What happens when a whole society wastes time and money on college

In Two big questions for economists today (2015) I reported that, coming away from an economics convention, one of the big questions was “Can higher education make a person more productive at his or her ultimate job?” It sure seems as though the answer for American higher education is “oftentimes no”. The New York Times today is focusing on the evils of the financial institutions profiting from Americans’ blind faith in the university system, e.g., with “Loans ‘Designed to Fail’: States Say Navient Preyed on Students”. I think the details are more interesting and the Times provides that with a separate story: “Voices of Navient’s Borrowers: ‘The Biggest Mistake of My Life’”

One 36-year-old attended two public schools in Florida and came out with what is now $83,300 in debt. She got a “B.A. in maritime history.” In the old days a young person from a wealthy family might have enjoyed four years studying maritime history (tuition would have been about $500 per year back then too). Somehow today this same experience is being marketed to the non-rich. For me the interesting question is why public universities don’t put more effort into online degrees in subjects such as these. Georgia Tech can deliver an online master’s in CS for $7,000. If learning maritime history is mostly reading books that are available in libraries or are no longer within copyright, why couldn’t a degree in the subject be earned by downloading a reading list and writing some papers? If the mission of a public university is to educate the public at a reasonable cost, why didn’t they offer this kind of degree online starting in the 1980s when personal computers became popular or the 1990s with the rise of the Web?

[Separately, if you’re a young economist and don’t like this subject, let me suggest looking at the effects of the change to no-fault divorce in the 1970s (history) and the 1990s switch to child support guidelines (in many states, these give a higher spending power to the person who has sex with a high-income partner than to the person who marries a medium-income partner; they also make it more lucrative to have sex with a high-income person than to go to college and work). See “Litigation, Alimony, and Child Support in the U.S. Economy” for an example. A group at MIT led by David Autor, for example, was referenced in the New York Times for their 2016 look at how children turn out depending on whether they are raised in two-parent or single-parent households. They didn’t have to compete for attention with a classic paper from 1960 because the government didn’t encourage single-parent households back then and there weren’t enough of them.]

4 thoughts on “What happens when a whole society wastes time and money on college

  1. Noah Smith at Bloomberg had an interesting article a few days ago: How Middle-Class America Got Fleeced. He mentions the high cost of college tuition, but as one of only several factors:

    The white middle-class that tended to support leaders like Ronald Reagan, Newt Gingrich and George W. Bush, lost huge percentages of their life’s savings because of excessive fees paid to actively managed mutual funds, financial advisers, stockbrokers, pension fund managers and the like. They also paid 6 percent real estate commissions even as people in most countries paid much less. They rejected the Clintons’ health-care plan in 1993, and ended up paying double what people in other countries pay for comparable treatment. They forked over more and more money in college tuition. They paid higher prices to companies that went on to monopolize markets after spending millions convincing the government to allow their megamergers. The spectacular rise of U.S. wealth inequality shows that trillions of dollars in middle-class assets were shifted up the socio-economic ladder into the hands of a relatively small and fantastically rich upper tier.

    Each of these little free-market failures was another slice off of the ham that was the wealth of the American middle class. The people who thought they were going to be the guests of honor at the feast ended up being the main course.

  2. The whole point of college is to allow young adults to drink and screw in relative peace. As Mark Twain said: Don’t let college interfere with your education

  3. Noah Smith is very misleading. Much of the white middle-class is working in healthcare at generous wages with excellent benefits, which is a major reason healthcare costs are higher here than in other countries. They also had consumption benefits from rising home prices that far exceeded the six percent commission on any home sale. And even the fee stuff is outweighed by the long-term up trend of the market. Much of the white middle-class also works in education, where the tuition for post-BA credentials and sometimes BA/BS themselves is often paid for by the employer rather than out of their own pockets, so they are in many cases insulated from price increases while reaping the financial windfall of additional credentials.

  4. So you think that the white middle class is doing fine, then? Smith noted on Twitter that median wealth in the US is pretty low, compared to Europe. A 2014 article.

    You’re saying that part of the rents from overpriced health care and education are going to the white middle class. But there’s a limit to how prosperous you can be by taking in each other’s laundry!

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