Freakonomics Goes to College, Part 2 (Ep. 88)

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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 here.

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.


One of the things I was surprised you didn't cover in the podcast is the difference in earning potential between majors and degrees. Yes, pretty much any college degree will get you higher earnings than someone without a high school diploma, but the amount you'll earn with a history major is going to be much lower than if you'd gone into engineering or medicine, and the chances of unemployment are higher. I'm not knocking the liberal college education -- I have an M.A. in medieval history -- but lumping a B.A. in philosophy with a B.Sc. in chemistry or a B.Comm. in accounting seems disingenuous to me.

Frank Vasquez

I agree that this is one of the more critical issues. The question of “college or not” is superficial, because people don't live "in the aggregate". They have to decide whether, given their personal options of schools, costs and degrees, what is the best option for them?

Too many schools charge “top ten prices” without giving top ten value. Many employers simply will not bother looking at students with degrees from lesser-regarded schools, no matter how talented those kids may be and no matter how much they paid for their degree. And some degrees appear to have very little intrinsic worth, or at least much less than others. This problem is even more endemic with respect to law schools.

But if the only conclusion is that college is valuable for its own sake without differentiation, shouldn’t we be encouraging students to simply take the least expensive option? I think that something about that conclusion does not sit too well with academia, even though it appears from this broadcast to be the unspoken truth.


Leah Kaminsky

Very interesting exploration, as always! I wonder, though, if there's not a hybrid option for students that crave the "learn how to think" liberal arts education and a little more direct, real-world practicality. Why not, for instance, spend three years studying liberal arts, and devote senior year to a start-up bootcamp like they do at the University of Texas at Austin, or to an intensive semester devoted to the types of skills you'll need in the business world, from basic knowledge of accounting to managing social media? It would be great if we could find a way to maintain that beautiful principle of knowledge for knowledge's sake while also learning the skills that can turn that knowledge into something directly valued in the marketplace.


I subscribe to the theory that college has enormous intangible benefits. Most people go from their parents home, where some level of shelter and care is constantly provided to whatever their post-high school world is. College is like training wheels for the real world for a lot of us.

My parents increased my responsibility for my life and finances over the course of my four years of college, and I rented my first apartment my junior year. Being wholly on my own wasn't the ice-cube-down-the-back it could've been if I'd gone straight out of my parent's care to a job and place of my own, since I'd juggled school and job, paid rent, bought and cooked food... all those lovely things that grown-ups should do for themselves.

Tom Barrett

Great podcast. My daughter graduated from a private college two years ago as a highly touted fashion designer. The total cost to me, her mother, and her was $280,000 for the four years. One year of which she went to school in Milan, Italy, on an exchange program (three Italian college students exchanged for her!) so that was an added unplanned for cost that added to the total cost. Well that's $70,000 a year in cold hard cash, ok her scholarship was worth $20,000 a year, leaving $25,000 a year each for her mother and me to pay (or rather for me to take out four parent/student loans that I will be paying for for the next 10 years, because students can't get them). First, I make $70,000 a year gross. Second her mother, who is a college professor, told her she was going to the best school and not the school she teaches at (where the cost would have been zero for her!). My suggestion which was soundly rejected by her mother, was for her to get a basic undergraduate degree at a good state school where here mother teaches (and from which I graduated) and then go to a great, expensive graduate school. Third, she finally found a job in a clothing boutique making $12 an hour in NYC.

College is important for a number of reasons, but is it worth it in the job market? Not really. College education adds to a base wage. So if a living wage in NYC is about $30 an hour, college has done nothing for her. Sure she is making a little more than minimum wage, but not much. You don't have to go to fashion school to sell clothes.

I graduated in 1976 with a BA in Biology and Chemistry and have never worked in that field. My schooling cost me $2,000 a year from 1972 - 76. I worked part-time and I walked away with $3,200 in student loans and a degree. Then I attended graduate school because I could not find a job that was paying more than $500 a month in my field and I was making twice that as a waiter. At the end of graduate school I was working for the state and my student loans came due, as my deferments stopped. Because I moved six or seven times they lost track of me and I them. A bill collector called one day to tell me that I needed to pay the $3,200. Two days later I was called out on an emergency that lasted for three weeks. My net overtime pay for the three weeks was $3,300. I paid off my four years of college with three weeks of overtime and had a $100 left over.

Bottom line, college was a learning experience, but it was not a career move. I've never work in the fields I went to school in (undergraduate or graduate) and I've only had one potential employer ask to see my school transcripts and diploma. The degree has never "upped" my income and in a few cases I was told in job interviews that I was "over-educated" or "we don't think you'd be happy here because of all your degrees." Huh? I'm happy when I"m eating and paying bills.

Anyway $280,000 was a ridiculous amount to pay for an undergraduate degree. Will there be a return for her? Well yeah, she didn't pay a cent for it, her parents did. Will her education help me out down the road? I can only hope so when she gets famous.


caleb b

Wow, wow. Thanks for sharing. I feel for you buddy. I can not give this comment enough thumbs up.

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If a primary benefit is in encountering people who are different from you, then do students who live at home throughout college get less benefit? Wouldn't mandatory time in a dorm (with no choice about the race/religion/politics/etc of your neighbors) be important? Wouldn't you get this same type of benefit from military service? And won't the online-only students get none or very little of this benefit, since they don't actually encounter any students or people who are different from them?


I disagree. For me, the primary social benefit of college (and I only attended after serving in the military and working for a decade or so) was in finally being able to interact with people who were LIKE me; who were (to use Biddy Martin's term) fellow eggheads, regardless of their skin color or ethnic background.

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Finally feeling like you're normal (an argument for high IQ students *not* going to the best large public school they can get into, as recommended for the average student here) has some psychological or emotional benefits, but I'm talking about the educational/intellectual benefits, which seem to be about encountering new and different ideas and concepts through peer effects.


Similarly to looking at data for particular majors, is there any data that gives insight into who might benefit most from going to college? Most of the conversation in the podcast centered on the "average" college student, with only a brief discussion of the differences in net price of college between different income classes. But these differences in net price begs the questions: for what family income level is going to college a prudent financial investment? Does this family income level change based on what subject the student plans to study? Is there a different class of individuals who are better suited to a trade degree versus a liberal arts degree?

I am a huge proponent of the value of a liberal arts degree, but are these programs (core curricula, great books, social and political thought) financially sound investments for many families? Or is a liberal arts program a privilege only students from wealthy families or students on scholarships and aid can enjoy?



Things are a little different here (I live in Canada) but I'd like to take a different spin at all of this: we (the grand WE, as in, our modern Western civilization) are better off when we increase the literacy and numeracy of the populace. Not just because it means some people get hired into higher paying occupations and pay more taxes and buy more things. But because the challenges our society faces going forward are better met by people that learned how to ask questions; to think critically; to not just take things at face value. To wit, by the kind of people that read "Freakonomics."

Education beyond high school increase the ability of a successful student to comprehend, read, write, communicate. Grasp difficult problems. Understand the "big picture." Analyze things. So, more college graduates means more folks with the fundamental skill set and experience in handling information. You may not find yourself infinitely employable with infinite options when you come out, but even in the realms where you're not in the field you studied, knowing more, about more, can't hurt you.



You guys didn't talk to Bryan Caplan?!?!


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:



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.

Ian M

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?

A.J. Wilkes

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.

Julien Couvreur

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?

Joel D

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)



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.

Michael Rochelle

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.