Occasionally the Bennett Hypothesis, which holds that federal financial-aid programs contribute to college-tuition increases, gains support from unlikely sources. A year ago, for example, Richard Vedder pointed out in this space that Vice President Joe Biden, contrary to the received wisdom in the White House, endorsed the basic tenet of the Bennett Hypothesis. Now we have Kevin Carey, in a somewhat confused but nevertheless thought-provoking essay, announcing his agreement with that hypothesis while trying to deny that he does:
The thesis advanced in some conservative and libertarian circles that federal aid causes increased college spending has tenuous empirical support. But federal aid has certainly abetted college spending, allowing institutions to avoid the kinds of difficult structural reforms experienced in other industries.
The first sentence is entirely defensible (even if it were to turn out to be incorrect), but I should point out that Carey is attacking the simplest (and laziest) version of the Bennett Hypothesis. Variations and improvements to the basic Bennett Hypothesis model (see this CCAP paper by Andrew Gillen) allow for the complexities of college pricing because those are necessary for us to explain why the empirical evidence on Bennett Hypothesis effects are often “mixed and contradictory.” It’s because of the mixed evidence that Carey makes a valid point when he criticizes the view that federal aid necessarily drives up college costs in all cases.
What is fascinating to me, though, is Carey’s next sentence in the above excerpt, which contains a surprising admission, given his previous sentence. His language (“federal aid has certainly abetted college spending”) is remarkably similar to former Secretary of Education William Bennett’s original formulation (“increases in financial aid in recent years have enabled colleges and universities blithely to raise their tuitions, confident that federal loan subsidies would help cushion the increase”). Despite his stated aversion to the notion, evidently Carey feels compelled to embrace the core of the Bennett Hypothesis. No wonder why it has stuck around with us for more than 25 years.
