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Higher Ed Bubble
How Much Is a College Degree Worth?

With student debt growing by the day, a discussion is raging about how much college degrees are actually worth. The Library of Economics and Liberty’s EconTalk podcast contributes to this conversation in a discussion with George Mason University’s Bryan Caplan. Caplan covers a number of subjects, focusing particularly on the oft-cited 83 percent wage premium for college grads, arguing that the number is vastly overstated as it doesn’t take into account the large number of students who attend college and don’t graduate or the fact that smarter students who graduate college would have likely fared better in the job market even without a degree. Instead, Caplan notes that the premium for students who attend but don’t graduate is somewhere closer to 10 percent, which makes the prospect of paying for college considerably dicier for those who aren’t sure they’ll graduate.

More generally, Caplan argues that the value of a college degree has little to do with the content that students actually learn, and instead is based mostly on the signal it sends to employers that a student is intelligent and hardworking. Among other things, this has interesting implications for federal education policy; if the value of a degree is mostly as a signal of preexisting attributes, policies that attempt to send a greater share of students to school will likely only result in increasing the work that talented students need to do to stand out from the pack, without significantly increasing prospects for less accomplished students. This also could spell trouble for MOOCs: If employers see colleges primarily as a grueling test for students to prove their determination rather than a learning experience, they may be less inclined to take MOOCs seriously, regardless of the actual quality of the education.

While we don’t fully agree with everything that is said, overall, this is an extremely engaging listen and worth hearing in full.

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  • free_agent

    I recall one study which showed that while getting a high school diploma raised one’s future income, getting a GED did not. This was despite that the GED requires that one passes an exam that shows one knows the information in question. The hypothesis was that the high school diploma demonstrates an ability to work in an environment of regimentation, while the GED does not.

  • Chris_8304

    Here is an interesting take on the value proposition of a college education by Stanford’s Provost:

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