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Education is not an unstable bubble. Looking at the low and high end of the market there does seem to be an education bubble despite plenty of vary good state

Education is not an unstable bubble. Looking at the low and high end of the market there does seem to be an education bubble despite plenty of vary good state schools with reasonable tuition. What people seem to miss is unlike the housing or gold bubble tuition costs don't really feed off each other. The high end is really just a luxury in another form and nothing is stopping Breitling from selling 300,000$ watches any time soon. And the low end is a direct government subsidy (like corn farming) which will continue as long as the government feels the need to waste money. PS: As long as demand is unlimited and wages elastic Technology can't really destroy jobs in the long term even as it disrupts industry after industry. Still, people will always look for the best workers, so even if a degree might not mean an increase in pay the unemployment rate for people with a BS is 1/2 that of those without one for a reason.

dpapathanasiou 15y ago
It has more to do with people getting degrees for the wrong reasons: being educated doesn't mean you will always have economic security. And that's where the housing bubble analogy comes in: there are many good reasons to buy a house, but doing so because you expect its value to increase constantly is not one of them.
- simpleTruth 15y ago
  The Education and Housing markets are complex systems. The bubble analogy works as a vary simplified analogy to describe how some markets can see sustained prices increases for a while followed by a sudden drop. This works with Housing, at a fundamental level if people decided to more houses one year the price increases, and if people buy fewer houses one year the value of your house decreases which can quickly cycle though to dramatic shifts. However, if fewer people decided to get a degree the value of your degree increases.
  - watchandwait 15y ago
    Both systems have a constant: massive government subsidies that distort the true supply, demand, and economic ROI for the good. There could not have been a housing bubble without Fannie and Freddie, the FHA, and the protected-by-regulation class of bond ratings agencies. Similarly, there would not be an education bubble without federal loan guarantees -- certainly they have escalated cost of college, and most of the shady for-profit colleges thrive on student subsidies.
    - simpleTruth 15y ago
      Sorry, bubbles happen even without government action. Read up on the tulip bubble for a classic one. http://en.wikipedia.org/wiki/Tulip_mania http://en.wikipedia.org/wiki/Tulip_mania There is also plenty of blame to spread around. EX: Irish http://en.wikipedia.org/wiki/Irish_property_bubble http://en.wikipedia.org/wiki/Irish_property_bubble burst 2008. UK http://en.wikipedia.org/wiki/British_property_bubble http://en.wikipedia.org/wiki/British_property_bubble burst 2008. Australian http://en.wikipedia.org/wiki/Australian_property_bubble http://en.wikipedia.org/wiki/Australian_property_bubble (yet to burst) etc. What is really interesting is how little the price could increase before market forces brought things back to reality. Housing is such a large percentage of the worlds wealth that we never saw the sort crazy multiples over value that other bubbles get to. EX: http://en.wikipedia.org/wiki/Japanese_asset_price_bubble http://en.wikipedia.org/wiki/Japanese_asset_price_bubble
      - jpadkins 15y ago
        Bubbles require rapid credit expansion. There may be varied reasons for what fuels a particular bubble, but the necessary precondition is easy money/credit. When the government regulates the currency & credit markets tightly, then government should share in the responsibility for the bubble.
        simpleTruth 15y ago
        The largest and least stable bubbles are often driven by credit but there is a wide range of causes. For example, one of the largest and less talked about bubbles comes from the shift from defined benefit plains to 401k style investing. In the mid-1980s there were fewer than 8 million participants with less than $100 billion of assets in 401(k) plans.[3] By 2006 there were seventy million participants with more than $3 trillion of assets in 401(k) plans. Now, what happens to the US stock market as baby boomers retire and there is a significant shift between people buying and selling stocks? PS: Many bubbles are simply money looking for somewhere to hide. Assume the US cut it's military budget by 80% and paid of the debt in 20 years, where do you think that money would end up?
- cmurdock 15y ago
  Hasn't this always been true? Universities have always offered plenty of degrees in fields that are hard if not impossible to find good paying jobs in.
  - arethuza 15y ago
    Other than jobs in academia, of course.
    - esw 15y ago
      This is a terrible time to be looking for work in academia, too.
krakensden 15y ago
> As long as demand is unlimited and wages elastic Technology can't really destroy jobs in the long term even as it disrupts industry after industry Sure it can- because in the real world demand /is/ limited [which is why bubbles pop] and wages are pretty inelastic [because raising wages is seen as a one-way ratchet]. Computer programmers can pretend it isn't true as long as we want, but that's because if someone does come up with a real AI, we're going to be the last ones out of the building.

dpapathanasiou 15y ago

It has more to do with people getting degrees for the wrong reasons: being educated doesn't mean you will always have economic security. And that's where the housing bubble analogy comes in: there are many good reasons to buy a house, but doing so because you expect its value to increase constantly is not one of them.

simpleTruth 15y ago
The Education and Housing markets are complex systems. The bubble analogy works as a vary simplified analogy to describe how some markets can see sustained prices increases for a while followed by a sudden drop. This works with Housing, at a fundamental level if people decided to more houses one year the price increases, and if people buy fewer houses one year the value of your house decreases which can quickly cycle though to dramatic shifts. However, if fewer people decided to get a degree the value of your degree increases.
- watchandwait 15y ago
  Both systems have a constant: massive government subsidies that distort the true supply, demand, and economic ROI for the good. There could not have been a housing bubble without Fannie and Freddie, the FHA, and the protected-by-regulation class of bond ratings agencies. Similarly, there would not be an education bubble without federal loan guarantees -- certainly they have escalated cost of college, and most of the shady for-profit colleges thrive on student subsidies.
  - simpleTruth 15y ago
    Sorry, bubbles happen even without government action. Read up on the tulip bubble for a classic one. http://en.wikipedia.org/wiki/Tulip_mania http://en.wikipedia.org/wiki/Tulip_mania There is also plenty of blame to spread around. EX: Irish http://en.wikipedia.org/wiki/Irish_property_bubble http://en.wikipedia.org/wiki/Irish_property_bubble burst 2008. UK http://en.wikipedia.org/wiki/British_property_bubble http://en.wikipedia.org/wiki/British_property_bubble burst 2008. Australian http://en.wikipedia.org/wiki/Australian_property_bubble http://en.wikipedia.org/wiki/Australian_property_bubble (yet to burst) etc. What is really interesting is how little the price could increase before market forces brought things back to reality. Housing is such a large percentage of the worlds wealth that we never saw the sort crazy multiples over value that other bubbles get to. EX: http://en.wikipedia.org/wiki/Japanese_asset_price_bubble http://en.wikipedia.org/wiki/Japanese_asset_price_bubble
    - jpadkins 15y ago
      Bubbles require rapid credit expansion. There may be varied reasons for what fuels a particular bubble, but the necessary precondition is easy money/credit. When the government regulates the currency & credit markets tightly, then government should share in the responsibility for the bubble.
      - simpleTruth 15y ago
        The largest and least stable bubbles are often driven by credit but there is a wide range of causes. For example, one of the largest and less talked about bubbles comes from the shift from defined benefit plains to 401k style investing. In the mid-1980s there were fewer than 8 million participants with less than $100 billion of assets in 401(k) plans.[3] By 2006 there were seventy million participants with more than $3 trillion of assets in 401(k) plans. Now, what happens to the US stock market as baby boomers retire and there is a significant shift between people buying and selling stocks? PS: Many bubbles are simply money looking for somewhere to hide. Assume the US cut it's military budget by 80% and paid of the debt in 20 years, where do you think that money would end up?
cmurdock 15y ago
Hasn't this always been true? Universities have always offered plenty of degrees in fields that are hard if not impossible to find good paying jobs in.
- arethuza 15y ago
  Other than jobs in academia, of course.
  - esw 15y ago
    This is a terrible time to be looking for work in academia, too.

krakensden 15y ago

> As long as demand is unlimited and wages elastic Technology can't really destroy jobs in the long term even as it disrupts industry after industry Sure it can- because in the real world demand /is/ limited [which is why bubbles pop] and wages are pretty inelastic [because raising wages is seen as a one-way ratchet]. Computer programmers can pretend it isn't true as long as we want, but that's because if someone does come up with a real AI, we're going to be the last ones out of the building.