Sowell again

Thomas Sowell has a great piece in NRO blasting Barack Obama's thoughts on jobs and the economy.

While his piece focuses mainly on jobs, he has a small snipet regarding the cost of education

Money quote

Senator Obama is for making college “affordable,” as if he has never considered that government subsidies push up tuition, just as government subsidies push up agricultural prices, the price of medical care and other prices.

I have a question for all libs out there. Why are college education rate increases, on average, almost double the rate of inflation?

Could it be that increased financial aid and availability of student loans contribute to the rate increases?

Absolutely not Gordon it must be other factors.

Well consider this on a micro economic basis. Assume I have a commodity that you need to earn more money and I'm willing to sell it to you for $1,000. You agree to the price because you know you'll be able to turn that thousand into $10,000 in a short period of time.

Now assume that Uncle Sam wants to allow poor people access to my widget so they are willing to give everyone $400.00 to buy it. Do I keep the price of my widget at $1,000.00?

Hell no I don't. I now have a larger supply of people with money to buy my widget. In addition, I already know that the market place has already set a price that people are willing to pay $1,000 without the subsidy. So guess what, I now increase my price to $1,400. Rich people are still out of pocket $1,000 and poor people still can't get in. So people like Obama now have a platform to increase the subsidy to $600.00, which only allows me to increase my prices yet again. It's a never ending cycle.

But Gordon, if you increase your prices won't competitors come in to the market and lower prices. Yes, more people will come into the market place but, I would argue that they come into the market place and take the $600.00 subsidy from poor people and deliver them a shoddy education. Look at all the "colleges" springing up in nearly every office park in the country.

So everybody wins, except the poor schmuck who's now on the hook for a $30,000 student loan that qualifies him to be a Cincinnati city councilman or a car salesman.

Sorry for the slam on car salesman.