The Education Bubble

Occupy Wall Street protests are drawing more attention to the Education Bubble. Since I coined the phrase, “Education Bubble,” I thought that I should repost my YouTube video about it. I originally posted this on May 4th, 2006, two years before Charles Murray published Real Education and three years before articles about the bubble began appearing in mainstream publications like The Chronicle of Higher Education and The Economist. Wikipedia claims that Bill Bennett originated the concept, but his editorial in 1987 did not use the phrase, and, of course, could not relate it to the series of economic bubbles that have occurred since.



The idea has really caught fire recently. PayPal founder Peter Thiel created a grant to encourage young people to skip college and start a business. He joined Murray in an Intelligence Squared debate on the subject. On Friday, comedian Bill Maher endorsed the existence of an education bubble on his HBO program, which elicited the typical, kneejerk reaction from liberal columnist Thomas Friedman to pump more money into educating more students. Friedman wants another GI Bill, but we did have a Post-9/11 GI Bill.

In order for credentials to have solid value, they must be a precious resource (to the extent that educational benefit bolsters zero-sum competitiveness), represent value added, and represent a quality of enduring merit. Because one often associates education with intelligence, and IQ tends to hold a stable value throughout an individual’s adulthood, one way to strengthen education’s value would be to make it more closely approximate IQ through stiffer admission policies or more challenging coursework. This also begs the question of whether allowing IQ testing in hiring would not be more efficient and, thereby, allow education to fill a different niche. Columnists like Friedman like to emphasize the role of education in teaching skills, but many skills do not necessarily endure as IQ and perhaps perseverance can. After the dot-com bubble burst and many engineers and computer scientists lost jobs, I recall James Fallows suggesting that graduates be able to purchase skills insurance so that their heavy investment does not crash when their particular set of specialized skills becomes obsolete. Maher quotes Fareed Zakaria in repeating the clichéd complaint about America’s paucity of engineers, but why should young people invest in advanced high-technology skills when someone as experienced and intelligent as Warren Buffett does not even feel confident in betting some money in high-technology companies. Even if the modern “information age” economy demands a more educated populace, there is no other age in which everyday folks had more access to cheap or free knowledge without needing to earn college credits in the process. Books are now available via illegal downloads as music has been for years, and bookstores are closing down permanently. Higher education is too expensive to constantly retrain workers, but tests could inexpensively verify knowledge or abilities.

What I find most ironic about the Education Bubble is that a liberal like Maher would endorse it without seeing that nearly any implication of it endorses politically incorrect concepts like IQ and the limitations of the well-meaning societal intervention that higher education is. All of this discussion is a high-wire act over the issue of race. It might not be “nice” to talk about race honestly, but racial disparities in IQ, SAT scores, and college majors are constants with profound economic impacts. Any reform will stir racial controversies with new disparities. Businesses cannot use straight IQ tests for reasons of race, alone. Can we afford our racial consensus?