Education: Enhancement of Hedonic Capacities

Greg Mankiw:

Here you can buy 10 economics lectures for $1.60 per lecture.

By contrast, Harvard tuition is about $30K (not counting room and board). Assuming 4 courses each of the two 12-week semesters and 3 class hours a week in each course, one finds that each hour class at Harvard costs about $100--roughly the same price as a good ticket to a Broadway show.

I suppose there is something special about live performances.

(Thanks to Arnold Kling for the link.)  This reminds me of a comment I made on EconLog a while back that I thought deserved cross-posting, where I reflected on the purposes education:

That education is publicly funded yet provides private benefits applies not just to tertiary but also to primary and secondary education. To my mind, the entire notion of education as a public good is misconceived.

Public provision of education is justified, but not because it is a public good. At least, not in the economic sense. Spencer writes that: "[Higher income due to education] is a private benefit but it is also a public benefit. If the objective of public policy is to contribute to higher incomes it is also a public good." By this argument, every private good is a public good. We might as well say that food is a public good because society is better off when people are better nourished. Public goods must be non-excludable, like national defense or law and order. Education is excludable.

Rather, the reason to provide public education is the one Daryl Gorman points out: "subsidized education ... counteracts classism - meaning it helps ensure that there is a route to wealth for the next generation other than being the lucky offspring of this generation's wealthy." Without public education, the children of well-to-do parents would do just fine, perhaps even better than at present, in the private education market. But children of poor or shiftless parents would not get an education and would see their earning power permanently reduced. Public education is a means of intergenerational redistribution, of equalizing the initial human capital endowment of the citizenry.

dsquared's claim is a variation of the same point: "The argument's quite simple; there is a financing constraint which prevents many people from buying as much education as they would want if that constraint did not exist." Whether this point applies to college education is debatable, but it surely applies to primary and secondary education, or it would in the absence of public education, since children are not considered legally capable of binding themselves into long-term credit arrangements. Moreover, the financing constraint would affect children differently: poor children would face it, richer children would not.

The weakness of dsquared's point is that 1) the market failure he assumes, namely that private markets could not enforce long-term debt contracts, is probably non-existent (I for one have borrowed a huge amount of money from private lenders for educational purposes) and 2) outside the market mechanism, we have no good way of knowing whether social investment in college education is paying off.

I do not find the claim that college education is an efficient investment in human capital for the purposes of raising long-term income plausible, either from the empirical evidence or from experience. One stylized fact figures against it: the rise of mass college education in the 1960s was followed, not by rising, but rather by a notable fall in productivity growth. In my experience, very little of what I learned in college has had much applicability to life in the real world, and I work at a think tank; for most of my friends, the usefulness would be much less.

I would interpret college differently. First, it's a form of consumption. For a lot of people, college is one of the best times of their lives. Second, it's a mark of class or rank, like medieval coats of arms: "Where did you go to college?" is a question that often arises early in a conversation with someone you've just met, and it's good to be able to say "Yale" or at least to have graduated, rather than to say, "One year at..." or "Nowhere." Another part of the class/rank aspect of college is that you make friends, and likely marry, with people as smart as you. Third, it is an investment in the capacity to enjoy. My Romantic literature class never put a dime in my pocket, directly or indirectly, but I can still read William Blake with pleasure. Perhaps more relevantly, I can participate in much more sophisticated and interesting conversations than I could have without college.

Fourth, for many people it's just a waste and a mistakeA lot of people I knew in college were confused and directionless. Around senior year an anxiety set in, a fear, terror even, of the Real World. Afterwards, they are deep in debt. The fun's over, and yet they didn't even have any fun. Related to this (fifth) it's a postponement of adulthood. It's sometimes very strange to note the basic life skills, such as cooking and paying bills, that college students don't have. On the other hand (sixth) it may have a high moral motivation, a quest for truth. That's what it was for me, and I was annoyed that so many people were just there to drink beer or make more money. Seventh, the increase in college education is partly a process of substitution for the failure of primary and secondary education to improve. While almost every economic sector is becoming more productive, the public education system is stagnant or deteriorating because it is a government-run monopoly. People go to college to learn what they could have learned before if the public education system were half-decent.

So while the financing-constraint argument makes sense, I disagree with it. I think it would be better if non-trust-fund babies had to work and save for a couple of years, and build up a credit rating, before they could go to college. If we took Mr. Econotarian's advice to "apply the economic model of colleges (mix of private/public, price discriminatory mix of tuition and government funding) to all public schooling," better primary and secondary education would probably reduce the need for mass tertiary education anyway. Those who did make it to college after a couple years of work would be more mature, more serious, less angst-ridden, with a valuable exposure to the Real World, and with more of a notion of what they wanted to do.

Meanwhile, there's another reason to publicly subsidize universities that has nothing to do with the benefit to students: knowledge creation. This is the reason that Jonathan Brown's comment-- "Is there any doubt that Berkeley, Stanford, USC, Calltech and UCLA and UCSD contributed to California's positionn in computers and biotechnology?"-- is cogent. So while we should probably stop subsidizing college education, we might want to look for other ways to continue, or even increase, subsidizing the universities' knowledge creation role. In the past, the British Crown would regularly shower rewards and money on favored inventors, writers, and so on. Maybe we should revive this function today: governors, legislatures, presidents and so on should create large cash awards for anyone whose work proved pleasing, or valuable: bloggers, book authors, scientists, etc. The Nobel Prize model of funding knowledge creation. If publicly funded scholars were more directly answerable to the public, it would be more difficult for academia to turn into a museum of discredited ideologies.

The idea of education as investment in the capacity to enjoy is one that seems to me to be still under-developed.  Surely there are many goods-- certain books, sophisticated films, European travel, the opera, blogging, many conversations-- which a certain amount of education is required in order to enjoy.  As people's lifetime incomes rise, they should be ready even to accept reductions in this lifetime income in order to increase their hedonic capacity to get maximum enjoyment out of every dollar.  I haven't seen this idea in the economics literature, however.  Surely if this was understood to be education's role, it would influence the way education is conducted.

In the case of the excess value of a live Harvard lecture over seeing the recording, I think the advantage is in how the whole Harvard experience puts bright people in touch with each other; stimulating company is what justifies the high premiums.  But can the blogosphere do that better?  Is the blogosphere the next great challenger to Harvard?

Harvard can always fall back on snob appeal.

Comments

[Nato]

Easily the best single thing about college for me was arguing with my friend Suzy about the nature of conscious experience and the possibility of explaining it using computational models. Clearly blogs can't support those kinds of arguments in the slightest, but fortunately for me I don't care about any of that bunk any more.

[Thomas]

Ah good ol' Nato, you amuse me. Nathanael makes a lot of good points. "The college experience" is worth the price of admission, I've found. It is also true that I enjoy certain things more because of college than I would have otherwise. The best thing that college gave me, though, was confidence in my abilities with respect to the rest of humanity; it made me realize that I'm not so different from those that are considered the great genius' and prodigies of history, that there's no intellectual endeavor beyond my grasp. That's actually a really big deal for me, considering that for most of my childhood and teen years I thought I was too stupid to go to college, and I had no encouragement from family or teachers in that regard.

[froclown]

The realization that there is no "intellectual endeavor" that is beyond my grasp, only serves to show me that my heroes are phonies, that the great minds, are not special or above the life day to day drama and shallow bullshit that I so dispies in my fellow humans. There is no escape from these monkeys who prater on about "OMG she said... oh no, he didn't... yeah but I found out that, blah blah blah". It turns out that academia is no escape into an ivory tower where we can cast out humanity in favor of the pure reason, removed from such nonsense as jealousy, territorial disputes, economic conflicts, and general social posturing. In fact it seems academia is full to the brim with the very same retarded monkey doings as any episode of "the real world".

Though I cry out against it time and time again "Do what thou WILT" no one hears, there is no escape, and I continue to be surrounded by stupid monkeys with their stupid monkeys problems, that are of no concern to me, other than that they are made to concern me.

In short, before university education I was surrounded by idiots after university, I am still surrounded by idiots.

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