Sabio Column

By James H. Choi
http://Column.SabioAcademy.com
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The concept of “free” or “freebie” has the power to distort reality. After all, there’s no escaping the fact that someone has to pay for something somewhere. Making something artificially free has unintended consequences—someone must cover the difference or incur a loss. In particular, if the person receiving the free benefits has more power than the one bearing the losses, this distortion becomes entrenched.

A representative example is the “free college” system. In Korea, there was once a “half-price tuition” movement, while in Brazil, they went a step further—state universities (which include most of the country’s top institutions) are legally required to provide free education. In other words, a system has been in place for decades where students can attend the best universities for free, as long as they study hard, regardless of their family’s financial circumstances.

What is the result? Children from wealthy families monopolize free college, while students from economically disadvantaged backgrounds either attend expensive private universities or give up on college altogether. In the end, the poor end up paying taxes to fund the college education of the wealthy, allowing them to maintain their social superiority.

The reason lies in the entrance exam. The University of São Paulo (Universidade de São Paulo, USP), considered the best university in South America, selects students through a highly competitive entrance exam. To pass, students must undergo rigorous preparation, which often requires attending an expensive private high school. The high school I attended was particularly well-known for sending many students to USP. As the entrance exam approached, large private institutes would visit our school, offering free review course certificates in exchange for our names. (I even sold my name to give to a friend.) These institutes would then use our names in newspaper advertisements and promotional materials as “lists of successful applicants,” creating the illusion of a high acceptance rate.

The problem was that students who couldn’t afford private high schools were often misled by these advertisements. Believing they had a real chance, they would spend large sums on “short-term intensive courses”—only to suffer significant financial loss.

From a Korean perspective, one might assume that even financially disadvantaged families would send their children to expensive private schools, struggling to secure a place at the University of São Paulo. However, in reality, such cases were rare—only my Korean friend’s family and mine did so. Most of my Brazilian friends came from financially well-off families.

Why has this flawed free college education system, which all Brazilians recognize and criticize, been maintained for decades? Because those who benefit hold power, while those who are harmed remain indifferent or have low voter turnout.

The same is true in the United States. On the surface, the American public high school system, which is almost “free,” gives the impression that every student can receive a quality education regardless of their family’s income. However, in reality, school districts manipulate local real estate prices, creating a system where only those who can afford to buy property gain access to excellent public education.

Until 2008, this was a privileged package that combined “free education” with “real estate investment profits.” High schools like New Trier, located in affluent areas, were highlighted in Savage Inequalities—a book criticizing educational inequality in the U.S.—as a prime example of privileged schooling.

About 10 years ago, District 211 in Schaumburg voted to raise property taxes to increase school operating expenses. The notices sent to residents at the time included the statement: “If your school fails to offer AP classes and other programs, the quality of your home will decline, and so will its value.” This felt more like a threat than a notice, and residents ultimately approved the tax increase.

The same pattern applies to public high schools that select students through entrance exams. Almost without exception, the list of successful applicants is dominated by students whose families have invested heavily in exam preparation. Ultimately, the conclusion is clear: in the United States, receiving a good public education largely depends on coming from a wealthy family.

This kind of distortion isn’t limited to education. At a popular singer’s concert, the real value of a seat is determined independently of the ticket price. Even if the concert is free, ticket prices skyrocket to market value through the black market. In other words, whether an event is free or paid, the final cost to the audience remains similar—it’s just the channel through which the money flows that changes.

The same applies to religious events. When Pope Benedict visited New York, free tickets to his Mass at a baseball stadium were distributed exclusively to Catholic church members in the city. However, those tickets soon appeared on the black market, selling for around $200 each.

This principle also extends to various rapidly growing free services, such as online university courses, Wikipedia, and open-source programming languages. These services have the power to distort markets, benefiting some while disadvantaging others. And the people who will be most directly affected by these shifts are our children, who are just beginning their journey into society.

A deeper analysis of this issue will be covered in Part 2.