"美式资本主义的骄傲"2: College Scam
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2019-04-23 07:00 by Karl Denninger
in Education , 58 references
How do you know something is a scam?
You get something like a "financial aid letter."
Congratulations - you are considering college! But first, paying for it: Students who applied for financial aid through the Free Application for Federal Student Aid, or FAFSA, should be receiving their award letters right about now.
Different schools have different names for these letters: financial aid offer, merit letter, award letter or financial aid package. And there's no standard format for them either, so deciphering how much assistance you're getting and how much you'll pay can be very confusing.
Who cares if they're "confusing" -- they're all factually felonious.
Let me explain.
In a competitive market the question is never "how much can you pay", which is the entire point of such a "letter."
That is, the entire process is structured around figuring out how much you can fork up when considering the "desirability" of your spawn to attend said school (in their view) which has to do with their innate characteristics and efforts (e.g. how black they are, for example, whether they can perform higher mathematics or whether they're a good football player.)
That this process exists is proof of collusion and market power, and between those two you have the defining element of a violation of 15 USC Chapter 1 which is a felony.
Colleges are not exempt from said law yet none of them get prosecuted.
How do we know this is proof?
Because in a competitive market the price of a good or service never has anything to do with what one can pay.
It is always a function of how low can competitors in a market set prices and still remain in business.
When I ran MCSNet we had roughly 100 competitors in our local marketplace. The local grocery store and gas station are the same; they both have many competitors. None of these ask for my financial information before giving me a price, nor does WalMart. Nor did MCSNet.
In all such cases where competition exists each individual firm's pricing decision is based on what they can sell at and still make a profit. Lock-step price changes are proof that no actual competition exists since each business has different costs, no matter how small. To intentionally not undercut your competitor when you are able to do so, even if by only a penny, is proof of collusive action whether formally or not and 15 USC Chapter 1 does not require a formal agreement.
The two boundaries of price are the maximum utility value to the consumer of a good or service on the upper end and the minimum at which a profit can be made by the provider on the lower end. Violate either and the production of either good or service goes to zero -- either because nobody buys an item that costs more than its personal utility value or because it cannot be produced and remain in business.
In a competitive market price will always be just above the lower limit. It cannot be otherwise; it will be slightly above the lower boundary because a profit must be more than 0.001%, obviously, to entice someone to enter and remain in a business. But world-wide over the space of hundreds of years market data says that mid-single digit to roughly 10% is where that natural margin rests in every single case. In other words being able to make 10% is sufficient to entice someone else to come into a market, and therefore that's the upper boundary in a competitive marketplace.
I can personally vouch for this; when I ran the original instantiation of Macro Computer Solutions Inc. (before I ran the second invocation, which was the internet business) we sold computer hardware, custom software and installation services (e.g. data cabling for ASCII terminals, etc.) We were always looking for a new angle on a line of business where few or no others were present given whatever unique advantage we could find.
Why?
Because in every other area of work we did where there were plenty of competitors margins always shrunk to 10% or less and we saw the same thing when comparing potential suppliers. Yet that was enough among every one of our suppliers to remain in business; that is, they wouldn't leave a 10% margin on the table and close up shop -- they were not only happy with it they were ecstatic as it was roughly double what the large company down the street was making!
Think I'm kidding? Look at publicly-available large corporate entities.
WalMart has a 1.3% profit margin and a 4.3% operating margin. They haven't decided to close.
Target? 3.9% profit margin, 5.61% operating margin. They haven't closed either.
Kroger? 2.57% profit margin.
Humana -- a health insurance firm? 2.95% profit margin, 5.47% operating margin.
All of these firms have plenty of competition in the markets they serve. All of them price at single-digit margins over cost.
Now look at that college letter again.
Where do you see any evidence that they're pricing based on their cost of delivering Calculus to your soon-to-be-collegiate son or daughter's mind? Nowhere. In fact what your son or daughter pays could be 400% more than the kid sitting next to him or her in the very same lecture hall.
They can only get away with that by doing things that are supposed to be illegal under 100+ year old law. Were they not doing any such things they'd be out of business in an afternoon if they tried this because none of the people paying the 400% more would pay; they'd go somewhere else to get the same thing at 1/4 the price, which the alternative could provide and still make a profit.
By the way the same thing is true in health care; nobody would pay 500% as much as the guy in the next bed with the same treatment being given if they knew that in advance. The guy paying the 500% more would go somewhere else and pay 1/5th as much. Prices would immediately normalize because the alternative to pricing at a reasonable margin over cost would be that all the people you gouged would leave and you'd be out of business in a week.
All of this bullcrap in colleges is a felonious scam and every one of the institutions involved deserves to be legally burned to the ground and the earth they sat on, along with that of all their former employees, salted and covered in lye to prevent anyone from ever so much as thinking about doing it again.
But instead you'll fawn over Pocahontas who has put forward a plan to make you pay for the monopolistic and felonious action of colleges that has resulted in over a trillion dollars in debt, all occasioned by fraud and felony. **** that, **** her, and those who intend to steal via such mechanisms need to be told that not only will we not consent we'll revoke consent to be governed in its entirety if they don't cut this crap out.
I insist that the felonies committed by these "businesses" and "institutions" be prosecuted and the politicians who egg them on deported to Somalia where they can learn all about the servitude they wish to impose on others.
