03
Nov
11

Higher ed bubble watch, subsidised “barista degrees” edition

Alex Tabarrok has a post up that I rather enjoyed:

He starts by describing the problem, which is no doubt related to alarming findings like these on the decrease in earnings for young college grads:

Over the past 25 years the total number of students in college has increased by about 50 percent. But the number of students graduating with degrees in science, technology, engineering and math (the so-called STEM fields) has remained more or less constant. Moreover, many of today’s STEM graduates are foreign born and are taking their knowledge and skills back to their native countries.

[…]

If students aren’t studying science, technology, engineering and math, what are they studying?

Well, maybe they’re doing business degrees, or nursing degrees, or education degrees, or pre-law, or other “real job” degrees.

In 2009 the U.S. graduated 89,140 students in the visual and performing arts, more than in computer science, math and chemical engineering combined and more than double the number of visual and performing arts graduates in 1985.

The chart at right shows the number of bachelor’s degrees in various fields today and 25 years ago. STEM fields are flat (declining for natives) while the visual and performing arts, psychology, and communication and journalism (!) are way up.

There is nothing wrong with the arts, psychology and journalism, but graduates in these fields have lower wages and are less likely to find work in their fields than graduates in science and math. Moreover, more than half of all humanities graduates end up in jobs that don’t require college degrees and these graduates don’t get a big college bonus.

(Link added to “the chart at right”.)

Well, that explains a lot of the “crushing student debt and dead-end jobs” narrative coming out of the Occupy Movement, doesn’t it?  People go off and get massive loans to take “fun” degrees, then graduate into a world without cushy jobs to offset the loan payments that pile up in the mailbox.

But Alex goes further:

The potential wage gains for college graduates go to the graduates — that’s reason enough for students to pursue a college education. We add subsidies to the mix, however, because we believe that education has positive spillover benefits that flow to society. One of the biggest of these benefits is the increase in innovation that highly educated workers theoretically bring to the economy.

As a result, an argument can be made for subsidizing students in fields with potentially large spillovers, such as microbiology, chemical engineering, nuclear physics and computer science. There is little justification for subsidizing sociology, dance and English majors.

Will Wilkinson is horrified by this argument:

I think he misses a few points.

Perhaps Will’s strongest argument is this one:

[Alex Tabarrok is] right that many of us hold that education is a boon to society. But this conviction is rooted less in growth theory than in a Jeffersonian faith in the importance of a well-informed, well-rounded citizenry.

(Emphasis added.)

I’m sympathetic to Will’s point.  I earned a very specialized B.Sc. in computing science, but I managed to wedge a few liberal-arts courses into my degree regardless, and I’m glad I did.  The courses I took on existentialist philosophy and informal logic unquestionably made me a better person, and if I’d taken an intro microeconomics course in first year rather than, say, statistics-for-dummies, I probably would’ve stopped being an insufferable Marxist cockbag in 1998 rather than 2001.  I don’t know that I’ve become a better citizen for all that, but there have probably been some knock-on effects to society.

Will doesn’t drive on that point, though.  Instead, he cites a wide variety of nice things that happen to be state-subsidized, things like high school football and drama programmes, and points out that nobody goes around complaining about having to pay an extra half-cent on their property taxes to pay for East High’s theatre renovation.  And yeah, that’s fair enough — of all the things municipal governments can do, funding theatre programmes is hardly at the top of my shit list.  But these things are basically luxuries, and we ought to be asking about their opportunity costs.  Should East High be spending money on renovating its theatre, or should it be replacing its comically out-of-date history textbooks, or hiring another Special Ed teacher?  Should cash-strapped state governments be subsidising Performing Arts BFA programmes, or should they be shoring up their woefully under-capitalized pension funds?

Next, Will picks at a glaring hole in Alex’s argument:

The fact that the percentage of students studying science, engineering, technology, and maths has declined, despite the fact that salaries for graduates with these majors are handsome and steadily increasing, ought to be very telling, especially to an economist. It’s important to note that everyone knows that engineering jobs are far more plentiful and remunerative than jobs in ballet companies. If we faithfully apply the economists’ idea of “revealed preference”, it seems we should infer that students decreasingly care to use their time at university preparing to land highly-paid jobs.

This ties into Alex’s mention of subsidies, in that both of them get oh!  So!  Close! to what I think is the crux of the issue, yet somehow manage to avoid stumbling over it.

Why are subsidies generally considered bad by economists?  Because they fuck with price signals.  Subsidies artificially decrease the price of the subsidized good.  If you hadn’t guessed by the fact that I keep calling higher ed a market bubble, I think the key problem in postsecondary education is that its price signals are foxtrot uniform.

Student loans don’t discriminate in price (by which I guess I mean interest rates) between “practical” or “vocational” degrees like B.Sc.s or B.Eng.s, which are likely to lead to well-paying in-field jobs that give the borrower a good shot at repaying the loan, and “classical” or “fun” degres like B.A.s or B.F.A.s, which (as Alex argues) are not only unlikely to lead to in-field jobs but are unlikely to lead to a college-degree earning bonus — making it vastly less likely that the borrower will easily be able to repay the loan.  This no doubt comes from the fact that it’s very difficult to discharge a student loan in bankruptcy: lenders know that they can continue to collect payments even to the point of garnishing the borrower’s Social Security cheques.

That leaves tuition as the remaining major price signal.  By subsidising Arts degrees, states artificially lower their prices to — or below! — parity with STEM degrees.  Will’s demonstrated preference argument doesn’t necessarily show that people are taking more Arts degrees because they like ’em better — it shows that they take more Arts degrees at subsidised tuition levels because they like the tradeoff better.  Alex argues that STEM degrees have a positive externality (innovation, growth, &c.), and it’s narrowly plausible to imagine that STEM tuition subsidies are in fact Pigovian.  Will fails to convince that Arts degrees have similar positive externalities — and as the Occupy Movement protests demonstrate, debt-funded state-subsidised Arts degrees often have large negative external costs.  Maybe states should be taxing Arts degrees instead.


2 Responses to “Higher ed bubble watch, subsidised “barista degrees” edition”


  1. 1 Not Sure
    November 4, 2011 at 18:47

    “We add subsidies to the mix, however, because we believe that education has positive spillover benefits that flow to society.

    As a result, an argument can be made for subsidizing students in fields with potentially large spillovers, such as microbiology, chemical engineering, nuclear physics and computer science.”

    I would imagine there’s also a benefit to society when there are people you can call to come and fix things when they stop working, too. Are the benefits equal? I don’t know, but I suppose one might ask someone with a hopelessly backed up toilet what they think.

    • 2 perlhaqr
      November 5, 2011 at 05:45

      I don’t know anything about any other place in the world, but in New Mexico, at least, and Albuquerque specifically, there’s a community college, and all of their vocational and trades classes are essentially free to residents. Like, $10 per credit hour vs: $100 for academic classes, or the $1500 they charge at the university up the road. (Disclosure: that university signs my paycheck.)


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