Wednesday, August 28, 2013

Education Cost and Benefit: Why Ed Loans Should Not Be Seen As a "Distortion" From a Perfect Market

Some see low interest education loans as distorting the market for education and therefore bad, supposedly making the market less perfect, less efficient, less well-tuned.

Why focus on the narrow education loan segment alone as if it weren't entirely and necessarily interconnected with the needs it serves. What about business needs? The larger market ecosystem -- the economics of business and education -- involves a requirement for a supply of educated workers. Limiting the supply to only those who can pay their own way into education impedes business, a practical flaw in the greater job market. How would it be perfecting the greater job market to reduce the supply of educated workers to business when it is already insufficient?

This opposition to "distortion" on a narrow, inextricable segment of the greater system fails to qualify as an objective "good". It's an artificial and aesthetic goal rather than a practical, objective improvement of the greater economic system. The greater economic system for workforce education can relatively objectively be seen as functioning more perfectly when it yields a supply of qualified labor that's sufficient to foster business profits and yet not so excessive as to detract from employee prosperity. The current system falls short in supply of educated workforce.

Seeing loans as a distortion here is rather like seeing the spokes in a gear as a distortion from a perfect circle. Yes, those teeth on a gear distort its form from a perfect circle. But cut the teeth off the gear that drives the propulsion and a machine won't get very far. Education loans serve as teeth for the workforce capability gear. Remove the "distortion" from education loans and the wheels of modern business will slow towards a halt.

Sometimes getting rid of distortion would rob us of what we need most.

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