The College Bubble

Started by winkio, May 08, 2011, 07:47:31 pm

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The following is a discussion between me and my brother about the cost of going to college.  I just thought I'd post it as an example of how to have a good discussion about something controversial without going straight to flaming.  Also, feel free to continue this discussion if it is of any interest :)
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Quote from: brotherHave not seen the movie yet, but plan to on May 15th... this is the biggest lie of our generation... if you go to college you will be set for life.  Obviously we are all ok, but there will be many people hurting in the next 10 years.

Quote from: meEducation is about more than just getting a job.  That said, very few people actually use their time at college effectively, and these people don't really need to be going in the first place if they are just going to waste it.  So I agree that college isn't this thing that everyone needs to do (you don't NEED a college degree to move on with your life), but it is very useful to many people, even if it doesn't help them get a job.

Quote from: brotherEducation is more than just getting a job.  But I would argue if you ask those footing the bill for college (the parents), they will say they sent their kid to college so that he/she would be prepared to start a career.  I don't think parents send kids to college exclusively for the experience... there are much cheaper options for that.  Arguably the primary goal behind the educational system in America is to train competitive professionals in their field so that they can boost national productivity - most commonly through the workforce.  Of course there are exceptions, but the majority of college grads are not going off to start their own company or to get a graduate degree.  When you look at statistics such as "there is more student loan debt in america than credit card debt" you have to start wondering if resources are being improperly allocated and if students are really getting their moneys worth out of their education.  While the top 10% of their class continue to thrive, there are the rapidly expanding average/subpar performers that are coming out with 100-200K in debt, interest payments, and no strong source of income to pay down that debt.  That is a not just a financial problem, but a social problem in America.  And now for the real scary thing... over the last 30 years, America has been in an environment of declining interest rates.  That means rates you pay on your mortgage and student loans has been dropping, year of year, for over a generation.  Looking forward you will see a rising interest rates environment, which means these student loans are going to begin attracting interest rates of 10%+ instead of the current 6-8%.  Combine that with weak employment and you have a debt crisis among college grads without jobs -

Bottom line is education is too expensive for the majority of Americans.  There is a largely skewed distribution of what different people earn out of their college degree, while the cost is evenly distributed - everyone pays about the same tuition.  Tuition rates have been growing faster than the rate of inflation and have outpaced other consumer prices.  Of course, our Mom and Dad do not have to worry about this, because they raised 3 hard working boys that will more than cover the cost of college in the long run.  The majority of America is not in this situation, and they will be laden with debt for years to come. 

The price of education needs to come down for the masses.  I think this will happen through creative startups that begin awarding degrees online.  This has already started to some extent but the credibility is not there yet and I think we need some really smart people to design a new way of teaching through online content.  Once that technology breaks through, you will see college tuition rates drop significantly at 2nd/3rd tier institutions to remain competitive.  Of course, top tier will likely keep its premium. 

Bottom line - while any college is a positive experience, everything has a cost, and for many people in America, the cost of college is beginning to outweigh the benefits of a college degree.

Quote from: mehere are many things in life that are not sound economic investments.  Why go to high school classes all day when you can skip the ones that you will never use and work a part time job instead?  Why spend 300,000 dollars on a medical procedure that will only extend the life of an elderly person for a year or two?

Let me pose a question: is the true value of a person in their economic output, or their mental output?  We have stopped natural selection with our medicine, saving people that otherwise would die, adding weaker genes to our gene pool.  Why?  To increase our mental abilities as a race.  Each person might have the next big idea that will revolutionize society or change people's lives for the better.  This is how we now evolve - by cars, computers, and satellites.  College is the most effective place I know of at unlocking an individual's mental potential, by challenging people to think critically about their passions.  Sometimes the effects are not immediate, and sometimes we don't see the effects at all.  But each person has some hidden mental potential, so I argue that it is always worth it to educate them in an attempt to free that potential.  Sure, many times this will end in failure, or loss.  But what if the person you convinced not to go to college would have found the cure for cancer if he or she had gone?  If we stop educating people, we lose so much hidden potential without ever realizing we had it.  We cripple our own abilities as a race.

I do think that online educations are a good idea though, as internet content is able to be much more interactive and complete.

Quote from: brotherYou go to high school classes because they are sound economic investments.  You are thinking too short term.  Getting great grades in all your high school classes, regardless of how little you think they matter, is what matters to top colleges, and getting into a top college is proven to lead to higher income. 

Spending 300K on a medical procedure is that will only keep someone alive for a year or two is not a rational decision and will ultimately be phased out of the system.  I do not think you believe the person you save for another 48 months is actually going to add anything mentally to society.  I have never heard of anyone making a major discovery on their death bed.  Most are made between the ages of 25-40. 

And lets be clear, I am not saying don't go to college, of course that is a horrible idea.  But would you agree that there is some price point at which it does not make sense.  Would you pay $500K a year to go to college? $5 million?  All I am saying is that for the majority of Americans, 50K is simply too much.  And from a rational standpoint, just like it does not make sense to keep the old person alive for 300K, it may not make sense to spend 200K on a college education. 

I am 100% for education EVERYONE, but we live in a world driven by costs and benefits.  We can't magically feed everyone in the world either.  All I am saying is there is a LARGE issue with how much it costs to go to college, it is not sustainable, so either we need to find a way to make it more cost effective, or not everyone will be able to enjoy the benefits. (A very similar argument can be made for the healthcare system)

Quote from: meAs I said, I agree that college is too expensive, that is not what I'm arguing about.  What I'm saying is that the function of college is not limited to getting/training for a job.  If college is too expensive, you need an intellectual alternative as well as an economic one, and that is what all these economists are ignoring, which is sad.

Also, on saving the old person - what if in their last two years alive, they sparked an interest in some issue, and talked to other people about it, leading to a big discovery shortly after their death.  I mean, look what Jesus did the last year before he died.  I don't think you value an individual human quite highly enough.

Quote from: brotherYou live in an ideological world - the college bubble.  Economics is important because it tells us we cannot afford to do that 300K operation on every elderly person in america.  You can call it devaluing human life, but ultimately it is valuing our current human society.  It is not a one way street, you cant just spend money saving everyone as if there are no consequences - who is going to foot the bill?  Who will pay the consequences?  For a great example of this, look at greece, look at ireland and the economic woes that have destroyed their economies and made many go hungry and homeless - how much are you personally willing to give up to save that human life for an extra 24 months?  There are countless examples in history where societies are ruined because of financial missteps. 

The only thing I can say in response to your opinion that I do not value life highly enough is I think you place too much value on keeping an individual alive.  Do you really think if Bill Gates never existed, someone else wouldn't have come up with the idea for an operating system?  If we choose not to save a 78 year old for 24 more months in which he would have cured cancer, that the cure will be lost forever and no one else will cure it?

And using Jesus as an example does not align with our previous argument.  1) Jesus was not old, 2) the people crucified him - the act of killing is not the same as the act of saving 3) do you really have to reach back over 2000 years to find an example as to why we should not spend up to our eyeballs to give people their final 24 months to live when they would have died naturally today?  In fact, one of the biggest problems with the current healthcare system is people doing the opposite of what I am, valuing life too highly! 

One thing I do not undervalue is the human intellect, and this is not characteristic of 24 year old nancy or 78 year old martha, but a characteristics of the entire human race.  We will cure cancer, not as an individual, but as a society.  New discoveries in healthcare and disease are rarely solved by an individual.  We will solve the energy problem, not as an individual, but as a society.  And to think that the whole experiment would be lost just because someone unexpectedly died in a car accident is myopic.  There is something bigger than any individual out there, no matter how special that individual is. 

Quote from: meAh yes, the consequences.  Now before we get down the wrong path, let me just say that it's obvious that we can't save every single person ever and we have to make decisions to save some or let others go, and often finance and economics are the deciding factors.  Right now we don't economically have the infrastructure needed to educate everyone at the level of a top tier institution, and it would be stupid to try to.  Right now our higher education system is creating a real economic burden on the current generation.  But here's the thing - if that burden doesn't destroy them, if they only have to make small sacrifices, then it is still worth it.  To put it into economic terms, the value of education (both economic and personal) outweighs the cost of the debt for small to medium size debts.  Now, you are going to say that personal value can't be traded, so it means nothing, so the whole situation still creates a loss, an inefficiency.  This is true - if education were to cost much less, it would be much more efficient for people who want it.  Regardless, people will not wait for the price of education to come down.  We are not going to throw away a year or two's worth of students waiting for the market to react in order to make education reasonably priced - everyone wants their chance at personal value, and they are going to take it whenever they can, even if it means living with inefficiency.

Oh, I knew you would pick out the Jesus example, but there is actually a long list of old people who did great things near their death - Ghandi, Einstein, Mark Twain, Nelson Mandela, etc.  I think these examples are going to be more of a distraction from this discussion, so I'm going to choose not to go more in depth.

And now onto your collective argument.  Society is setup to advance at a certain steady pace.  That pace is an average of all the individual paces, and thus is much slower than the pace of the fastest half of the individuals.  A more efficient system would be to let the single fastest individual advance all of society.  Of course, how do you determine who is fastest, how do you replicate the actions of one person in all of society, etc, etc.  My point is you need both - you need society to keep the steady pace up and keep everything together, and you need individuals to speed up that pace and increase its overall efficiency.

Quote from: brotherI think you are still missing one of my key points.  I am not suggesting that people should wait until school is cheaper until they start going again, effectively bringing down the price.  That is very simply micro econ way of thinking, there is a lot more than simple supply and demand and markets drift far away from efficiency.  What I am saying is that people will continue to pay more than they can afford until one day, poof, people will simply not be able to be afford to go anymore, and the financial aid centers of the government will break down because they will be trying to cover the millions of dollars of defaults from our generation.  In order to keep the current system healthy, where, for the most part you can go to college regardless of financial background, we have to lower the cost of education itself.  You are right, people are not going to stop going to school, but they will continue to make financially irresponsible decisions.  We saw the same thing happen in the housing crisis as the strawberry farm worker that makes 12,000 a year somehow got a loan for a house valued at 750K.  This is no different, and it will end no better.  All I am suggesting is we, as a society, need to come up with a cheaper, but equally effective way to educate people.  And I am also pointing out that a lot of kids your and my age are quite frankly, screwed with how much the educational system has charged them.

Your final argument I think is alluding to the theory that individuals make great leaps forward in progress while the society keeps the engine running, waiting for the next great mind to come along and find a way to shift to the next gear.  I agree with this theory, but I have never seen a gear shifter originate from someones deathbed.  To put another way, if you haven't made some major discovery in the first 75 years of your life, it is highly unlikely that you do in the final 24 months.  One key characteristic of all the people you mentioned is that they making breakthroughs way before their deathbed.  Maybe as a society we should value their lives above others and they should be revived from death whenever possible.  But you know what the funny thing is, those people all were very well off and made plenty of money to the point where they COULD afford whatever healthcare they wanted.  The economy allocated more resources to those individuals simply because they were great and they were the gearshifters.  Now I know I am being a bit nerdy, but that is the true beauty of economics.  Now you could go and say that people like Mother Theresa didnt have wealth at all, but she was an important figure with a large impact on society.  I can only respond with the idea that resources go beyond just dollars.  This is why some people don't care at all about money, they just want to be recognized by their peers.  But this is just another form of resource - obviously harder to obtain and not minted by any bank.  But at the end of the day there is a great demand and exchange of this resource in the form of ideas.  These ideas are the greatest resource we have discovered as a human race, and they are met with the highest of respect when presented to the world.  So high, that I am fairly certain any doctor would care for Mother Theresa on her deathbed simply for the recognition.  Now that is called being wealthy beyond most peoples dreams.  Ok I am done nerding out...


Very intelligent debate.

Although I offer no excuses for some of the trolling and spamming that seem to infect every thread in the Intelligent Debate section, in all fairness, this topic was not about anything worthy of getting in any heated debate about.

I suppose that I have seen topics that are even more "tame" get into an uproar, though.

Either way, nice debate. (I tend to agree more with you than him  ;) )
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