Saturday, June 24, 2006

Subsidies Part 1: The Social Value of Veterinary School

At breakfast this morning, my girlfriend and I somehow got on the subject of veterinary school: acceptance rates, number of schools in the US, cost of school and (most interesting for me) government subsidies.

Most people know that higher education is expensive, but fewer people realize how much the government subsidizes that education. I could do a cost-benefit analysis of all different levels of education, and types of degrees (medieval history, for example). The analysis would likely show that the government underfunds some degrees, and over-subsidizes others.

As a case study, lets look at the Mississippi State University veterinary school, which is the smallest accredited veterinary college in the US. Mississippi's program costs $12 million to operate each year. In-state tuition is about $12,000 a year and out-of-state tuition is about $31,000 a year. There are 72 students in a class, 50% of which are in-state. This means that students pay for $1,548,000, or 12% of the yearly costs of the school. The rest of their education, 88%, is paid by government subsidies, and presumably, by some endowment.

What is the social benefit of educating these 72 students? The subsidy will increase the number of vets who graduate, and unless vets are colluding, lower the cost of veterinary care. That means pet owners will get cheaper care and the price of your ground beef is probably one millionth of a cent cheaper in the supermarket.

Is it worth it? That really depends on whether there are positive externalities to educating vets. There are probably positive externalities from veterinary research for feed animals (since I don't think markets correctly value most innovation). But, the government could better promote this by offering scholarships to the best students or by offering financial incentives for certain innovations. Pets are said to make people live longer and healthier lives, and cheaper vet care may translate into owning more pets. However, this pet-effect is likely dominant for single people in old age, rather than people of prime working age, which is what cold-blooded economists care about more.

I believe that the government should subsidize most education. In the case of medical school (for humans), I feel that the government could probably subsidize more and should try to open more schools. Given that there are fewer positive externalities for vet school, and the fact that they turn away many qualified applicants each year, I feel that there is probably too great of a subsidy for animal care. And yes, that means I value people more highly than animals.

1 Comments:

Anonymous Anonymous said...

Hi pwn,

I am yn, a commenter in Mankiw's blog. I found your comment interesting and followed the link to your blog. Nice blog. I will come back to read more later.

Thank you for your comment on Mankiw's blog. It seems to me that Mankiw doesn't care about economic teaching. Nor he cares about the lower income, the unemployed, the division of the pie...

I read a report a couple of years ago saying that the 90's boom increased total income (the pie) but the distribution became more uneven (the poor gets a smaller division).

Thank you again.

3:04 PM  

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