The Higher Education Bubble Explained
Created by John Warren.
CARPE DIEM
Professor Mark J. Perry's Blog for Economics and Finance
Saturday, April 16, 2011
About Me
- Name: Mark J. Perry
- Location: Washington, D.C., United States
Dr. Mark J. Perry is a professor of economics and finance in the School of Management at the Flint campus of the University of Michigan. Perry holds two graduate degrees in economics (M.A. and Ph.D.) from George Mason University near Washington, D.C. In addition, he holds an MBA degree in finance from the Curtis L. Carlson School of Management at the University of Minnesota. In addition to a faculty appointment at the University of Michigan-Flint, Perry is also a visiting scholar at The American Enterprise Institute in Washington, D.C.
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7 Comments:
There are a lot of errors in this view of "higher education". The last part is perhaps the only valid assumptions made throughout; ie the lending and funding incentives of the individuals and institutions.
The error made is to generalize all degrees and majors as "higher education". They are not the same, however. I got a undergrad and MS in engineering in 5 years, but my "higher education" is incomparable to someone doing the same in philosophy. So why do we insist on aggregating all post-secondary education to one term, and then talk about average costs and funding, as if these apply equally to all the different majors.
What do the average costs of an engineering major and a glitter and glue major, tell us? Nothing. The video itself makes the error of applying "average costs" and "average" amounts of loans to the example. Averages mean nothing in this case.
Lets move away from the concept of "higher education", and move towards talking about individual majors; they are the only thing that counts.
As for the PhD market, I'm not sure the video gets that right too. Up till a few weeks ago I was in the market for a PhD as well, but moved away due to a better offer. The only fields you'll get dental hygienist salaries for PhDs (around $60k, which is not bad at all) is in the liberal arts. That seems like an awfully GREAT wage for someone with absolutely no applicable skills to the real world. And actually a 300:1 acceptance ratio compares pretty favorably with MOST private market jobs offering that salary range. An engineering recruiter will easily get 400 applications a week per position, in these days at least.
We do not have a "higher education" bubble, but a educational loans bubble. And this lending structure is incentivizing behavior where individuals enter into majors with very low probabilities of success. But as far as that goes, I have no real problems with it that individuals make stupid decisions that they will pay for themselves.
The real problem (once we get past the lending issues), for me, is the fact that we kick out of this country large numbers of highly educated engineers, scientists etc because they are non-citizens. And thus, not only are we incentivizing our youth to do nothing with their lives, the ones who come here to do something, we then kick out. We ought to give them a green card the moment they graduate with a BS or MS degree.
AIG
While your criticism of the video is valid as to depth of discussion, and amount of material covered, you may be asking too much of a 5 minute cartoon.
While being somewhat informative, I believe it's intended primarily to entertain.
A more serious presentation would likely include real talking heads with scowling faces to indicate the serious weight of their words.
Ron I know. As an interesting side note, since I am still relatively close to a university setting, is that out of all the American female students I know, at least 70% are studying or have graduated in some sort of "education" related field (almost no foreign-born female students go for these fields). One might have to wonder what role the government plays not only in financing useless degrees, but in hiring and providing attractive opportunities for people with useless degrees.
I didn't bother watching the video- I don't need boring talking heads to tell me that college degrees are a waste of time- but I'd say that engineering degrees are filled with waste also. For example, my EE degree required learning fundamentals of electromagnetics, Maxwell's equations and the like, which is an outdated theoretical basis that almost none of the graduating engineers would ever use again. This is because almost none would ever have to design at such a low level in an actual job, instead using higher-level components that are already designed based on those fundamentals.
However, EEs are usually forced to this day to learn that stuff, with most of them groaning and putting it off till their last year. The only reason this stuff is in the curriculum is because it's been there for a century and never taken out. Similarly, most engineering curricula are larded up with such useless classes, all to push the degree out to 4 years and extract more money from the students, no other reason. So while one can say the engineering degree actually has some classes of value, the truth is it is as corrupted by academia as anything else.
"I didn't bother watching the video- I don't need boring talking heads to tell me that college degrees are a waste of time-"
Too bad. You missed an entertaining little 5 minute cartoon that might have given you a chuckle, while expressing a believable viewpoint on higher education.
Quote fro AIG: "We do not have a "higher education" bubble, but a educational loans bubble."
The loans bubble creates the education bubble. Have you been to a large university lately? The amount of building and capital investment is astronomical.
Science and engineering research facilities, clinical teaching facilities, even classrooms and dormatories are huge investments. We don't build simple boxes with windows and roofs anymore. Buildings have state of the art climate control, computerized control systems, plus all the "green", fire safety and ADA requirements. Even old dorms have had to be upgraded just to handle the increased electrical load from individual computers, plus all the other electrical equipment (refrigerators, microwaves, etc.).
None of these capital costs would be supported if not for the student financial aid bubble. When the bubble pops, colleges will have to start liquidating all this capital malinvestment (get ready for more bailouts).
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