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The author only addresses one side of the equation. The other side is the person who makes the loan. This bubble has a lot to do with the ease of which a loan c

The author only addresses one side of the equation. The other side is the person who makes the loan. This bubble has a lot to do with the ease of which a loan can be obtained - thereby driving up the price (see: Housing Bubble). The bubble will begin to pop when enough students start defaulting on the loan (by not working or getting paid under the table), not when potential students come to the realization that it is overpriced.

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yummyfajitas 15y ago
It's quite possible that if the government guarantees for student loans are removed, speculators will increase the price of loans and reduce education spending a bit. But I suspect the result won't be a bubble popping, but merely a leveling off at a higher level.
- lkrubner 15y ago
  Your remark is reminiscent of "Stock prices have reached what looks like a permanently high plateau." Are you aware what an awful history lies behind the idea of "merely a leveling off at a higher level"? That is not how markets work. Things go up and down, they do not stabilize for any length of time. The above quote is famous because it was terribly wrong, and it came from a respected voice. In the USA, the recession had already begun, which later developed into the Great Depression. For context: "Stock prices have reached what looks like a permanently high plateau. I do not feel there will be soon if ever a 50 or 60 point break from present levels, such as (bears) have predicted. I expect to see the stock market a good deal higher within a few months." - Irving Fisher, Ph.D. in economics, Oct. 17, 1929 He said this 12 days before Black Monday. http://www.gold-eagle.com/editorials_01/seymour062001.html http://www.gold-eagle.com/editorials_01/seymour062001.html I recall some economics blog, it was either Calculated Risk or Paul Krugman, pointed out several examples of "a permanently high plateau" being applied to the USA housing market circa 2005-2008. It is remarkable how often this phrase gets resurrected, and always just before some class of assets is seen to be losing a great deal of its value.
  - yummyfajitas 15y ago
    Are you aware what an awful history lies behind the idea of "merely a leveling off at a higher level"? As far as I know, this sometimes occurs and sometimes does not. Automobile consumption seems to have increased and remained stable and is only likely to change in response to changes in fundamentals (e.g., oil prices increasing). In contrast, housing increased for speculative reasons, and the bubble burst with no changes in fundamentals (i.e., it was not precipitated by a drop in population). I postulated a game theoretic reason why our current high-education state might be locally stable (i.e., changing only in response to fundamentals) rather than merely a bubble. Do you have any arguments against this besides "other people made similar claims, and I can find a few cases when they were wrong"?

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yummyfajitas 15y ago

It's quite possible that if the government guarantees for student loans are removed, speculators will increase the price of loans and reduce education spending a bit. But I suspect the result won't be a bubble popping, but merely a leveling off at a higher level.

lkrubner 15y ago
Your remark is reminiscent of "Stock prices have reached what looks like a permanently high plateau." Are you aware what an awful history lies behind the idea of "merely a leveling off at a higher level"? That is not how markets work. Things go up and down, they do not stabilize for any length of time. The above quote is famous because it was terribly wrong, and it came from a respected voice. In the USA, the recession had already begun, which later developed into the Great Depression. For context: "Stock prices have reached what looks like a permanently high plateau. I do not feel there will be soon if ever a 50 or 60 point break from present levels, such as (bears) have predicted. I expect to see the stock market a good deal higher within a few months." - Irving Fisher, Ph.D. in economics, Oct. 17, 1929 He said this 12 days before Black Monday. http://www.gold-eagle.com/editorials_01/seymour062001.html http://www.gold-eagle.com/editorials_01/seymour062001.html I recall some economics blog, it was either Calculated Risk or Paul Krugman, pointed out several examples of "a permanently high plateau" being applied to the USA housing market circa 2005-2008. It is remarkable how often this phrase gets resurrected, and always just before some class of assets is seen to be losing a great deal of its value.
- yummyfajitas 15y ago
  Are you aware what an awful history lies behind the idea of "merely a leveling off at a higher level"? As far as I know, this sometimes occurs and sometimes does not. Automobile consumption seems to have increased and remained stable and is only likely to change in response to changes in fundamentals (e.g., oil prices increasing). In contrast, housing increased for speculative reasons, and the bubble burst with no changes in fundamentals (i.e., it was not precipitated by a drop in population). I postulated a game theoretic reason why our current high-education state might be locally stable (i.e., changing only in response to fundamentals) rather than merely a bubble. Do you have any arguments against this besides "other people made similar claims, and I can find a few cases when they were wrong"?