The author explores a lot of information showing the increase in the price of college education while the quality of learning has not changed or even decreased. He also points out that the United States has the highest college dropout rate (with just over half of those who start college getting 4 year degrees) and has fallen from first to twelfth world-wide in percentage of 25-34 year-olds with a college degree. Although there are a variety of reasons, many do not finish because it simply costs too much.
"The cost of college in the past 30 years has gone up tenfold. Healthcare has only gone up six fold, and inflation only threefold." So this begs a purely economic question: Why do Americans keep buying a college education if the cost is so high and the return so low?
To explore that question, the author asks "What kind of economic good is a college education?" In other words, what other purchases is buying a college education like? Some say that it is a luxury good--a high end product whose appeal grows in proportion to the sticker price. Some also say it is a good investment--that you will make more later and at the end of the day you're better off. Another argument is that completion of a college degree serves an important 'signaling' function, advertising that the holder of the degree has a minimum level of talent, pedigree and ambition. But do these answers really explain why Americans, despite the worst job market in 50 years, keep sending their kids to college despite the cost going up tenfold over the last 30 years? I have to agree with the critics, that it is not an adequate explanation. The article's answer is best in its own words:
But if college is neither a luxury good nor an investment, what is it? For Thiel, the commodity college most closely resembles is the humble insurance policy. Americans have become terrified, he says, of what will happen to their children if they don’t send them to college. The recession, widening income inequality, growing job insecurity, the uncertain future of the welfare state, the increasing costs of health care—all have deepened the anxieties that made college such an attractive option for a rising middle class in the first place. “I think that’s the way probably a lot of parents think about it. It’s a way for their kids to be safe, to be protected from the chaos. You’re paying for college because it’s an insurance policy against falling out of the middle class.” The larger question this raises, he says, is, “Why are we spending ten times as much for insurance as we were 30 years ago? And does that tell us something has gone really badly wrong with our country?”(Peter Thiel is the founder of Pay-Pal - See the article for more detailed background information.)
Obviously, there are plenty of exceptions to these general rules. You do not finish high school chemistry properly prepared to enter the working world developing groundbreaking drugs or industrial chemicals. But for many of the liberal arts degrees, there is ample evidence that a college degree is optional. In my current position with the State of Utah, I have 18 more or less equals throughout the state. Most of us are college graduates and about a half dozen of us have advanced degrees (MPA, MBA, Law Degree, etc). However, there is at least one (maybe more) whose highest formal educational attainment is a high school diploma. Yet, we are all paid in the same range.
While I have a difficult time thinking of a college degree as nothing more than an insurance policy, I find it difficult to refute the argument that such is the best comparison in terms of the type of economic commodity a college education really is.
Please do not misunderstand me. I am not saying in any way that young people should not go to college. What I am saying is that when it comes time to decide on the amount and type of post-secondary education one is to seek out, make this decision carefully and with vision--don't just go on auto-pilot thinking all will work out.
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