Yesterday the Biden administration announced that is forgiving up to $20k per person in student debt. So far we’ve seen lots of debate over whether this was a good/fair idea; as an economist who paid back his own debt early, you can probably guess what I have to say about that, so I’ll move on to the more interesting question of what happens now.
The above is a quote from Thomas Sowell as a political commentator, but he was also a great economist. His book Applied Economics says that the essence of the economic approach to policy analysis is to not just consider the immediate effect, but instead to keep asking “and then what?” So let’s try that here.
We’ll start with the immediate effects. Those whose debt just fell will be happy, and will have more money…
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