The Bubble of the Bachelors Degree
Content
Check this out - http://www.federalreserve.gov/econresdata/notes/fedsnotes/2014/a-few-thoughts-on-the-recent-deceleration-of-student-loan-debt20140219.html
A solution to the College Education Bubble
Higher education in the United States is in the latter stages of a bubble. Bubbles are
created when thinking and reality diverge in large proportions. In this aspect,
almost all paradigms and ideas have potential to become bubbles. In fact, it happens
to us daily. The vast amount of information and cognitive biases makes our
understanding imperfect. The reason most ideas don’t reach bubble proportion is
because reality forces a perspective to evolve to best match the facts. The bubble
analogy is often used in investing, but is as applicable to higher education as it was
towards technology companies in the late 1990’s.
A bubble can be described as a fertile fallacy. It is fertile because the misconception
produced positive results before the deficiencies were discovered. It is a fallacy
because it is based on imperfect understanding. The fallacy grows in social
paradigms because they are rooted in accumulated biases. Such biases have a
tendency to have a large part in shaping a society. False ideas can prevail for a long
time, especially if they have previously produced positive results. A prolonged
fertile fallacy embedded in the collective consciousness produces widespread
negative societal outcomes.
A college education is the quintessential fertile fallacy. A college degree once
assured a certain standard of living. It was structured nepotism. Prospective
students from the upper middle class and upper class were the only ones who could
afford it. Once the degree was attained, the recent alumni had the seal of approval.
When the opportunity to attend college increased to lower classes, it seemed like a
no-brainer. The value of attaining a college degree has changed significantly from
previous generations, but remains a societal stepping stone.
Adolescents are highly influenced by their culture and family. Many kids go to
college because it is the socially acceptable or it is the parents wishes. Many parents
hold conservative views on the job market and college. The problem is that at 17
years of age, most kids have very limited knowledge on the world, so they defer
reasoning to the parents. This problem gets compounded because most kids view
their parents knowledge as almost infallible.
The decision to attend college is rooted in the emotions of past generations.
Parents often live vicariously through their children and are as susceptible to social
conditioning. Most mothers, from the day their child is born, sadly extract their
value from the child. Their will-to-power is expressed through the child. It hurts a
mothers ego when her child is not viewed as a societal success. The same is true for
fathers, but to a varying degree depending on his ability to express his will-to-power
in other forms. The problem arises when the parents shape the childs views in
extinct or conservative thought paradigms; like the value of a college education.
The inefficiency of higher education has and will continue to create problems for job
seekers and society. The embedded beauracratic nature of higher education has
created a lagging mechanism. Colleges alter or eliminate a degree program after a
sustained trend of decreased enrollment. This is exasperated by the fact that
decreased enrollment occurs once the public realizes the demand for the degree in
the labor market has diminished; which can take a long time.
Why is a college degree not as valuable as it once was? There are a few factors to
this. The labor market is like any other market. It is a function of supply and
demand. On aggregate, the supply of college graduates is increasing and demand is
not keeping pace.
The supply of people with college degrees has increased significantly. From 1970 to
2011 the amount of enrolled college students has increased from approximately 7
million to 18 million. The enrollment of girls enrolled has increased greater than
300%. It is problematic to look at such a statistic and claim how well the society is
doing as most politicians would. Like any other market, if demand does not exist or
far outstrips supply, then the value is diminished.
The demand of a college graduate’s labor is multifaceted. The work force is working
longer. This is due to many factors. The real wage decrease, debt increase, excessive
consumption, and lack of long-term planning are a few of the reasons. The reason
why this has an effect on college graduates getting a job is due to the trickle down
effect and the profit motive. For example, when an experienced middle manager
works longer, it prolongs the promotional process. When the promotional process
slows, it delays the entry level hiring.
In conjunction, the rapid increase in technology has increased corporate
productivity greatly. A task that previously took three workers now only takes one.
This “creative destruction” has not only decreased the demand for manufacturing
jobs, but also corporate entry and middle level positions.
Globalization has also had a profound impact on the labor market. As the rest of the
world catches up in economic production, it creates a deflationary pressure on the
US economy. If a Chinese company produces a similar good/service at a lower cost,
then the American company will have to lower its costs. If the equilibrium in the job
market is changing; what is the value of a college degree?
The intrinsic value within an education is supposed to be to gain productive
knowledge in a field of study. The difference between productive knowledge and a
college education is a pervasive misconception. There are two reasons for enrolling
in a college program. One is to create a cash flow from the investment and the other
is strictly to attain knowledge for its own sake. Both reasons provide the same effect
of attaining knowledge in the field of study.
For someone who just wants to obtain the knowledge, say in philosophy, would it
make sense to do your own independent study or enroll in a degree program? The
“degree paper” would provide no upside other than maybe boost you’re ego. The
cost would be significant. Not only that, but you would have to study many other
courses such as intro-to-college and biology. On the flip side, if you did an
independent study, you could learn at your own pace and model the curriculum
after the Oxford philosophy course description and reading list. The only drawback
from the independent method would not having structured feedback from a
professor. This drawback has been mitigated significantly since the advent of the
internet. You could join a philosophy group, or even hire a tutor or ex-professor to
review you’re work. Ironically, most universities even structure some of their
courses where a Ph.d speaks out of the book and the effective learning takes place
with the teaching assistant at another time.
The same logic of independent study could be proposed for the person interested in
making a career in their field of study if society chose to evolve. The catalyst to
making this a reality would be businesses not making the degree a requirement. A
company could ask prospective entry level employees to present research, provide
knowledge on the industry, or even take a test to prove knowledge and
understanding. To mitigate a long-term commitment to a nonperformer, the
company could implement a trial period similar to an internship.
Changing the entry level requirements would have enormous value to society. It
would cut the cost of learning down significantly. Students that would prefer
attending a four year college program would also get a cheaper education. It would
reverse the $1 trillion student debt. Below is a graph on the cost difference:
$90,000
$80,000
$70,000
$60,000
$50,000
college
$40,000
independent
$30,000
$20,000
$10,000
$room &
board
books
tuition &
fees
tutor
total
The above chart assumes the independent learner would continue living with their
parents, a textbook cost of $900, and a tutoring service for $1000. This cost of $1900
encompasses the entire explicit cost to the learner. The college educaton is based off
Pennsylvania’s average 2014 in-state public university costs.
There are infinite paths a learner could take. For instance, they could spend the first
year at home clarifying their career interest and learning money-management.
Throughout the rest of their study they could move overseas to immerse themselves
in other cultures and languages. There are a lot of options to take with the average
college budget of $80,000.
This method would also stimulate responsibility and passion since the student has
more independency over his coursework and life. Many college students have
manipulated the learning process so they get the highest grade with the lowest
knowledge retention. Although these maneuvers might be shortsighted, they are
performed because the student is either not interested in the material or they find
no real-world applicability.
Below will not be used in the article-but for an investment
proposition
The Congress has specified that Federal Reserve Banks must hold collateral equal in
value to the Federal Reserve notes that the Federal Reserve Bank puts in to
circulation. This collateral is chiefly held in the form of U.S. Treasury, federal agency,
and government-sponsored enterprise securities.
Cost of the 4 year degree- include debt and opportunity cost
How the debt market played a role
Total student debt is now over $1 trillion. Like most bubbles, debt has played a vital
role in the consumerist education.
In any investment decision, debt financing is a precarious proposition. In modern
society, debt can be used for asset purchases ranging from televisions to housing.
What makes financing a college education unique is the mix of social narrative and
uncertainty. The social narrative, as discussed earlier, pressures a person to take on
the investment. The uncertainty arises due to its potential long-term and volatile
payoff.
When an investment opportunity is evaluated in corporate finance, a net present
value is calculated. This methodology projects an estimated cash inflow and
discounts it by the financing cost. 17-year-old kids lack the to create a net present
value for the education investment. They, and the’re parents naivly believe that the
benefit will be greater than the cost.
This is synonymous to the housing bubble. Low interest rates mixed with
government financing and subsidies was the foundation. Aggressive underwriting
due to the profit motive instigated the narrative that people should finance real
estate.
Measure of unemployment
The vagueness of unemployment rates also propels the consumerist education
fertile fallacy. Colleges at best provide biased statistics and at worst make nonquantitative statements.
The U.S. Bureau of Labor Statistics reports on the unemployment in the U.S. The’re
methodology is questionable.
Catalyst to bubble burst-ppl cant pay loans/societies views conform with reality
A catalyst to the consumerist education bubble burst could be from a few areas. If
the student loan repayment has large defaults, then the debt market will likely
change its terms or stop offering the financing.
Check this out - http://www.federalreserve.gov/econresdata/notes/fedsnotes/2014/a-few-thoughts-on-the-recent-deceleration-of-student-loan-debt20140219.html
National center for education statistics – nces.ed.gov
A solution to the College Education Bubble
Higher education in the United States is in the latter stages of a bubble. Bubbles are
created when thinking and reality diverge in large proportions. In this aspect,
almost all paradigms and ideas have potential to become bubbles. In fact, it happens
to us daily. The vast amount of information and cognitive biases makes our
understanding imperfect. The reason most ideas don’t reach bubble proportion is
because reality forces a perspective to evolve to best match the facts. The bubble
analogy is often used in investing, but is as applicable to higher education as it was
towards technology companies in the late 1990’s.
A bubble can be described as a fertile fallacy. It is fertile because the misconception
produced positive results before the deficiencies were discovered. It is a fallacy
because it is based on imperfect understanding. The fallacy grows in social
paradigms because they are rooted in accumulated biases. Such biases have a
tendency to have a large part in shaping a society. False ideas can prevail for a long
time, especially if they have previously produced positive results. A prolonged
fertile fallacy embedded in the collective consciousness produces widespread
negative societal outcomes.
A college education is the quintessential fertile fallacy. A college degree once
assured a certain standard of living. It was structured nepotism. Prospective
students from the upper middle class and upper class were the only ones who could
afford it. Once the degree was attained, the recent alumni had the seal of approval.
When the opportunity to attend college increased to lower classes, it seemed like a
no-brainer. The value of attaining a college degree has changed significantly from
previous generations, but remains a societal stepping stone.
Adolescents are highly influenced by their culture and family. Many kids go to
college because it is the socially acceptable or it is the parents wishes. Many parents
hold conservative views on the job market and college. The problem is that at 17
years of age, most kids have very limited knowledge on the world, so they defer
reasoning to the parents. This problem gets compounded because most kids view
their parents knowledge as almost infallible.
The decision to attend college is rooted in the emotions of past generations.
Parents often live vicariously through their children and are as susceptible to social
conditioning. Most mothers, from the day their child is born, sadly extract their
value from the child. Their will-to-power is expressed through the child. It hurts a
mothers ego when her child is not viewed as a societal success. The same is true for
fathers, but to a varying degree depending on his ability to express his will-to-power
in other forms. The problem arises when the parents shape the childs views in
extinct or conservative thought paradigms; like the value of a college education.
The inefficiency of higher education has and will continue to create problems for job
seekers and society. The embedded beauracratic nature of higher education has
created a lagging mechanism. Colleges alter or eliminate a degree program after a
sustained trend of decreased enrollment. This is exasperated by the fact that
decreased enrollment occurs once the public realizes the demand for the degree in
the labor market has diminished; which can take a long time.
Why is a college degree not as valuable as it once was? There are a few factors to
this. The labor market is like any other market. It is a function of supply and
demand. On aggregate, the supply of college graduates is increasing and demand is
not keeping pace.
The supply of people with college degrees has increased significantly. From 1970 to
2011 the amount of enrolled college students has increased from approximately 7
million to 18 million. The enrollment of girls enrolled has increased greater than
300%. It is problematic to look at such a statistic and claim how well the society is
doing as most politicians would. Like any other market, if demand does not exist or
far outstrips supply, then the value is diminished.
The demand of a college graduate’s labor is multifaceted. The work force is working
longer. This is due to many factors. The real wage decrease, debt increase, excessive
consumption, and lack of long-term planning are a few of the reasons. The reason
why this has an effect on college graduates getting a job is due to the trickle down
effect and the profit motive. For example, when an experienced middle manager
works longer, it prolongs the promotional process. When the promotional process
slows, it delays the entry level hiring.
In conjunction, the rapid increase in technology has increased corporate
productivity greatly. A task that previously took three workers now only takes one.
This “creative destruction” has not only decreased the demand for manufacturing
jobs, but also corporate entry and middle level positions.
Globalization has also had a profound impact on the labor market. As the rest of the
world catches up in economic production, it creates a deflationary pressure on the
US economy. If a Chinese company produces a similar good/service at a lower cost,
then the American company will have to lower its costs. If the equilibrium in the job
market is changing; what is the value of a college degree?
The intrinsic value within an education is supposed to be to gain productive
knowledge in a field of study. The difference between productive knowledge and a
college education is a pervasive misconception. There are two reasons for enrolling
in a college program. One is to create a cash flow from the investment and the other
is strictly to attain knowledge for its own sake. Both reasons provide the same effect
of attaining knowledge in the field of study.
For someone who just wants to obtain the knowledge, say in philosophy, would it
make sense to do your own independent study or enroll in a degree program? The
“degree paper” would provide no upside other than maybe boost you’re ego. The
cost would be significant. Not only that, but you would have to study many other
courses such as intro-to-college and biology. On the flip side, if you did an
independent study, you could learn at your own pace and model the curriculum
after the Oxford philosophy course description and reading list. The only drawback
from the independent method would not having structured feedback from a
professor. This drawback has been mitigated significantly since the advent of the
internet. You could join a philosophy group, or even hire a tutor or ex-professor to
review you’re work. Ironically, most universities even structure some of their
courses where a Ph.d speaks out of the book and the effective learning takes place
with the teaching assistant at another time.
The same logic of independent study could be proposed for the person interested in
making a career in their field of study if society chose to evolve. The catalyst to
making this a reality would be businesses not making the degree a requirement. A
company could ask prospective entry level employees to present research, provide
knowledge on the industry, or even take a test to prove knowledge and
understanding. To mitigate a long-term commitment to a nonperformer, the
company could implement a trial period similar to an internship.
Changing the entry level requirements would have enormous value to society. It
would cut the cost of learning down significantly. Students that would prefer
attending a four year college program would also get a cheaper education. It would
reverse the $1 trillion student debt. Below is a graph on the cost difference:
$90,000
$80,000
$70,000
$60,000
$50,000
college
$40,000
independent
$30,000
$20,000
$10,000
$room &
board
books
tuition &
fees
tutor
total
The above chart assumes the independent learner would continue living with their
parents, a textbook cost of $900, and a tutoring service for $1000. This cost of $1900
encompasses the entire explicit cost to the learner. The college educaton is based off
Pennsylvania’s average 2014 in-state public university costs.
There are infinite paths a learner could take. For instance, they could spend the first
year at home clarifying their career interest and learning money-management.
Throughout the rest of their study they could move overseas to immerse themselves
in other cultures and languages. There are a lot of options to take with the average
college budget of $80,000.
This method would also stimulate responsibility and passion since the student has
more independency over his coursework and life. Many college students have
manipulated the learning process so they get the highest grade with the lowest
knowledge retention. Although these maneuvers might be shortsighted, they are
performed because the student is either not interested in the material or they find
no real-world applicability.
Below will not be used in the article-but for an investment
proposition
The Congress has specified that Federal Reserve Banks must hold collateral equal in
value to the Federal Reserve notes that the Federal Reserve Bank puts in to
circulation. This collateral is chiefly held in the form of U.S. Treasury, federal agency,
and government-sponsored enterprise securities.
Cost of the 4 year degree- include debt and opportunity cost
How the debt market played a role
Total student debt is now over $1 trillion. Like most bubbles, debt has played a vital
role in the consumerist education.
In any investment decision, debt financing is a precarious proposition. In modern
society, debt can be used for asset purchases ranging from televisions to housing.
What makes financing a college education unique is the mix of social narrative and
uncertainty. The social narrative, as discussed earlier, pressures a person to take on
the investment. The uncertainty arises due to its potential long-term and volatile
payoff.
When an investment opportunity is evaluated in corporate finance, a net present
value is calculated. This methodology projects an estimated cash inflow and
discounts it by the financing cost. 17-year-old kids lack the to create a net present
value for the education investment. They, and the’re parents naivly believe that the
benefit will be greater than the cost.
This is synonymous to the housing bubble. Low interest rates mixed with
government financing and subsidies was the foundation. Aggressive underwriting
due to the profit motive instigated the narrative that people should finance real
estate.
Measure of unemployment
The vagueness of unemployment rates also propels the consumerist education
fertile fallacy. Colleges at best provide biased statistics and at worst make nonquantitative statements.
The U.S. Bureau of Labor Statistics reports on the unemployment in the U.S. The’re
methodology is questionable.
Catalyst to bubble burst-ppl cant pay loans/societies views conform with reality
A catalyst to the consumerist education bubble burst could be from a few areas. If
the student loan repayment has large defaults, then the debt market will likely
change its terms or stop offering the financing.
Check this out - http://www.federalreserve.gov/econresdata/notes/fedsnotes/2014/a-few-thoughts-on-the-recent-deceleration-of-student-loan-debt20140219.html
National center for education statistics – nces.ed.gov
