Another example of a mis-application of the free market fairy tale:

At 11:23 AM 11/24/2004 -0500, Dr. Joe Dumas wrote:
>Jarrod Whaley wrote:
>
>>Don't taxes pay us?
>
>Partly.  (Also the tuition that our students pay.)  To the extent that
>we are supported by taxes, we are *always* going to have a problem
>getting funding because the taxpayers are tired of always having to pay
>more, more, more....
>
>>And not enough?
>
>In some cases.  Too much, in others.  Probably about right in most.
>It's hard to tell since higher education is not exactly a free market
>where the "right" amount would be whatever the students were willing to
>pay for our services.  Maybe it's time for a paradigm shift?

If by "right" amount you mean the amount that would be efficient, then
education is a good example of the market FAILING to generate the right amount.

Since education is in some sense a durable good, whose benefits extend into
the future, an efficient market should enable buyers to borrow today and
repay the loan tomorrow when the benefits accrue.  An exact parallel takes
place in real estate, where a house buyer can borrow a mortgage loan today
and repay tomorrow when she benefits from the house. The price of the loan
is the interest rate.

But the home loan is secured by the house itself, which becomes the
property of the lender if the loan defaults.  In the case of education,
there is nothing to secure the loan, so it doesn't take place.  There is
some interest rate that would lead to an optimal amount of borrowing for an
optimal amount of education, but the market fails to materialize because
the loan cannot be secured.  Consequently, the amount of education
generated by the market is less than the "right" amount.

Education loans do take place, but they are guaranteed by the big, bad
federal government. (Really, this is a subsidy to the banking industry, but
maybe government is OK if it helps the banking corporations?)  And the
amount of education produced reaches the level it does only because the
price of tuition is subsidized by the state drawing on those who "are tired
of always having to pay more, more, more."

The problem with education as a commodity is that it is bound up with a
human being who retains it inalienably, where that word is used in the same
sense Jefferson meant in the Declaration--it can't be sold (alienated
through transfer of property rights).  In other words, it is NOT a
commodity so long as humans are not commodities.  If they were, their
persons would secure the loan in the same way a house does.  Slavery or
indentured servitude would overcome this barrier, and that may be the
paradigm shift Prof Dumas has in mind.  After all,  if one doubts the
wisdom of the 16th amendment, similar doubts about the wisdom of the 13th
amendment on grounds of states' rights can't be far behind.

The larger question, then, concerns what may become a commodity, and
specifically whether education should be commodified.  Most Americans would
oppose commodifying people via slavery.  A majority, though not all, seem
to favor socialized education through the 12th grade.  This is novel, of
course.  Two or three hundred years ago this would not have been true.  And
the number of years of entitlement has varied from five to eight to twelve,
not to mention by race and gender.  Most advanced industrial nations have a
similar view of health care; the US does not.  In some states and some
societies sex is a commodity; others regard this as immoral at
best.  Certain drugs are commodities in some places, not in
others.  Alcohol has been a legal commodity at some times and places, not
others.  Until this century it was considered immoral to assert property
rights to pharmaceutical drugs.  And what about stem cells, embryos, or
genetic material, human and otherwise?  Are all of these best turned over
to the market?

My observation is that humans resist becoming commodities, and to a lesser
extent they resist having their labor turned into a commodity, although
they can be more easily socialized into accepting that fate than into
accepting slavery.  The paradigm shift I would prefer is for work to become
a moral virtue and community obligation, and for an end to labor as a
commodity.  Unfortunately, that battle was lost some five centuries ago,
and it seem likely it will take at least that long to reverse this
particular setback to civilization.