Government policy always has economic impacts. Over time, these impacts accumulate and multiply upon one another. This leads prices of goods and services away from what they would be under a “freer market”. Distorted prices create distorted allocations, which may be good or bad, depending on how one feels about government manipulating markets in the first place.
At some point, though, the relative prices of things get so far away from “natural” prices that the system of valuation breaks down. This breakdown is what I call “The Great Repricing”.
Captain Capitalism runs a thought experiment which illustrates how relative prices have lost touch with relative values:
St. Paul public schools spend $17,000 per pupil per year. This translates into $221,000 per pupil over the course of their k-12 career, and that does not include baby-sitting school...er...I mean "pre-school."
This got me thinking.
"What if we just gave the kids the $221,000 instead of educated them? Wouldn't they be better off? I mean, I never had $221,000 in my name in my LIFE. But by the age of 18, you could buy a house FOR CASH and never have to pay rent again."
You could buy 1.1 houses per pupil instead of sending them to school.
Both housing markets and educational markets have been explicitly targeted by government manipulators. And educational costs are also indirectly impacted by the mechanism of government unions staffing publicly-funded schools.
Wouldn't it be better to just home school or outsource as much schooling as possible over the internet? Close down these schools, privatize the development and deployment of classes with some government standards and oversight, give the kids not just the ability to have an education, but to explore whatever they'd like for free? We'd cut down on public school expenditures by at least 80% and with NO DROP IN THE QUALITY of education (because you can only go up from here, right Detroit?)
When elementary education costs as much as a house, something has to give. If housing prices collapse further, the ratio looks even worse. If school costs continue rising, more parents will do the math and escape the system (by homeschooling in low-tax jurisdictions). This tends to reduce the quality of education for those who remain in the system, which always leads to increased per-pupil spending.
I don’t know what the “right” allocations are, but what we have is not sustainable.