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Federal Government takes over the college loan business

Not even the opponents of the law deny that it will save the taxpayers some $87 billion dollars over the next decade. No one is too worried that it will diminish the level of services. In fact, more students will be able to borrow more money.

This example illustrates how antiquated really is the debate over big government vs. private enterprise. The ideologies of the two major political parties are just too rigid, and fail to see the reality of the contemporary information society. Some things are clearly better done by the government, and others – by the market. It is just very naïve to believe that the government is always good or always evil. In this case, it is a straight forward distribution of loans – the same kind of service, without much need for local variations. The government can do massive and standardized operations with the use of the modern information technologies, and be more efficient than the market. What’s there to compete about? In fact, competition in this case only encourages creation of redundant private bureaucracies, each providing a product undistinguishable from the competition, at a higher overall cost. I suspect health insurance is just like that, and Medicaid, Medicare, and the VA system do a good job. No reason to think they won’t be as good if scaled up.

Similarly, the government is great at funding education at all levels, because it is a straight forward tax-and-distribute operation. In fact the Federal Government could do it a lot more efficiently and equitably than the number of state and local governments with their arcane tax laws and insanely complicated funding mechanisms. However, governments have a terrible record in running schools, and the bigger the public school district, the more likely it is to be a mess. To run a school, you need knowledge of local conditions, creativity, insight, and – yes, some level of competition to spur innovation. People are creative when they work for a smaller organization, where their voices are heard, and initiative is recognized and rewarded. Education delivery thrives on difference, not on sameness. Therefore, governments should gradually get out of the busyness of schooling completely, and just make sure education is funded, and is accountable for the results.

Governments and markets coexist in any modern society; it is just a matter of finding where each works the best.