Luxembourg's 'free' school books aren't free
Pre-paying for goods and services through taxes does not make them free, writes Bill Wirtz
The Luxembourgish government prides itself on its education policy, which, on a practical level, attempts make every aspect surrounding education "free". Children starting school this month will be the first to have access to school books "free" at the point of use. They also benefit from 20 "free hours" of preschool and "free" public transport, which also includes students.
How exactly the government can make goods and services free remains the question because, of course, someone did have to pay for them in the first place. Be it through VAT, excise tax, income tax, taxes in interests or petrol tax, everyone in the Grand Duchy is a taxpayer and contributes to the system that sustains the welfare state. The question of whether that is a fruitful investment is a debate in and of itself, but the idea that minister of family affairs Corinne Cahen is correct in saying parents are getting "free" preschool care is pure political semantics.
The Nobel Prize winner and American economist Milton Friedman popularised the so-called Free Lunch Myth by dispelling the notion that anything the government provides is free because mere government spending is a tax itself. Not all inhabitants of the Grand Duchy pay income tax – in fact, only a minority of residents do. But even those who don't are affected by the government's spending, borrowing and inflating the currency. The preschool hours, books and buses have already been paid for by those who consider them "free".
Two problems arise from this situation.
First, it distorts real market prices, meaning consumers don't actually know what their goods and services are worth. Should a short-term public transport ticket in Luxembourg cost €2? Since ticket prices do not cover the cost of the service, it's safe to say that, if the ticket incorporated all the expenses, it would be much more expensive. How is that, for €2, you can go from Luxembourg's central station to the airport when you could just as easily get to Strasbourg, which is more than 250 km away, with a private bus operator for €12? If we take into account the actual prices of government goods and services, we quickly recognise we're being ripped off – and that the idea these services are "social goods" doesn't really reflect the prices citizens must pay for them.
Furthermore, on "free" school books, parents who are now even less inclined to attempt to just copy the relevant pages and not buy the book at all will contribute to increased prices for school books. Those producers unregulated by the Luxembourgish state will see no reason not to benefit from the fact customers are storming into book shops to get books free of charge. Unless the Ministry of Education is willing to take certain school books off the list because they are too expensive, which presumes that viable alternatives would exist, editors would be able to increase prices steadily.
A sense of entitlement
The second problem is that children learn that certain goods and services should be free. If Mom and Dad explain to a child going to school that nobody is paying for the books, the bus or the teachers, then that child will be raised with a sense of entitlement – "Why should I pay for basic services, if I really need them?" This is the precise reason student representatives continuously demand increased subsidies for higher education: for them, education should be viewed as a necessity. They shouldn't need to work for their own education.
Raising children by making them dependent on handouts cannot possibly create responsible adults. In essence, the question is really: what is a complimentary good or service today that will be considered a basic need in a couple years' time? What about the right to a free phone, which, in the age of information, is absolutely necessary? That list could get very long very quickly.
The Free Lunch Myth didn't start as a theory on public policy. In the US of the 1930s, restaurants would serve "free" lunches for drinking customers who paid for their drinks. At least back in those days restaurants made more than they would have otherwise. It does not take an economics degree to understand that the price of the food was tucked into the price of the pint. The same goes for free books and buses.
Whether or not you consider goods and services surrounding education to be so important they need to be "free" is a debate that needs to take place. But, before then, everyone should agree that all of these subsidies need to be examined for their causes and effects. The government should be able to put "free" services on the table only if it can prove it can provide the service more cheaply than the market.
Those Luxembourgers fond of the saying "Vu näischt kënnt näischt" ("Nothing comes from nothing") should know this best. Let's hope they teach this lesson to their children.