
How the College Bubble Will Pop - muzz
http://online.wsj.com/news/articles/SB10001424052702303933104579302951214561682
======
ekidd
The author seems to have particular ax to grind against tenured faculty. This
seems, at least in my personal experience, to be a bit of red herring.

I've spent time around a couple of research universities (the kind where the
degrees _do_ pay for themselves), and I've known a lot people who pursued
PhDs, post-docs and faculty positions. Most of these people are extremely
bright and incredibly hard-working, and many of them were paid less than than
third of what a typical programmer makes. Why did they put up with it? Because
they loved their subject, and they convinced themselves they had a shot at
tenure.

But tenure is _incredibly_ hard to obtain at an elite university. You've got
to sacrifice your 20s and much of your 30s in a haze of work, and the odds are
still very slim that you'll win the tenure lottery. And if you do win it,
well, you've just spent the last 15 years proving you're a workaholic who _can
't_ stop. And if you do manage to slack off? I know at least one professor who
was told, "Absolutely, you're a professor for life, no question. But your
salary is paid for by the research you bring in. If you can't bring in the
grants, we can't afford to pay you. At least not much."

So for every piece of tenured deadwood, there are probably at least 4 crazed
workaholics (and in my personal experience, far more). And beyond that,
there's 50 or 100 grad students, postdocs and young faculty all working for
ridiculously low wages in hopes of getting tenure.

So let's do a little thought experiment: What happens if we do what this
writer from the American Enterprise Institute wants, and get rid of tenure?
Well, to make an analogy, how would the behavior of startup founders change if
they no longer had a tiny chance of a big payout someday?

I do not know why US education keeps getting more expensive. But tenure,
ironically, seems to be one of the things holding down salaries at elite
universities, in the same way that big chunks of equity hold down startup
wages. Unless somebody can provide actual _numbers_ demonstrating that tenure
is a problem, I'm inclined to look elsewhere.

~~~
jseliger
_I do not know why US education keeps getting more expensive_

There are two major hypotheses, along with variants. One hypothesis, advanced
mostly by Bill Bowen, holds that colleges are eating the student loan
subsidies and engaging in amenities arms races (the growth in the number of
administrators fits into this hypothesis). The other is related to Baumol's
cost disease, which happens when some goods experience major productivity
improvements (think of most physical goods) while others don't (think of
education or medicine).

See here:
[http://marginalrevolution.com/marginalrevolution/2012/11/mea...](http://marginalrevolution.com/marginalrevolution/2012/11/measuring-
baumol-and-bowen-effects-in-public-research-universities.html) for one good
discussion. See here:
[http://www.washingtonpost.com/blogs/wonkblog/wp/2013/09/02/t...](http://www.washingtonpost.com/blogs/wonkblog/wp/2013/09/02/the-
tuition-is-too-damn-high-part-vi-why-theres-no-reason-for-big-universities-to-
rein-in-spending/) for another. See _Why Does College Cost So Much?_ for an
elaboration on the Baumol hypothesis.

I buy the Bowen hypothesis.

Tenure is not a major part of the cost story, but in any system that's not
working so hot almost every part starts to come under scrutiny. I tend to
favor limiting or removing tenure because of the way it distorts the academic
labor market, but that's a pretty long discussion.

~~~
superuser2
People throw around offensive-sounding numbers of millions of dollars for
college amenities, but often they work out to pocket change per student (quite
a few people will circulate through a large state university over the lifetime
of a building) or are paid for by private donors.

The Bowen hypothesis makes people feel better about themselves - it says the
root of all our problems is that kids today are spoiled. However, one must
consider that state subsidization of public higher education has been slashed
in half since 1975; students and their families pay a higher proportion of the
cost than they once did.

[http://www.nasfaa.org/advocacy/perspectives/articles/Myths_a...](http://www.nasfaa.org/advocacy/perspectives/articles/Myths_and_Realities_about_Rising_College_Tuition.aspx)

~~~
001sky
_People throw around offensive-sounding numbers of millions of dollars for
college amenities, but often they work out to pocket change per student_

This is not true, generally. The cost of running a modern university
(property, plant, energy) is quite material. These costs are an order of
magnitude above "pocket change".

~~~
superuser2
Physical plant costs are material, yes. However, the issue is specifically the
incremental physical plant costs of having nice things like brand new athletic
centers.

My university has a new $51m gym. $51,000,000 / 12,000 students / 30 years =
$142/student/year. Roughly the price of a single science textbook, and that's
assuming it only lasts 30 years.

Not pocket change on a student's personal expenses budget, but compared to the
$65k sticker cost of attendance, it's a drop in the ocean. If administration
had refrained from spoiling its students with nice things, cost of attendance
would not be markedly less.

~~~
001sky
_In 2013-14, Stanford is a $4.8 billion enterprise

Expenditures for FY 2013-14

59% salaries & benefits

31% operating expenses

4% SLAC National Accelerator Laboratory

6% financial aid_

_________

=~$1.5 B on opex. Which is basically garnderers, housekeepers, lawn-mowers,
and janitors. That, plus security, heat electric, etc. golf courses, gyms,
etc.

------
TrainedMonkey
I think current situation is amalgamation of two distinct problems:

1\. Extremely easy access to loans for higher education. This, along with
systematic misinformation makes for tons of philosophy/liberal arts majors
that do not know what to do with themselves and their massive debt at the end
of education.

2\. Lack of student motivation. I went to college in order to obtain skills
and knowledge. On the other hand, many people have other priorities as
evidenced by amount of fraternities/sorrorities as well general alcohol
consumption in college (Can anyone find number of liters of alcohol purchased
in area near universities vs average? I remember seeing quite stark figure few
years ago).

So, #1 was brought by college for everyone mantra. Problem with that is
illustrated in #2, college should be only for people that want to and are
willing to learn. IMHO, until those two issues are reconciled this particular
higher education problem will not go away.

~~~
cmollis
exactly.. why don't more people say this? so much of the 'worth' of your
college degree is essentially a function of how valuable it is in the current
workplace. If you major in 'business' or 'communications' then you are
majoring in 'fucking around'. There aren't too many jobs that I know of are
looking for this.

If you go to college to get a degree that is useless, then you will work at
Walmart. I mean, seriously, is that really fucking news?

What's news is how colleges still manage to increase their tuition costs some
5 times the inflation rate year over year just to crank out vast quantities of
mindless degrees that are of no use in this economy.

Bill Gates thinks it's a supply-and-demand issue, but it sounds like
unmitigated greed to me.

~~~
ahoy
>If you major in 'business' or 'communications' then you are majoring in
'fucking around'.

Most of the sales team that I work with must have majored in 'fucking around'
then. Somehow they manage to work just as hard as us dev guys and pull their
weight anyway.

~~~
argonaut
You've got the correlations mixed up. Just because lots of skilled people
majored in business does not mean most business majors are super
skilled/motivated.

It could be that both 1) People genuinely interested and determined to get
into business, and 2) People fucking around major in business. This matches my
anecdotal experience.

------
j2kun
The article phrases things in terms of economics (as WSJ is wont to do), but
there are more issues.

> The Obama administration has dubbed college "the ticket to the middle
> class,"

Indeed, the problem is that higher education is deemed a "ticket" to ride.
Even the president is implying (whether he really believes it or not) that a
college degree entitles someone to a good standard of living. Not effort, hard
work, or other qualities commonly associated with the American dream.

~~~
wonderzombie
You wouldn't characterize education as a commonly discussed component of
upward mobility? It seems to me that an education is exactly how you'd expect
your children to do well, as opposed to the "effort" and "hard work" of a
mostly-unskilled job with an obvious ceiling on wages, etc.

~~~
gaius
There's education and there's education. Academic learning is only one kind of
intelligence, learning physical skills is intelligence too. Which is why
plumbers are so well paid. Here in the UK the Labour government told all the
working class kids hey, don't bother to learn a trade like your parents, go to
an ex-poly and get a degree in media studies! Now they're unemployable and all
our tradesmen come from Poland, where they do still understand education and
they do still respect the trades. And without them, the UK is in a lot of
trouble.

------
WalterBright
Probably one of the most productive skills one can learn, that will pay off
for your entire career, is selling. No matter what career path you choose,
having sales skills will help considerably.

Even if it's just selling yourself to a potential employer.

------
nemesisj
There's a third path here which the author ignores, but is already well
underway both online and throughout the rest of the world - an increased
emphasis on non-degreed training programs. Yes, the "for-profit" education
model is rife with its own problems, but for much of the world, many don't
have the option to attend a 4 year degree school and beyond. For those who
don't (or increasingly, won't due to rising costs and lower advantages) the
option to get skill specific training for their job or specific interests is
becoming increasingly attractive.

Even big time universities are getting into this - witness executive programs
offered by many prestigious programs. On the flip side, companies like
Treehouse and more exotic options like MOOCs and "learn a language as a
service" style instruction are becoming formidable, low risk options.

I think the future will see a reversion to 4 year institutions serving those
students who always used to go to college, a reduction in the amenities arms
race that others on this thread have pointed out, and an increasingly level
playing field (and better perception) of those people who didn't go to
college, but do have highly valuable (and demonstrable) skills acquired
through for-profit teaching avenues.

Many here will find this distasteful. That's OK. Many who are over 40 find
internet dating inherently distasteful too, but that hasn't changed the
perception among younger people or stopped its explosion as a real alternative
to traditional dating.

Disclosure: I work for an educational technology company who serves a lot of
commercial training providers but also many four year institutions.

------
codegeek
I have strong opinions about the whole college bubble issue. In my opinion,
the single biggest reason for this mess in America is the whole "student loan"
scam. Let me explain. Colleges don't really care about what their actual cost
is because whatever they bill, they get paid by the govt. (aka student loans)
for the most part. Yes, the students have no choice but to get those loans and
get enrolled. Imagine if the easy supply of these loans was stopped AND the
colleges were actually demanded to justify their tuition costs, I bet the
student enrollment will not go down while the costs will go down
significantly.

Imagine this. Lets say a good private college costs $40,000/yr (making up but
pretty close) on paper. The actual amount that a student pays out of pocket is
wayyyyy less say $10,000. The rest is covered by student loans/grants etc. So
the student still ends up with a huge debt of $40,000 while the college makes
a profit from the govt. This is true for both private/public colleges.

------
johnohara
_There are exceptions. Applications to top universities are booming, as
employers recognize these graduates will become our society 's future
innovators and leaders._

How strong is the evidence to support this statement?

~~~
bluedino
Which statement, the increase in applications to top universities or the
employers recognizing they are the cream of the crop?

[https://newscenter.berkeley.edu/2012/01/12/freshman-
applicat...](https://newscenter.berkeley.edu/2012/01/12/freshman-applications-
increase-dramatically/)

~~~
j2kun
The latter, of course.

------
rmcfeeley
Interesting that few of the comments here address the question: "What is the
true goal of higher education?"

One of the root causes of the "college bubble" might just be completely
overlooking this question, or taking any number of half-hearted answers for
granted... or thinking that the relativistic mindset which has beset academia
in the last 50 years is the final frontier.

Currently reading "The Closing of the American Mind" (as an American, wearily)
and finding the history of the university as laid out there very interesting.

(Trying to formulate a general opinion but the deeper I go, the harder it is.)

There are countless difficult questions and choices which face man, and in
most institutions of higher learning, they've taken a backseat to questions of
employability & cost.

On an unrelated note, the new undergraduate business school building at my
alma mater cost $55 million.

~~~
skylan_q
_On an unrelated note, the new undergraduate business school building at my
alma mater cost $55 million._

That's probably one of the most relevant things you could mention. Many
schools don't get $55 million a year in tuition. Imagine how affordable
education would be if these schools spent more money on research and education
than they did on architecture?

~~~
ido
Buildings are often payed for by donations, and they can't use the donations
to pay for the basic upkeep.

------
protomyth
One very large problem in University costs is administration spending. Cutting
that spending would go a long way towards reducing the costs back to something
acceptable and makes college a better economic choice.

[http://www.washingtonmonthly.com/magazine/septemberoctober_2...](http://www.washingtonmonthly.com/magazine/septemberoctober_2011/features/administrators_ate_my_tuition031641.php?page=all)

------
incision
As someone who dropped out of high school and took a gradual, but relatively
direct route to pretty well-paid work my opinion on College has changed quite
a bit over the years.

So much so that at the moment, I'm working full-time and a full-time student.

I'm not sure what to say about this article. It makes a few points, but
there's a lot there which is just odd.

I see this issue being less about what colleges are providing than the
motivations and expectations of the students and particularly parents paying
into them.

The common perception seems to be that degree is a binary thing, a membership
with guarantees on either side. A princely income in a related field for
members and a lifetime of poverty beneath a glass ceiling for non-members.

Recognize college as a multiplier more than a membership and none of this is
particularly surprising.

Freakonomics did a pretty interesting series on College [0] providing an
outlook far less dreary than this piece.

0: [http://freakonomics.com/2012/07/30/freakonomics-goes-to-
coll...](http://freakonomics.com/2012/07/30/freakonomics-goes-to-college-
part-1-a-new-freakonomics-radio-podcast/)

------
vorg
The college/university industry is self-perpetuating, like many other
industries. A typical example...

A 6-month vocational course training people in some specific in-demand skill
is started at a college/technical institute, partly funded by some big
company, and everyone who graduates gets a job. A bottleneck is created at the
admission stage as applications soar, and only some get selected. A year or
two later, the course is converted into a one-year program, teaching/admin
staff numbers increased, and the original staff rise up the ladder. The course
is then converted to a two-year program, the curriculum generalized to include
other related skills, and enrollments for each year increased. When the
student loan system recognizes the course as eligible for loans, the fees go
up. When the course becomes a 3 or 4 year diploma or degree, enrollments have
gone up so much the bottleneck is now at the job-seeking or internship-seeking
stage and the original program creators are attending frequent overseas
conferences.

------
Tycho
_Since 2006, the gap between what the median college graduate earned compared
with the median high-school graduate has narrowed by $1,387 for men over 25
working full time, a 5% fall. Women in the same category have fared worse,
losing 7% of their income advantage ($1,496)._

Does the median tell the whole story though? What about the skewness? Maybe
non-degree-holders' income has a heavy negative skew, while for degree holders
a heavy positive skew. So while the mean income may not be very different, the
two paths still offer very different prospects. How much is _the chance_ that
your income will not have a low ceiling worth to you?

~~~
muzz
Even if not, the decrease in earnings per year of $1,387 is a 5% drop, that
would indicate that the median college graduate earned $27,740 more than the
median high-school graduate PER YEAR.

Of course, that is before the "narrowing" of the gap-- the number is now
$26,382 PER YEAR.

This annual difference in earning is much, much higher than the median debt
amount for almost any college.

------
pessimizer
The cab driver stat is really interesting, but I'd like to see the comparison
between 2007 and now even more than the 1970 to now comparison.

We have a lot more degrees, but also a lot more unemployment and
underemployment.

~~~
cafard
Cabbie is also not infrequently an immigrant's first or second job. I can
remember a Ph.D. cabbie from West Africa--driving cabs in Washington, DC,
wasn't the safest occupation, but for him it was safer than staying in his
native land.

~~~
rzt
This was the first thing I thought when I saw that subhead.

------
cafard
1\. Does working at the American Enterprise Institute qualify one as a member
of "[t]he American political class"?

2\. What is "working in retail"? A couple of cousins with business degrees
started "in retail" out of college. They weren't that I know of stocking
shelves or mostly operating cash registers, and both have done quite well,
though only one works in a related field now.

3\. There is a rage for credentials that goes a ways back and is not helpful.

------
brohoolio
Education has been labor intensive. Being labor intensive means that it is
exposed to healthcare costs.

I wonder how much of the rise is cost is tied to our inefficient healthcare
system?

~~~
greenyoda
Depends on the course. An intro-level lecture course like Econ 101 is very
labor-efficient: one professor teaches 500 students in a huge lecture hall,
with the help of a few very poorly paid TAs.

Also, colleges are increasingly hiring adjunct faculty who receive no
healthcare or other benefits.

~~~
zecho
If you measure efficiency as the number of students per lecture, sure. I never
found large classrooms to be all that useful while I was at university. I
certainly remember more from my smaller classrooms where I was more closely
connected to my classmates and profs.

------
aidenn0
The bump in median annual wage is still greater than the average total debt
per student. It still seems like a no-brainer financially.

