MWD47 - On Supply & Demand

or an allegory about why I hate APs

Here, for your reading enjoyment, is a special, unrequested Friday Night Edition of Midweek Dinner, offered in gratitude for your indulgence of my outpouring of personal anxiety yesterday. Back to the big picture here.

Here’s the basic concept of supply and demand as we were taught it:

In a free market, if there are not very many of a thing and lots of people want it, the price will go up and only the wealthy and/or connected will be able to get it. If there are lots of a thing and lots of people want it, competition between the various sellers will create a reasonable price equilibrium, and most everyone will get it. If there are lots of a thing and nobody wants it, the price will plummet with sellers hoping that a low-enough price will entice at least a few buyers. If there are not very many of a thing and nobody wants it, nobody cares.

Supposedly ALL of this is determined by “the market,” and it is usually discussed in hypothetical situations that involve nonessential items. “So, let’s say you want a new pair of shoes,” says your high school economics teacher. And we all learn about supply and demand through these very real and very nonessential shoes. But what happens when the “thing” making its way onto the market is essential? What happens when it’s a matter of survival, such as heat in sub-freezing temperatures or insulin or food?

When we learn about these issues in school, we are not taught to consider them through the lens of survival. The lessons of scarcity resulting in high prices (and the resultant lesson of elite collectors being the ones with all the Jordans) is not depicted as part of a dystopian future; it is posed as an affirmation and aspiration. We leave that lesson thinking, yeah, man, if I work hard, one day I might be one of the few guys who can afford those shoes!

Issues of supply and demand are likely in a world with rapidly declining natural resources. Here in the present, however, with adequate energy to meet demand, we are outraged to learn of those folks in Texas and Oklahoma who didn’t lose power during the recent winter storms and are now responsible for exorbitant bills. Supply and demand, some say with a shrug. What can you do? You can do what’s right. To overcharge someone for the thing they need to survive is a gross injustice. It is easy to understand.

But what about when it’s not so clear? Imagine with me this scenario:

Water is still abundant, and each year, a user’s water costs reflect measurable but small increases. At the same time, society is making measurable shifts. The world is changing, they say. The message to young people gradually becomes this:

The only way you will ever be successful is if you use more water. We want every one of you to be successful, so we are going to ask you to keep track of your water usage. Several times a year, you will submit your water log to us for evaluation, so we can tell you if you’re on the path to success and suggest ways to accomplish your ultimate goal: filling your ten-thousand-gallon tank with water. If you’ve used enough water during high school, you will get your tank at graduation. If you are able to fill it in the next four years, you will be successful!

—— You might be figuring out where I’m going here. Bear with me. ——

So, we’ve hammered that message. Made it a fact. Made getting that tank and filling it the only possible goal in life. And then, we raise the price of water. Dramatically. Supply is still abundant, but water is now unaffordable for most. This thing that is the key to every child’s success is now unbearably costly.

Now picture that around every corner is a company willing to loan us the money to pay for the water we need that year. Low interest rates, borrow as much as you need. If we have kids, we want to help them make their water logs and high school usage as strong as possible. Those of us with means will borrow more and do more to help our kids, even getting the tank delivered early based on how well they’re doing in high school. Those of us with less will do the best we can because we really want our kids to succeed.

Knowing our kid will have no way to fill that tank on her own, we encourage her to borrow whatever it takes to get that tank filled. We add what we can when we can - some of us significantly more than others - but we insist it is fine to borrow so much because filling that tank is all that matters.

Years later, when she has filled her tank (and then another one because now you need at least two tanks to be successful), and she is barely making ends meet as she works jobs she doesn’t like just to pay off her water loans, loans she will pay off the same year her daughter starts filling her own tank, you have the audacity to tell her she should have made a different choice, she shouldn’t have borrowed so much, she should have chosen to study something else?

This is, of course, absurd and outrageous and nonsensical. And it is exactly what we have done to young people for decades regarding college. We’ve artificially increased demand in a system that can provide infinite supply, and there is no balance. Except the balance due on those loans.

The laws of supply and demand only work if the market can’t be manipulated. And when it comes to higher education, we have all been manipulated. There is no law of supply and demand if we tell everyone it is a requirement and then fix the prices. That’s called a monopoly, and it’s illegal. And there are immensely powerful education-adjacent industries that would very much like to keep it that way. The College Board might be a not-for-profit organization, but it still did over a billion dollars in revenue in 2017, and its dozens of executives have extremely healthy compensation packages. Kaplan and Pearson and 529 firms and all the other for-profit agencies that benefit from this system are also just fine with the current set up. Is anyone else? Certainly it’s not students or the wide raft of adjunct faculty members who teach them.

As we enter into another round of conversations about student debt cancellation, let’s also interrogate the lies, starting with the the biggest one:

  1. Is college essential?

  2. If so, for what?

Currently, we operate a system where all of primary and secondary schooling is aimed toward college. And all of college is aimed toward work. I can’t help but wonder: What would happen if we changed the target?

I owe a lot of today’s thoughts to Anne Helen Peterson’s newsletter and this related piece she wrote for Vox. In both, she raises really good questions about the individualism inherent in the system and the broken funding and forgiveness models that currently exist all while insisting cancellation of student debt is the only way to reverse a trend that will only lead to further inequities.

I don’t disagree, but if the choice is between forgiving the loans I’m still paying off (from degrees earned in 1999 & 2001) or radically changing the costs, goals, and framework of the school-to-work pipeline — well, I’d rather invest in the future. But as Anne Helen and others have so aptly argued, it’s all one thing. So let’s get started making it better.

Thanks as always for reading and thinking with me. Have comments, suggestions, or questions? Reply to this email, and I promise a response.