Suppose for the moment that you're 23 years old and applying for graduate school. You found a topic you love to study and you've felt the call to teach. Perhaps you had a professor who encouraged you, perhaps your friends support your decision. Perhaps you look at just how much it is that the institutions of higher education across the country seem to be expanding. Perhaps other employment opportunities seem stultifying or oppressive. You can't imagine yourself writing TPS reports for the next forty years. No sir, graduate school is the right choice for you. It's spiritually satisfying, it's intellectually rewarding, and you're bolstered by the knowledge that well educated people earn a comfortable living.
So you study Medieval History. You get a PhD and end up teaching in rural Arizona. You end up on food stamps. This doesn't seem right. You did everything right, and it seems someone pulled the rug out from under you. You blame the Governor and the Republicans and whoever else might be convenient. To an extent, you're right. You made a good-faith effort based on the best available information that your field would be in high enough demand to justify going into hock for it. The question is, were you wrong by plain random luck or did you make a systematically biased error?
There's good reason to suspect that there's a higher education bubble. It's hard to say that any industry that has been so heavily subsidized for so long won't have some capital misallocation. The question is more like will that misallocation remain in place over the arc of my career? As it turns out for a lot of folks, the answer is, sadly, no. Bad timing and bad luck have put academics in the bread lines.
And it's weird, too, right? You'd figure that in the universe of all possible exchanges, advanced degrees should be the least subject to non-EE conditions. Smart people have good outside options: their BATNA is quite attractive. No one is forcing you to go to grad school (quite the opposite, very often). Credit markets are liquid enough to let even temporarily poor folks get a sheepskin, so the conventional capacity to own and exchange is there. If there are any externalities, they're ostensibly positive (to the extent that education actually has positive externalities). It just doesn't seem like we'd have the ordinary circumstances for exploitation, yet there it is.
The remedy is even less clear. The Austrians say that it's a terrible idea to inflate a bubble in the first place, but that's small consolation for those who get hurt when an existing bubble collapses. It's also supercilious to tell someone with a doctorate to get a different job. At that point, they're so specialized as to be almost unemployable outside the academy. What's likely to happen is that legislators will keep the bubble inflated for as long as they can. Incoming students will continue to make non-euvoluntary allocation decisions and those who end up in the thick of things when the bubble bursts will be left holding the tattered remains, as is so often the case.
So maybe you should pity the 23 year old you on the cusp of making what could perhaps be a terrible mistake. The young (old? what's the median age of the readers here?) you is looking down a branch of the game tree they think is green and vibrant, but in reality it's dead and withered, but with a fresh coat of beechnut green paint and a spritz of lilac air freshener. Fooled by hope, fooled by the availability bias, fooled by subsidy. Education is a marvelous fun consumption good, but moving from a consumer to a producer is a whole different ball of a different color of a pig in a poke.
Points for classroom discussion:
- What are the likely prospects for tenure track positions 20 years from now?
- What role will technology play in the future of education?
- If your students are moving on to a graduate degree, what alternatives are they giving up? What are their expected future earnings?