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The Contender
Pro (for)
9 Points

Subsidizing STEM Education

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Voting Style: Open Point System: 7 Point
Started: 7/14/2012 Category: Economics
Updated: 5 years ago Status: Post Voting Period
Viewed: 7,446 times Debate No: 24539
Debate Rounds (4)
Comments (42)
Votes (5)




Resolution: The United States should subsidize college students with STEM (Science, Technology, Engineering, and Math) majors.

BOP is shared.

1st Round for Acceptance.


Thanks for the debate LF.

I accept...
Debate Round No. 1


C1: Human Capital Markets
How do we make sure we produce the right amount of most goods? We use capital markets. Money flows wherever it is profitable. The government doesn’t need to determine that cars are valuable and then subsidize them for cars to be produced. The market handles it—through stock offerings and debt sales, capital flows to car producers. Profit and loss signals to investors where capital is most needed. If an industry is very profitable, that sends a signal—that people should invest there. Investors will, and competition drives profit rates down to a normal level. If an industry is losing money, that sends the opposite signal—to take money out of there and put it somewhere else.

Why not do this with people? The current system, an artificial low interest rate that’s the same for everyone, makes no sense—just imagine if that’s how businesses were funded. I propose we deregulate human capital markets. Loans would work like corporate loans—the interest rate would be determined by your ability to pay back the loan. Philosophy majors would have high rates, if they got loans at all, and engineering majors would have lower rates. There could even be stock offerings of a sort—cash up-front for school in exchange for X% of the student’s income for life, if a student preferred to pay back their money over a longer period of time, rather than all at the beginning of his working life.

If there’s a shortage of engineers, for example, the income of engineers would rise, and stocks in engineering students (the X% of income contract) would become more valuable. Money would then flow to where it is more profitable, fixing the problem. I contend that under this system, saying that there ‘aren’t enough’ engineers being produced is as illegitimate as saying that there aren’t enough cars produced now. The market—that is, the collective wisdom of the millions of individuals investing in capital markets—knows more than any one person standing outside looking in can know.

C2: Interfering with Human Capital Markets
The consequences of interfering in human capital markets are the same as the consequences of interfering with any other market. By distorting the price system, you make things worse.

Market prices are not arbitrary—they exist for a good reason. The price system organizes production and exchange—it puts everything in its right place. Prices signal to businesses whether or not something should be produced—if the price goes up, and production of something becomes more profitable, the price signals that businesses should invest more there. Prices going down signal the opposite. High prices signal to consumers that something is scarce, and they should buy less—low prices signal the opposite. Same thing with wages—the price of labor. Low and high wages tell people which professions to leave and enter. The price of time—interest—tells businesses how much to borrow and savers how much to save.

Prices are the only way a business can have any idea what to do. What’s a more efficient production process—50 hours of labor, 1 ton of coal and 1 ton of steel, or 20 hours of labor, 2 tons of coal, and 2 tons of steel? It’s impossible to say with just that information. But prices let us compare apples and oranges—we can see which is more costly by looking at the prices of each product.

The only way to have real prices is laissez-faire. The subjective desires of consumers create the different demands for different products. The demand for those products creates demand for the different factors of production—raw materials, labor, etc. Competition among entrepreneurs to find the cheapest way to produce the stuff consumers want (50 hours of labor, 1 ton of coal and 1 ton of steel, or 20 hours of labor, 2 tons of coal, and 2 tons of steel?) determines the prices of those factors of production.

What happens when this system is distorted? Say, the government subsidizes steel production so much that the price goes down from $10 a ton to $5 a ton. Businesses will make their decisions based on the $5 price. But the most efficient way to do things would the decisions they would have made with a $10 price. Businesses won’t be able to calculate costs correctly, and will make the wrong decisions.

The same principle applies to subsidizing education. What costs less—2 hours of skilled labor and 2 hours of unskilled labor, or 6 hours of unskilled labor? The only way to know is to have a free market in human capital.

C3: Signaling and Market Failure
Of course, the free market system isn’t perfect. The problem is that part of the reason college graduates earn more is signaling. The type of person that goes to college is more productive than the type of person that doesn’t before they take any classes. A college degree signals to employers that a person is reasonably intelligent and conscientious. This means that to the extent that signaling explains a college graduate’s higher income, a college degree has a private return—someone will still earn more because they go to college, but no social return, since they aren’t more productive.

This has important implications for human capital markets. For example, imagine if there was no signaling, and the added income from going to college was 100% additional human capital. In this case, an 8% return for an investor in that education means an 8% social return too in the form of additional productivity. If the additional income was 100% from signaling traits the student already had, then the investor would still earn 8%, but the social return would be 0%, since the student isn’t any more productive. Most likely, it’s somewhere in the middle. Perhaps mostly human capital for engineering majors, and mostly signaling for liberal arts majors, but not 100% either way for anyone. Whatever the actual number is, as long as any amount of the additional income students earn is because of signaling, markets will work inefficiently.

To get the optimum amount of education, rather than subsidize it, we should tax it. A tax could be levied on investors in proportion to what % of a major is signaling. If engineering majors are only 20% signaling, then a 20% tax would put the private return on investment in line with the social return. For example, if the private return for investors was 8%, with 20% signaling, the social return would be 6.4%. A 20% tax would bring the private return for investors down to 6.4%, which would make sure that the correct amount of education was produced.

C4: Why aren’t there ‘enough’ engineers now?
If my argument is correct, then it would seem like we should have a surplus of engineers right now, since we subsidize engineering rather than tax it. But it doesn't look like that's the case. One possible reason is that while we subsidize engineering, we also subsidize everything else. In a free market, engineers would get much lower interest rates than liberal arts majors, incentivizing smart people to go into engineering rather than philosophy. Another possible reason is that rather than a shortage of education, we have a shortage of smart people. STEM majors are difficult—not many people are able to complete them. About a 1/3 of students entering college plan on majoring in a STEM field—but most of them either drop out or change majors. [1] If the latter problem is significant, then there will still be too few engineers, but subsidies can’t really do anything about it—we would just have to import engineers from other countries.



Thanks for the quick round 2, LaissezFaire.

== My case ==

C1) Selective subsidization

The topic is: to selectively subsidize STEM, while minimizing or eliminating subsidization of other majors. This is good because: if earning a STEM degree becomes significantly cheaper than earning a "Communications" or "Ethnic Studies" degree, then more people will choose to be STEM majors.

C2) Importance of STEM jobs

STEM jobs are key to economic growth. A report by Cherly Grossman of Ohio State concluded that 50% of our GDP growth since WWII has been caused by the STEM fields. [5] STEM workers are more productive members of society and add more substantially to both consumer spending and the tax base. A Congressional Report entitled "STEM Education: Preparing for the Jobs of the Future" points out that STEM workers enjoy *half* the unemployment rate and 26% higher salaries than their non-STEM counterparts. [6] STEM jobs are essential to decreasing unemployment. Over the last ten years, job growth has been 300% faster in STEM fields than in non-STEM fields. [7]

C3) The looming shortage of STEM workers

Current projections show that the US will not graduate enough STEM majors to meet the future needs of our businesses. The President's Council of Advisors on Science and Technology report concluded that "the United States must produce approximately one million more STEM graduates in the next 10 years to keep pace with the number of positions requiring STEM skills." [8] There will be critical STEM shortages not just in the private sector, but in the public sector as well. The Department of Defense will be retiring 70% of its STEM workers in the next few years and is in dire need of replacements. [9] Our military capabilities will dwindle without adequate R&D.

C4) Foreign workers

Companies have been filling the shortfall with foreign workers, although they can only do this for so long. Fareed Zakaria notes in "The Post-American World" that the rapidly rising *global* demand for STEM workers is driving more and more US-educated foreigners to return home upon graduation. Thus, educating mostly foreigners becomes a risky prospect, particularly at public institutions, where the "investment" is wasted if the student takes his or her skills to another country.

The Congressional Research Service points out that "in 2006, foreign students on temporary resident visas earned 32.0% of the doctorates in the sciences, and 58.6% of the doctorates in engineering" in the US. [10] Given these statistics, employers say they "have no choice" – they have to hire mostly foreign workers. [11] The head of an Oracle consultant group said, "We advertise for American workers. The problem is, we don't get any applicants." [11]

A study by William Kerr of Harvard Business School found that from 1995 to 2006, 67% of the growth in the STEM workforce "stemmed from immigrants." [11] This represents wasted opportunities to decrease the unemployment rate and strengthen the foundations of our economy.

== Rebuttal ==

R1) Human markets

LF essentially argues that there is a market solution to shortages in engineering students in the US. There are two key responses to this:

1. Markets aren't perfect. Robert Reich, professor in Economics at UC Berkeley, wrote a book called "Aftershock" explaining why the economy is currently such a mess. One key reason he cites is blind (and misplaced) faith in markets to correctly allocate resources, which has resulted in the complete erosion of middle class purchasing power. Reich bemoans the failure to invest in the middle class, such as sponsoring education (as we did in the ‘Age of Prosperity' with the GI Bill); he writes, "Instead of implementing a new set of policies that would enable the middle class to flourish under these very different circumstances, political leaders—reflecting the prevailing faith in an omnipotent and all-knowing free market—embraced deregulation… cut taxes on the wealthy, and shredded social safety nets." [1]

2. The free market doesn't care if private firms hire their engineers from at home or abroad. The free market generally fills market shortages in these fields with foreign labor. But *we* should care. American prosperity depends on increasing the purchasing power and human capital of American citizens.

R2) Market distortions?

My opponent waxes poetic about free market capitalism. However, he talks about the price that firms pay for labor. Yet, under the current system, demand for STEM majors is projected to rapidly outpace supply over the next 10 years (creating a 1 million shortfall in STEM majors). This will drive up the price. Since employers would theoretically like to subsidize education, but each employer could only have a marginal impact individually, this leads to a collective action problem, which is one reason that free markets fail.

In addition, if we want more STEM majors, we need to look at the cost of a degree, not the price of labor. And education is not a free market. Colleges set the tuition for all majors at the exact same price. Labor demand has no ability to influence tuition costs. That's why subsidies are necessary to avoid labor shortfalls.

Lastly, turn – China subsidizes STEM majors now, so they have already created a market distortion. We need to match them to remain competitive, or else all our STEM jobs will go to their artificially cheap (subsidized) graduates. "In China, more than 40 percent of all degrees awarded are STEM degrees. In the US, just one in eight is a STEM degree." [2]

R3) Signaling

LaissezFaire – under this point - is essentially arguing for the *opposite* of what I am arguing; he is arguing for additional *penalties* for STEM majors (and all college majors). He is basically saying that if 20% of your Math degree only benefits *you*, then your subsequent income will face an additional 20% tax. Even if liberal arts degrees face a higher tax rate than STEM degrees, levying additional taxes on college graduates will merely result in *fewer* people attending college. The decrease might be less in STEM majors, if they faced less of a tax. But a decrease is the opposite of what we want.

Regardless, LF can never win this argument because it's impossible to quantify what percentage of one's income is due to signaling. LF's argument also seems to contradict his free market ethos – the point of taxation isn't to rob individuals of all the parts of their incomes that "do not benefit society." Lastly, this argument fails the mutual exclusivity test – you could try to tax the "individual benefits" of the degree, while still subsidizing the "societal benefits." Although I don't recommend it.

LF's plan is over-complicated, infeasible, and impractical.

R4) Solvency

LF and I agreed beforehand that I would argue that we shouldn't subsidize non-STEM majors, so I don't get why he made this argument about how we shouldn't "subsidize everything else."

I agree that studies show that 40% of STEM majors switch to an easier major. If a STEM degree were substantially cheaper, these students would think twice about switching in order to "lighten their workload." In addition, Obama has said we need 100,000 more STEM graduates in order to teach STEM in K-12. Providing subsidies to STEM majors also improves STEM education in K-12, ensuring the next generation is better prepared for college.

== Sources ==

[1] Reich, Robert B. (2010-09-21). Aftershock: The Next Economy and America's Future (Vintage) (Kindle Locations 126-127). Random House, Inc.. Kindle Edition.


[3,4] - deleted







Debate Round No. 2


== Rebuttal==
R1: Selective Subsidization
My system would have this feature too. See C1 and C4 from Round 2.

R2: Importance of STEM Jobs
Food is important. Cars are important. Clothes are important. But “we should subsidize X” doesn’t follow from “X is important.” We allocate resources among all the different important things in the economy through the price system, which is driven by consumer demand. Resources are allocated to different areas in proportion to how important they are to consumers. To argue that the market allocation isn’t enough, and something should be subsidized, then you need to prove market failure. Market failure, broadly defined, is when individual rationality leads to group irrationality. In the case of positive externalities, for example, the market fails because the social benefits of something are higher than the private benefits, so the market produces less than society would want if it could act collectively. To show that something has positive externalities, you can’t just show that it’s good or “important”—you need to show that it has extra benefits to society in addition to the benefits to the buyer of that product.

If there isn’t any positive externality (or, rather, if education has negative externalities, as I argue), then it doesn’t matter how great STEM jobs are. Taxing everyone to subsidize these majors doesn’t have net benefits unless the positive effect of the subsidy is greater than the negative effect of the taxes, which is only the case when we have positive externalities. Since bluesteel has failed to prove positive externalities, and failed to rebut my claim that education is a negative externality, we must conclude that education subsidies are a net negative for society.

R3: Looming Shortage of STEM Majors
See C1 and C4 from Round 2.

Again, I contend that claiming that a free market has a shortage of anything, absent positive externalities, is incoherent. In a free market, the allocation of resources in different areas is driven by consumer demand. The allocation of resources into STEM fields is determined by consumer demand. If you say that that allocation is wrong, and we need more resources devoted to STEM fields, you are saying that you know better what’s best and everyone else is wrong—that consumers’ decisions are wrong and you know better than them what they should buy.

R4: Foreign Workers
Educating foreigners is only a bad investment for us if we subsidize their education. If we had a free market, and everyone paid for their own education, that wouldn’t be a problem—they’d get all the benefits, but they’d pay all the costs too.

Many engineering jobs are going to immigrants, but I fail to see how this is a problem. I don’t have anything against people that happened to be born far away from where I was born, and I don’t see why anyone else would.

==My Case==
C1: Human Capital Markets
1. Voters should note that this isn’t actually an argument, bluesteel is just quoting Reich’s conclusions. If bluesteel would like to cite the evidence Reich uses in his book, that would be fine, but simply saying, “hey look some guy wrote a book that says you’re wrong” doesn’t cut it.

Bluesteel’s point is that markets aren’t perfect. But I never said they were. See my C3 about market failure in education.

2. We should care more about American workers than foreign ones? Why? How is this different from saying that us white people should focus on helping white workers, and white prosperity depends on increasing the purchasing power and human capital of white people?

And even if you do care about Americans more than foreigners, the idea that this implies that we should subsidize education is nonsense. It’s no different from protectionists trying to protect “our” steel or car industries with tariffs and subsidies. The reason we want engineers is so that we can have the products that need to be made by engineers. If foreigners have a comparative advantage at making engineers, then we should just use theirs to make the products we want to buy.

C2: Market Distortions
Let’s tweak bluesteel’s argument slightly. 'Under the current system, demand for steel is projected to rapidly outpace supply over the next 10 years (creating a 1 million shortfall in steel). This will drive up the price. Since steel users would theoretically like to subsidize steel production, but each user could only have a marginal impact individually, this leads to a collective action problem, which is one reason that free markets fail.'

Obviously this is a load of crap. If the price is going to rise in the future, markets will allocate resources to that sector to reap the profits resulting from the price rise. See C1 from Round 2 for an explanation of how this would work in education, and C4 from Round 2 for why there aren’t ‘enough’ engineers now. If they don’t, then it means that there was an even better opportunity to allocate capital elsewhere. An engineering shortage is not “a collective action problem” anymore than the steel shortage in the above paragraph is. The problem is that the steel buyers wouldn’t benefit from subsidizing steel production themselves, and want everyone else to be forced to chip in. “We want everyone in the country to pay for stuff we buy” is not a market failure.

Labor demand doesn’t influence tuition costs under the current system. It would under my system—see C1 from Round 2.

The fact that China subsidizes STEM majors doesn’t imply that we need to. Imagine if China subsidized STEM majors so much that the price of the products STEM majors produce went down 50%. Chinese tax payers would be subsidizing buyers of those products all over the world. Not a good deal for them, but a great deal for everyone else.

C3: Signaling and Market Failure
It’s impossible to quantify to quantify what percentage of one’s income is signaling? I don’t see why. One study found that 40% of the income differential between college graduates and non-graduates is explained by IQ alone. [1] Other traits that college degrees signal, like conscientiousness, could also be measured and controlled for. Perhaps someone could design an econometric study that measures productivity and income across workers in the economy, and uses a differences-in-differences approach to measure the difference between the gains to productivity and income from college degrees. I don’t know enough about econometrics to run the numbers myself, but I don’t see why this study, or a similar one, would be impossible.

Bluesteel argues that our proposals are not mutually exclusive—but this makes no sense. You can’t subsidize the part of the degree that’s useful and tax the part that isn’t, because the two are inseparable. Try to imagine a college program that teaches skills that add to productivity, but that doesn’t also have an element of signaling. It would have to be the case that the people who went into such a program were a random selection of the population—they weren’t any smarter or better workers than anyone else. What sort of engineering program is populated by such people?

Of course, one could object that it’s wrong to tax some people to give to others, even if it promotes economic efficiency, but then I suppose we can’t do bluesteel’s plan either.

C4: Not enough engineers
Here, bluesteel misunderstands my point. I wasn’t arguing that “we shouldn’t subsidize everything else,” I was arguing that the fact that we currently subsidize all college majors equally distorts the market. In a free market, STEM majors would get much better deals on loans than liberal arts majors, which would incentivize smart people to go into engineering rather than philosophy. The fact that it doesn’t work like this, and every major gets the same loan, helps explain the engineering shortage—the price equalization drives smart people into useless majors.



Thanks LF.

I'll start off responding to the refutations to my case.

C1) Selective subsidization

LF claims his C1 and C4 do the same thing as selectively subsidizing STEM majors. Yet, his C1 and C4 are completely contradictory advocacies. C1 is a "free market" solution and C4 is a tax. Taxes distort markets just as much as subsidies. They are actually modeled the exact same way on a supply-demand curve. How can someone advocate a method free of government intervention (C1) and then argue the government should intervene with a tax (C4)?

In addition, Con doesn't get object fiat – he can't argue that in a free market, all universities will suddenly "float" tuition rates and match them to labor demand. The current system for private universities *is* a free market, yet universities don't do this. Con doesn't get to "mind control" all the university presidents.

And the tax in C4 is impractical and a bad idea on face.

C2) Importance of STEM

I agree that *just* because something is important, doesn't mean you subsidize it. But LF drops the Zakaria evidence – that foreign students are no longer staying in the US upon graduation. This means the US *will* fall behind in STEM fields if we don't subsidize education because there will be labor shortfalls. The Cheryl Grossman evidence says that if we fall behind in STEM, we lose half our GDP growth.

LF claims repeatedly that there are no market failures in STEM education. I'll address that here. As I already stated, the supply of STEM workers is determined by factors set by universities and the government, namely tuition rates and financial aid. The supply of STEM workers is *not* influenced by anything STEM *employers* do.

LF draws an analogy to the steel industry. However, if demand outpaces supply in the steel industry by 1 million units, then the price of steel rises. As the price rises, companies can make a lot of money by increasing their production. *This is directly within their control.* A steel company is responsive to changes in demand. In contrast, universities are not responsive to changes in labor demand.

Theoretically, a STEM employer, looking at the projected 1 million shortfall, would want to do *something* to ensure more Americans graduated in STEM fields. However, each employer has little individual ability to influence tuition – at best, each employer can set up a few scholarships. But there is no guarantee that the students who get those scholarships end up working for that particular employer. Thus, employers don't bother, and we get a collective action problem, i.e. a market failure.

LF claims I prove no positive externalities from STEM education, but I proved that if a greater number of Americans earned STEM degrees, we could decrease the unemployment rate and increase the purchasing power of the middle class. These have positive externalities because of consumer spending and the multiplier effect. When people have more money, they purchase more goods and services. The companies that produce these goods and services – in turn – earn more money, pay their workers more, and then *these* workers spend those additional earnings back into the economy. And the cycle goes on and on…

There is also a direct societal benefit from decreasing unemployment and increasing the salaries of American workers: they pay more in taxes. These taxes support public goods, like fixing our nation's ailing roads and bridges.

C3) Looming shortage

Yes, LF, I *am* saying that individuals' decisions are "wrong." College students are going into fields where there aren't enough jobs. The decision to drop out of mechanical engineering and instead major in "communications" usually has little to do with complex calculations of job availability, and more to do with the college student's desire to "party harder." Ironically, most people are less rational in their decision-making process when choosing a major than when buying a car, even though the former is a bigger decision.

C4) Foreign workers

I'm not hating on foreigners, but it's more socially optimal to train domestic workers. If the unemployment rate is 10%, the way to decrease that rate is to hire more Americans. Most of our new jobs are in STEM fields, so we need to subsidize these majors. We could even offer retraining programs for the unemployed geared towards STEM professions.

It's unsustainable to prop up a failing economy by importing foreign talent. Robert Reich explains that we need the middle class to have enough purchasing power to sustain the economy. If the middle class isn't wealthy enough to buy things, then businesses don't invest because they don't anticipate a strong enough market for potential expansion. The aggregate demand simply isn't there. This is what happened during the Great Depression.

In addition, foreign workers are not a good solution because there is a cap on H1B "skilled worker" visas, and the cap is quite low. Businesses cannot feasibly meet all their demand for labor this way.

Lastly, non-citizens cannot get a security clearance, so foreign workers cannot solve for the Department of Defense STEM shortage. If we lose our R&D capabilities, we lose our hegemony, unipolarity collapses, and great power wars recommence.

I'll now go back over LF's case.

R1) Human capital markets

I already addressed market failures above. Reich was saying that investments in education after WWII led to an "Age of Prosperity," where income inequality in the US decreased to its lowest point in recent history. People who couldn't have afforded college without government subsidies were able to add massively to our economic growth.

In terms of foreign workers, this is a non-starter issue because of the Zakaria evidence that foreign students are going back to their countries of origin, and there aren't enough H1B visas. The projection of a 1 million shortfall in STEM graduates takes into account trends in foreign workers.

R2) Market distortions

Steel and education are different. Period.

In terms of China, if most of the world's STEM graduates live in China, companies will decrease network costs by moving to China. The US will lose all our tech firms. When the labor stops coming to the firms, the firms must go to the labor.

R3) Tax plan

LF himself says that the "signaling" percentage varies, depending on IQ, college grades, major, etc. The IRS cannot be expected to run a regression analysis for each individual taxpayer to determine that person's tax rate. LF never clarifies if this tax is above-and-beyond current taxes. He never addresses that it disincentives *anyone* from attending college. And it *would* be possible to subsidize someone's education, *then* charge that person more in taxes. Since the government could theoretically do both, this isn't a reason to vote Con.

R4) Not enough engineers

LF argues the same thing I do: that STEM majors should get better financial assistance. However, if the government provides this assistance, it overcomes any potential collective action problems. In the field of Law & Economics, the government's entire existence is justified based on its ability to overcome collective action problems. So with government, better loans for STEM majors are guaranteed. With the free market, they are anything but guaranteed.

R5) Solvency questions for LF

For the "free market plan": A) how does this work? B) How do we "free up" the market? C) Do we privatize all public universities? D) What if a student is "undeclared" – what tuition does she pay? E) What labor market do we use to calculate demand? For example, not all English majors become authors. There is no specific labor market for liberal arts majors.

For the tax, is there even *one* academic paper that claims to quantify the signaling percentage? Does the tax replace or add to federal income tax? Why are "signals" so evil? Isn't "brand name recognition" another example of signaling – the brand is mere reputation and doesn't enhance the function. Should companies be taxed to remove their profits from brand name recognition?
Debate Round No. 3


==Bluesteel's Case==
R1: Selective Subsidization

C1 and C4 are not contradictory—C4 is an explanation of why it seems like we don’t have enough engineers now. C3 is the contention with the tax proposal.

The amount of STEM workers would be influenced by employer demand in a free market. See the last paragraph of C1 Round 2.

I do not think that universities would “float” tuition rates to labor demand. To quote my C1 from Round 2: “Loans would work like corporate loans—the interest rate would be determined by your ability to pay back the loan. Philosophy majors would have high rates, if they got loans at all, and engineering majors would have lower rates.” And C4: “In a free market, engineers would get much lower interest rates than liberal arts majors, incentivizing smart people to go into engineering rather than philosophy.” I should not have to waste my space repeating myself—I’d ask BS to put the same care he puts into writing his wonderful RFDs into reading my arguments.

R2: Importance of STEM
BS fails to explain how taxing the rest of the country to subsidize STEM has a net benefit. Lawyers have lower unemployment rates and higher wages than everyone else. Therefore, if we tax $10 billion out of the economy and spend $10 billion subsidizing law schools, we will have a net benefit. See how this argument is wrong? It would only have a net benefit if there were positive externalities (see graph below).

R3: Shortage
See C4 of Round 2 for why this is.

R4: Foreign Workers
Foreign engineers don’t need to immigrate here for us to benefit from them. See C2 this round.

I’m not going to waste my space responding to BS’s “if we had somewhat less R&D WWIII would break out” argument because he doesn’t have an argument—just an assertion.

==My case==
C1: Human Capital Markets
Reich was saying that, and perhaps he has some evidence and arguments to support that thesis, I don’t know, I haven’t read his book. But if he does, BS has not presented them in this debate. Simply stating that an author agrees with you is not an argument.

I realized you were talking about foreign workers going back to their own countries. My criticism still applies—why should we care more about prosperity here than prosperity elsewhere? Foreign engineers can do just as much good as American engineers. And it doesn’t matter how many H1B1 visas we have, we don’t need foreign engineers to live here to benefit from them, we can just import the products they make.

C2: Market Distortions
Steel and educated workers are different. But they are both factors of production. Are they so different that different economic laws apply to them? Perhaps there are reasons why this is so, but BS has not provided them.

Again, I fail to see why engineering production moving to China is a problem. 1) Even if it does help them at the expense of Americans, why should we care more about American prosperity than Chinese prosperity? And 2) It doesn’t help Chinese people at the expense of Americans—we benefit from Chinese engineers. STEM majors aren’t an end in themselves, science and engineering is valuable because of the valuable products it produces. What difference does it make whether we’re buying computers, medicine, etc made here or in China? I repeat my earlier example: “Imagine if China subsidized STEM majors so much that the price of the products STEM majors produce went down 50%. Chinese tax payers would be subsidizing buyers of those products all over the world. Not a good deal for them, but a great deal for everyone else.”

C3: Signaling and Market Failure
“The IRS cannot be expected to run a regression analysis for each individual taxpayer to determine that person's tax rate.”
Nor can the government run a regression analysis for each individual high school student to determine that person’s subsidy. That’s why you suggest basing the subsidy just on major—my tax would work the same way.

“LF never clarifies if this tax is above-and-beyond current taxes.”
It doesn’t matter.

“He never addresses that it disincentives *anyone* from attending college.”
Yes I do! The ENTIRE POINT of the tax is to disincentivize people from going to college—it is a pigovian tax, like carbon taxes.

“And it *would* be possible to subsidize someone's education, *then* charge that person more in taxes.”
The point of the tax is to reduce the amount of education. A tax that does that cannot be combined with a subsidy that does the opposite.

C4: Not Enough Engineers?
BS has failed to identify any “collective action problems.” A public good is a collective action problem—it is something the market could not provide at all, since even though it is collectively beneficial, it isn’t individually rational to pay for it, because of the free rider problem. Positive and negative externalities are collective action problems.
In exchanges without externalities, the amount of exchange that is voluntary is the optimal amount. Consumers compare the benefits of any given product they buy to the opportunity costs (whatever else they could buy with that money), and buy as much of the product as is optimal.

Externalities change this—there are costs or benefits outside of the people participating in the exchange. If there are external costs in an exchange, consumers will buy more of that product than is socially optimal—individuals buy what is optimal for themselves, considering their costs and benefits, without considering the costs to others.

If there are external benefits in an exchange, consumers will buy less of that product than is socially optimal—individuals buy what is optimal for themselves, considering their costs and benefits, without considering the benefits to others.

C5: Solvency Questions
A) See C1 in Round 2.
B) Abolish all government subsidies and loans, deregulate the loan market to make the kind of financial contracts I describe in C1 Round 2 legal.
C) Technically, they don’t need to be abolished, they just need to not subsidize the tuition of their students anymore.
D) I don’t know or care. Remember, my plan isn’t about different tuitions for different majors—see R1 this round.
E) Labor demand doesn’t need to be “calculated.” The amount of investment in loans for college students is determined by supply and demand in capital markets—same as any other investment. “We” don’t need to calculate the demand for English majors for these markets to work anymore than “we” need to calculate the demand for food for capital markets in agriculture to work.

I don’t need an academic paper measuring signaling. I think that the question of how such a number could be found is interesting, and explained how I thought it might work last round, but it isn’t really relevant to this debate. My BOP is to show that we shouldn’t subsidize education—I’ve more than met this if I show that theoretically, the optimum amount of education is produced with some sort of signaling tax. It doesn’t matter if such a tax can’t be calculated.

Signals aren’t evil, just socially inefficient—they are a negative externality. There are private benefits—the signaler gets a higher income by signaling positive traits to employers. But this doesn’t raise total income—it just crowds out other people who might have gotten that higher income. This is the negative externality—the costs imposed on 3rd parties in an exchange. Thus, the social benefit of private education is lower than the private benefit, and education will be overproduced in a free market (see the graph C4). Brand name recognition isn’t quite the same thing as signaling, but there’s no room to go into this here—PM me if anyone wants a better explanation. Regardless, it isn’t relevant to this debate.



Thanks for the debate LF!

{{{ Weighing mechanism }}}

I would have thought this went without saying, but since the resolution is asking what the *United States* should do, it's asking us to weigh the debate based on which outcome best serves US interests. Nations are supposed to prioritize their own interests.

I'll start by attacking LF's case.

{{{ "Free market" solution }}}

Problem 1: Contradicting advocacies

LF never bothers responding to the argument that his tax proposal and his free market solution contradict. In economics, taxes are said to cause *just as much* market distortion as subsidies. LF argues that supposedly, in a free market, non-socially optimal college majors would be disincentivized with higher interest rates on student loans. Adding a tax on top of this would create another, non-free market, disincentive to attend college. The tax would distort the market and caused a sub-optimal number of people to attend college.

So LF's insistence on arguing for a tax takes out any advantage he claims from solving market distortions.

And I would argue that it's better to distort the market to create too many STEM majors than too few.

Problem 2: College isn't a free market

Even if we implement LF's proposal for student loans, college still won't be a free market because tuition rates are all fixed at the same price for each major. Thus, tuition rates are not responsive to labor demand. If there is a labor shortage in a specific field, tuition rates for that field don't drop. Thus, the free market cannot solve labor shortages. We need tuition subsidies to solve labor shortages.

Essentially, colleges have created a market distortion through "price fixing," and only government intervention can solve this distortion.

Student loans are not a large enough part of the picture because not every student needs loans, and the cost of tuition matters more than interest payments. Paying 10% interest on a $40,000 loan (for tuition at a public university, where education costs are subsidized by the state) is cheaper than paying 5% interest on a $120,000 loan (for a private university). Tuition affects the size of the principal on the loan and thus the size of interest payments, but is not determined by the free market, even under LF's plan.

Since we *don't* have a fully free market in college education, we are forced to intervene in the market to solve for market distortions. I prove that the market is undersupplying STEM majors, so we need to subsidize these majors.

Problem 3: Collective Action Problem

The free market cannot solve labor shortages because there is a collective action problem.

I *did* explain why there is a collective action problem. Theoretically, if there is a projected shortfall in the supply of STEM graduates, employers would want to take measures – like subsidizing education - to ensure they could secure workers in the future. However, not every employer will subsidize college, since employers can free ride on the employers who *do* subsidize college. And because students can choose to go to any employer they want upon graduation, *no* employers will subsidize education because students could go to a "free riding" employer. Subsidizing STEM education doesn't guarantee your individual firm more workers. This is "collective action problem 101": a benefit that accrues to everyone is not achieved because of free riding. Only the government can overcome a collective action problem.

{{{ Tax plan }}}

Problem 1: Not quantifiable

Not a single economist has been able to quantify signaling cost. If the IRS cannot quantify signaling cost, they don't know what tax rate to charge people. LF has the burden to show that his counter-proposal can actually be implemented. A theoretical but impractical solution doesn't do employers any good when the labor shortage hits.

Problem 2: Raising taxes

LF is willing to argue that we add this tax on top of current taxes. A massive tax increase during a recession would cripple our economy. Plus, you can't charge someone more than a 100% tax rate, and LF himself says that his tax could be as high as 80% for some types of majors. How would you add an 80% tax to the current 35% federal income tax? Impractical.

Problem 3: Decreases STEM graduates

The tax makes getting a STEM degree, or any college degree, less lucrative.

LF admits this would decrease the number of STEM graduates. Thus, if I prove *any* benefit to STEM graduates, I win.

{{{ Shortage explained }}}

LF keeps extending his C4 without responding to any of my responses. True, some STEM majors switch to easier majors. Some people switch because STEM is too hard, but some people switch because they are lazy, prioritize their social life in college, etc. If getting a STEM degree were significantly cheaper than other degrees, people would think twice before switching and would be more likely to "tough it out." In addition, even if STEM is too hard for some people, we need to graduate an additional 100,000 STEM majors so they can teach STEM courses in K-12. A subsidy is required so we have enough good STEM high school teachers, who can ensure their students enter college better prepared.

Now on to…

== MY CASE ==

{{{ The Looming Shortage in STEM Workers }}}

LF concedes the President's Council of Advisors evidence – that over the next 10 years, there will be a shortfall of 1 million STEM graduates in the US.

His only response to this in the last round is that we can meet this demand with foreign workers. LF even agrees that the foreign workers won't even *come* here anymore (between the Zakaria evidence and the lack of H1B visas). LF agrees that American companies would have to "close shop" in the US and relocate to where the engineers are (India, China, etc). He says that we can just import the products they make.

However, if US companies leave, we lose jobs and corporate tax revenue. How can we afford to buy these products if Americans don't have any jobs?

In addition, education subsidies would most definitely be cheaper than the lost tax revenue from losing our STEM firms. Just losing Apple and Microsoft would mean losing upwards of $20 billion a year in tax revenue. Thus, subsidizing STEM would be a net positive for the US.

LF seems to agree, at times, that his proposal will hurt American prosperity, but asks why we should prefer American prosperity to Chinese prosperity. The answer: nations are supposed to prioritize the interests of their own citizens. When debating US domestic policy, we must adopt a weighing mechanism that puts US interests first.

So we face a shortage of 1 million STEM workers over the next 10 years. STEM fields account for *half* our GDP growth. If STEM companies relocate abroad, our economy will stagnate or even shrink. STEM jobs are key to American prosperity: they pay 26% more and have triple the job growth of comparable jobs.

LF also makes a mistake dismissing my Department of Defense argument without answering it. With the Baby Boomers retiring, we will lose 70% of our DoD STEM workers, all at once. If our military can't do R&D, the US cannot maintain military superiority. Most international relations (IR) scholars agree that US military superiority (unipolarity) is essential to maintaining world peace. Without enough STEM workers, the international system becomes more chaotic and dangerous. Since LF can't claim to solve for this with foreign workers, his only response to my shortage arguments goes out the window. You can vote on this argument alone.

{{{ Conclusion }}}

LF has merely cited generic economic theory that does not apply to the special "market" for education. LF has proposed two impractical solutions that won't even solve the looming STEM shortage. And by his own admission, voting Con leads to a mass exodus of tech firms from the US. Prioritize US interests by voting Pro.
Debate Round No. 4
42 comments have been posted on this debate. Showing 1 through 10 records.
Posted by socialpinko 5 years ago
"Con promotes a vision of a world that does not exist. He offers no evidence of his theory being born out in practice"

Interesting point Roy, does economic reasoning no longer count as evidence?
Posted by socialpinko 5 years ago
Pro Case

C1. Con was correct that a real positive externality is needed to prove the existence of the need for subsidies. Just saying that a particular service is important doesn't justifiably make the jump to it. The rest of the reasoning for this point is generally the same as Con's own C2 and the two points heavily overlapped. See Con's C2 for Con's win on this point. Pro's own C2 argument also rested on generally the same premises and had the same burden of proof i.e. to show the existence of a positive externality which would create a shortage in a free market (as opposed to current markets). Pro's C3 is also related to these two points so extend the analysis and Pro's C4 relates to Con's own C1.

All in all, this was an overall win to Con. While Pro was correct in pointing out the incompatibility of supporting one type of market distortion (taxes) while opposing another (subsidies), Con's points regarding the disutility of distorting interest rates, the favorability of comparative advantage and trading with foreign companies, and the lack of evidence or logical reasoning regarding the existence of a real *free market* positive externality in education (meaning one which would exist under a non-subsidized college market, not the current one) won the debate. Overall good arguments from both sides though.
Posted by socialpinko 5 years ago
Con Case

C1. Pro's rebuttal that we should care whether or not foreigners or Americans are the ones filling STEM positions was only relevant if these degrees are being subsidized by government finance as Con correctly pointed out. Furthermore Con's point regarding comparative advantage and specialization went unrefuted. BS's point that the U.S. should prioritize American interests doesn't serve to refute LF's point that imports from foreign countries are still a benefit and that foreign workers moving overseas doesn't mean Americans can't benefit from their work. Con wins at that point.

C2. Con was correct in pointing out the need to present evidence of a positive externality of STEM education in order to prove that a shortage would develop even if Con's free market approach were taken. Pro's rebuttal that college education wouldn't be a free market considering the fact that different majors still cost the same ignores Con's point in his R2, that different interest rates for different types of degrees would cause prices to shift in different degree areas. Con wins on that point.

C3. On this point, Pro is correct that what Con is advocating is essentially also a distortion of market forces which is what he was arguing against to begin with. Furthermore, the mutual incompatibility of the two positions makes Pro's refutation moot seeing as refuting a tax based on market distortions also serves to refute subsidization. Basically, the point by Con here doesn't serve to help his case while Pro's refutation serves to undermine his own. The point therefore goes to neither.

C4. Con was also correct in pointing out that the idea that there will be a shortage of STEM majors under *current* conditions does not refute his free market argument since the future STEM shortage can be explained via current market distortions, not free market principles. Since the projected shortfall was the source by which Pro's entire collective action problem stemmed, it falls short.
Posted by F-16_Fighting_Falcon 5 years ago
The weighing mechanism I used is to figure out whether subsidizing STEM majors benefits the US *overall.*

Bluesteel's main argument rests on the importance of STEM jobs to the United States and the argument that there is a shortage of STEM workers while LF argues that STEM isn't important to the consumers. He argues that in a free market, STEM majors would cost less and wouldn't need to be artificially subsidized. However, this is negated by the fact that LF proposed taxing those STEM majors which BS claims causes economic distortions. Since it is unadressed, I will assume it true. Also, BS's argument that college majors are not free markets was refuted since LF had already said that it would work like a standard loan.

Coming to voting, the single, most clear *reason* why STEM majors should be subsidized is what I voted off of. This is Bluesteel's argument that we have a shortage of STEM workers (this is bad for the US overall) and to correct this shortage, we need to subsidize STEM majors. LF's response to this was to refer to C4 of round 2. In this contention, LF explains that in a free market, STEM majors would get much better deals on loans. Going to Bluesteel's rebuttal, he argues that better financial assistance to STEM majors must be guaranteed and subsidizing them provides this guarantee.

Now it comes down to the question: "Why must this assistance be guaranteed? Is there anything good to come out of it?" This was answered by the economic benefit provided - US military superiority.

This was extremely close. I am voting Bluesteel for pointing out that STEM majors are good for the economy, that there is a shortage of STEM majors and then explaining that subsidization provides guaranteed assistance while LF's plan does not guarantee this assistance.
Posted by LaissezFaire 5 years ago
I guess I thought of arguments in a more Bayesian way--arguments count to the extent that they show that the thesis is more likely to be true. I don't think I would have liked the competitive debating you guys do.
Posted by CiRrK 5 years ago

Oh I go by a different definition of tabula rosa judging - that all assumptions, even judging paradigm assumptions, are rejected. I refer to what you are referring to a "games" judge.


Ok Ill read it over again tonight.
Posted by LaissezFaire 5 years ago
Cirrk, I would like to hear your opinion about the economics arguments--you only addressed the hegemony in your RFD--but I don't care whether or not you vote.
Posted by bluesteel 5 years ago
in tabula rasa, it's dropped. A tabula rasa judge is supposed to vote on any assertion, even if it's stupid or under-explained. A tabula rasa judge is classically supposed to accept the argument "the sky is red" as long as it's dropped.

If you treat my arguments as mere assertions, that particular judging paradigm tells you to accept an assertion without a counter-assertion. LF's response that "that's just an assertion" wouldn't be considered a response at all. "The sky is red" is just an assertion, but that's the classic example of something tabula rasa would have to accept without a given reason to believe the contrary.

The conduct could be your actual vote. It's hard to know what you would have decided anymore without outside arguing. It's hard to tell if LF reminded you to do something you forgot or convinced you to award a point that you had been comtemplating, but decided not to award.


I'm still mad, but more at the perceived injustice. I'm mad at the situation, not you. We'll still be cool after this. I can also understand using the site as a marketplace for ideas, instead of for competitive purposes. But to me, that's more what the forums are for. Inherently, if people can argue judges out of votes, that ability is going to be asymettric. Some debaters will be closer to some judges and have more personal sway; some debaters may not even realize out-of-round arguing is happening or that votes were changed (they didn't see the original vote). It just creates issues.
Posted by CiRrK 5 years ago
Im just keeping it a tie, unless you guys want me to vote.
Posted by CiRrK 5 years ago
BS, the conduct vote was my actual vote, he didnt convince me of that. The problem Im having with allocating an arguments vote is whether I should break the tabula rasa rule and intervene. Its not the substance which is changing my mind, its judge intervention or at least...the degree Im intervening.
5 votes have been placed for this debate. Showing 1 through 5 records.
Vote Placed by socialpinko 5 years ago
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Reasons for voting decision: RFD in comments.
Vote Placed by F-16_Fighting_Falcon 5 years ago
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Reasons for voting decision: Comment # 39
Vote Placed by CiRrK 5 years ago
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Reasons for voting decision: -_-
Vote Placed by RoyLatham 5 years ago
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Reasons for voting decision: Con promotes a vision of a world that does not exist. He offers no evidence of his theory being born out in practice. In particular, Con did not adequately respond to foreign competition, where STEM education is heavily subsidized. Con's argument that we shouldn't care if China prospers rather than the US denies a premise of the debate that we should do what's better for us. Reich is a weak expert opinion, but was not countered by a better expert. Con's "load of crap" loses conduct.
Vote Placed by darkkermit 5 years ago
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Reasons for voting decision: LF showed how free market principles triumps over subsidizes. He demonstrates that while STEM is important, other important industries are not subsidized as well. He shows that through loan contracts liberal art majors can be decentivized and STEM majors incentivized. Also showed it doesn't matter whether a foreign or US person is in STEM. Discussion on tax policy was mainly a distraction and unnecessary part of the debate.