Wednesday, August 24, 2011

Go to College, Dummy ∞

Is college too expensive? Ask any economics professor, and they’ll say no, the return on your investment exceeds its cost. That’s true. And if you’re considering whether to attend college or not, you almost certainly should. But that response doesn’t answer the question.

Let’s say, as a native English speaker, being fluent in a foreign language will earn you an additional $5k/year. Would you consider spending $25k on a comprehensive Spanish textbook or software program?

No, of course you wouldn’t, because many substitutes exist. There are thousands of people, if not many, many more, with the knowledge necessary to develop the coursework materials to teach you Spanish, and there are not many other limits on supply. Therefore, Spanish instruction is a monopolistic competition, and its price should reflect its production cost and a small profit (several hundred dollars), not its value to you as the student (tens of thousands of dollars).

So is college too expensive? Maybe. It depends on the college. Of course, economics professors are beholden to their potentially-overpriced academic institutions and do not disclose their conflicts of interest, so this argument is rarely voiced.¹

¹ Watch “Inside Job.”