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The college graduate as collateral

Published: Thursday, June 14 2012 4:50 p.m. MDT

Just as subsidies for homeownership have increased the price of houses, so have education subsidies contributed to the soaring price of college.

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Our take: University of Chicago business professor Luigi Zingales once again shows his chops as one the most creative defenders and thinkers about capitalism by reviving (and refining) and idea from Milton Friedman — allow investors to make equity investments in the human capital of promising young students. His opinion recently appeared in The New York Times:

Investors could finance students education with equity rather than debt. In exchange for their capital, the investors would receive a fraction of a students future income — or, even better, a fraction of the increase in her income that derives from college attendance. (This increase can be easily calculated as the difference between the actual income and the average income of high school graduates in the same area.)

This is not a modern form of indentured servitude, but a voluntary form of taxation, one that would make only the beneficiaries of a college education — not all taxpayers — pay for the costs of it.

Read more about The College Graduate as Collateral on The New York Times.

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