With great government power comes potential for great government irresponsibility: artificially lowering prices for some either through outright money printing or by taxing some to subsidize others
- In the Austrian business cycle theory (hereafter ABCT), lowering prices artificially causes serious trouble in the economy, as the government is directing excessive resources into an area unsupported by accompanying supply and demand
- Without the profit motive, banks apply less discretion in granting loans, universities lower entrance requirements, and potential students reevaluate their options in favor of college
- Many of these government loans constitute malinvestment; the students cannot secure a job that enables repayment
- Under market conditions, banks would have to ensure enough loans are repaid to cover their costs and make a profit. Under conditions of government intervention, the opposite incentives manifest
Because ABCT is based in sound microeconomic theory, it can help explain personal economic cycles, as well as general macro trends, even when the former aren't related explicitly to general recessions.
- Other BCTs claim micro- and macroeconomics are isolated phenomena, and only purport to explain one type of incident; namely, a downturn in gross domestic product (GDP).
It is worth asking why Western governments have pursued this insanity
- Why have they pushed students with a 99 IQ through a communications degree when it wrecks the student's life prospects and distorts the general economy?
- Joseph Schumpeter argues that elites push as many students through university knowing that they will not be able to secure jobs proportionate to their status.
- They will become "psychically unemployable in manual occupations without necessarily acquiring employability in, say, professional work."
- These graduates "swell the host of intellectuals... whose numbers increase disproportionately. They enter it in a thoroughly discontented frame of mind. Discontent breeds resentment. And it often rationalizes itself into... social criticism... [and] moral disapproval of the capitalist order."
https://mises.org/wire/seeing-student-loan-crisis-form-boom-and-bust
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