Tuesday, May 10, 2011

The Higher Education Bubble

Article by Peter Thiel of PayPal

Blog entry by John Robb

Higher Education's Bubble is About to Burst by Glenn Reynolds, May 10 2011:
So what happens if the bubble collapses? Will it be a tragedy, with millions of Americans losing their path to higher-paying jobs?

Maybe not. College is often described as a path to prosperity, but is it? A college education can help people make more money in three different ways.

First, it may actually make them more economically productive by teaching them skills valued in the workplace: Computer programming, nursing or engineering, say. (Religious and women's studies, not so much.)

Second, it may provide a credential that employers want, not because it represents actual skills, but because it's a weeding tool that doesn't produce civil-rights suits as, say, IQ tests might. A four-year college degree, even if its holder acquired no actual skills, at least indicates some ability to show up on time and perform as instructed.

And, third, a college degree -- at least an elite one -- may hook its holder up with a useful social network that can provide jobs and opportunities in the future. (This is more true if it's a degree from Yale than if it's one from Eastern Kentucky, but it's true everywhere to some degree).

While an individual might rationally pursue all three of these, only the first one -- actual added skills -- produces a net benefit for society. The other two are just distributional -- about who gets the goodies, not about making more of them.

The Higher Education Bubble by Richard Vedder, April 5 2011
The sad thing about it all is that much of the increase in governmental spending that is at the root cause of most of the bubble has been undeniably wasted. The goal was to increase enrollment among the poor, arguing that equal educational opportunity is an important step in achieving the American Dream. Yet the percentage of college students in, say, the bottom quintile of the income distribution is lower today than it was in 1970 before we even had, for example, Pell Grants.

Wikipedia entry on "higher education bubble"

Article in The Economist

Industrial Education by John Robb. "costs for collegiate education have increased 4.39 times faster than inflation over the past three decades and has now eclipsed affordability for most households (median incomes have stagnated during this same period) with no appreciable improvement in the quality of graduates." (see graph below)


College Unbound

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