A HERETICAL PLAN FOR CUTTING SPENDING ON EDUCATION.

• Author: Caplan, Bryan

GOVERNMENT AT ALL levels fuels an educational arms race through lavish and indiscriminate funding. Given all we know and suspect about the low social returns on investments in schooling, what practical changes should concerned citizens favor?

Sharply reduce government support not only for higher education, but for high school as well.

The increasingly popular "Too many kids are going to college" slogan suggests that social returns are merely low for the weakest post-secondary students. In fact, social returns to education are low virtually across the board.

The good news is that basic economics provides a simple remedy for wasteful investments: Reduce them. If the car industry earns a low return, automakers should respond by building fewer cars, starting with the biggest money losers. As the supply of new vehicles falls, prices will rise...until automobiles are once again worth producing.

Concerned citizens should view schooling with the same investor's eye. If it has a low return, we need less of it. The supply of highly educated workers will fall, but this is a feature, not a bug. As supply falls, market rewards for education will rise...until schooling is once again worth encouraging. In light of the very poor current social returns on education, however, these rewards would truly have to soar first.

In the U.S., spending on public elementary, secondary, and tertiary schools now amounts to almost $1 trillion a year. Private education also relies on subsidized student loans and other government support. This gives society a nearly foolproof remedy for educational waste: Cut budgets for public education and subsidies for private education. Give schools less taxpayer money. The central question isn't "How?" but "Where do we start?"

Cut high school a lot, college more, and master's programs the most.

Governments overinvest in education across the board, but they do not overinvest evenly. As a rule, the "higher" the education, the greater the waste--and the deeper the desirable cuts. The master's degree is a disaster, earning negative returns as far as the eye can see. (Even Excellent Students don't recoup the costs to society of getting an M.A.) Bachelor's degrees aren't quite as awful: Investing in strong students may yield low but positive returns. High school is the least bad. Making generous assumptions, its social return is reliably mediocre--and for low-ability young men, possibly stellar.

Cautious citizens might want to base education...