(from Carpe Diem)
The parallels with housing are striking. In the case of housing, government policy wanted to promote home ownership. In this case, government policy is to promote higher education. The mechanisms were also similar: the U.S. government (and Canadian provinces) expanded credit by subsidizing student loans and tuition. Low interest rates under the Greenspan years also made borrowing easier. The result, it’s easier to afford school.
Well intentioned? Yes. More people get university educations, and that’s good, right? Maybe. I’m sceptical. But there are some serious downsides: first, the degree costs more and is worth less. Second, the high demand has resulted in even higher prices. Cheap credit allows everyone to play, but when everyone plays, the price rises, and the ‘signalling value’ decrease. Who wins? The universities that reap the benefits of high tuition costs and skyrocketing demand. Who loses? The students: they overvalue the degree: too many people go to school. If you’re one of those people the reality is you’re not as rich as you think you are. Education is an investment. Students made what you think is a solid investment in school with the expectation of some future payoff and then realize when they test the market that they may have to accept a lower paying job or no job at all in their field. When the interest rates on student debt rise, the emerging graduates feel a little bit more like they’ve been ripped off: the actual cost of the degree (not to mention the opportunity cost) was a little bit more than it was worth. In short, you’re not quite as rich as you thought you were. Devalued human capital makes up the slack.
What about on the supply side? The artificially high price of education leads to further misallocation of resources: too many ‘resources’ are sucked into the education sphere. Universities are expanding based on these price signals. They are making commitments, investments etc… If the bubble bursts maybe some people are not going to get paid. Just like housing. Now the big question is: will the bubble burst? Obviously I don’t know. Since government student loan programs can keep hammering out cheap credit forever, this bubble may continue for a long time. But there are other factors: maybe employers may place less value on university as a signalling model. This makes sense because North American universities are turning out some pretty bad grads. Third, a major technological change in the way that affects how education is delivered might totally mess things up.
Another weird parallel is with gov. response to bad investments. In housing, creditors and
bankers received the now infamous bailouts. What about educational malinvestments? That’s really what the OWS movement was a calling for on this one… investor bailouts: the investor in this case: the beleaguered women’s studies grad.
Read more
It is true that the idea that everyone can own her own home is a pleasant thought; very few women in history have had that expectation, unless they shared it with a man - either her father or her husband. There have always been poor people who could not afford to buy a house. In an attempt to appear compassionate (and to spur on construction growth, I suspect), governments tried to help all who had little hope of the dream of home ownership. At the very least, one can say that their intentions were good on some leve.. Moreover, they cannot entirely take the blame for the bubble that was created because lots of other factors were in play as well.
ReplyDeleteYet when one compares the experience of home ownership to education, I believe it is the proverbial 'apples and oranges' situation. A home can a powerful external symbol of oneself, that is true, particularly if one judges one's self-worth on what one does or does not own. Yet, if I do not have a home but instead rent an apartment, I merely have exchanged one idea of shelter for another. It really depends upon your values - On the other hand, education stimulates and empowers the mind and soul of the recipient. The pleasure of mastering philosophy, language, literature, theatre, music, social or 'hard' sciences and math elevate even the 'bad grads' who perhaps took in more than they thought they had. Once you have been exposed to so-called 'higher education', you really 'get it' - you understand how valuable it is for the whole person and his/her development. So what if government has created univeral higher education. The elites in the good old days had higher education as part of their birthright (and many of them were 'bad grads' - take George W.). The point is that adult individuals are elevated by learning, debate, and the sharing of knowledge and culture. High school kids are still kids, sorting out their hormones, working out the timeless problems of adolescence. These poor lost and searching beings must be given a chance as adults to experience what education really is. A Bachelor's degree should be the basic expectation (or some equivalent in other fields) for every child born. Society must recognized that it is not what you have (like a house and everything that the Jones' have) that matters, though every businessman and politician, large and small will try and convince you otherwise - buy this, buy that, bigger TV, smaller cellphone, and so on. I maintain that the love of learning, of language, of science, of politics and philosophy, and the striving to understand our world from a moral stance is what makes us so uniquely human. Governments spend billions of dollars on all sorts of ridiculous things; let them spend some of it on education. It may not be a money maker, but it won't bring down the government. Just because everyone has an education does not make it worthless. At one time, only a few people were literate. Everyone being literate turns out to be a good thing - and I believe that everyone being exposed to higher education is a very good thing. Worth every penny.