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April 25, 2009


Val Larsen

The principle rationale for educational subsidies is that 18 year olds--not yet being as wise as they will one day be--will generally underinvest in education. Given a choice between cars and consumer electronics and school, too many would choose immediate consumption over investment. But it isn't just the 18 year old who loses when they underinvest. The society has an interest in the magnitude of their future earnings because they will constitute the tax base. Moreover, the lifestyle and well being of non-college graduates in a society depends heavily on the number of graduates around them because there is a huge wealth spillover to the less educated and skilled in a society, e.g., compare the lifestyle of poorly educated people in the U.S. with the lifestyle of even well educated people in Bangladesh. While educational subsidies (from govenment and parents) may well increase the degree of wealth inequality in a society, they surely raise the absolute level of economic well being of everyone by increasing the aggregate wealth producing capacity of the population.

Nathan Smith

Hmm. This story is hard for me to identify with. When I was 18 years old, my unwisdom consisted precisely in the obsessive intensity of my desire to "invest" (indulge) in education, i.e. in being more smartypants than anybody else. The same went for most of my friends. We would have felt ashamed to take some time out to acquire practical skills. Certainly at my high school and in most of the circles I've moved in since, it seems that anybody who could benefit from college at all-- in a real way; ignoring "sheepskin effects" in labor markets-- went, and then some. And the quality of education seemed, if anything, to be held back by the oversupply of those who went. I tend to think a good part of the college education in America is a sort of credentialing arms race.

The US-Bangladesh difference may or may not have much to do with the different levels of education... or, if it does, it may be co-causation or inverse causation, that is, some feature X makes Americans get more education and independently makes them richer, or Americans consume more education because they have higher lifetime incomes than Bangladeshis and consume more of everything.

But if the paternalistic argument is valid-- that 18 year olds "are not as wise as they will one day be"-- why don't we just let them wise up and do college when they can appreciate its worth? It might even make them better students. If it's because colleges won't let them in, ban age discrimination in college admissions.

Personally I'm not at all sure I'm any wiser than I ever was in the past; I've learned stuff, but forgotten stuff too, and while it's hard to compare what I've learned and what I've forgotten since I've forgotten the latter, I wouldn't be at all surprised if the latter was more valuable. Though I have become humbler, I think, which isn't saying much consider what a high estimation of myself I had when I was 18.

Val Larsen

That increse in humility and greater sense of your own limits is not unique to you. It is an instance of the increase of wisdom with age I was alluding to. As young people become older, their range of responsibilities tend to increase, e.g. they have children, and the social costs of their devoting themselves somewhat singlemindedly to skill acquisition increase. To be sure, older students who are being educated on their own dime to acquire specific skills and increase earning power tend to be more serious than 18 year olds. But they generally must cram the learning into much tighter schedules. The time cost required to get a liberal education is often too great. As a teenager, I got a first hand look at what it means to go to college when you are in your late 40's since my own father did it. His college experience was much less satisfying than my own because his family responsibilities left him much less time to fully benefit from the learning opportunities a university affords. On balance, the greater responsibilities of older students overbalance their greater seriousness and result in a more poorly educated populace when people delay their entry into university to a more advanced age. The externalities of education are positive for the society--do you deny this--so the increase in education that flows from the subsidy may justify the societal investment.

Nathan Smith

As for whether the externalities of education are positive for society... that's a hard question. The economy grew faster before the 1960s when people had less education. I don't claim that's a strong empirical argument exactly, but it's something to think about. The whole concept of externalities is a difficult one. Here's a question: what is the relationship, theoretically, between "positive externalities" and "consumer surplus?" If I make shirts and sell them to you, you probably get more value than you pay for, in the sense that you would have paid more than I sell you the shirts for. Can we call that a positive externality? If so, college education surely has some positive externalities, but then, so would most of the other stuff that could be done with the money and time. *Universities* have positive externalities apart from the education they provide, because they do *research*, and generate all kinds of information that gets transferred to the public. So if subsidizing education is a good way to subsidize research, that would be one reason to do it-- and it may be. I think the effect of credentials arms races-- a negative externality from education-- is real, though not necessarily dominant. And there are diminishing returns as you educate people less and less suited to higher education. And probably some majors and courses of study are more socially useful than others, with many of them doing little more than instill paranoid or neo-pagan (environmentalist) political notions that lower the quality of the electorate. If I had to hazard a guess, I'd say it's a wash.

If we grant for the sake of argument that higher education has positive externalities (this hypothesis, bear in mind, is in contrast to the hypothesis that it yields net benefits only for those who get it, not that it is altogether useless), it doesn't quite follow that it would be under-consumed in the absence of subsidies, or at any rate not significantly under-consumed. Suppose, for example, that 100% of kids went to college, because it yielded them net benefits of $100,000. There would be no need to subsidize it just because college generated an additional $100,000 social benefit. Of course, that's a counter-factual; but it may be the case that pretty much everyone who would benefit from college already goes; and it may even be the case that pretty much everyone who would benefit from college would still go without the subsidies.

If college generates positive externalities AND there would be under-investment without subsidies, if the redistributive effects were sufficiently perverse, it might still be better not to subsidize it. That's not quite my position, I guess...

What I really meant about being older is not waiting till you're *much* older, when the responsibilities really start to pile up, but just waiting 2-5 years or so. And I don't mean everybody: rather, make that a condition for receiving subsidies. That would be a good way to select for those who really need the subsidies. Having kids definitely makes it harder to do college, but these days not that many people-- especially, not that many men-- have kids when they're under 25. And if the result was to encourage people to delay having kids, that might be OK too. Or, on the other hand, people might learn to reconcile kids and college by relying more on parents and extended family. Also, colleges might be able to adapt.

In general, I think the norm that everybody go to college at 18 is a source of unhealthy conformism and tends to deepen social stratification. It would be better if there was a larger menu of educational options, and a greater variety of educational-cum-career paths. College students seem to me a bit like an aristocracy: parasitical, embodying all that our society most praises-- youth and beauty; learning; aloof from the nitty-gritty realities of life; absorbed at best in their own dreams and vague ambitions, at worst in their debauches and sexual intrigues. We exalt them to that height and then cast them out into the real world, confused. The whole phenomenon is not one that deserves public support, I think, although an alternative model with more diversity that made more of an effort to target benefits to the needy and determined probably would be.


I think the greatest advantage college confers on students is the network effect of meeting a bunch of other upwardly mobile types. To some extent, a greater focus on learning is less helpful than meeting people who have the wherewithal (monetarily, intellectually, socially) to be major players. The other end of this is why ghettos are so poisonous. Imagine how it would be if not only do you have some traditional disadvantages (poor, uneducated family, lower-quality schooling, etc.) but you don't even know anyone who has ever been successful. Success is something that happens to gangsters and celebrities.

Nathan Smith

Well, that kind of makes my point. If the main benefit of college is that you get to hang out with a certain kind of people, by sucking in all of that kind of people, college may be harming those left on the outside.

I think it could be a great thing if a large percentage of the bright, upwardly-mobile 18- and 19- and 20-year-olds were out there working with their hands in low-level jobs to earn money for school or learning trades, because it would facilitate encounters between different social classes that could benefit both sides. Sorting can be efficient in some ways, but it can also narrow people's understanding of the world.


College-type sorting is, I think, a form of artificial density. I wish I could find the article - I think it was something in The Atlantic a few months ago - that outlined recent research on why cities are so prolific of highly high-productivity firms even on a per-capita basis. It seemed to relate to how many people from how many fields mixed in the same area, something that usually only happens if those people are living in approximately the same place. College does the same, to some extent supplying the only mixing that's likely to happen in the suburbs.

Which is not to argue against Nathan's position but only to expand on it. There are many functions "College" serves in 2009 that we wouldn't want to lose, but it seems unlikely that the current configuration is the best.


The other thing to consider is that not all education is the same. My field of Electrical and Computer Engineering, for instance, would be extremely difficult to learn on one's own, and employers can't risk hiring someone to learn on the job without already knowing, through the credential-ing of higher education, that the person has the requisite knowledge and experience, and will eventually be able to handle the job. Even then, employers in my field still want work experience on top of a degree; a degree will get you maybe an interview, but experience will get you the job, and without a degree, you won't even be considered (except in rare cases). I would not have got my current job without having the exact keywords in my resume that the employer was looking for: ECE degree, NIST (company was founded by a guy from NIST), GRSOC (company has dealings with the GRSOC), Security Clearance. I was fortunate that someone somewhere cared about all of that stuff and gave me a job in the absence of relevant work experience.

I was also a Music major, and I must say that getting a higher education in Music is mostly pointless. I only did it to have fun, and because CU had a special fast-track program for Engineering and Music double-majors. But honestly, I barely learned anything I didn't already know. I have learned more about music in my free time than I ever did in college. I can imagine there are quite a few degrees like that, where personal study is more fruitious.

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