I’ve been going back and forth over whether there’s actually an education bubble in this country. I used to be a solid no. Then I went to “maybe.” Reading back posts from the blog EduBubble made me want to switch to yes, but today I’m not so sure.
Correct me if I’m wrong, but the most common education bubble argument would be that students will wise up to the fact that all their money goes to athletics, administrative salaries and wine and cheese parties for the professors. To make matters worse, even if they pay the exorbitant cost of tuition there may be no job waiting for them when they’re done.
OK, then explain this (via Yglesias):
The more education you have, the less likely you are to be unemployed. So while higher education may be a gamble, no higher education is a worse gamble. Even if you score a job straight out of high school, what’s your lifetime income potential going to be if you aren’t Mark Zuckerberg?
The thing is, I can’t shake the feeling that there is something bubbly about higher education these days. My new tentative theory is this: There’s not a higher education bubble, there’s a student bubble. At first my evidence has been entirely anecdotal. How many college presidents do you know whose plan to save the campus is to double enrollment? Publicly traded for-profit colleges have that plan embedded in their DNA. If state funding isn’t coming back, then the public schools will have to increase enrollment to keep the same campus experience as before. To get there, they invest in climbing walls rather than faculty.
But they can’t get all of them, can they? This is the first actual evidence I’ve seen that my theory might be right:
[I]n sharp contrast to the competitive admissions landscape at some colleges, hundreds of other universities struggle every year to fill their freshman classes. For some of those institutions, the sluggish economy has only added to the challenge of completing the freshman class.
That means that those high school seniors unhappy with their college choices, or beginning their college search late in the academic year, could still end up somewhere terrific that may not yet be on their radar.
A good place to begin such a search would be the annual “Space Availability Survey” from the National Association for College Admission Counseling, which was released on the organization’s Web site today.
It lists more than 280 institutions that, according to Nacac, told the organization that they at least had limited room in this fall’s freshman class, and in some instances quite a bit of room. The list, which is alphabetical and easy to search (as well as convert to an Excel file) ranges from Agnes Scott College in Georgia to Youngstown State in Ohio, and covers a wide geographical area, from the University of Southern Maine to Florida State University to the University of Washington at Tacoma.
This theory of mine is definitely a work in progress, so any constructive criticism or additional evidence would be much appreciated.
Update: Of course, as soon as I hit “publish,” I find this.
More or Less Bunk 
Your last minute reference contains the following summery: “The cost of college, as these arguments typically go, has grown far too high, the return far too uncertain, the education far too lax.”
Then it goes on and talks the PayPal filthy rich guy.
The cost of, mainly, private college is hilariously and absurdly high. That is true. What is less certain is the “return is uncertain.” The graph shows that this statement is false. As for lax education, there are many colleges with very high standards where the education is anything but lax.
Only very few become rich, simple statistical data, therefore making everyone a business person is a joke.
We are left with the cost issue only. That isn’t a bubble; everything is outrageously expensive nowadays. Why target Colleges?
Look, for something to be a bubble there have to be a couple of things going on.
First, you have to have something that is behaving like a commodity. That is to say that something can be reduced to purely a dollar amount. Its value is only realized when that asset is sold. I am not sure a college BA fits that definition. A commodity can also generally be traded on the basis of its future value. Please show me the futures market in higher education.
Second, for there to be a bubble, speculation has to play a role in bidding up the value of the asset. That is, the price of that asset is growing for a reason other than the real costs of creating and maintaining that asset. Again, there are a lot of reasons explaining why the cost of college education is going up: Increased labor costs (including executive compensation / administratium); double digit increases in the cost of health insurance; student life amenities in the form of health centers, climbing walls, flat screen TVs and sports teams, posh dorms, etc. The list is long, but speculative pressure in bidding up the value of a college degree is not one of them.
The education bubble is a meme being flogged by the ultra wealthy (“pay pal guy”) and well connected east coast journalist types who are pissing and moaning about paying off their student loans from Swarthmore. (Oh, and by definition, its not a bubble if everyone is talking about it. )
The people talking up the higher education bubble have a vested interest in killing the public university systems in the same way they have done in public primary and secondary education. Otherwise they will have truly wasted their money on an expensive private school education. More of the class war by the wealthiest 10% on the rest of us.
Matt:
You do realize I’m on your side, right?
My argument would be that universities are spending money on exercise rooms, organic salad bars and posh dorms to attract rich students who will eventually fail to materialize. The price of attracting a student has increased enough to pinch spending on faculty and academics in general. On the second point in your definition, perhaps the expected return of every extra student is vastly overrated compared to the cost of attracting them.
College pays off in the end for most people, but if nobody can afford it anymore perhaps it will pop like a bubble as the assumptions of future student growth proves illusionary. Or maybe I’m full of it. Who knows?
Jonathan, sure, we agree on the things that are driving up the costs of a college education. But I am disagreeing with you on your choice metaphor. I think these economic or business metaphors are part of the problem.
It would be refreshing if we could talk about education as a public good, rather than just another consumer choice. We have public universities because investing in a broadly educated population is beneficial for society, regardless of the payoff for any one individual. For example, societies with higher rates of post-secondary education have lower murder rates. That good for everyone, even for the people who don’t go to college.
My question is this: if there is a bubble, then where is the smart university president who is willing to ignore the conventional wisdom and seek a niche as a “value institution?” No posh dorms or work out centers, minimalist student activity programing, and instead touting their investment in quality faculty, labs, and library resources. A school with a reputation for fiscal probity and academic excellence should win more market share, and yet this approach would probably get a university president
The reason you do not see this is because higher education is not a market and there is no bubble. Higher education spending does not follow a market logic. Its about ‘cultural capital’ as much as it is about dollars and cents.
Sorry the end to that second to last paragraph should read, “…this approach would probably get a university president fired.”
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