Higher Education: Will the Bubble Burst?

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Evil HR Lady Suzanne Lucas points us to a highly interesting news item from North Carolina. Here’s the deal: some community activists think their neighborhood would be a lot safer if a couple of traffic lights were installed. The city hires an engineer to assess the situation,  and he comes back with a report indicating that no, no traffic lights are needed. The community activists don’t take this response lying down, and one of them does his own sophisticated analysis of traffic at the intersections in question. His results look very different from those provided by the city-hired engineer, showing that the case for the new traffic lights is sound.

Multiple choice time. How does the city respond?

a). They thank the concerned citizen for the improved analysis and start making plans to install the requested traffic signals.

b). They look over both analyses and make a judgment based on which one seems the most credible.

c.) They open a government investigation of the guy who did the analysis for the concerned citizens.

Yep, you guessed right. The individual who figured out how to do his own alternative analysis is now being investigated for “practicing engineering without a license,” apparently because the local officials couldn’t find a law that would support charging him with “knowing how to do things we would prefer you didn’t know.”

All of which leads Suzanne Lucas to post the following near-blasphemy over at BNET: Graduate Degrees and Ivy League Pedigrees Are Highly Over-Rated. That’s a provocative statement. Could there possibly be any truth to it?

Well, Instapundit Glenn Reynolds has recently devoted some time and effort to explaining that higher education is really just the latest in a series of financial bubbles:

It’s a story of an industry that may sound familiar.

The buyers think what they’re buying will appreciate in value, making them rich in the future. The product grows more and more elaborate, and more and more expensive, but the expense is offset by cheap credit provided by sellers eager to encourage buyers to buy.

Buyers see that everyone else is taking on mounds of debt, and so are more comfortable when they do so themselves; besides, for a generation, the value of what they’re buying has gone up steadily. What could go wrong? Everything continues smoothly until, at some point, it doesn’t.

Yes, this sounds like the housing bubble, but I’m afraid it’s also sounding a lot like a still-inflating higher education bubble. And despite (or because of) the fact that my day job involves higher education, I think it’s better for us to face up to what’s going on before the bubble bursts messily.

There’s no denying that the cost of higher education has skyrocketed in recent years. The economic return on this investment is not always obvious. Young people spend many years of their lives paying back the enormous debt they acquire in pursuit of a degree.

And it isn’t just the financial costs. PayPal co-founder and Facebook financier Peter Thiel, a strong proponent of the “education bubble” argument, is now offering $100,000 to a select group of under-20′s to drop out of school and pursue entrepreneurial endeavors. Thiel is concerned about the financial costs of higher education (describing student loans as creating a state of “indentured servitude”) as well as the overly politically correct atmosphere on some campuses. Moreover, he worries about the opportunity cost of spending four years or more in pursuit of degree(s). For many young people, he argues, that time might be better spent in pursuit of real accomplishments, rather than just credentials that would allow them, perhaps, to accomplish something some day.

Meanwhile, as formal higher education becomes more expensive and ultimately less accessible, informal learning is exploding thanks to the Internet. The Khan Academy is one of the best examples — thousands of classes developed independently and provided via Youtube. Their mission is to provide “a world-class education to anyone, anywhere.”

At absolutely no cost to the student.

And not all of the “informal” channels are all that informal.  MIT famously offers many of its courses online for free. The courses are free, but they don’t lead to a degree. The degree will still cost you a bundle.

A Soap bubble

Source: Wikimedia Commons

Imagine two students, one who actually attends MIT and one who studies the online courseware (and many other freely available sources). If at the end of their studies, the two could be shown to score comparably on standardized tests, what is it that makes the first student’s knowledge — equivalent to the second student’s — worth tens or hundreds of thousands of dollars? What is it that makes the first student a more viable job applicant? Other than the social connections that the first student carries away from MIT, which definitely have economic worth, any other argument for the first student quickly begins to sound like rank credentialism or elitism.

Which leads us back to Suzanne Lucas’ thoughts on higher education and and the need for credentials:

Looking at job postings, requirements are for MBAs, bachelor’s degrees in specific subjects, and certain certifications. No, you don’t want someone without actual medical knowledge performing your emergency appendectomy, but will it kill you (ha!) to buy a casket from a monk rather than a licensed funeral home?

What areas should require specific credentials, degrees and licenses?  And what areas should actual knowledge and skill count for more than the piece of paper you obtained at 22?  Have you been held back because, even though you had the knowledge, you lacked the paper?

Great questions.

Perhaps the higher education establishment will implement some much-needed changes before the bubble actually bursts. Or maybe the education bubble will start a small chain reaction — and the credential bubble will be next.

2 Comments

  1. 2011-02-10 17:21:45

    Hey Sally -- My guess is that's a long way off. For some reason it's okay for start-ups to be founded by dropouts, but those dropouts always seem to surround themselves with highly credentialed individuals.

  2. 2011-02-09 14:53:24

    Could small start-ups accelerate this process by dropping certain requirements for certain jobs, and let it be known throughout the Net what they are doing and why? Students know what companies require. When they realize that some very new and interesting places to work at no longer require "the sheepskin," the students may well begin making different decisions about how and where they learn. Kudos to Thiel for doing what he's doing.

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