“Michael Bloomberg: Why I’m Giving $1.8 Billion for College Financial Aid” (nytimes):
Let’s eliminate money problems from the admissions equation for qualified students.
America is at its best when we reward people based on the quality of their work, not the size of their pocketbook. Denying students entry to a college based on their ability to pay undermines equal opportunity. It perpetuates intergenerational poverty. And it strikes at the heart of the American dream: the idea that every person, from every community, has the chance to rise based on merit.
… I am donating an additional $1.8 billion to Hopkins that will be used for financial aid for qualified low- and middle-income students.
Here’s a simple idea I bet most Americans agree with: No qualified high school student should ever be barred entrance to a college based on his or her family’s bank account. Yet it happens all the time.
Let’s ignore the obvious solution for the Hopkins administrators: raise headline tuition prices by $1.8 billion over the next 10 years, charge families exactly what they were being charged before, but say that “financial aid” has been increased by $1.8 billion. (See “Credit Supply and the Rise in College Tuition: Evidence from the Expansion in Federal Student Aid Programs”, a 2015 paper from the New York Fed; 60 percent of subsidized student loans were captured by increased tuition rates and provided no relief to the purported beneficiaries.)
Suppose that the Bloomberg program works as advertised and therefore that lower income families will actually pay $1.8 billion less over the forthcoming years.
Won’t this exacerbate the inequality that Bloomberg himself was decrying as recently as May 2018 (see “Inaction on inequality could lead to uprising”)? People born fortunate (high academic potential in an economy that rewards cognitive skills) will now go to college for free instead of taking out loans and paying them back from their high earnings. So they will pull yet farther ahead of Americans with low academic ability.
Instead of the rich-in-genetics person with an IQ of 140 paying back student loans that enabled attendance at an elite university, the rich-in-genetics person will now get to use a full 50-60 percent of income (assume 40-50 percent total tax rate in California, New York, and other typical destinations for elite Americans) on consumption and retirement savings. The smart Hopkins grad who came from a lower-income family will essentially get a gift from Michael Bloomberg of luxury clothing and automobiles that will make median-IQ, median-income Americans sick with envy.
In “Protests against Charles Murray inadvertently prove the points he made in The Bell Curve?” I asked “If you like to fret about inequality, the sidelining of less-than-brilliant workers in favor of robots, etc., why wouldn’t you love Charles Murray?”
See also “The Bell Curve revisited,” my 2004 post on the book. Excerpts:
The Bell Curve starts out by talking about how we live in an era where people get sorted by cognitive ability into socioeconomic classes. In 14th century England if you were a peasant with a high IQ or a noble with a low IQ it didn’t affect your life, reproductive potential, or income very much. In our more meritocratic and vastly more sophisticated economy a smart kid from a lower middle class might make it to the top of a big company (cf. Jack Welch, who paid himself $680 million as CEO of GE) or at least into a $300,000/year job as a radiologist. For the authors of the Bell Curve the increasing disparity in income in the U.S. is primarly due to the fact that employees with high IQs are worth a lot more than employees with low IQs. They note that we have an incredibly complex legal system and criminal justice system. So you’d expect people with poor cognitive ability to fail to figure out what is a crime, which crimes are actually likely to be punished, etc., and end up in jail. (A Google search brought up a report on juvenile justice in North Carolina; the average offender had an IQ of 79.) If they stay out of jail through dumb (literally) luck, there is no way that they are ever going to be able to start a small business; the legal and administrative hoops through which one must jump in order to employ even one other person are impenetrable obstacles to those with below-average intelligence.
… For us oldsters, one unexpected piece of cheerful news from this book is that younger Americans are getting genetically dumber every year. Even if you ignore the racial and immigrant angles of the book that created so much controversy back in 1994 it is hard to argue with the authors’ assertion that smart women tend to choose higher education and careers rather than cranking out lots of babies. … Our population is predicted to reach 450 million or so [by 2050], i.e., the same as India had back when we were kids and our mothers told us about this starving and overpopulated country. An individual person’s labor in India has negligible economic value … It would seem that no enterprise would need an old guy’s skills in a country of 450 million; why bother when there are so many energetic young people around? And how would we be able to afford a house or apartment if there are 450 million smart young people out there earning big bucks and putting pressure on real estate prices? But if the book is right most of those young people will be dumb as bricks.
Whenever anyone talks about “financial aid,” I love to respond with “United Airlines gives more than 95 percent of customers financial aid since the official maximum ticket price is much higher than the typical price paid. Economists call charging each customer according to his or her ability to pay price discrimination, but it sounds better if you say ‘we’re giving these poor souls financial aid.'” (Note that price discrimination is possible
only in markets dominated by monopolies or oligopolies. McDonald’s can’t do this because Burger King is right across the street.)
Readers: Is it logically inconsistent for Michael Bloomberg to say that he wants to reduce income inequality and then give $1.8 billion to reduce college expenses for those Americans who are best set up to earn high incomes after graduation? Full post, including comments