Up through high school, I agree with you. After that, the students are adults and it’s their job to take advantage of the education being offered.
Also, I don’t think anybody is saying college for everyone and literally thinks everybody will be able to go to college. It just means the people that do go won’t have to pay. Frankly, I wouldn’t be surprised if the number of available spots isn’t lowered. That means if you don’t have an A or high B average, there probably isn’t a spot for you in the public system. I’m sure there will still be lots of space in the private system that isn’t free.
What surprised me the most in the study was the level of support is higher in the South than the North East. In fact Southern states support free college only 1% less than West coast states. I wouldn’t have guessed the South would support the measure as strongly as they do.
That is definitely less surprising than the Piketty claim seemed to me, so I’m happy to accept it for now. I’m also generally inclined to trust Warren Buffett and market efficiency over actually being able to derive a sustained advantage from a strategy when everyone can see what you’re doing and some can copy it.
I do wonder though about that “after 1995” and whether it is doing any of the heavy lifting (maybe financial markets became significantly more efficient since the mid-1990s, but otherwise the claim should be true on average over any comparable length or longer period). Or for any large endowment.
I’m also skeptical of the number of investigator degrees of freedom “here’s a blend of index funds that beats this specific endowment over this specific timeframe” allows. Does the same blend beat almost every endowment portfolio?
maybe financial markets became significantly more efficient since the mid-1990s
Yeah, I’d be interested to know more about that as well. I did read somewhere (can’t find it right now) that the massive success of big hedge funds through the 70’s and 80’s led to a lot of copycat investing making it harder to get the same returns. I’m not sure if that’s true or not, but it sounded good.
Also, Harvard has over $30 billion to invest. I bet it’s pretty hard for them to get into and out of the market without moving it a fair bit. With the size of investments they need to make, they are going to be stuck with large cap companies (otherwise they are going to end up owning a lot of companies).
State colleges typically have been dealing with lack of affordability due to high tuition by importing more foreign students.
One of the main problems such schools have now is “Detroit Syndrome”. The easy money of predatory student loans means the schools are flush with funds which they tend to use to expand facilities, rather than build up savings. When it all comes crashing down, they are left with a budget they can’t sustain and facilities they can’t keep in good order.
Interesting, thanks.
But to your last point (as an example) the Vanguard Total Stock Market Index has >$600 billion invested, so I hardly see how going to an index fund changes things in that regard.
Edit to add: in the early 1980s you could put money in a long term CD at 10-14% interest (which is how a small legal settlement when she was a baby paid for most of my sister’s college tuition). Absolute nominal percentage ROIs were crazy then. Maybe markets were just noisier in such an environment, in a way that could be gamed, in addition to fewer people trying to do so?
Those are all great points. I wonder if a better first step wouldn’t be to make all community colleges free. More English majors wandering around is never a bad thing, but having more tradespeople (welding, HVAC, construction, etc…) is even better.
Basic investment truth is that a number of fund managers very close to zero manage to beat index funds. An even smaller number manage to do it consistently.
No matter how big your fund, unless you are looking to achieve something specific with it like actually owning a particular business, for general investment return you are better off sticking it in the cheapest index tracker you can find.
As Headache says, it’s the fees.
If you’re starting with a big pot, even just sticking it in a bunch of stocks and never trading again will beat most managed funds.
Compound returns and the lowest fees you can get away with = profit.
ETA: Of course it does depend on your timescale. If you need your profit to happen within say 5 years, active trading may be better.
Not really an issue for institutions like universities.
Whenever someone suggests a good policy in America (like government run healthcare or free college tuition) the answer always seems to be that Americans are uniquely incompetent and/or corrupt. Other countries have free tuition. In some cases, even for international students. They don’t have corrupt university administrators putting money-in-the-back ahead of educating students. Why would America have that problem? Without positing that Americans are uniquely shitty or evil, I don’t know why we’d speculate about this problem.
The thing is, when you make university education free, you make university about learning instead of about taking money from the students. The same thing happens with hospitals. Even in America private hospitals are more deadly and give worse care than public hospitals. When the purpose of an institution is to educate, to heal, or to provide some other public benefit, you hire administrators who are interested in balancing the books in service of that goal rather than doing it for the sake of racking up a financial high score.
I think the best place to start when speculating about what the world would be like if college were free is by looking at countries where post-secondary education is free and seeing what they are like. From a distance it seems like it works out okay. Since there are other countries that are doing it fine already, rather than starting from scratch on all questions of how to do it, American states could look to working examples.
Heart surgery isn’t for everyone, but to me it seems in everyone’s interest that everyone can afford it if it is for them.
I think “better investment opportunities” doesn’t necessarily mean having managed hedge funds. If you have just $1000 to invest that probably means going to your bank and taking whatever they give you, or guessing at stocks yourself. If you have $1B to invest you have a huge range of options, are in a position to actually negotiate, and can effectively buy a diverse portfolio of stocks to grow with the market.
Also, Piketty’s data shows that large fortunes do grow faster than small ones for a fact, but why they do that leaves the realm of fact and enters into the realm of social science (no shade on Piketty or even social science here, but there is a gap between a simple fact like r > g and the analysis of that fact which is subject to debate and revision).
Right; I find it so weird that the same people who have no doubt in their minds that “America is the greatest nation in the world” also believe we are not just unwilling but incapable of implementing things most other countries already have like universal healthcare.
True, universities are immortal and long-lived ones with substantial endowment have plans for spending decades in advance.
However, they also need to keep the lights on every year. If you’re committed to spending at least a certain dollar value each year from the endowment, then too much volatility can take a long time to recover from after you spend while markets are down. Not sure how much that affects optimum strategy, though.
I’m not sure volatility is irrelevant. It would be if the endowment were used only for things like large capital expense that they can time for when the market is good.
But to the extent that they use the endowment for fixed operating costs (which they do), universities are somewhat like immortal retirees who can never afford to outlive their savings.
Note: I’m not actually arguing for any particular conclusion here. I just don’t think any of the discussions I’ve seen are comprehensive enough to convince me without a doubt that this is what universities should do. I certainly keep (and will continue to keep) my own savings in index funds.
I’m suggesting neither. The university admins already don’t want the students that they have now. They make you hire new professors, build/heat/cool more classrooms, and generally spend more resources. And the more you take on the more your on-time graduation rate starts to slip. Basically, college kids are a necessary evil when your “business” happens to be a university. One that can be minimized by just being more exclusive.
This is all completely beside the original point, which is that @Headache 's musing about keeping state funding the same while forbidding tuition is naïve. State funding is often a pittance compared to grants, tuition, interest on endowments, T-shirt royalties, etc., with tuition being the only source of income that even cares whether or not you have any significant number of students.
Tutition-free state schools are quiet possible in a America. They bring on a whole slew of challenges, new systems to game, new laws to prevent gaming the systems, and so on. But you either have to run a school a little like a business (that is, charge to tuition) or accept that it’s a government program (and make the state fund it). A bizarre unfunded mandate would just drop the quality of service.
Edit: On a related note: if you want to make college more affordable, figure out away to kill US News & World Report 's college ranking system. Or at least make them stop giving colleges more clout for having a higher price tag. (Seriously: part of the ranking is based solely on how expensive a place is, as a proxy for exclusivity. The president of my wife’s alma mater flat-out told the alumnae group that they keep raising tuition to maintain a higher ranking, trying to make up for it a little bit by giving out more scholarships and grants.)