Independence Day is celebrated every year on the 4th of July. While the Americans enjoy the freedom, it seems that the majority of the population has also lost its financial independence. The loss of financial freedom can be created by many factors; perhaps the economic system may have played special roles. While Adam Smith’s concept of invisible hand suggests a free economic system with insignificant of government’s intervention, it may not be completely true in the case of US higher education. The industry has been let-alone for hundreds of years. Data suggest that giving too much freedom without rigorous control system will create chaos. For example, letting the for-profit corporation to participate in the education industry has perhaps created more problems than its expected good. It surely will cause excess supply of education services. If the growth of demand for higher education in the US is less than the growth in the supply side, it certainly will cause problems. Sooner or later, it will increase the risk of college closures or mergers. In such a case, Adam Smith’s invisible hand paradigm predicts the outcome very well. Two well-known cases occurred just recently which show how negative impacts might occur. Apparently the invisible hand does work well in the US higher education system. Though AAEA has not done statistical analyses, one may have to prove the maintained hypothesis of possible positive relationship between skyrocketed cost of education, student loans and the policy to let the for-profit corporation to participate in the industry.
Happy Fourth. Please let us know what you guys think?