End the Garage Sale at University of California

The precipitous decline in the count of African Americans and Latinos in the 1998 freshmen class at UC Berkeley has been heralded as a political problem in need of a political solution, namely the resurrection of affirmative action. The Board of Regents of the UC system and state legislators would be well advised to see the problem in economic terms.

Education is a service in high demand, commanding a high price. It is no longer unusual for parents to spend more than $100,000 on their child’s four-year degree at a top-tier private university, all in the hope that a college degree will provide their child with a lifetime economic advantage.

While parents take the cost of a college education seriously, many of the public university governing bodies apparently do not. Unlike their private counterparts, public universities do not price their education in line with market forces. A “Mercedes-quality” education at any of the UC campuses now sells for less than the price of a used Yugo.

When considering college, many wealthy families ask why they should pay more than $20,000 in tuition and fees for an elite education at a private university when a comparable education can be had for less than $5,000 at a UC campus. Consequently, the count of admission applications to the UC system is vastly higher than it would be if its tuition and fees were market-based.

Since SAT scores correlate with family income, upper-income students have a clear admissions advantage over lower-income students. And since the UC system dramatically underprices its product, it encourages thousands of wealthier students with high SAT scores to apply to the UC system rather than to the private colleges that their parents can afford.

The UC pricing system has consequences.

The number of wealthy, highly qualified students who apply for admissions is much higher than it would be if tuition were market-priced.

Highly qualified wealthy students take up a disproportionate share of the space available, reducing the openings for low-income minorities and whites.

Middle- and low-income taxpayers often subsidize wealthy families in acquiring one of the most valuable assets in our society, an elite college education. The underpriced UC education benefits the wealthy and those minorities who qualify under affirmative action. Lost in the process were middle- and low-income, non-affirmative action students who have had a difficult time gaining admission even though their families paid their fair share of taxes to support the UC system.

California simply cannot abolish affirmative action without abolishing the underlying pricing system that made affirmative action necessary in the first place.

UC tuition and fees should be raised to something close to competitive market levels, acknowledging in the process that UC Berkeley especially is one of the nation’s elite universities and should charge a base tuition comparable to its competitors.

In addition, Berkeley should price discriminate in the same way other elite universities do, charging wealthy families the full price. All other students would, in effect, get “scholarships,” paying tuition on a sliding scale based on their family income. The sliding scale would be set up to bring in the same revenues generated today.

We would expect this proposal to cause many wealthy parents to send their children to private schools, freeing up more space for talented minority students and lower-income whites. It also would bring to a halt the process of California selling one of its most valuable educational products at a garage sale discount.