From:  (J Klein)
Subject: Re: the MIT anti-trust case
Followup-To: soc.college,sci.econ
Organization: Public Macs, Academic Computing, Yale University
Date: Tue, 29 Sep 1992 09:37:58 GMT

Most of this will be difficult to respond to because so many straw men have
been put up and slayed, but here goes...

> >On the other hand, just about every private university was increasing at
> >that high rate (and continue to do so, even after the decision), therefore,
> >overlap was not the only cause.
> 
> Take some price theory some time.  The Overlap Group acted as price-setters.

As I said before, since the overlap group is gone now, there are no
price-setters, yet still the increases continue at the same rate at most
private universities.  There's more to it than you say.

> >evidence:  ask any financial aid office, and see argument below.
> 
> Financial aid offices have ulterior motives for claiming this.  They
> still hope to win on appeal--they're not going to go and say "Gee, I
> guess we were just being collusive bastards.  Okay, students who we've
> ripped off over the last twenty years--come and sue us for treble
> damages now!"
 
Not a fair argument.  Yale for one is not looking to win on appeal, and
anyone can claim anyone has ulterior motives (even you).  Attack their
arguments, not them.

> >> Universities have always competed for rich students.  Nothing in the
> >> decision requires them to give financial aid to "rich" students.  A
> >> college can still choose to refuse to give financial aid to whomever
> >> it wants.  It just can't be protected from the consequences of that
> >> decision should another college choose to grant that student financial
> >> aid.
> >
> >		Correct.  Universities are not forced de jure to compete for rich
> >students, only de facto because of competition.  However, de facto results
> >must be taken into account in a good decision.
> 
> No, the law must be taken into account.  What the universities were doing
> was illegal.

		This comment is totally off-point.  I don't really understand it.  I'll
elaborate on what I meant in case it was unclear.  First, we are arguing
whether or not the decision was fair to students.  There is no explicit
statement in the decision that financial aid must be given to "rich"
students.  However, in reality, competition will force schools to compete
for rich students, which leads to the conclusion below.  A good decision
must take into account how it is effected in the real world, including
redistribution effects.

> Price-fixing was bad for all students, rich and poor.  See Rich Morrison's
> Comment on the subject.

		From a standpoint of economic efficiency, price-fixing is bad for all
students.  However, as I continue to argue, there are other factors that
determine a policy's 'goodness' or 'badness.'  In this case, another factor
is redistribution.

> >		NOT an "assertion without proof" but a logical economic argument. Taken a
> >fixed amount of resources, if some money is re-allocated to richer students
> >and therefore away from poorer students, the redistribution now favors the
> >rich.  This change is a qualitative one, one I would argue is bad.
> 
> There isn't a fixed amount of resources.  Colleges were wasting a lot
> of money because they could.  (As would be predicted by standard economic
> theory on monopoly: see Posner, _Antitrust Law_ at 14-15).  And, once
> again a lot of the "resources" were faux resources: if a college is
> charging $20,000 a student rather than a competitive price of $16,000
> a student, it might very well be the case that a poor student has her
> financial aid reduced from $3,000 to $0 -- but the poor student is still
> better off under the competitive system than under the monopolistic system.
> 

		Here's a key point where we disagree.  Resources are relatively fixed
after the basic expenses needed to employ professors, maintain libraries,
etc.  Especially now, in a recession, where even the richest universities
are forced to cut programs, the amount of money that can be spent on
financial aid decreases because the fixed costs of the University are so
high, and the variable costs so minimal.

> >Your case is relevant but counterfactual.  You may have beaten the
> >statistics, but most poorer students haven't.  True, financial aid is not
> >required to be tied to SATs, etc. by the decision, but that is how schools
> >determine the merit of an applicant and if the applicant would be headed
> >for success at their school.
> 
> Poorer students do worse on the SATs because poorer students, on average,
> get worse educations in elementary and high schools.  Attacking the SAT
> is attacking the symptom, rather than the problem.  Improve the educational
> system so that poor 12 year-olds get the same education as rich 12 year-olds,
> and the SAT gap will disappear.
> 
> And why do you assume that a college will choose to recruit solely on
> SATs?  There has never been a top university that looked at SATs and SATs
> only--why do you think that because they're told to stop breaking the law
> they'll suddenly switch to an irrational method of choosing which students
> they want most?
> -- 

These comments are also off-point.  I never attacked the SATs (however I am
sorry that I reduced "SATs, grades, quality of education, activities,
community service, and athletics, etc." to "SATs, etc.")  There isn't a
whole lot to respond to here now, so I'll take it you agree that poorer
students statistically have poorer records by these standards, and would
therefore exacerbate the problem.
Newsgroups: soc.college