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« A New Knowledge Economy or Just Plain Stupid? | Main | The Great Manical Depression »

October 10, 2007


Bond investor

Sallie Mae's primary competitor *is* the federal government. Sallie does the FFELP (Ford Federal Education Loan Program) and the feds do the FDLP (Federal Direct Loan Program). The cuts in subsidies favored by House and Senate can also be viewed as a Democratic grab for more federal power and jobs for the FDLP.

The counterpoint is that Sallie has been more innovative and flexible in meeting the needs of universities and working with them.

I think your discussion of education as a private vs. public good is interesting, but let's distinguish between "knowledge" and "education." Education is a process for getting knowledge. Knowledge is a very special good in economic parlance: it can often be shared easily, creating more of it doesn't typically reduce the value of existing knowledge, it can be used repeatedly without depreciation.

Based on the differentials between student-loan interest rates, market rates of interest, and the rate of growth for college graduates' salaries, I would say that a rational person would buy postsecondary education at market rates of interest because it's an excellent investment. We shouldn't need any subsidy for something that the free market shows us we should get.

People without the resources to borrow for an education (children, the poor) should receive a subsidy for primary and secondary education. Which brings us to a point you may want to consider...

The education process (the delivery of knowledge) is a means of control. I sung the praises of knowledge above, but incorrect knowledge, bad theories, opinion masquerading as fact, or faith-based knowledge that lacks positive societal externalities can all poison the value of knowledge. Just look at the proportions of left-wing people in education. Or look at the mullahs in charge of the madrassa religious schools in Pakistan, Iran and Saudi. Controlling the flow of knowledge in education processes is a clever form of censorship when used wrongly. The solution is to encourage debate about what "correct knowledge" is. Don't only teach established "facts" -- you'll get automatons without useful skills who can be obseleted. And established "facts" in 1980 included global cooling and Carternomics.

Maybe I'm convincing myself that "education" should be learning "how to think," not just accumulation of "knowledge stock."

Back to researching bonds....

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