Monday, November 23, 2009

Freak Says High Tuition Rocks

The Freakonomics guys say that high tuition for public schools is good, if matched by support for low and middle incomes.  Well, the UC system is going to rock their world.  And we shall see more of the same across the country as states continue to cut their budgets.

Financial aid is, at its core, a price-discrimination scheme. Consumers pay different prices (net of financial aid) for the same service. Higher education is the very rare market where the seller says “Tell me in detail about your ability to pay, and I’ll tell you what your (net) price will be.” But instead of maximizing firm revenue, the goal is to enhance equity. By increasing the effective tuition for some of our wealthier students, we might be able to reduce the price for some of the less wealthy.

As a self-interested professor, all I can say is: whoo hoo!

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