Tuesday, September 11, 2012

Is College Worth It?

My girl, Megan McArdle is blogging again, now at the Daily Beast. It's fitting that I discovered this today, as I first started reading her blog in 2001, when she was volunteering at Ground Zero.

Today, in a Newsweek article she's looking at whether college is a good investment, and it's not the slam dunk that it used to be:
Experts tend to agree that for the average student, college is still worth it today, but they also agree that the rapid increase in price is eating up more and more of the potential return. For borderline students, tuition hikes can push those returns into negative territory.
She articulates various reasons for the declining returns on education, including increased competition, spiraling costs, and the use of a degree as a "signal" of qualification, rather than indicia of actually valuable skills. She hammers this home with me, by looking at English majors with no skills who use law school as the springboard to a career. Today there are 45,000 graduates competing for 30,000 positions, which means that the high-paying, interesting jobs that JDs expect after three years are by no means guaranteed. As a clueless, average student from a pretty good law school, who wanted to relocate, I had a tough time finding a job in 1990, and then felt a lot of financial strain from the now piddling $30,000 of debt I'd incurred; I'm not sure that things would work out similarly for me today. Moreover, I was able to retire my loan debt by way of refinancing our DC mortgage (and then reselling the house) during the height of the housing bubble.

As I mentioned before in my post about Marginal Revolution University, I am hopeful that there will be some changes to the model before the OG is ready to matriculate, but that's just a scant five years away, not a lot of time for a thoroughgoing restructuring of hidebound academia.

So computers are replacing people, who are spending more on girding themselves to race against the machine, convinced that a gazillion dollars for a circle of lifetime friends and a short, cloistered respite from reality is a good "investment." That sounds eerily reminiscent of another bubble:
Just as homeowners took out equity loans to buy themselves spa bathrooms and chef’s kitchens and told themselves that they were really building value with every borrowed dollar, today’s college students can buy themselves a four-year vacation in an increasingly well-upholstered resort, and everyone congratulates them for investing in themselves.
We want to give our kids every chance to succeed, but I think we also have to be wary of buying in to the idea that what worked before is the way to go this time. I'm glad people with data are talking about it.


  1. I don’t know what makes me feel older. Hearing the same old stories, recycled to a different time and place. Or watching my fortyish kids turn into grumpy old men. It seems that each generation wants to consolidate its own gains and then close the gate behind them. The boomers, having vested their social security and medicare, vote for tea party candidates that want to deny the same benefits to those coming along after them. Even the UAW, now negotiating a new labor contract, thinks that new employees should work for lower wages and reduced benefits while preserving all that they can for their long-time members. The gen-xers, having attained their own (often heavily subsidized education, say that the millenials could just as well do without university. Hey, a high school diploma will do just fine in the present economy, won’t it? No need for that expensive “higher education”. Or maybe they can just download some new skills. What was that line? A “four year vacation in a well upholstered resort”? My students work hard to attain the knowledge and skills that they will need in the increasingly difficult economy of the future. I am always amazed at how each year’s new group seems to be smarter and more capable than the last bunch. Met my first class of the new academic year on Monday. It’s going to be hard to keep up with them. It always is. But then, I’m getting older.

  2. I don't think anyone's impugning the value of education, but rather trying to quantify--as economists love to do--the return on investment. Elite colleges and high performing students(like yours) aside, the data supporting a college education as a guarantee of employment just isn't there like it use to be, and the real costs are inarguably higher, easily outpacing inflation. It seems to me that the model could use a little tweaking, just like the other programs you reference. According to the SSA, you should have retired six years ago, and yet here you are breaking in a new bunch of colts and reporting news to my two hundred-year old grandmothers. Things are different now, at least on the margins, and I don't see why I shouldn't be an advocate for change.