5 ms·

When the Education Bubble Finally Pops

61 points by babyshake 18y ago

nihilocrat 18y ago
Uh, I've been spared this doom-widget. I feel the press is a bit bubble-happy these days, but the scale of the economic depression doesn't make that unmerited. In fact, I welcome it; education costs have gotten more and more out of hand and no one seems to be making a fuss about it except those having to pay. The bubble craze has pointed out areas where things have been going wrong for a very long time, it's sort of like draining a swamp to reveal all the bodies. I think part of the bubble is an untested assumption, that having a degree will always net you more income in the long run, much like it was assumed that house prices would never, ever, ever fall. It's a core indicator of a bubble, because it's easy for reality to break things if the assumption stops being true. I can definitely vouch for those who have gotten degrees and lead careers that have nothing to do with them; from a career perspective (not a personal or educational one, mind you), a lot of people have just wasted four years of their life. I was raised by engineers who got degrees to go work in the very specific fields they got degrees in, so of course this flies directly in the face of what I thought was supposed to be the way things work.
- coliveira 18y ago
  The fact that people have a career in an area different from their university degree doesn't mean that they wasted time with education. They just didn't know what they wanted to do, and the education helped despite not being in the field that they ended up working. A better comparison would be: how many people with college degrees are doing worse than people without them? If you do the math, you will see that very few people without college education are working in the same job as people with degrees. The main reason for that is that a college degree is a pre-requisite for most well-paying jobs. Which means that people cannot afford not to have a university education, because their prospects will be pretty limited without it.
- wallflower 18y ago
  "Writer Noel Weyrich compared college administrators to the mafia. "Call it La Alma Mater," he suggested. "Cultivated and well-connected, its kingpins are masters of what amounts to a high-stakes protection racket. 'Nice kid you got there,' goes the shakedown. 'What a shame if he ends up flipping burgers without a degree.' That's an offer most parents can't refuse." http://www.incharacter.org/article.php?article=3 http://www.incharacter.org/article.php?article=3
- netcan 18y ago
  I don't think it is right to think of this as a economic bubble. Degrees are not a straight investment. It differs from place to place, of course. But on the whole, demand isn't that related to real or assumed future income effects. Even when it is, it is also related to prestige, ideas about what it's like to be a lawyer/engineer/doctor & other things. It's not unreasonable that the price will outweigh benefits & that people will pay to be a lawyer. >>from a career perspective (not a personal or educational one, mind you), I don't think you can isolate those two in the long run. But all that said, the education world can be turned on it's head. There are more ways to learn things now & there are potentially much, much cheaper ways to provide education. Students subsidising research doesn't make much sense. I once worked out that for a year of full time study, I was only getting about 5-10 hours of dedicated lecturer/tutor time. That includes some classes with low enrolment & some with massive enrolment & doesn't include preparation or marking.
  - neilc 18y ago
    Students subsidising research doesn't make much sense. I don't think that is very common: the vast majority of the funding for research comes from the government (e.g. NSF, DARPA, NIH), various non-profits, and corporate sponsorship.
    - netcan 18y ago
      A lot comes from these sources, but often a lot comes from fees. Also funding is not necessarily research grants. It also includes keeping the physical Universities & their bureaucracies going. In any case, my point was that the fees charged by elite US schools are disproportionate to the cost of providing the education. Even the costs are probably disproportionate to the what costs would be if universities were competing on efficiency/price.
      - kurtosis 18y ago
        my advisor is charged a significant ~50% overhead on my stipend and a significant percentage overhead on all equipment (e.g. 100k laser systems). This is paid out of NSF grants and it is supposed to cover costs of building maintenance and utilities.
mechanical_fish 18y ago
I'm being attacked by an evil widget on this page. There is a big-ass Javascript popup, apparently perpetrated by something called "PostRank", that obscures the page on initial load (in Safari 3/Mac). It has a list of posts labeled "Top Posts", none of which are the one I want to read. I can't figure out how to make this thing go away -- there is no close box, and clicking inside it links me away to something else -- and when I scroll the damn thing follows me to make very sure that I never get a glimpse of the actual post. I can't see around it. Words cannot express how infuriating that widget is. It's like Snap.com only more evil. Banish it back to the nether regions from whence it came and submit this post again so I can actually read it. UPDATE: Seriously, I can't get rid of it. Clicking inside it, clicking outside it, the Escape key, nasty words about its mother -- nothing works. I even tried following one of its links, and the resulting page had the same obscuring widget on it. Who designs the UI for these things? I'll try restarting Safari. FURTHER UPDATE: Nope, it's out of excuses. That is officially the suckiest non-musical widget I've ever seen.
- tokenadult 18y ago
  Yes, there was some problem with that page earlier such that it wouldn't display at all to me. (There was an error message that implied the server was overwhelmed.) Now I see a lot of spammy blog content, which I'm not sure is an improvement, but I did think this part "Robb claims that as 'there is reason to believe that costs of higher education (direct costs and lost income) are now nearly equal (in net present value) to the additional lifetime income derived from having a degree' this situation has all the earmarks of a bubble." Have college costs risen so steeply that there is now no economic rationale (from increased lifetime income) to seek a college degree?
- gsmaverick 18y ago
  I get it too. Make it stop -.-
- joeyo 18y ago
  Wow, that thing sucks. It completely obscures content on Chrome too. [edit: It doesn't appear at all in Firefox 3.x/Win!]
- 18y ago
blackguardx 18y ago
Having taken online classes, I can say that they are no replacement for being in a classroom and having interaction with a teacher and classmates. It would be a shame to see all education move online for purely cost reasons.
- teuobk 18y ago
  Indeed. Book knowledge at universities is wonderful, but the value of the social experience cannot be understated. In some sense, one's classmates at a university form a giant fraternity. Stephen Leacock put this quite eloquently in "Oxford as I See It": "If I were founding a university--and I say it with all the seriousness of which I am capable--I would found first a smoking room; then when I had a little more money in hand I would found a dormitory; then after that, or more probably with it, a decent reading room and a library. After that, if I still had money over that I couldn't use, I would hire a professor and get some text books."
  - boredguy8 18y ago
    Yes, but Oxford is still about learning (and suffering for it!) and far less about job training.
- deleted 18y ago
  [deleted]
- Goladus 18y ago
  It won't. Lots of people agree with you, and demand for classroom and personal education is not likely to ever go away. Some significant restructuring of the system and how the money flows may be required, though, and a lot of wealth may get lost in the shuffle. (Colleges shutting down, buildings being left to rot, etc.)
- jaytee_clone 18y ago
  I agree that face-to-face interaction between master and apprentice are critical for certain type of skill learning. However, all memory based knowledge can all go online. Also, video and audio of lectures, homework assignments, etc. Much like MIT opencourse, UC Berkeley webcast.
dhimes 18y ago
I believe universities will be back to being a haven for those who pursue knowledge for its own sake, and most professional-related credentials will no longer include a "degree." One of the harbingers of this is the fact that a lot of employers started giving exams to the folks they hire. The 4.0 gpa start not being enough to prove to them that someone was educated enough to do the job (whoa!). I can envision the day when passing some sort of qualifier will be accepted in lieu of a degree for most professions. How you come by the knowledge to pass that qualifier will be up to you.
- cchooper 18y ago
  The use of universities as a general source of credentials is probably nothing more than inertia from the days when only a select few could attend. There really is no good reason why everyone should get their education from a research institution, especially when they have no intention of going into research. I suspect that the system is self-destructing right now. The more degrees that universities award, the less it will matter that it came from a university. This will bring about the end of most university education, and hence most universities (because they can't all be doing worthwhile research).
  - tjmc 18y ago
    What about qualifications that require specialised equipment or infrastructure? If you need to learn about say chip fabrication or radiology it's not enough to just read about it. I suppose you could just pay for access to facilities and equipment on demand, but in the case of something like a chemistry lab or x-ray machine the institution granting access has to know your level of competance before they give you access and the easiest way of doing that without checking each time is a structured program.
    - cchooper 18y ago
      I think other institutions will arise to fill those gaps. They will be pure teaching institutions rather than universisites.
likpok 18y ago
One point: If wages are trending downwards, then wages for professors should also trend downwards. This might make tuition trend downwards as well. (all trends are in real dollars, costs may simply grow slower than inflation) Other solutions may be a globalization of the educational system. Currently, US institutions are the top. Perhaps that will change, and costs will decrease as suppliers increase.
- coliveira 18y ago
  Salaries for professors are not the main expense in a university. In fact, salaries have increased at a much slower pace then tuition. The whole infrastructure of the university is what is expensive: labs, administration, fitness centers, counseling, etc. Real education is just a small part of the package when a student goes to a university. Also, tuition is not going to research. Most research is payed by the Government and a few non-profit institutions.
  - rw 18y ago
    Let us not forget the salaries of administrators. Administrative bloat is a huge problem at many universities, and a large number of these people get higher salaries than tenured professors. Is this personnel overhead necessary? Why can't professors have more of a direct influence on university policy? I suspect many of them would like to run things more collectively, with more attention paid to the students. The "corporate university" thing makes me sick. No thank you, Mr. CEO President.
patio11 18y ago
The education bubble is, in large part, a credit bubble. If you have a resource which has perceived value approaching infinite, competition for the resource, and a government policy subsidizing consumption of the resource (especially via loans), you're naturally going to see the price balloon. It would be like what happened if you subsidized the speculative investment in assets that people irrationally thought would never decline in price, like, I don't know, homes.
- daniel-cussen 18y ago
  Genius. I had never thought of education this way.
Dilpil 18y ago
The advantage of a college degree is not just salary: the jobs available to college graduates carry better working conditions, hours, and prestige. Evaluations using a net present value calculation are missing the point.
hs 18y ago
after credit card bubble bursts
johnrob 18y ago
In our capitalist society we have a pyramid shaped distribution of income. For a good portion of history, a college education has meant a place in the top triangle. However, there are only so many spots in that triangle. That is precisely why the cost of a college education will no longer (necessarily) pay for itself in future income. Wages are based on a person's relative skill, and if the whole country has a degree, than it doesn't end up differentiating anyone. Which is why the cost is now seemingly overpriced. If we really need college degrees for everyone, then there is no choice but to go the high school route and fund it publicly.
- eru 18y ago
  You seem to assume that education has no effect on your (absolute) productivity?
fhars 18y ago
But isn't it the characteristic of efficient markets when prices approach real value and the characteristic of a bubble if you can realize huge arbitrage gains by investing a bit in your education to get a top job? So the bubble the author is bemoaning is already gone and he is just longigng for it to reappear because he used to belong to the winners. But then I am from the old world where education is a basic right and never understood why people would frame it as a purely economic question...
ninguem2 18y ago
Foreign Universities (esp. in English speaking countries: Canada, UK, Australia,...) would be the most likely to provide arbitrage and offer the same service at lower costs. It is just fear of living overseas that is stopping this from happening on a large scale now.

61 points by babyshake 18y ago

Uh, I've been spared this doom-widget. I feel the press is a bit bubble-happy these days, but the scale of the economic depression doesn't make that unmerited. In fact, I welcome it; education costs have gotten more and more out of hand and no one seems to be making a fuss about it except those having to pay. The bubble craze has pointed out areas where things have been going wrong for a very long time, it's sort of like draining a swamp to reveal all the bodies. I think part of the bubble is an untested assumption, that having a degree will always net you more income in the long run, much like it was assumed that house prices would never, ever, ever fall. It's a core indicator of a bubble, because it's easy for reality to break things if the assumption stops being true. I can definitely vouch for those who have gotten degrees and lead careers that have nothing to do with them; from a career perspective (not a personal or educational one, mind you), a lot of people have just wasted four years of their life. I was raised by engineers who got degrees to go work in the very specific fields they got degrees in, so of course this flies directly in the face of what I thought was supposed to be the way things work.

coliveira 18y ago
The fact that people have a career in an area different from their university degree doesn't mean that they wasted time with education. They just didn't know what they wanted to do, and the education helped despite not being in the field that they ended up working. A better comparison would be: how many people with college degrees are doing worse than people without them? If you do the math, you will see that very few people without college education are working in the same job as people with degrees. The main reason for that is that a college degree is a pre-requisite for most well-paying jobs. Which means that people cannot afford not to have a university education, because their prospects will be pretty limited without it.
wallflower 18y ago
"Writer Noel Weyrich compared college administrators to the mafia. "Call it La Alma Mater," he suggested. "Cultivated and well-connected, its kingpins are masters of what amounts to a high-stakes protection racket. 'Nice kid you got there,' goes the shakedown. 'What a shame if he ends up flipping burgers without a degree.' That's an offer most parents can't refuse." http://www.incharacter.org/article.php?article=3 http://www.incharacter.org/article.php?article=3
netcan 18y ago
I don't think it is right to think of this as a economic bubble. Degrees are not a straight investment. It differs from place to place, of course. But on the whole, demand isn't that related to real or assumed future income effects. Even when it is, it is also related to prestige, ideas about what it's like to be a lawyer/engineer/doctor & other things. It's not unreasonable that the price will outweigh benefits & that people will pay to be a lawyer. >>from a career perspective (not a personal or educational one, mind you), I don't think you can isolate those two in the long run. But all that said, the education world can be turned on it's head. There are more ways to learn things now & there are potentially much, much cheaper ways to provide education. Students subsidising research doesn't make much sense. I once worked out that for a year of full time study, I was only getting about 5-10 hours of dedicated lecturer/tutor time. That includes some classes with low enrolment & some with massive enrolment & doesn't include preparation or marking.
- neilc 18y ago
  Students subsidising research doesn't make much sense. I don't think that is very common: the vast majority of the funding for research comes from the government (e.g. NSF, DARPA, NIH), various non-profits, and corporate sponsorship.
  - netcan 18y ago
    A lot comes from these sources, but often a lot comes from fees. Also funding is not necessarily research grants. It also includes keeping the physical Universities & their bureaucracies going. In any case, my point was that the fees charged by elite US schools are disproportionate to the cost of providing the education. Even the costs are probably disproportionate to the what costs would be if universities were competing on efficiency/price.
    - kurtosis 18y ago
      my advisor is charged a significant ~50% overhead on my stipend and a significant percentage overhead on all equipment (e.g. 100k laser systems). This is paid out of NSF grants and it is supposed to cover costs of building maintenance and utilities.

mechanical_fish 18y ago

I'm being attacked by an evil widget on this page. There is a big-ass Javascript popup, apparently perpetrated by something called "PostRank", that obscures the page on initial load (in Safari 3/Mac). It has a list of posts labeled "Top Posts", none of which are the one I want to read. I can't figure out how to make this thing go away -- there is no close box, and clicking inside it links me away to something else -- and when I scroll the damn thing follows me to make very sure that I never get a glimpse of the actual post. I can't see around it. Words cannot express how infuriating that widget is. It's like Snap.com only more evil. Banish it back to the nether regions from whence it came and submit this post again so I can actually read it. UPDATE: Seriously, I can't get rid of it. Clicking inside it, clicking outside it, the Escape key, nasty words about its mother -- nothing works. I even tried following one of its links, and the resulting page had the same obscuring widget on it. Who designs the UI for these things? I'll try restarting Safari. FURTHER UPDATE: Nope, it's out of excuses. That is officially the suckiest non-musical widget I've ever seen.

tokenadult 18y ago
Yes, there was some problem with that page earlier such that it wouldn't display at all to me. (There was an error message that implied the server was overwhelmed.) Now I see a lot of spammy blog content, which I'm not sure is an improvement, but I did think this part "Robb claims that as 'there is reason to believe that costs of higher education (direct costs and lost income) are now nearly equal (in net present value) to the additional lifetime income derived from having a degree' this situation has all the earmarks of a bubble." Have college costs risen so steeply that there is now no economic rationale (from increased lifetime income) to seek a college degree?
gsmaverick 18y ago
I get it too. Make it stop -.-
joeyo 18y ago
Wow, that thing sucks. It completely obscures content on Chrome too. [edit: It doesn't appear at all in Firefox 3.x/Win!]
18y ago

blackguardx 18y ago

Having taken online classes, I can say that they are no replacement for being in a classroom and having interaction with a teacher and classmates. It would be a shame to see all education move online for purely cost reasons.

teuobk 18y ago
Indeed. Book knowledge at universities is wonderful, but the value of the social experience cannot be understated. In some sense, one's classmates at a university form a giant fraternity. Stephen Leacock put this quite eloquently in "Oxford as I See It": "If I were founding a university--and I say it with all the seriousness of which I am capable--I would found first a smoking room; then when I had a little more money in hand I would found a dormitory; then after that, or more probably with it, a decent reading room and a library. After that, if I still had money over that I couldn't use, I would hire a professor and get some text books."
- boredguy8 18y ago
  Yes, but Oxford is still about learning (and suffering for it!) and far less about job training.
deleted 18y ago
[deleted]
Goladus 18y ago
It won't. Lots of people agree with you, and demand for classroom and personal education is not likely to ever go away. Some significant restructuring of the system and how the money flows may be required, though, and a lot of wealth may get lost in the shuffle. (Colleges shutting down, buildings being left to rot, etc.)
jaytee_clone 18y ago
I agree that face-to-face interaction between master and apprentice are critical for certain type of skill learning. However, all memory based knowledge can all go online. Also, video and audio of lectures, homework assignments, etc. Much like MIT opencourse, UC Berkeley webcast.

dhimes 18y ago

I believe universities will be back to being a haven for those who pursue knowledge for its own sake, and most professional-related credentials will no longer include a "degree." One of the harbingers of this is the fact that a lot of employers started giving exams to the folks they hire. The 4.0 gpa start not being enough to prove to them that someone was educated enough to do the job (whoa!). I can envision the day when passing some sort of qualifier will be accepted in lieu of a degree for most professions. How you come by the knowledge to pass that qualifier will be up to you.

cchooper 18y ago
The use of universities as a general source of credentials is probably nothing more than inertia from the days when only a select few could attend. There really is no good reason why everyone should get their education from a research institution, especially when they have no intention of going into research. I suspect that the system is self-destructing right now. The more degrees that universities award, the less it will matter that it came from a university. This will bring about the end of most university education, and hence most universities (because they can't all be doing worthwhile research).
- tjmc 18y ago
  What about qualifications that require specialised equipment or infrastructure? If you need to learn about say chip fabrication or radiology it's not enough to just read about it. I suppose you could just pay for access to facilities and equipment on demand, but in the case of something like a chemistry lab or x-ray machine the institution granting access has to know your level of competance before they give you access and the easiest way of doing that without checking each time is a structured program.
  - cchooper 18y ago
    I think other institutions will arise to fill those gaps. They will be pure teaching institutions rather than universisites.

likpok 18y ago

One point: If wages are trending downwards, then wages for professors should also trend downwards. This might make tuition trend downwards as well. (all trends are in real dollars, costs may simply grow slower than inflation) Other solutions may be a globalization of the educational system. Currently, US institutions are the top. Perhaps that will change, and costs will decrease as suppliers increase.

coliveira 18y ago
Salaries for professors are not the main expense in a university. In fact, salaries have increased at a much slower pace then tuition. The whole infrastructure of the university is what is expensive: labs, administration, fitness centers, counseling, etc. Real education is just a small part of the package when a student goes to a university. Also, tuition is not going to research. Most research is payed by the Government and a few non-profit institutions.
- rw 18y ago
  Let us not forget the salaries of administrators. Administrative bloat is a huge problem at many universities, and a large number of these people get higher salaries than tenured professors. Is this personnel overhead necessary? Why can't professors have more of a direct influence on university policy? I suspect many of them would like to run things more collectively, with more attention paid to the students. The "corporate university" thing makes me sick. No thank you, Mr. CEO President.

patio11 18y ago

The education bubble is, in large part, a credit bubble. If you have a resource which has perceived value approaching infinite, competition for the resource, and a government policy subsidizing consumption of the resource (especially via loans), you're naturally going to see the price balloon. It would be like what happened if you subsidized the speculative investment in assets that people irrationally thought would never decline in price, like, I don't know, homes.

daniel-cussen 18y ago
Genius. I had never thought of education this way.

Dilpil 18y ago

The advantage of a college degree is not just salary: the jobs available to college graduates carry better working conditions, hours, and prestige. Evaluations using a net present value calculation are missing the point.

hs 18y ago

after credit card bubble bursts

johnrob 18y ago

In our capitalist society we have a pyramid shaped distribution of income. For a good portion of history, a college education has meant a place in the top triangle. However, there are only so many spots in that triangle. That is precisely why the cost of a college education will no longer (necessarily) pay for itself in future income. Wages are based on a person's relative skill, and if the whole country has a degree, than it doesn't end up differentiating anyone. Which is why the cost is now seemingly overpriced. If we really need college degrees for everyone, then there is no choice but to go the high school route and fund it publicly.

eru 18y ago
You seem to assume that education has no effect on your (absolute) productivity?

fhars 18y ago

But isn't it the characteristic of efficient markets when prices approach real value and the characteristic of a bubble if you can realize huge arbitrage gains by investing a bit in your education to get a top job? So the bubble the author is bemoaning is already gone and he is just longigng for it to reappear because he used to belong to the winners. But then I am from the old world where education is a basic right and never understood why people would frame it as a purely economic question...

ninguem2 18y ago

Foreign Universities (esp. in English speaking countries: Canada, UK, Australia,...) would be the most likely to provide arbitrage and offer the same service at lower costs. It is just fear of living overseas that is stopping this from happening on a large scale now.