Skip to comments.Is College Worth It? (the coming digital revolution in academia)
Posted on 03/11/2006 12:56:51 PM PST by Dark Skies
Asset classes--stocks, bonds, real estate, collectibles--are always competing with one another. Each clamors for our spare dollars. For periods we favor one asset class over others (e.g., stocks from 1982 to 2000). But when a collective judgment is reached that a particular asset class has been bid up too high, dollars are pulled and the asset class shrinks in value. Real estate may now be at that point.
I can think of only one asset class that in my adult life has outperformed GDP growth plus inflation yet has been blissfully immune from busts--any busts at all. That is the value of a four-year-college degree. When I graduated from college in 1976, our class joker had T shirts made up that said $24,000 for one diploma and a lousy T shirt. Actually my diploma and shirt cost only $12,000, as I had transferred from a community college where Id been on a track scholarship. Those Adidas spikes, pricey at $24.95 in the early 1970s, were a great investment.
Today it costs $175,000 to send your kid to my alma mater. Yep--thats the market price for four years of tuition and expenses at any elite private college. Did I say elite? Sorry. The second- and third-tier private colleges have also learned this economics game. They, too, are charging north of $100,000 for a four-year degree. And parents are lining up to write checks. Special Offer for Forbes.com members -- receive a Free Trial Issue of Forbes Magazine... no risk... no obligation! Click here for your Free Issue!
Do you suspect that this asset class--a four-year-college degree--might be overpriced? I do, for three reasons:
# Search engines such as Google have ushered in the era of open-source learning. Society is rapidly progressing to the point where any Googler is on equal footing with a Widener Library pass-holder.
# Most of todays higher-paying jobs go to those who exhibit a combination of adaptable intelligence, numeracy, communications skills and a strong work ethic, as opposed to evidence of specific knowledge.
# Which leads to a third, and no doubt controversial, point. Society once counted on universities to imbue students with the traits named in the paragraph above. It was once assumed, for instance, that a liberal arts degree holder was numerate and literate and knew how to draw lessons from history, weigh evidence, think, write, speak, debate and learn. Or so Larry Summers, the ex-Harvard president, innocently imagined. He thought undergrads should learn about the math-and-science-driven world theyd be entering as adults. This belief conflicted with the postmodern professoriat that prefers cutting rap records to teaching--or, if forced to teach, teaches liberation theology over the American Revolution. Summers lost the battle.
My prediction is that parents who risk their own financial security shelling out $100,000 to $175,000 for a four-year degree will lose, too. History will show that they could have achieved far greater returns for themselves and their children in other asset classes.
Why does the price of a four-year degree keep rising? Past performance is one reason. The cost of college degrees earned in the 1940s--tuition at Yale was $450 in 1940--through the 1980s looks like a bargain compared with the cost of those today. The return on investment for older degrees has been spectacular. Take a well-known statistic: As recently as the 1970s, there was little difference in the lifetime earning potential between a high school grad and a four-year-college degree holder. But in just one generation the four-year degree holder has leaped ahead in the earnings wars. In 2003 he could have expected to earn 62% more than the high school grad.
But theres no guarantee the present trend will hold. It might even reverse. The same forces--technology and globalism--that quelled the wage growth of blue-collar workers may do the same to white-collar workers. Already software writers feel salary pressure from India, cartoon animators from China, classified ad salesmen from Ebay and so on. Despite this, you may conclude that my opinion of the worth of a college degree is nonsense. Degrees have always gone up in value, you think, and always will.
Degree Is Just a Proxy
Okay. Allow me to pose a question. Suppose you are an employer and are filling jobs for which no credential is required. In other words, for typical white-collar jobs--product design and engineering, sales, marketing, non-CPA accounting work and so forth. Would you pay a steep salary premium for a four-year degree holder versus a high school grad? You might. Perhaps youd think the four-year degree speaks to the job applicants intelligence, along with a certain facility to set goals and finish them.
But what if you could guarantee those qualities in other ways (military service, missionary work, etc.)? See, I think the Harvard or Yale degree is worth plenty, not because of what Harvard or Yale teaches--the postmodern university can do more harm than good; witness Yales admission of a former Taliban spokesman. The degree simply puts an official stamp on the fact that the student was intelligent, hardworking and competitive enough to get into Harvard or Yale in the first place. May I present to the jury Bill Gates? He was smart enough to get into Harvard. Then he proved his financial intelligence by dropping out to start a company.
Okay, enough Harvard/Yale whipping. Like oceanfront property, their degrees will always command a premium and will probably pay out a terrific ROI. The same is true of degrees from 10 to 20 other private colleges. But beyond those 10 to 20 schools, I suspect the price of a four-year, private college degree--$100,000 to $175,000--will be money poorly invested.
Not so sure about this. I think the Ivy Leagues are going to lose their reputation in 10-20 years.
Good post. Thank you. Anyone know if there's a financial / stock market ping list on Free Republic? I've been looking for one.
Invest that $100 grand plus into the Dow Industrial index and your child can retire by the time they are 50. And he or she won't need a high paying, high stress job.
I imagine he wanted to avoid a slap at Steve Forbes' alma mater (Princeton IIRC).
Alternate path = 2yrs at the local J.C. & a $100,000 down payment on a Cat D8, etc.
no workplace drama/trauma
in charge of one's destiny.
Democrats need not apply !
Rightly or wrongly, there is a certain amount of credibility one has, even in "non-credentialed" fields like those above, that a degree brings. A non-degreed person may very well be as or more intelligent than one with a degree. But that non-degreed one will find it harder to be accepted professionally, as his or her peers that went to college will say, "what do you know about <-fill in the blank->?"
Whaddya think? Any chance?
Considering what is going on in these days (see Horowitz, The Professors), I see zero (or perhaps even negative) value in a so-called "liberal arts" degree. Sooner or later, the public will wake up to this reality, one would hope. Then the looney "professors" will have to find another scam.
Engineering and science is another matter, of course.
Elite liberal arts schools are not worth the money because they stopped hiring professors based on merit but rather skin color and gender, forcing the best and brightest to seek employment elsewhere.
They should, but they won't.
Its REALLY gotten me thinking as well....
Is education a free market? apparently not. Like healthcare, its regulated, protected, subsidized and pampered. Which is why its product prices dont reflect their true value in a more competitive environment.
I too think the overrated 4 yr college education craze will fall by the wayside. I don't quite think that art=fart but can see why people who do, do. The liberal arts education offered today is plain atrccious.
As for the degree proving you have intelligence or ability . . .
Equivalency exams do the trick.
Honestly, state schools are the way to go for undergraduate education. Having attended both a top 15ish university and a standard State U, I'd choose State U hands down. Better environment, more enjoyable people, and a lot less $$$.
Unless you're going to Wharton undergrad or a top-notch engineering field, why bother with all that expensive tuition?
Save the money for UVA, Chicago, or Penn Law. Much better return for your money there. Same thing goes for business schools. Not really medicine.
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