Freakonomics Goes to College, Part 2: A New Freakonomics Radio Podcast

Our latest Freakonomics Radio podcast is called “Freakonomics Goes to College, Part 2.”

Part 1 explored the value of a college degree and the market for fake diplomas. This episode looks at tuition costs and also tries to figure out exactly how the college experience makes people so much better off.

You can download/subscribe at iTunes, get the RSS feed, listen via the media player above, or read the transcript below.

While there are a lot of different voices in this episode, including current and recent college grads, the episode is also a bit heavy on economists (d’oh!), including:

+ David Card at Berkeley, whose education papers are here;

+ Ronald Ehrenberg at Cornell, whose recent paper “American Higher Education in Transition” discusses tuition inflation;

+ Betsey Stevenson; her blog contributions are here, and she tweets too;

+ Justin Wolfers, whose blog writing is here; he too tweets; additionally, he and Stevenson are a matched pair — heading for the University of Michigan, by the way — who also appeared in our “Economist’s Guide to Parenting” podcast, along with daughter Matilda, whom they discuss again in this episode; and:

+ Steve Levitt, who has this to say:

LEVITT: So I did a study many years back that looked at Chicago public schools, and it turned out that the single biggest impact of school choice in Chicago schools was giving kids who were not doing well in the traditional kinds of schools the opportunity to go to trade, culinary school, or schools that actually taught them real skill. So, clearly you can see how going to school to learn real skills like nursing or something like that could have huge returns. The tougher question is these general liberal-arts educations, what are you learning? And that’s something that economists haven’t even tried to really think about very much.

As we explain in the podcast, calculating the true costs of college isn’t simple. A sensible place to start is the College Board, whose website includes a Trends in College Pricing page, which compares tuition “sticker” prices versus net prices, and a Trends in Student Aid page, which catalogs various forms of financial aid. Here’s David Card on the potential returns to investment on a college education:

CARD: If you’re thinking about this as an investor, you know, you’ve got a kid and you’re thinking of sending them to college or not, you have to pay a lot of money upfront and then reap those returns later on. And several features of that are difficult. One is the cost that you have to pay upfront has gone up quite a bit, and the second is the uncertainty involved in whether the kid will actually successfully complete the degree. It’s a pretty risky investment.

And here’s Betsey Stevenson on an overlooked angle of college costs:

STEVENSON: I think that people often make the mistake of not thinking through the problem as systematically and thoroughly as an economist would advise. So first of all, there are two major costs of college. Everybody thinks about tuition. But there is another equally important cost, and that’s the opportunity cost of not working. So when you go to college you’re going to forgo working a job that’s going to pay you some kind of salary. And while lots of students have part-time jobs, or try to fit some kind of work in while they’re in college, they’re obviously not doing the kind of work that they would be doing if they didn’t go to college.

That said, the returns to education are, in a word, huge. College graduates earn more money, live longer, and are healthier and happier than similar people who don’t graduate from college. Is all this upside a product of the degree itself, or does college perform some kind of alchemy? To explore that angle, we hear from Amherst president Biddy Martin about the unlikely route she took to the land of higher education; and I travel back to Appalachian State to chat with my old documentary film professor Joe Murphy:

MURPHY: People are insisting on some measure to prove to them that their $100,000 investment or $40,000 investment is worth it. I can understand that. That’s a lot of money. But in reality, I don’t think there is a way to quantify the value of college. I know you can look at statistics about people who have a college education are better paid. I think you have to look at how quality of life issues. To me, ignorance breeds hatred. And if you can get people knowledgeable, there will be less hatred, more understanding. That’s my theory.

(I spoke to a couple more favorite former professors that day, Leon Lewis and Jim Winders, and you’ll be hearing a separate podcast later in the fall that includes all three of them.)

One last highlight of the episode: a conversation with recent-ish University of Chicago grad Bourree Lam, editor of this blog and all-around Freakonomics superstar, talking with another recent grad about the hardship of not finding suitable work after graduation.

So what have we learned about college? Let’s give the final word to Biddy Martin:

MARTIN: It’s impossible to learn a completely different way of thinking about things without unlearning what one has already learned. And I think it’s important to realize that, because it’s often the case now that people think about education as the acquisition of new things as if it were an unproblematic and promising process simply of adding to what one already knows or thinks. And the truth is it is transformative, and that means upending a whole set of assumptions about how to see things, what’s possible, what’s real.

Audio Transcript

College STUDENTS: My name is Allison, this is my last semester at Duke University... we’re at Minneapolis Technical and Community College … Mitchell State University in St. Paul… first year at Wellesley University … I’m at University of North Carolina …I’m a sophomore, I go to Morehouse College … I’m Jasmine, I’m a freshman and I’m at Harvard University. I’m Jasmine, and I’m a freshman, and I’m at Harvard University. You guys are both Jasmine? Yeah! (laughs)

FREAKONOMICS: Can I ask y'all some questions? This is for a show called Freakonomics Radio.

STUDENT: What? Of course. I’m an economics major and philosophy minor, bring it. Jeffrey Williams from East Atlanta, Georgia.

FREAKONOMICS: Do you think college is worth it?

STUDENT: I feel like if a bunch of people from the community just sat in a park every day for three months straight and just exchanged books and had lectures, we’d learn much more than we had in three years here.

STUDENT: I guess that when I came here, I was expecting I’d put a lot of time and effort and money into this, and I wanna get that out it’s not looking that way right away.

STUDENT: I always worry, because of what the economy’s like and everything, if I’m going to have a job, if there’s going to be a job out there for me.

STUDENT: In today’s day, a college degree is what a high school diploma was decades ago.

STUDENT: You didn’t really think about why you were going to college, just that you were going to.

STUDENT: Society forces you to think that because you go to college, you’re going to be successful. And that’s not true. You don’t need college.

[THEME]

ANNOUNCER: From WNYC and APM, American Public Media: This is Freakonomics Radio, the podcast that explores the hidden side of everything. Here’s your host, Stephen Dubner.

Stephen J. DUBNER: This is the second of two episodes about the value of a college education. In Part 1, we heard Allen Ezell, a former FBI agent, talk about the huge market for fake degrees. Pretty much any diploma that you can imagine, even an M.D., can be bought online.

Allen EZELL: You would be shocked at the number of people that buy this garbage and then put it on their resume, and then post this online.

DUBNER: But mostly we talked about real degrees. Steve Levitt, my Freakonomics friend and co-author, assured us that going to college definitely pays off in the long run.

LEVITT: One thing is clear is that the market puts a tremendous reward on education. So the best estimates that economists have are that each extra year of education that you get is worth about maybe an eight percent increment to your earnings each year for the rest of your life. So it turns out for most people buying a lot of education, or at least for the average person let me say, buying a lot of education is a really good deal.

DUBNER: But let’s acknowledge the obvious: buying all that education has gotten a lot more expensive.

David CARD: So if you’re thinking about this as an investor,

DUBNER: That’s David Card, he’s an economist at the University of California, Berkeley.

CARD: You know, you’ve got a kid and you’re thinking of sending them to college or not, you have to pay a lot of money upfront and then reap those returns later on. And several features of that are difficult. One is the cost that you have to pay upfront has gone up quite a bit, and the second is the uncertainty involved in whether the kid will actually successfully complete the degree. It’s a pretty risky investment.

DUBNER: Hey Bourree, say hello.

Bourree LAM: Hi.

DUBNER: So, Bourree Lam works here at Freakonomics Central -- she’s editor of the Freakonomics blog, among other things. And you are a fairly recent college graduate, yes?

LAM: Yes, I graduated in 2007 from the University of Chicago.

DUBNER: Good school. And you studied economics at Chicago, yes?

LAM: Yes, I did.

DUBNER: So economists always talk about the “returns to education,” that is, that a college degree hugely increases your chances of making a good living. So you must know these numbers by heart?

LAM: Of course. All of us know these numbers are, as college graduates, that they’re on our side and that statistically, college grads will make a lot more money over the lifetime than those who don’t go to college.

DUBNER: And you take great comfort knowing these numbers, I assume, yes?

LAM: More comfort when I was in college than now.

DUBNER: (laughs) So, what’s the problem? Why do they offer less comfort now?

LAM: Well, these are numbers on average. And after graduation,  a lot of my friends were struggling. Many of them were unemployed or underemployed, and they weren’t doing what they wanted to be doing. It was hard to look at those numbers.

DUBNER: Right, so the numbers in the aggregate paint this pretty great picture, but if you’re not living that life, then it’s not so pretty.

LAM: Right. I called up one of my friends to talk about this. His name is Luke Anable, and we graduated together from the University of Chicago.

DUBNER: Did Luke study economics as well?

LAM: No, he studied English.

DUBNER: OK, and what’s Luke doing for a job now?

LAM: Luke’s a bartender in Tuscon, Arizona.

DUBNER: So let’s hear what Luke had to say, yeah?

LAM: Has anybody asked you, what are you doing with your degree because of what you’re doing?

Luke ANABLE: I think so. I think my parents finally stopped asking that question, which is nice.

LAM: Yeah, I guess in the media and in general there’s this conversation about whether college is worth it. I know you don’t have second thoughts about that, you’re glad you went.

ANABLE: Yeah, definitely.

LAM: But that, what that next step is is kind of blurry for all of us.

ANABLE: I think so. And I think, for how sort of positive, and confident, and proud I am of the institution, I always felt like the career programming was kind of farcical. You know, it was like the college would hire the people who couldn’t get jobs to teach you about how to get a job so they could produce the numbers of graduates that had jobs.

LAM: Yeah.

ANABLE: It was just kind of silly. And then I think when you say is it worth it, you have to ask, worth what? Financially, was it worth a hundred and sixty thousand dollars? I mean, I don’t know, I probably haven’t made a hundred and sixty thousand dollars in the past four years.

LAM: That’s okay, I haven’t either. (laughs)

ANABLE: Yeah.

Betsey STEVENSON: I went to Wellesley College. I think it was a great place, and I saw the other day their tuition for the incoming class and almost spit out my drink.

DUBNER: That’s Betsey Stevenson.

Justin WOLFERS: I’m actually reading about the Fed right now.

DUBNER: And that’s Justin Wolfers.

WOLFERS: The committee’s members concurred that the date given in the statement would be subject to revision in response to significant changes...

STEVENSON: Justin’s obviously heard that sketch where the whole point of NPR is to bore people into submission.

DUBNER: Stevenson and Wolfers may sound a bit familiar. We’ve had them on our program before, and they write for the Freakonomics blog. They also happen to live together.

WOLFERS: We start with coauthors, then we move on to having offices next to each other, but yes we also share a home, a life, and a child.

DUBNER: They are both college professors, both economists, both of them in the neighborhood of 40 years old. And over the course of their careers, they have seen the cost of college climb and climb.

STEVENSON: I mean, it is true that the prices have just gone up a lot more than the prices of food, the prices of other sort of goods.

DUBNER: Maybe not gold, but I can’t think of any other things that have kept pace with tuition inflation.

WOLFERS: I think a key distinction people need to make is between sticker price, and actual prices being paid. And all of our alarm is about the rising sticker prices. And I have no doubt that the prices that people are actually paying, which is, you know, after scholarships and financial aid, and all these different ways we can help, I’ve no doubt that’s going up, but it’s not going up at anywhere near the rate that the sticker price is going up.

STEVENSON: And it’s not surprising that a bunch, particularly of the private schools, have increased the generosity of their aid program, so it’s not surprising that their top-end prices would go up to help make that balance.

WOLFERS: So let’s think about the school that I know best, which is Harvard, my alma mater. The cost of going to Harvard for a working-class kid has never been lower. It’s zero. So that’s a case where the sticker price is enormously high, the actual price being paid for a working-class kid is enormously much lower.

DUBNER: And what’s the incentive for the institution to make public a sticker price that’s so out of whack with the actual price for a certain kind of student?

WOLFERS: I actually think it’s wonderful that Harvard has raised its sticker price. Very few people pay the sticker price, only the kids of the super-rich, the people who get none of this financial aid and assistance, and so on. So the higher sticker price is essentially increasing price discrimination. We’re charging the rich more for college. The question we really need to ask ourselves, are we charging the working and the middle class more or less. That’s a much, much harder question. Knowing the sticker price tells you very little about that.

DUBNER: So, this is a great and important point that you’re making, but I just want to know where do we find that number?

WOLFERS: You call real education economists, not me.

[PHONE RINGING]

Ronald EHRENBERG: I’m Ronald Ehrenberg. I’m a professor at Cornell University where I also direct the Cornell Higher Education Research Institute.

DUBNER: Ronald Ehrenberg is a real education economist.

EHRENBERG: We should distinguish between the sticker price, the posted price that students that students are supposed to pay and the net tuition, which is the price that they pay once you take account of grant aid from the federal government, and state governments, institutional aid, and also tax credits that are provided by the federal government. And although the sticker price has gone up at very, very rapid rates, the rates of increase in the net tuition, which students actually pay, on average has been somewhat more modest.

DUBNER: Okay, but still -- in most cases net tuition prices have gone up too, a lot. We asked Ehrenberg: where’s all that money going?

EHRENBERG: The answer is really that there’s no such thing as a free lunch. Economists are very fond of saying that, that education currently is a highly labor-intensive industry and there has not been great productivity growth.

DUBNER: Allow me to translate from economist-speak. College is a “labor-intensive industry” because it involves real human beings -- professors, in this case -- doing a real task in real time, which means you can’t just flip a switch and churn out more students. Unless of course, you’re talking about online education, which is starting to change the college landscape, but let’s not get into that now.  So if you want more productivity, you have to hire more people, or pay the same people more money.

EHRENBERG: So this money all comes in, and the major thing that it pays for are faculty and staff salaries.

DUBNER: And don’t forget healthcare, which is a huge part of anybody’s salary. So it’s a complex situation and there are lots of nuances, like the difference between private and public schools.

EHRENBERG: In private higher education, when tuitions go up it’s usually because the private institutions are spending more on their students. But in public higher education when tuitions go up, expenditures per student often go down because in the public sector tuition increases are often efforts to try to make up for cutbacks in state support.

DUBNER: So that’s the supply side. What do we know about the demand side, the students? Here are some numbers: roughly two-thirds of students attending college today receive some kind of financial aid -- grants, loans, scholarships, education tax credits, and so on. And how much does that aid help? Well, about two-thirds of the students who graduate do so with debt, and their average debt is about $23,000. Now, that’s not a trivial amount, but, if the returns to education are as big as economists say they are, well, the math can still work. So for a family thinking about sending a kid to college, but struggling with the cost, it might help to think a bit like an economist -- to think about stretching your dollars. Here, once again, is David Card.

CARD: You don’t have to live in the dorm. You can live with your parents, which is what they do in all of Europe. You don’t have to go to the elite private school. You can go to the best public school you can get into. And the reality today is the majority of kids going to college are working part-time.

DUBNER: So for the most part, this seems like good news. The returns to education are huge. And college, despite some serious tuition inflation, doesn’t cost as much as it may seem, at least relative to its value. So does that mean that everyone should go to college?

STEVENSON: I think that people often make the mistake of not thinking through the problem as systematically and thoroughly as an economist would advise. So first of all, there are two major costs of college. Everybody thinks about tuition. But there is another equally important cost, and that’s the opportunity cost of not working. So when you go to college you’re going to forgo working a job that’s going to pay you some kind of salary. And while lots of students have part-time jobs, or try to fit some kind of work on while they’re in college, they’re obviously not doing the kind of work that they would be doing if they didn’t go to college.

DUBNER: Because, right, as you describe it, I mean, let’s just imagine this mythical eighteen-year-old kid who thinks about it and says, “Okay, I’m going to go spend four years, and probably a whole lot of someone’s money, to produce an outcome that is not quite clear to me” versus “I’m going to start tomorrow doing this thing that I am already pretty good at and I think I could be great at.” That strikes me as a harder dilemma, a tougher dilemma than I think most of us think about. So how do you go around thinking through that muddle?

WOLFERS: So Stephen, I’m going to surprise you, I was that guy. I finished high school in Australia and my great passion in life at the time was horse racing. I wanted to either become a professional gambler or a bookie when I grew up. And so when I finished school I was not going to go to college. I thought, exactly what am I going to learn in four years at college that I couldn’t learn being on the first rung of what I saw as a career path? I had a bookmaker who was going to mentor me, and I thought that this was going to be a career that I would really enjoy.

DUBNER: And we should say, and the legality of bookmaking privately in Australia versus here is what?

WOLFERS: So in Australia bookmaking is legal. So this would have been a legal career path.

DUBNER: Alright, very good.

WOLFERS: And I was one of those natural experiments. I was very lucky. I got fired two and half weeks, actually one and half weeks into my first job. And at that point I shrugged my shoulders and thought, what the heck, I’ll just go to college, now I’ve got something to do.

DUBNER: So when you see these numbers, when you see such low, relatively low unemployment the more education you have, when you see relatively more money earning, earning more money the more education you have, do you ever wonder how could there possibly be a debate about the value of college?

STEVENSON: Well, the debate is about is it worth it for the marginal kid, and if it is, what should they be doing, what should they be studying, why is it going to matter for them? And so if you’re trying to figure out for an individual kid what’s going to be the return for them, I think it’s a lot harder.

WOLFERS: Yeah, so if you had to grade some of the exams I’ve had to grade, the worst kid in my class is the marginal kid. And that kid, most of my students are outstanding, spectacular, they learn a lot, their exams are brilliant, but the students who are at the bottom, it’s not clear they understand a word I said. And so I think, you know, if the alternative is casual work, retail jobs, dead-end jobs, going nowhere jobs, then I would say, I’d look any eighteen-year-old kid in the eye and say, “Four more years of this isn’t taking you anywhere, four more years of college may well take you somewhere.” For kids who are going to start a trade, apprentices and the like, for whom four years in the workforce is going to be an investment in the future, there I think it’s a lot harder. I think if I had a kid who was good with their hands and not academically inclined, and they could find a good apprenticeship, sure, I’d encourage them to follow that.

DUBNER:So Wolfers and Stevenson aren’t arguing that college is right for every kid. But what about … their kid? Their daughter Matilda is three years old. And what happens if, 15 years from now, she has a different idea?

STEVENSON: Well, this is a great question because while I like her to think about there being choices in the world…

DUBNER: (laughs) She has no choice in this matter!

STEVENSON: I do not want her to grow up thinking about whether college is a choice. And in fact, when you said you were going to ask me that question it made me a little nervous. I was like, I don’t want her to listen to a radio interview where she hears this discussed as an option. I would be very disappointed if she chose not to go that path.

WOLFERS: Your question also comes a little late. Matilda actually reassured me the other day just before bath time: “Daddy, I’m going to college.”

DUBNER: Coming up, Steve Levitt tries to explain the magic that happens in a college classroom... or maybe it’s not in the classroom.

Steven LEVITT: It is kind of hard when you watch it to figure out where it is that the value is added.

[UNDERWRITING]

ANNOUNCER: From WNYC and APM: American Public Media, this is Freakonomics Radio. Here’s your host, Stephen Dubner.

DUBNER: Economists tell us that college is good for us, and not just in terms of higher pay. People who go to college tend to be healthier, happier, they tend to live longer. So we know that college works, somehow. But how? What exactly does college do to produce all those gains? Here’s Justin Wolfers again.

WOLFERS: It’s clear to me that college is a good choice for many. It’s much less clear to me why. I do the best I can when I teach. But it’s not clear that anything I teach the kids is going to make them better businesspeople, or better members of the economy, or more productive. It’s not obvious it wouldn’t. And then I think about my own experience, well, I went to college with a bunch of really smart people, so maybe it’s all peer effects, in which case we can just get the professors out. And maybe that’s a big part of it. Maybe it’s expectations. So maybe the important thing that I demonstrate for my students is not that demand curves slope down and supply curves slope up, but I expect them to go on and do great things. I’m not really sure what it is. I just know there are effects.

DUBNER: Steve Levitt has spent the past quarter-century on college campuses, either as a student or a professor. And, since he specializes in solving economic mysteries, I went to him with the question.

LEVITT: Personally I have to say I don’t know anything about that. And I watch the college production function, I watch us produce college students here at the University of Chicago, I was a college student being produced. It is kind of hard when you watch it to figure out where it is that the value is added. So, obviously I teach my students, I teach them very specific things. But I know that when I talk to them years later they don’t remember anything that I taught them. I mean, I can ask them the most simple questions about the material we covered and they have no recollections whatsoever, the typical student, so...

DUBNER: I’m curious, I mean, you teach at least one really big class each year right? The Economics of Crime is a pretty big class?

LEVITT: A hundred students, not huge.

DUBNER: And then occasionally smaller classes, yeah?

LEVITT: Yeah, mostly for the graduate students. I teach small classes, fifteen or twenty students.

DUBNER: Okay, so over your years of teaching, you’ve been teaching college for how long, more than like twelve, fifteen…

LEVITT: Fifteen.

DUBNER: Fifteen years. Okay, so you’ve seen a couple thousand people come through, and obviously you can’t know much about too many of them. But if you think about your role as a professor trying to teach people, you know, how to think, how to learn to think about things, problem solving and so on, what’s just your personal observation of when you’ve been successful at that or how often you think you may have been successful at helping that?

LEVITT: I think it’s, I think it… I would say about five of those students have later written me and said, “Hey, you really helped me learn how to think.” So that’s the only direct evidence I have. I give them exams. And my exams are really, a lot of my exams are about how to think. A counter-argument to what I’m saying about teaching kids how to think is that the returns that students get from other kinds of education, so real, actual skills like trade schools, I think there are real returns. So I did a study many years back that looked at Chicago public schools, and it turned out that the single biggest impact of school choice in the Chicago schools was giving kids who were not doing well in the traditional kinds of schools the opportunity to go to trade, culinary school, or schools that actually taught them real skills. So, clearly you can see how going to school to learn real skills like nursing or something like that could have huge returns. The tougher question is these general liberal arts education, what are you learning? And that’s something that economists haven’t even tried to really think about very much.

Biddy MARTIN: I’m Biddy Martin. I’m president of Amherst College.

DUBNER: Biddy Martin is not an economist. Before becoming an administrator, she was a professor of German and women’s studies. But as a college president, she has thought a lot about the power of education, and what happens to people during those four years. Martin herself grew up in rural Virginia. Her family expected her to go to high school, and do well,  but college was another issue.

MARTIN: The family was skeptical of education. They worried about the impact of a college education, especially on girls. They made it clear to me that it was more important for boys to be educated than for me. They grew up in a time and a place when the bias against what they would have called eggheads and overly educated people included, among other things, I think a fear that people with a lot of education think they’re better than those who don’t have an education. So they had a fear about being looked down on, I think. They had a fear of loss, that is, the loss of children who go off to college and begin to think differently, and as they used to say to me, talk differently. “We didn’t raise you to talk like that.” Who actually move geographically to other parts of the country. They became afraid in the late sixties and early seventies of the impact that college might have on political, my political views.

DUBNER: In high school, Martin had a guidance counselor who encouraged her to apply to college. And, over time, her family came around to the idea, even supported her. But their fear -- that she would change -- never really went away. And in retrospect... they were kind of right.

MARTIN: I left home and I didn’t return to live in that area. I made choices about my life, the kind of work I wanted to do, the people I wanted to be with, that were hard for them. And they never ceased being hard for them. It’s impossible to learn a completely different way of thinking about things without unlearning what one has already learned. And I think it’s important to realize that because it’s often the case now, people think about education as the acquisition of new things as if it were an unproblematic and promising process simply of adding to what one already knows or thinks. And the truth is, it is transformative, and that means upending a whole set of assumptions about how to see things, what’s possible, what’s real.

DUBNER: I recently visited my undergraduate alma mater, Appalachian State University. And I caught up with a few of my favorite professors, including Joe Murphy, who taught, and still teaches, documentary filmmaking. If you asked me whether I learned a lot from Joe Muphy, I’d say that absolutely I did. If you asked me what I learned... that’s harder to say. So I asked Joe to describe, from his perspective, what happens to a kid who goes to college.

Joe MURPHY: Well, I think the best thing people can learn in college is to not be afraid of the new or the different. You know, these people come to the college, or most people come to college, with a fairly walled-off background of experience. You know, they come from a high school in a small town, even a high school in a city, and they don’t know many people, they haven’t met many different kinds of racial ethnic groups. They haven’t been exposed to ideas that are radically different from their parents’ ideas. And so what I hope they take away from college, and I think the better ones do, is an openness to other people, other ideas, the great diversity that’s in life.

DUBNER: Yeah. I mean, I’ll tell you, that's what happened to me. Even a place like Appalachian State University in a place like Boone, North Carolina, which you would think would be pretty homogenous, some of the best friends I made here happened to be guys on the soccer team. There were the Nigerians, and Keith Lane from Ghana, and my good friend Greg Cuddy from Ireland who unfortunately has passed away. And I mean, it was a UN in the middle of the North Carolina -- it was bizarre! No expectation of that. So to me coming down, all these people were these wildly worldly, worldly people.

MURPHY: I guess the negative part for me is people who come to college to accumulate credit hours and all they’re really interested in doing is getting a degree. Because you can definitely get a degree here and know nothing, unfortunately, as I think you can anywhere. And it’s sad to see young people who set such a low standard for themselves, that's to me crushing. Somebody that’s 18, 19, 20 years old. Because chances are good they're going to live that way the rest of their lives, you know? I was a major in economics. The reason I majored in economics, because I thought it was interesting. Isn’t that a strange reason to major in something?

DUBNER: (laughs) You think that happens less these days?

MURPHY: Absolutely. I mean, people major in what they think will get them a job. People major in business because they think that will get them a job.

DUBNER: Do you blame them for that?

MURPHY: Um, no. I don’t. College is very expensive. And people are insisting on some measure to prove to them that their $100,000 investment or $40,000 investment is worth it. And I can understand that. I mean, that’s a lot of money. But in reality, I don’t think there is a way to quantify the value of college. And I know you can look at statistics about people who have a college education are better paid. I think you have to look at how quality of life issues, you know? To me, ignorance breeds hatred. And if you can get people knowledgeable, there will be less hatred, more understanding... that’s my theory.

STUDENT: It’s a question I’ve been asking myself a lot lately, if it’s worth it or not to go to college.

STUDENT: College is definitely worth it. Without an education, no one can go far. It doesn’t matter what you decide to do.

STUDENT: Just being even able to socialize and become a mature person, so when you hit the workforce you’re not as immature as you are when you came out of high school.

STUDENT: Higher education is the best thing. I think a human being is nothing without education.

STUDENT: I choose to go to college because I want to advance myself. I need a good family, I need a good job, I need a well-paid job. So if I am educated, gradually those things will come my way.

STUDENT: I’m not going to college to make more money, interestingly enough, I’m actually here because the stuff interests me.

STUDENT: When I really look back at what I’ve done, I’m about to graduate, and I really didn’t do a thing. I really just want to be happy, whatever that means. If that means 30 grand a year or 300 grand a year, I just want to be happy.

STUDENT: If I could redo the four, the past four years, I maybe wouldn’t go to college right away... if at all.

STUDENT: Is college worth it? Of course, man! Without knowledge, there’s no progress. We’re all students in the end, you know. No one’s bigger than nobody.

STUDENT: If you can find a way to do it big without going to school, then props to you, but we haven’t done that yet. We’re here, we’re here for the long haul, so it’s good.

[CREDITS]

Leave A Comment

Comments are moderated and generally will be posted if they are on-topic and not abusive.

 

COMMENTS: 64

View All Comments »
  1. Brian says:

    I went to a “Top 30″ private school.

    My freshman year the total cost of school was about $35,000. Three years later the total cost had risen to about $55,000.

    There is absolutely no way anyone, anywhere, is going to justify my “education” costing an extra $20,000 a year just three years later. When I received my letter each time of tuition increasing the justification consisted of maybe one sentence. I believe it was something to the tune of “administrative costs.” The school could barely justify it themselves.

    The amount of students at the school did not change, the student-teacher ratio did not change. I would love for someone to try and justify my professors being $20,000 dollars a year better for me than my freshman year. Or over 50% better.

    (Of course when 2,000+ students are all paying an extra $20,000 a year the administrators, who are college grads, certainly boost the average earnings of college graduates.)

    We did get a new football stadium during this time. So you thought that could explain things until you remembered the entire stadium was built off alumni donations.

    We did get a renovated dorm house during this time. I don’t remember what paid for that, but I do remember not thinking a new dorm was increasing the my earning potential upon graduation. Especially considering the new dorm neglected to have doors on the hinges the first night I was there. (This is from a “Top 30″ private school!)

    Use the money and live off campus you say? Funny how the school passed a rule disallowing off campus housing during this time.

    (Oh, and because the housing market was so “great” during this time, my financial aid actually went down due to the fact my parents house increased in value. And it’s just hysterical that as soon as I graduated my parents house value completely tanked but the cost of my “education” did not.)

    Based on the jobs my classmates have, if they even have one, I highly doubt any study is going to come out of that school saying graduates of ’09 earnings are over 50% better than graduates of ’06 either.

    The worst aspect of all this is the public school down the road from me offered more things for free, at 2/3 less tuition cost. The private school even charged us for latex gloves for our mandatory bio labs. $55,000 a year, one of the largest endowments in the country, and the public school down the road can give out latex gloves for free but the private school needs to charge for them and our dissection kits?

    In fact, I think the private school I attended may be the best run business I’ve ever been around. Buy a new Calc book at $180, (because after all you HAVE to have that new edition), resell it for $50, watch the school then resell that book to next year’s freshman at $120.

    College is a business and market like anything else. (And they have mastered marketing.) As long as people continue to pay for it, prices will continue to climb.

    Lastly, I’m surprised no one has talked about this. I believe this book quotes a study showing that those who get into Harvard and don’t go are just as successful as those who get in and do go: http://www.amazon.com/The-Chosen-Admission-Exclusion-Princeton/dp/0618574581

    Well-loved. Like or Dislike: Thumb up 15 Thumb down 0
  2. Matt says:

    What a bunch of crap on your podcast. Your use of AVERAGES is very misleading. The real cause of the rise in tution is that they can. The demographics of college age students is that there is a huge supply of students and a small amount of space in colleges. You should also look at the wage inflation at colleges (how much does a 1m dollar president bring in). Colleges have become the new Military-Industrial complex.

    Thumb up 3 Thumb down 1
  3. Ian M says:

    I sure wish I had learned a trade like I wanted to. I had very good marks in school and I was led to believe that I would be wasting my academic achievements by not attending university. I relented and studied engineering. I hate what I do, sitting at a desk plugging away at excel or the like. I feel like I contribute nothing to the world through my work (I don’t mean that I don’t contribute through other aspects of my life).

    I would much rather be a millwright. At 38 with a mortgage and 2 children, going back to school is not an option. I am not unhappy in life but I am in my work.

    Perhaps a better question would be does earning a college degree generally make one happier?

    Thumb up 0 Thumb down 0
  4. A.J. Wilkes says:

    I think recent college grads are having pipe-dreams about entry level position’s salaries if they’re not checking the Occupational Employment Statistics for their city. At the very least, high school seniors need to be taught how to calculate the present values of future wages and costs of college using that data.

    Thumb up 1 Thumb down 0
  5. Julien Couvreur says:

    I am surprised that the podcast jumps from a correlation (people with degrees make 8% more over their lifetime) to a causation (degrees cause the wage increase) without offering evidence.

    Furthermore, I wish that this analysis would be broken into different majors. It seems likely that, the effect of a degree (if confirmed), would be different for an English major and a computer science major. Was that studied.

    Finally, you seem surprised that people would display time preference (prefer money now, rather than more money later). How does the 8% figure relate to the interest rate? How much money would you make if you chose to invest your tuition fee instead of spending it on college?

    Thumb up 4 Thumb down 0
  6. Joel D says:

    It was an enjoyable listen (both parts) but it left me feeling sort of dissatisfied as well. Ultimately the show’s only real takeaway was that many people have different perspectives about the value of college. I kind of suspected that already.

    I would have liked to hear some relevant, pointed questions posed. For example, to the guy who focused on college’s intangible benefits: Are those benefits worth $55k per year? Is college really the only or best place to acquire those benefits? To those who note (correctly) that the sticker price is different from the out-of-pocket cost: are there any studies quantifying the differences or looking for any relationship between rising sticker prices and the also-rising aid sources meant to offset them?

    I’m also intensely curious about another thing I had really hoped FR would explore: the “network effect,” or the idea that some of the correlation between a college degree and higher earnings has to do with the kinds of people you network with during college and the opportunity discoveries that follow from that. If the network effect is significant, the real difference between going to Harvard and going to Western Governors (all-online, therefore far less networking opportunities) seems much a good deal clearer.

    Joel (@joeld on Twitter)

    Thumb up 4 Thumb down 0
  7. Jeff says:

    I totally agree with Joe Murphy. I majored in History because I thought it was tremendously interesting. I’ve since graduated and got a job in advertising and I’m always asked how the transition even happened. I have ‘business’ students clamoring at my desk for internships and entry level openings who have no experience, knowledge, or understanding of advertising because they took the route that they thought would have returns in dollars rather than taking the route of what inspires them.

    Thumb up 2 Thumb down 1
  8. Michael Rochelle says:

    I was soooooooo looking forward to part 2 of this podcast, and it didn’t disappoint. Of course, there are many perspectives on this, and one I didn’t hear was the one that incoroporated the cost of student loans included in the sticker price. I heard the economist or professors mention sticker price and that many low-income or working-class students/families weren’t paying the sticker price of tuition at Harvard, but what about all of the students (like myself) who go to the thousands of other institutions besides Harvard and don’t get offered that sort of system. Looking at the “sticker price” or tax breaks or whatever other benefits of a college education is not complete unless you factor in the total amount that will be repaid over the course of that student’s life, or his or her parents’ lives. The sticker price may currently be $8,000 a year and that’s the number that is being used, but if you get your degree and think that you’ll just be handing over $8,000 back to the lender, that will be your fist wake up call.

    Secondly, in my opinion, students and professors are not the best source for whether a college education is worth it or not. Professors have a vested interest in the matter and students would sound really stupid to be going to school but then say there is little value in it. The people to ask would be the people who graduated 5, 10, 20, years ago. Where did they land in terms of the job market? How did the bad economy affect them? Are they in jobs that required the degree they worked on or any form of degree? I think there is a shift with this, but throughout my work history, most of my previous managers landed in their roles based on experience, not based on a degree, which many didn’t have. Though, I will admit that the supervisors or managers that I’ve had over the past three years have either had degrees or were working on them. However, five years ago, that wasn’t the case when the manager I had at that time didn’t have a degree, and the manager prior to that job didn’t have one either. Oh, and I work in the accounting field and both managers had the role of “accounting manager” or “accounts payable manager” without a degree. That should help give some context to my comment.

    Personally, I enjoyed the experience of college, but I have to be honest and say that the worth of my liberal arts undergrad degree is subjective. Basically, when I graduated in 2010, no one cared about my English degree. No interviews. No callbacks. Very limited job openings for writers. The only thing that was marketable about me was that I’d worked in accounting for 12 years while working on that degree. Fast forward two years and I’m currently a staff accountant working on my MBA, not because it’s my passion, but because I had to do something to arm myself with a degree that would put me in a better position to pay living expenses while paying back all the loans I took on while working on my English degree.

    So, ask me in 10 years was college worth it and I’ll be able to give a better answer. But on the flip side, because I’m creative and I like to write, if I hadn’t majored in English during undergrad, I would have never finished college because no other field interested me at the time. However, now, business is an interest out of necessity. I’ve grown to accept it as a meal ticket. And, yes, my accounting career is progressing, but more because of circumstance than because of my English degree.

    Thumb up 2 Thumb down 0