Law Professor Writes excellent editorial about the Education Bubble. It's a Gem.

I am envious of Glenn Harlan Reynolds, a professor of law at the University of Tennessee, for writing an excellent piece about the higher education bubble: Higher Education's Bubble is About to Burst.  I am envious because he presented the issue in a clear and concise manner and I'm not sure I could have done a better job.

Maybe this op-ed is old news, but I only just discovered it today, in which case it probably hasn't made the scamblogging circuit which is why I wanted to share it with you.  (I found it from a link to this post which I must have found on a fellow scamblogger's post, but I don't think a direct link to Reynolds's article was posted.)

First, Reynolds's did a good job of explaining the bubble victim's mindset:

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.

He then goes on to explain the potential value of college:

College is often described as a path to prosperity, but is it? A college education can help people make more money in three different ways.

First, it may actually make them more economically productive by teaching them skills valued in the workplace: Computer programming, nursing or engineering, say. (Religious and women's studies, not so much.)

Second, it may provide a credential that employers want, not because it represents actual skills, but because it's a weeding tool that doesn't produce civil-rights suits as, say, IQ tests might. A four-year college degree, even if its holder acquired no actual skills, at least indicates some ability to show up on time and perform as instructed.

And, third, a college degree -- at least an elite one -- may hook its holder up with a useful social network that can provide jobs and opportunities in the future. (This is more true if it's a degree from Yale than if it's one from Eastern Kentucky, but it's true everywhere to some degree).

While an individual might rationally pursue all three of these,

only the first one -- actual added skills -- produces a net benefit for society. The other two are just distributional -- about who gets the goodies, not about making more of them.

It's refreshing to see someone else point out that college education often has no value other than to serve as a proxy for IQ for employers.  In other words, oftentimes college education has no real economic value and a great many jobs that require a college education do not really require it.  Decades ago these types of jobs were filled by people with high school diplomas who worked their way up.  However, as a result of the Education Arms Race we now have a huge abundance of people with college educations so employers can make bachelors degrees a precondition of employment.

My only real issue with Reynolds's op-ed is the implicit suggestion that if everyone majored in a useful degree program such as nursing or engineering that the education would now have economic value.

Post-bubble, perhaps students -- and employers, not to mention parents and lenders -- will focus instead on education that fosters economic value. And that is likely to press colleges to focus more on providing useful majors.

In reality I think it would result in a huge oversupply of unemployed and underemployed nurses and engineers.  If everyone majored in fields that "foster economic value" the education would not have economic value because much of that education would be unneeded excess education that the employment market cannot absorb and thus that society cannot utilize.

The real problem in higher education is simply that we have too much higher education.  In other words, far more people are going to college than our society and economy really needs.  Relatively few career fields actually make use of Reynolds' first category, "education that fosters economic value".  Rather, most college education today is "distributional" in nature in that it merely serves to help employers separate candidates by IQ, ambition, and responsibility.  As a poster at another forum once put it, "If everyone went to college we would have the world's most educated Walmart and McDonalds employees."

Coming from a law professor, Reynolds's op-ed may be profound. I wonder what he thinks about lawyer overproduction and Professor Tamanaha's recent wake up call.