Will Higher Ed Be Next Bubble To Burst Open?

IBD Editorials ^ | July 20, 2011 | MICHAEL BARONE

[Kaslin]

When governments want to encourage what they believe is beneficial behavior, they subsidize it. Sounds like good public policy. But there can be problems. Behavior that is beneficial for most people may not be so for everybody. And government subsidies can go too far.

Subsidies create incentives for what economists call rent-seeking behavior. Providers of supposedly beneficial goods or services try to sop up as much of the subsidy money as they can by raising prices. After all, their customers pay with money supplied by the government. Bubble money, as it turns out. Sooner or later, bubbles burst.

We are still suffering from the bursting of the housing bubble created by low interest rates, lowered mortgage standards and subsidies to Fannie Mae and Freddie Mac. Those policies encouraged the granting of mortgages to people who should never have gotten them — and when they defaulted, the whole financial sector collapsed.

Now some people see signs that another bubble is bursting. They call it the higher-education bubble.

For years, government has assumed it's a good thing to go to college. College graduates tend to earn more money than non-college graduates. Politicians of both parties have called for giving everybody a chance to go to college, just as they called for giving everybody a chance to buy a home. So government has been subsidizing higher education with low-interest college loans, Pell grants and cheap tuitions at state colleges and universities.

The predictable result is that higher education costs have risen much faster than inflation, much faster than personal incomes, much faster than the economy over the past 40 years.

[WeatherGuy]

Beware the Government-Education Complex.

[Nailbiter]

ping on 12,

[aruanan]

Read "Faculty Lounges"--this Barone does not put enough on the shoulders of the Parasites Hunting Dinner who rip us off, work 11-2 on Tues, Wed, Thurs, let grad students to all the teaching.

At least they don't do this at the University of Chicago. The classes are taught by the actual professors. When I, as a grad student, assisted in a class in the biological sciences for undergraduates, I taught one section of material for about two class periods out of the entire quarter, but that was part of my training.

[OCC]

Whenever a slimy pol says "make it easier", watch out for your wallet.

[Cheburashka]

my thinking is, if you limit the number of degrees per year (like nursing/med schools have done for decades), then you don’t have 500,000 people with psychology degrees oweing the taxpayer $150K+ in federal student loans apiece, they likely will never repay (and in fact, may tend to be ‘professional students’).

---

So how many thousands of government bureaucrats you plan to hire to decide how many psychology degrees we need per year? As well as every other kind of degree, of course.

Your solution is bound to start the Obamanation salivating. The obvious answer to any problem you can identify: A New Government Program!! More rules!! More regulations!! Then more programs, more rules, and more regulations to solve the unintended consequences of your original program!!

Um, I suggest letting the market handle it.

[Mamzelle]

Nursing med schools may do a certain amount of “guild mentality” behavior, but the real driver is the high cost of educating any kind of medical personnel. People can’t seem to understand that putting teacher in a classroom is cheap, hiring medical personnel to train students requires a hospital, an interesting patient pool...it is far more difficult to train an RN than a lawyer. But I keep hearing this “limiting” stuff. We wouldn’t be importing all these docs from Muslim countries if we could educate more US doctors. It’s cheaper to let other countries educate the docs.

[Mamzelle]

Suggest you pick up a copy of “Faculty Lounges” or at least skim it in the bookstore...I believe there are a few examples of UofC.

[grey_whiskers]

There are a few other worthy colleges.

Grove City, Patrick Henry College, some of the Catholic schools.

If you liked the Christian band DC Talk they went to Liberty University.

Financially, big state schools are good if you go in-state.

Cheers!

[OldPossum]

...Make professors actually teach classes again.

I am here to testify that they once did. Throughout my years at a small Southern college I was instructed by professors and only professors, almost all of whom were Phds. There were absolutely no grad student instructors there.

[OldPossum]

I should add that that was a long time ago: 1962-66.

[aruanan]

Suggest you pick up a copy of “Faculty Lounges” or at least skim it in the bookstore...I believe there are a few examples of UofC.

I'll look for it in the bookstore. I've been here since 1994 and this place is quite unlike industrial-sized schools like University of Illinois at Chicago (UIC).

[freedomfiter2]

limit the degrees to x number of graduates per field per year based on future job availability actuarial estimates. Now we’re talkin...

That would put the government in charge of predicting the future and awarding those degree slots.

[blueplum]

I see your point, but we already have the system in place.

We already know to a certain degree, how many jobs total are available in just about every occupation, and how many jobs are expected to be added, based on reported forecasts of number of companies in each industry, with a fudge factor for start-ups. This info is produced at least annually. We could lose upwards of half of the govt people pushing around mountains of paperwork generated from loan renewals, add-on loans, defaults, etc. Costs of education go down, number of ‘professional students’ go down, quality of graduates increase, and more people can be educated towards occupations that are not already top-heavy and where they can actually find employment.

What other solution do we have to solve the runaway studentloan/educationcost problem, factoring the upward costpush of educational unions’ influence on a “free-market” system?

[dangus]

>> This...is a bubble I could get behind 100% - pop it, bring the cost of education back down to reality and limit the degrees to x number of graduates per field per year based on future job availability actuarial estimates. Now we’re talkin... <<

Government action to limit education? You Liberal, you!

HHOK

But seriously, put an end to government incentives, and the market will balance itself out.

[Vide]

It’s basic math:

In the old days, university degrees used to be calibrated so that they were attainable by someone with what was then considered to be “elementary school teacher’s” academic ability - an IQ of 115 points.

Of course, IQ doesn’t correlate perfectly with real-world ability, but if it’s a proxy for anything, it’s for academic ability.

IQ is normally distributed.

An IQ of 115 points is 1 standard deviation above the average (which is, by definition, 100).

30% of any normally distributed population is 1 standard deviation or more above the average.

Hence, only 30% of the general population could potentially have gained a degree under the old standard. (Of course, far fewer had the chance of a college education in the “bad old days”.)

Last year, 70% of US High School grads enrolled in 4 year college.

The least academically gifted of those 70% will have an IQ one standard deviation (15 points) below the average - 85 points.

In less politically correct days, an IQ of 85 was considered “educationally sub-normal”.

Bottom line: what is the value of a qualification that is calibrated to be within reach of 70% of the population?

I’m guessing the value is materially below the current cost of a four year degree.

Sorry to be a party-pooper: of course it would be “nice” if everyone could get a college degree, but a degree that anyone can get is worthless.

Time to end the shameful scam that loads kids up with debt for inappropriate and useless “qualifications”.

[OrangeHoof]

The difference is that a college education produces extremely little in terms of tangible goods. When you subsidize a house, at the end you get a house. When you subsidize an oil well, at the end you get oil (hopefully). But when you subsidize a college education, all you are getting, at best, is a better mind. But there is no tangible asset acquired and, therefore, nothing of real value acquired. You *could* use that mind to get a better job or invent a better technology, etc. but there’s no guarantee of that. Some of the sharpest minds in technology today never completed college before they started making their millions.

[Mom MD]

Hillsdale college and Colorado Christian university are conservative and excellent schools

[arthurus]

I am a security guard at a beach resort. We get "Spring Break" crowds and we get the summer people. It has been my observation that the college age kids and those up into their thirties each year are dumber than the year before. This year the decline is precipitous rather than a continuation of what had seemed to be an even progression of decline. People do not recognize standard hand signals for "proceed" or "hi." I find myself using shorter and shorter words and limiting my sentences to three words with as few adjectives as possible. Foreigners with little English are much easier to communicate with than American students and young adults. This is the cohort that will be our next generation of managers. this is the group that will be supplying our government functionaries and electees. I don't think we are going to come out of this depression.

All the good that solid conservatives might do in Washington and the state governments must come to naught because these kids will be their successors.I suppose it is not a scientific sampling and perhaps this resort is experiencing some odd confluence of college retardation and modern noneducation this past half decade but I am not optimistic.

[M1903A1]

“I’ll look for it in the bookstore. I’ve been here since 1994 and this place is quite unlike industrial-sized schools like University of Illinois at Chicago (UIC).”

I attended UIC for a few years in the 90s. Talk about a total abomination of a school.

Their library collection was fantastic, and I found a small handful of good profs who really cared about their subject and doing their job, but on the whole I learned more working my way through college than in a UIC classroom. And their add/drop and refund policy was outrageous.

I transferred out after three years and never looked back.

[PA Engineer]

Beware the Government-Education Complex.

Excellent and a keeper!