Don't be like French Students!

As you may be aware, France is being brought to a standstill by industrial action at the moment. The beef is that the retirement age is being increased from 60 to 62. In case you thought you might have misread that, you didn't. Even after the increase, the French will be retiring at least three years before Brits. And of course, they limit working weeks to 35 hours also, so while they are working for that shorter timespan, they put in less hours.

Of course, that's a very general argument and doesn't take into account how hard the French work in that more limited time - it may be they are more productive because they get more rest.

Nonetheless, students are rioting too about this! What is their rationale? Apparently they fear that because old people will be retiring later, there will be less jobs for them when they (eventually) finish their studies.

This highlights a mistake that as keen economics students Martin and I would like you to never make: The economy isn't a zero-sum game. I.e. there isn't a fixed number (say 40m) jobs to go around meaning that if one job is taken by one person, that's one job less left in the economy. The economy is a dynamic place where opportunities are constantly arising to set-up business and provide a product/service. Hence the potential number of jobs is always changing and so the economy is not a zero-sum game in economist speak.

So these students are perhaps even more deluded than the students that speak out on behalf of the NUS in the UK.

Learning Economics Will Challenge You...

...if the views held by the NUS are anything to go by.  I've blogged on this before, but the National Union of Students, whom you may come to enjoy the provisions of during your time at Birmingham, tend to appoint economic illiterates to their Presidency.  This morning the current incumbent, a chap called Aaron Porter, displayed another great dose of either economic illiteracy, or just naivety on Radio 4.

The basic gist was: Fees may go up in the future, and Radio 4 had Dr Wendy Platt of the Russell Group of universities (which includes Birmingham) interviewed along with Porter.  Porter, however, disputed the idea that universities are making a loss on teaching undergraduate students in the UK due to the constraints on fees and other funding from central government.

The fact is, the Economics Department makes a huge loss on teaching undergraduates here in Birmingham, and we don't have anything like the amount of equipment involved in the physical sciences when teaching you.  £3000 from each of you per year simply doesn't cut the mustard of hours of lecturing, hours of preparing, hours of TAs giving classes, room bookings, energy costs of lighting rooms and powering up huge projectors, etc.  And that doesn't even begin to get going on opportunity costs - what else could the University have done with these resources?  Couldn't I have been researching?

Furthermore, a more important question even than this is: Why should the taxpayer completely fund your university education?  What does Joe Bloggs taxpayer down in the less wealthy suburbs of Birmingham gain from your being educated here that his taxpayers money should subsidise it?  (in reality: To subsidise your beer consumption)  Why shouldn't fees be much, much higher than they are to reflect this?

You'll learn this coming term about externalities of education: The social benefit is actually greater than the private benefit: It does actually help Joe Bloggs in the suburbs if you help to shape better government policy, if you run a company that provides them with better products, and it certainly helps Joe Bloggs if we have a much better educated elite in this country dictating what will happen in the future.

But how much is he helped?  How much greater is the social benefit of having an educated you vs a non-educated you?  The chances are, you will earn hundreds of thousands of pounds more than you would have without your degree for various reasons (not even related to the intrinsic quality of it - just having the degree signals a lot about you to future employers) - so you're getting a fantastic pay-off for your trifling three grand a year - why shouldn't you pay a bit more for that?

Final point: What about those that can't afford it?  Scholarships.