Thursday, September 10, 2009

The National Education Service 

Gerald Prante notices the comparison President Obama made last night in comparing the competitive advantage of public option health insurance to that of public universities.
Public colleges and universities not only rely on billions of dollars in government subsidies (which he says the public option would not receive), public colleges and universities do indeed crowd out private colleges, largely because of these subsidies. For a California resident, UC-Berkeley (probably the best public university in the nation) is indeed a lower-priced substitute for Harvard University. To say otherwise would show ignorance of basic economics.
But of course not every state has a Berkeley (and, I'd argue, there are other universities that are good substitutes for an Ivy, such as Virginia, Michigan, or North Carolina.) Those students go to Tier 3 or Tier 4 schools. They get less-good higher education. So will we equalize health care across the states? Will every state get a Mayo Clinic, with equal access?

And how will innovation occur? In higher education, even with the ubiquity of state universities, costs are enough that private concerns are competing and dwindling enrollments for public institutions at a time when we have fewer students graduating high school. There are demands for more. And so how do public schools respond?
The Education Department is making plans to create free, online courses for the nation's 1,200 community colleges � which teach nearly half of undergrads � to make it easier for students to learn basic skills for jobs. The courses would be offered as part of a "national skills college" managed by the department.
One of my lectures in public finance (when I taught it years ago) was that we could separate the public role in allocation to public provision of goods and services and financing of those goods and services. Trash collection can be public financed through taxes yet a private hauler hired to provide the service. Private prisons and defense armaments were other examples I used in class. But I have wondered aloud whether financing eventually leads to provision? Is the box where you have private provision, public financed goods stable, or is there a tendency to have those goods drift into the public-public box (in some 2x2 grid)?

I don't think I have to worry that Blue Cross is going to operate its own hospitals some day. Firms find their specialization and stay on it until technology changes and their comparative advantage with it. But government can vertically integrate anywhere it wants -- it can be both in the insurance and the hospital administration businesses.

I particularly concern myself over non-profit hospitals like the St. Cloud Hospital. Their mission derives from the social concerns of the Catholic church. If you perceive the government will fill that need, does the hospital have a mission? Will it withdraw? This is what I think of when I hear Dennis Prager say "the bigger the government becomes, the smaller the individual citizen becomes."

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