Thursday, October 18, 2012

Status Goods

A status good is one bought not for hedonic purposes, but to claim relative social ranking. Many folks, economists and non-economists alike agree that diverting scarce resources towards a relative ranking contest is wasteful.

Part of the problem with these status goods is that while it's in the interest of the individual consumer (the one that wishes to participate in this contest, anyway) to engage the market, the collective benefit is close to zero. In logic, we call this the fallacy of composition: if one person stands up at a concert, she can get a better view of the stage. If everyone does it, no one gets a better view, and moreover, if everyone else is standing up, if you choose to sit, your view is worse. Status goods are a little bit like pollution.

A.C. Pigou counseled taxing things like pollution: tax something and you get less of it. But what we've done with education is to subsidize the bejeezus out this high status end of the market and slowly dismantle the low status end. Unfortunately, I can't easily find a time series of FTE students for US vocational schools, so for the purposes of this post, I'll rely on anecdote. Please note that I'd be perfectly happy to be proven wrong, so if any of my readers can refute my claims, I'd welcome contrary evidence in the comments.

Vocational and trade schools are in decline in the US. More and more students are steered towards college, and with rising incarceration rates, it seems that the old separating equilibrium of [trade school | high school | college] has been replaced by [the penitentiary | college]. I know this is a gross exaggeration, but what might stylized impressions can we make about the euvoluntarity of higher and lower ed?

Consider BATNA: the usual alternative to all education is to become what we used to call a bum: a low wage earner, a gadabout or a mooch. For any given individual, the alternative to a college education is to accept a relatively low status, particularly now that it's easier than ever before to secure student loans and to pass classes.

I'd be open to a claim that for many young students, attending college is coercive: since parents claim social standing based on their children's school performance, they may have an incentive to lean especially heavily on their kids to get into a reputable school.

Underpinning most of the arguments seems to be a presumption of regret aversion: "if you don't get a good degree, you'll just end up flipping burgers." Ignore for the moment the insult to people who work in food service and ask yourself what a plausible counterfactual state of the world would look like if the state stopped putting its thumb on the scale in favor of the university system. Would the equilibrium be that hordes of young people would have to work low-end service industry jobs? Just think of how many fast food joints would have to open.

My point is that I have a hunch that for individuals, education isn't especially euvoluntary. This may explain why there's been quite a bit of state intervention. It does seem a pity that voters have supported elites that have indulged a zero-sum status game at the expense of the lower third of students. It seems weird to have to point out to education enthusiasts that some students are simply not suited to abstract cognitive tasks and work much better with practical tasks. Someone predisposed to carpentry would probably make a lousy sociologist and vice-versa. Similarly, it seems vapid to have to point out that if everyone was an engineer, we'd have a lot of pretty drawings, but no actual machines. Yes, engineers are important, but so are machinists, welders, technicians, operators and site supervisors. Why subsidize the engineers, but not the others? Why should anyone have to point this out?

In the effort to strap rocket boosters on American students' race to the top, a whole lot of kids are flying right off the track into a ditch. This is a wise education policy? This is more euvoluntary? Please.

No comments:

Post a Comment

Do you have suggestions on where we could find more examples of this phenomenon?