Bryan Caplan  

Education Bet Update

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In 2011, my co-blogger David and I bet on the future of higher education.  The terms:
I propose that we use the official numbers from the National Center for Education Statistics' Table 212.  2009 is the latest available year of data.  29.6% of 18-24 year-olds were enrolled in 4-year institutions.  I bet that in 2019, that percent will be no more than 10% lower.  Rounding in your favor, I win if the number is 26.7% or more.  If the number is lower, you win.  If the data series is discontinued, the bet is canceled.  Stakes: $100 at even odds.
Three more years of data are now in.  Education bubble pundits notwithstanding, nothing much has happened.  In 2010, the enrollment rate fell to 28.2%.  In 2011, it rebounded to an all-time high of 30.0%. In 2012, the rate fell back to 28.3%. 

What if we'd bet on enrollment rates of recent high school completers rather 18-24 year-olds?  2009 was an all-time high of 70.1%.  This fell back to 68.1% in 2010, stayed at 68.2% in 2011, and sharply dropped to 66.2% in 2012.

If current trends continue, I will lose this bet.  I wouldn't be surprised if I did; after all, I bet at even odds.  But the point of the bet was never to deny that college enrollments may modestly decline, or that today's start-ups will find their niche.  The point, rather, was to scoff at the notion that any of today's start-ups - our the industry as a whole - will be the Napster of education.  Not gonna happen.

"There are seven more years to go!," you protest?  I'm still happy to bet on the original terms. 


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COMMENTS (4 to date)
Dan King writes:

Higher ed surely isn't the only way to put together a signal. It is probably not even the cheapest anymore. Other ways to put together a good signal are:

1) Join the military
2) Start a business
3) Work at a boring job for a long time, eventually in a position that demands reliability and accountability (e.g., opening & closing)
4) Take examinations, such as for Cisco certifications
5) Engage in a hobby that has both tangible and marketable outcomes, e.g., restoring old houses
6) Write a blog that demonstrates real expertise. Become an expert on, say, 3D printing technology

Higher ed is not only too expensive, it is increasingly irrelevant. That is, what little human capital it does contribute is gradually shrinking.

As Trotsky said, Revolution is impossible until it becomes inevitable. Some bump in the night is going to throw higher ed off its perch. Until then, not much will happen.

Dan King writes:
The point, rather, was to scoff at the notion that any of today's start-ups - our the industry as a whole - will be the Napster of education. Not gonna happen.

I think this is correct, but it is irrelevant. The threat to higher ed does not come from within the industry, but rather from outside. LinkedIn, for example, is trying to provide its members with a reliable signal. If they're successful, then college is toast.

Think about newspapers. They were done in by Craig Newmark--somebody with neither interest nor background in that journalism. Or Main St. travel offices--they were killed off by fiber-optic cable. It had nothing to do with better airplanes.

Brian writes:

"Higher ed is not only too expensive, it is increasingly irrelevant."

Dan,

This is mere mythmaking. If college were too expensive, we would see the demand for it level off or go down, but that's not what is happening. In fact, the net return to college education relative to high school continues to increase, implying that supply still cannot meet demand. You should check out this recent article, which provides an eye-opening analysis. Figures 3 and 4 make the relevant points especially well.

With regard to human capital, the idea that college is mostly signaling and contributes little to human capital is not consistent with the trends mentioned above. While it is easy to see why the demand for human capital might continue to increase in our tech and knowledge economy, there's no good reason why demand for signaling should. See also Figure 2, which shows that the U.S. has the highest wage returns to skill. Far from being irrelevant, getting a college education is probably the most reliable means of moving into a higher income level.

Gustav writes:

[Comment removed for supplying false email address. Email the webmaster@econlib.org to request restoring your comment privileges. A valid email address is required to post comments on EconLog and EconTalk.--Econlib Ed.]

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