'll start off responding to the refutations to my case. C1) Selective subsidization LF claims his C1 and C4 do the same thing as selectively subsidizing STEM majors. Yet, his C1 and C4 are completely contradictory advocacies. C1 is a "free market" solution and C4 is a tax. Taxes distort markets just as much as subsidies. They are actually modeled the exact same way on a supply-demand curve. How can someone advocate a method free of government intervention (C1) and then argue the government should intervene with a tax (C4)? In addition, Con doesn't get object fiat – he can't argue that in a free market, all universities will suddenly "float" tuition rates and match them to labor demand. The current system for private universities *is* a free market, yet universities don't do this. Con doesn't get to "mind control" all the university presidents. And the tax in C4 is impractical and a bad idea on face. C2) Importance of STEM I agree that *just* because something is important, doesn't mean you subsidize it. But LF drops the Zakaria evidence – that foreign students are no longer staying in the US upon graduation. This means the US *will* fall behind in STEM fields if we don't subsidize education because there will be labor shortfalls. The Cheryl Grossman evidence says that if we fall behind in STEM, we lose half our GDP growth. LF claims repeatedly that there are no market failures in STEM education. I'll address that here. As I already stated, the supply of STEM workers is determined by factors set by universities and the government, namely tuition rates and financial aid. The supply of STEM workers is *not* influenced by anything STEM *employers* do. LF draws an analogy to the steel industry. However, if demand outpaces supply in the steel industry by 1 million units, then the price of steel rises. As the price rises, companies can make a lot of money by increasing their production. *This is directly within their control.* A steel company is responsive to changes in demand. In contrast, universities are not responsive to changes in labor demand. Theoretically, a STEM employer, looking at the projected 1 million shortfall, would want to do *something* to ensure more Americans graduated in STEM fields. However, each employer has little individual ability to influence tuition – at best, each employer can set up a few scholarships. But there is no guarantee that the students who get those scholarships end up working for that particular employer. Thus, employers don't bother, and we get a collective action problem, i.e. a market failure. LF claims I prove no positive externalities from STEM education, but I proved that if a greater number of Americans earned STEM degrees, we could decrease the unemployment rate and increase the purchasing power of the middle class. These have positive externalities because of consumer spending and the multiplier effect. When people have more money, they purchase more goods and services. The companies that produce these goods and services – in turn – earn more money, pay their workers more, and then *these* workers spend those additional earnings back into the economy. And the cycle goes on and on… There is also a direct societal benefit from decreasing unemployment and increasing the salaries of American workers: they pay more in taxes. These taxes support public goods, like fixing our nation's ailing roads and bridges. C3) Looming shortage Yes, LF, I *am* saying that individuals' decisions are "wrong." College students are going into fields where there aren't enough jobs. The decision to drop out of mechanical engineering and instead major in "communications" usually has little to do with complex calculations of job availability, and more to do with the college student's desire to "party harder." Ironically, most people are less rational in their decision-making process when choosing a major than when buying a car, even though the former is a bigger decision. C4) Foreign workers I'm not hating on foreigners, but it's more socially optimal to train domestic workers. If the unemployment rate is 10%, the way to decrease that rate is to hire more Americans. Most of our new jobs are in STEM fields, so we need to subsidize these majors. We could even offer retraining programs for the unemployed geared towards STEM professions. It's unsustainable to prop up a failing economy by importing foreign talent. Robert Reich explains that we need the middle class to have enough purchasing power to sustain the economy. If the middle class isn't wealthy enough to buy things, then businesses don't invest because they don't anticipate a strong enough market for potential expansion. The aggregate demand simply isn't there. This is what happened during the Great Depression. In addition, foreign workers are not a good solution because there is a cap on H1B "skilled worker" visas, and the cap is quite low. Businesses cannot feasibly meet all their demand for labor this way. Lastly, non-citizens cannot get a security clearance, so foreign workers cannot solve for the Department of Defense STEM shortage. If we lose our R&D capabilities, we lose our hegemony, unipolarity collapses, and great power wars recommence. I'll now go back over LF's case. R1) Human capital markets I already addressed market failures above. Reich was saying that investments in education after WWII led to an "Age of Prosperity," where income inequality in the US decreased to its lowest point in recent history. People who couldn't have afforded college without government subsidies were able to add massively to our economic growth. In terms of foreign workers, this is a non-starter issue because of the Zakaria evidence that foreign students are going back to their countries of origin, and there aren't enough H1B visas. The projection of a 1 million shortfall in STEM graduates takes into account trends in foreign workers. R2) Market distortions Steel and education are different. Period. In terms of China, if most of the world's STEM graduates live in China, companies will decrease network costs by moving to China. The US will lose all our tech firms. When the labor stops coming to the firms, the firms must go to the labor. R3) Tax plan LF himself says that the "signaling" percentage varies, depending on IQ, college grades, major, etc. The IRS cannot be expected to run a regression analysis for each individual taxpayer to determine that person's tax rate. LF never clarifies if this tax is above-and-beyond current taxes. He never addresses that it disincentives *anyone* from attending college. And it *would* be possible to subsidize someone's education, *then* charge that person more in taxes. Since the government could theoretically do both, this isn't a reason to vote Con. R4) Not enough engineers LF argues the same thing I do: that STEM majors should get better financial assistance. However, if the government provides this assistance, it overcomes any potential collective action problems. In the field of Law & Economics, the government's entire existence is justified based on its ability to overcome collective action problems. So with government, better loans for STEM majors are guaranteed. With the free market, they are anything but guaranteed. R5) Solvency questions for LF For the "free market plan": A) how does this work? B) How do we "free up" the market? C) Do we privatize all public universities? D) What if a student is "undeclared" – what tuition does she pay? E) What labor market do we use to calculate demand? For example, not all English majors become authors. There is no specific labor market for liberal arts majors. For the tax, is there even *one* academic paper that claims to quantify the signaling percentage? Does the tax replace or add to federal income tax? Why are "signals" so evil? Isn't "brand name recognition" another example of signaling – the brand is mere reputation and doesn't enhance the function. Should companies be taxed to remove their profits from brand name recognition?