Problems with tuition subsidies

Richard Posner writes:

...it does not appear that many persons who would benefit from a college education fail to obtain one. As Becker points out, the private returns (higher earnings) from a college degree are very great and a student can borrow to finance the tuition and other costs of the degree.

...if I am right that very few persons who could benefit from a college education are deterred by its cost, the main effect of increasing the subsidy will be to attract applicants who would not benefit if they weren't being "paid" to attend college. That would be a misallocation of resources.

Milton Friedman's argument about students who take advantage of subsidies to enjoy a pleasant interlude is a little blunter.

Arnold Kling writes of "Wizard-of-Oz Diplomas":

One politically popular idea is to try to send more young adults to college. This may seem appealing, but in reality we already have too many students in college who lack sufficient basic skills...

I fear that many of the students who pass will go on to earn Wizard-of-Oz diplomas, which signify nothing. Students will claim to be educated, but employers will know otherwise. The phenomenon of the Wizard-of-Oz diploma has discredited the college degree.

...many entry barriers in education are artificial. One of the biggest entry barriers is that government aid to education is given to incumbent institutions, rather than to parents and students. It is difficult for an entrepreneur to compete with a school or college that receives a hefty subsidy from the government. Changing the form of government aid from institutional assistance to vouchers would be a major step toward removing entry barriers in the field of education.

Another entry barrier is the accreditation process, which is controlled by the incumbents. Imagine what would happen in another industry, such as supermarkets or landscaping services, if in order to start a new business in that industry you had to become accredited by a board consisting mostly of incumbents in that industry. Nobody likes competition, and it is easy to think of excuses not to accredit a newcomer, especially an innovative upstart. If we had such an accreditation system in place in other industries, competition would be stifled, and the incumbents would be under no pressure to improve service or reduce costs. Creating a consumer-oriented accreditation board would help to lower this important entry barrier.

In my view, the key to improving education is removing entry barriers and allowing alternative schooling experiments to flourish. From this perspective, the politicians of both parties who are most strongly "pro-education" are in fact the biggest obstacles to improvement, since their policies serve only to entrench the educational establishment.

So, no tuition subsidies? No limiting the competition? What's next? Defined-Contribution Plans instead of Defined-Benefit Plans or Money-Purchase Pension Plans for state employees? Oh, the humanity!

Update
More from Debating debt:

it's possible that college doesn't cost students enough. One of my favourite professors said to me, just before I graduated from a very expensive institution of American higher learning, "Why is it that you all spend so much time trying to make sure that you get as little as possible for your $100,000?" The answer is that since we mostly weren't paying for it, we didn't value it very highly.