MitGiven that one can listen at low cost/free on the Internet to the best professors in the country giving courses in many leading subjects (MIT has all its courses free online, Yale and Stanford some of theirs), how long will consumers be willing to pay $200,000 for four years of Ivy League and other leading private courses often taught by uninspiring assistants and graduate students — often, in the case of math and science courses, mumbling foreign graduate students whose English is incomprehensible? I well realize that a degree from a leading private university is a considerable signal to employers, potential spouses and others, of one's intelligence and diligence (and I also realize that the $200,000 cost is usually not borne by the consumer him- or herself). But still, how long in this age of technology, outsourcing and arbitrage can such a differential persist?

Steve Ellison reports:

In an NBER paper, Avery and Hoxby state:

If [a student with very high college aptitude] acts as a "rational" investor, not bound by credit constraints … then he need make only two calculations for each college in his choice set. Supposing that the student has figured out the cheapest way to attend each college, given the aid offered him, his first calculation is the present discounted cost of attending each college j …

His second calculation is the present discounted value of the consumption he enjoys at college j plus the present discounted value of the stream of income generated by the human capital invested in him at college j …

Jeff Sasmor reacts:

What college student thinks this way? As someone who has just gone through this process with an intelligent child entering college (Barnard) next fall, the decision involved more emotional choices than rational ones.

1. What school best fits what I think I want to do with my life?

2. What school has the type of people I want to hang out with for the next four years?

3. I want to get out of NJ. Even though I was accepted into Rutgers' Honors program I don't want to go there, yuk. I want to go to a brand-name school. I want NYC because I want to experience an urban lifestyle. You know, I'll need a bigger allowance!

4. Don't lecture me, I don't care what it costs.

Riz Din shares:

I was painting our fence the other day while listening to a variety of quality podcasts and lectures (painting a fence takes longer than I thought) and I had similar thoughts.

The differential has to fall over time because the act of standing in front of a group of people and lecturing them is outmoded in today's world and is fast becoming commoditised through technology. The idea of an institution herding students into a room at a fixed time and having a one-sided conversation with them while they rapidly jot down all the salient points just doesn't hold water when there are much better, more productive ways of teaching. I start to drift after the half hour mark in many lectures and being able to press 'pause' on the lecturer would have been a real boon.

Universities can be extremely slow to adapt (e.g. Latin was standard at Oxford and Cambridge several hundred years after other places of learning adopted English), so overhauling the entire way of teaching may be some years in the making. Nevertheless, I think the education establishments are going to have to figure out how to better differentiate themselves because we thankfully live in a world where one's prospects depend less on one's place of learning or social standing and more on one's capability. Just as increased competition in the forex world led to massive spread reductions over the years, forcing many banks to evolve and differentiate their forex offerings with value-added propositions such as better research, option strategies, trading systems, etc., so universities and other places of learning must adapt their models. As a hybrid model at least, I can foresee on-line lectures combined with seminars and other, more interactive modes of learning. In today's world, perhaps knowledge isn't power because it isn't scarce, and the emphasis is increasingly on the the application of knowledge.





Speak your mind

7 Comments so far

  1. C. Davis on June 4, 2009 6:57 am

    Check out my book, Beating the College Bubble. It's sort of a brain dump that asks the same question and then runs through a few alternatives. The free courses are surprisingly good options.

  2. Shawn Surdyk on June 4, 2009 1:15 pm

    I don't believe you can put a real dollar-value on (1) the connections you make, (2) the value of holding a degree from a top university, and (3) the high level of thought that results when you get groups of very intelligent people together (including profs). Because of this, I think this "differential" that you point out will continue to exist. In the long run, it will always be worth it to choose a top college that costs more over a 2nd-tier college that's cheaper. The top names have amazing good-will that will always attract the best and brightest(in students and professors), and these are the people you want to surround yourself with. $200k is a small price to pay for being part of such a community. I believe high quality lecturing is only an ancillary benefit of going to these top universities.

  3. Nic Chalmers on June 5, 2009 1:19 am

    I think one only appreciates the quality of ones education many years after graduating. I admit that I remember deciding that the best University for me would be as far away from parental supervision as possible, in a warm coastal city with good sporting facilities and a large female student body. Alas, my hidden agenda was quickly spotted by my hard working, and well educated, sponsor and my University dreams soon turned into two awakening years in the army.

  4. Dan Costin on June 6, 2009 5:30 am

    Do they have online squash games?

  5. derrick on June 6, 2009 3:29 pm

    I graduated Kent State, known more for May 4th 1970 than academics. It is also the second largest college in Ohio after THE Ohio State University. Notable graduates are Muriel Siebert, Michael Keaton, Drew Carey, Antonio Gates, Jack Lambert, Arsenio Hall, Michael Capellas and others. It is recognized for its Education College, Architecture, Journalism, Nursing, Geography, business, liquid crystal institute and others.

    I graduated with an undergrad medicine. Two of my colleagues who I remain in touch with are as follows:
    Cardiologist on staff at Johns Hopkins.

    Others became respected Doctors surgeons dentists and others.

    When I started tuition was less than $1000 per year.This was back in 1975-1979. I had the grades and the scores to go to another institution many private but stayed near home. Today it is $4200 per semester.

    My point is I got a great education, a rewarding experience, and it was very cost efficient. I did not owe one dollar when i graduated. Had I not gone to Kent I do not know where I might have gone. Thank God for public colleges. Not once did I ever feel as though I were left out because I did not go to a private college, or missed out on other opportunities.

    I have long believed that the goal of an undergraduate education is to get an education. If you are gifted work hard and strive for excellence then the rest will take care of itself. And if you are blessed to continue with a graduate degree program, if you are deserving, you will find a place.


  6. Anonymous on June 6, 2009 9:12 pm

    there is no question that relationships can play a role in securing a job post college. Pledging the correct fraternity, playing sports, being a legacy, can all make the difference between gaining a position with a leading company.

    Graduating from an Ivy League in business can lead to work on Wall Street. It can also help in gaining admission into graduate programs. MIT and Georgia Tech can lead to prominent work as chemical,electrical, mechanical engineers.

    In Florida, a sheepskin can play a prominent role in securing a job in the sunshine state.

    There also is the flipside of cost of college. Let’s say you attend a public college for 4 years instead of Private. Cal instead of Stanford. Rutgers instead of Princeton. Georgia instead of Georgia Tech. UNC instead of Duke.Illinois instead of Northwestern. You get the point. You take the difference in money, once again for the sake of an argument $125,000 and at the end of the 4 years invest the money in a business or into a diversified portfolio of mutual funds or other securities. What are the benefits that might occur here. No huge debt service. Where will one be in 10 or 20 years using this strategy.

    Many ways of looking at things.

  7. bob fleck on June 18, 2009 2:22 am

    "Hollywood" has been summed up as "junior high… with money." There's a comparison here. The Ivies are all about joining your pod o' peers and tracking them the rest of your life. In the entertainment biz, you're either in town or somewhere else that doesn't matter. Same with the Ivies. Either you get in or you're set dressing. It's not about the quality of learning, pedagogy, education, yada yada. It's about sniffing and being sniffed so that you're wired into your peer-set as you carefully navigate the halls, towers, studios, etc. of power. As we experience the deconstruction of our economy and the emergence of something nobody can see yet, are there still going to be Ve-ri-tas sweatshirts running tomorrow's show? Maybe, maybe not. We annoying little, nimble, hard-to-catch scuttling mammals outlasted the dinosaurs. Online learning may yet trump exclusive herding in the halls of power and privilege.


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