What you study matters

by Russ Roberts on November 7, 2011

in Education

The return to a college education depends on what you study. Yes, just surviving tells employers something. But learning something while you’re there is an even better idea. Alex Tabarrok has recently been writing about this issue and this post on the financial returns to studying puppetry, is superb.

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Junkyard_hawg1985 November 7, 2011 at 5:10 pm

One of the big problems with the federal government running a “one size fits all” student loan program is that there are no differences in interest rates for various degrees. I imagine if a true free market student loan system existed, the interest rate for students studying engineering or business would be considerably lower than for those studying puppetry, philosophy, etc. As it currenty stands, engineers are subsidizing the puppeteers with the lower default rates.

EG November 7, 2011 at 5:22 pm

Absolutely agree. A lot of people who rage against “college” (as unfortunately too many of the right do), ignore the differences between “college” degrees, and which is really being subsidized.

Bastiat Smith November 7, 2011 at 11:33 pm

As for subsidies. I think that the gov should not pay for education, rather, if it pays at all, it should reimburse once the bill has been paid by the student. Maybe we could say, whatever you pay off in the 4 years after graduation, that’s the amount for which you’ll be reimbursed. That way, a student will pursue degrees that will earn them enough income to pay for school. Then the government will only pay for relatively productive degrees. The people that made poor choices will eat their losses. The people that are productive for society — you know, that thing that government is supposed to care about– will be rewarded. In this situation, the government makes no normative valuations on which degrees are ‘desirable’, the market does that instead.

I think this is a third best solution. Obviously the first best solution isn’t politically possible.

Ken November 7, 2011 at 7:40 pm

There are no differences in tuition and fees either, as there might be in an independent market. I’ve often speculated (I teach marketing myself) on what an institution would look like in which the professors were independent contractors, compensated on the demand for their services. Not saying I advocate it necessarily, mind you ;) , but it makes for a fascinating thought experiment.

Junkyard_hawg1985 November 8, 2011 at 10:22 am

Ken, You make a great point. I imagine a puppetry professor would be less expensive than a fluid dynamics professor. I also imagne that you may get a far better puppetry education as an apprentice with a master than in a classroom at a university.

Martin Brock November 8, 2011 at 2:42 pm

I also imagne that you may get a far better puppetry education as an apprentice with a master than in a classroom at a university.

I imagine that goes for practically any education.

roo November 7, 2011 at 5:12 pm

For my sake I hope economists aren’t as out of demand as puppeteers by the time I get out of school. Stuff like Khan Academy has definitely pushed me toward taking more math and computer courses just to hedge against the chance that teaching as an occupation goes the way of the dodo in my lifetime.

Darren November 7, 2011 at 6:41 pm

teaching as an occupation goes the way of the dodo in my lifetime

It seems like there is a push toward online education (strongly opposed by teachers’ unions of course).

Krishnan November 7, 2011 at 7:14 pm

Online education is not a panacea – sure, it may be better in many cases than the desperate states many schools are in, but it is not a long term solution – and no, I am not a fan of the teachers’ unions. Computers/internet has definitely changed how we deliver lessons and teach – but at it’s core is the role of the teacher/guru/mentor – a presence that the students can identify with and learn

GAAPrulesIFRSdrools November 7, 2011 at 7:45 pm

There are some fields where it can’t be done. Nursing for example. I’m not getting a catheter from anybody who hasn’t practiced under careful supervision before being set loose!

Ryan Vann November 8, 2011 at 5:10 pm

Online education is still pretty untapped in my view. I wouldn’t expect brick and motors to become obsolete any time soon.

Ryan Vann November 8, 2011 at 5:32 pm

Brick and mortars rather

Thinkofthechildren November 7, 2011 at 5:39 pm

Considerable harm has been done by telling our children that they can be anything and do whatever they want. The market will only pay for you to do what other people want. If what they want also is what you want, how fortunate.

Thinkofthechildren November 7, 2011 at 5:41 pm

That, and 12-15 years spent in an institution where children are essentially devoid of any responsibility or purpose beyond amusing themselves, has given this generation some very twisted expectations.

Justin P November 8, 2011 at 12:13 am

You must be watching #OWS.

Dan J November 8, 2011 at 12:34 am

I wanted to be a stagecoach salesman and repair shop, but the free market capitalistic society is unfair and corporations cheated me out of my dream. Now, I am unfairly left with my debt incurred by purchasing all materials needed for my shop.

danny November 7, 2011 at 6:39 pm

A sort of related point is that the way universities are always “ranked” (US News, etc.) intentionally blurs the distinctions between degrees and what people are actually studying. I’d take an engineering degree from #62 ranked Purdue University over a Anthropology degree from #3 Columbia University any day of the week all other things equal. To assume that you can aggregate entire universities (or even colleges within the universities) sounds more than a little flawed to me.

If the process wasn’t one in which students focus a lot on the aggregate reputation of the school first and foremost I think there would be less incentive for prospective students to make poor choices of major. “But I went to the 11th best university in the country and I can’t get a job with this underwater basket weaving degree! I blame Wall Street!”

Dan J November 7, 2011 at 11:47 pm

Tennessee law degree will not be recognized by the aristocrats at the Bar Ass. Since they did not give their seal of approval of accreditation which required the school to spend millions in mandated upgrades. These upgrades had no factor in determining skills or level of comprehension in law.

Steve_0 November 7, 2011 at 11:53 pm

The schools are ranked according to fields, and anyone I know who has been looking for possible graduate school locations at-least, is looking at the rankings in their particular field. I would assume at least some undergrads do the same.

danny November 8, 2011 at 9:55 pm

They are ranked according to fields, but they usually aren’t priced differently by college according to those rankings. Some are, but it is usually a small surcharge relative to the cost of tuition.

That they have composite rankings at all I think is silly.

Methinks1776 November 7, 2011 at 6:58 pm

Shall I tell you how long my family in Moscow laughed when they heard there are people here getting degrees in “Women’s Studies” (once they got over the confusion and shock, that is)?

Wiping the tears of laughter from their eyes they asked what such a degree could qualify a person to do. The obvious answer was to sleep in a park in protest of the success of people who acquired skills that extended beyond growing armpit hair to a braidable lenght and bitching about society.

Jon Murphy November 7, 2011 at 9:07 pm

Ew

ArrowSmith November 8, 2011 at 2:56 am

In Soviet Russia the women study YOU.

Krishnan November 7, 2011 at 7:11 pm

Here is an idea for the redistributionists – demand that Congress pass a law that mandates equal pay for all degrees – that is, the employers may not discriminate against those who have majored in puppetry against those majored in engineering – And if the ones who can do puppetry cannot engineer or fix or create – they can demand that the ones that can, help them – for nothing – or go to jail. After all if it costs the same money to get a degree in engineering as in puppetry, why should the market not pay the same wages?

Itchy November 7, 2011 at 7:31 pm

Last year I did a career fair at a local high school. I got to be the Engineering speaker. I had to give my pitch to two different groups of students. The career fair was at the end of day on a Friday so you can imagine the enthusiasm from a room full of 10th graders. There was a Q&A session at the end of each presentation. Surprisingly, enough students asked questions that we didn’t stand there looking at each other for 15 minutes

Keep in mind the answers were coming from someone who wasted a lot of money his sophomore year drinking crappy beer and showing up to take the test and get his “C”. Luckily I had a professor call me out. I think his exact phrase was “You are a classic underachiever. Figure out what you want to do with your life and stop wasting both of our time” – I needed that.

Here was my three favorite questions from the day:

Student: Do you need to be good at math to be an engineer?
Me: You have to do a lot of math in college. It’s pretty hard the 1st two years, but it gets better. You’ll get to do fun problems later on. Then when you actually have a job, someone else already did all the hard math, and you just have understand enough to apply it.
Student: Oh, well I suck at math so I probably should be at a different presentation.

Student: What if we don’t ask any questions?
Me: I will make up a problem, write it on the dry-erase board and we can solve it together.
– lots of questions followed

Student: If you do engineering, will you have time to have fun and be cool?
Me: College is generally a fun place to be; it’s like high school without your parents and teachers constantly on you back. You’ll have a lot of free time, and you just need to remember to do your homework during some of it. So, yes you’ll still have some fun. You might not be able to start your weekend on Wednesday like some of your friends, and you probably won’t be the “coolest” person on campus. BUT what is not cool is being 30, living in your parents basement and working at Starbucks because you have a worthless degree.

Amazingly they asked me to come back and present again this year.

Krishnan November 7, 2011 at 8:22 pm

I am surprised you were not asked “Which degree will give you a highest starting salary?” – as opposed to “What do engineers with this degree do” and so on – if so, send them to the Zucotti Park and let them carry a sign that says “No discrimination – Engineers and Women’s studies majors should be paid the same”

Itchy November 7, 2011 at 8:53 pm

Actually they weren’t all that interested in pay. I did present the statistics during my little spiel: you won’t be rich, but odds are you’ll be employed and live pretty comfortably. Maybe the actually listened?

vidyohs November 7, 2011 at 7:48 pm

I have made the comment in the past and I’ll repeat it.
During Daddy Bush’s presidency, and the brief recession, he made a trip to Boston to give a speech. His route had well wishers and complainers along the way. Time magazine ran a photo of a young man, looked to be in his early thirties, who was standing just off the curb and holding a sign that said, “Why should engineers be pumping gas?”

To me that man was the epitome of the pathetic loser.

Who told him to enter engineering school, who guaranteed him a job for life when he got a degree, who told him………………..no one. It was all his decision, and then he found himself on a path that seemed to come to an end and he wanted to blame some one else. Typical New England looney lefty.

Krishnan November 7, 2011 at 8:19 pm

It is possible that he graduated with a degree in “engineering” but knows nothing – The pressure to “graduate” and “retain” engineering students is so intense that even as quality drops, the quantity graduating seems to increase – that it is not enough to have a degree that says “engineering” may not be obvious to him (and others) – you have to actually know something – be able to solve problems

vidyohs November 7, 2011 at 8:45 pm

The point is not his degree, the point is that he thinks that his having gained one means someone owes him employment in that field.

The answer to his question is, “If you can’t find a job in engineering, then find a job that feeds you, even it is shoveling socialism…….er. I mean crap.”

Krishnan November 7, 2011 at 8:58 pm

Oh, I agree … In fact the idea that somehow pumping gas is beneath him is vile … the idea that there is dignity in labor seems to disappearing – today it is “I AM ENTITLED” and “GIMME GIMME GIMME”

Dan J November 7, 2011 at 11:50 pm

Then vote for Obama in hopes of getting ‘free’ stuff.

dave smith November 8, 2011 at 9:41 am

Alex gets something wrong here. He wonders why the folks at the Nation don’t realize how stupid their example of a puppeteer is. I’d bet they do. They are writing for an audience of rich elite white liberals that find a market economy contemptible for not making opportunities for someone with a MFA in puppets.

I am reminded of my son, when he was 5, saying that someone who could invert his eyelids is “going to be a millionaire.” The readers of the Nation seem to have the same ability to judge value as a 5 year old.

EG November 8, 2011 at 1:03 pm

Well I have 2 issues with Tabarrok comments.

1) He is dealing with an example of someone with a useless degree, getting another useless degree. The guy had an education degree to being with, a degree which only exists because of the monstrosity of the public school system. Maybe saying that there is a guy out there with an education degree…ie someone who had to spend 6 years in college to learn how to teach 7 year olds…is a good enough example of what is wrong with our higher education.

2) The assumption that “Americans aren’t studying in the field with the greatest economic potential”, isn’t necessarily supported by the example. It is also constrained by the person’s potential. Not everyone can be an engineer, or doctor, or physicist.

Given the constraint of the person’s intelligence, their choice MAY indeed be their economic maximizing degree. However, given the government subsidizing such useless degrees…it may not be taxpayer money’s economic maximizing degree.

Also we need to be careful when speaking of the “right” or “appropriate” majors. Such conversations often lead us down the road of…”China and India produce 10 times more engineers than we do!”. Well, yes, but quality matters infinitely more than quantity in this case. I am quite comfortable with the “number”, and certainly the quality, of people perusing degrees with the highest economic potential.

Sure in America we have Women’s studies degrees. Sure in Moscow they only had engineering and physics and medicine. Sure the Soviets produced 20 times more engineers than the US did. And yet they couldn’t design a toaster if their life depended on it. Just as our government is bloating the numbers of people with useless degrees that mostly apply to government-related jobs, their governments bloated the numbers of “engineering etc” degrees to the point where they got no quality out of it.

What we need to have is the ability to appropriately PRICE the degree, and the ability to let those who make poor decisions suffer the consequences.

PS: Looking at my old school’s list of starting salaries for each of the majors offered, my degree had a starting median salary approximately 5.6 times higher than Fine Arts :) The school charges the same for both degrees, and yet there’s still kids going into Fine Arts. Go figure!

Ryan Vann November 8, 2011 at 5:14 pm

What a subversive revolutionary concept you are presenting here. Area of expertise factors into income generatign potential? Nonsense I say!

James Strong November 8, 2011 at 11:48 pm

I’m planning on getting a college degree. I don’t approve of colleges though. From my perspective, the whole model of gathering people to sit in a classroom is outdated. What makes the price of college so outrageous is that you could get the same knowledge vastly cheaper through other means, such as the internet. The only thing you are paying for is accreditation.

EG November 9, 2011 at 9:41 am

No. University is not about getting the information. Information by itself is useless. Its about testing that you know how to apply the information for 4 years. Its a 4 year selection process for future employees. As such, it is far from outdated or useless.

James Strong November 9, 2011 at 10:55 am

Which is what I said. You’re only paying for accreditation, but accreditation itself is not what drives up the cost of college up the roof. That accreditation process can be abstracted from the college-model easily and could be offered in a standalone way. So, yes, it is very much outdated to force students to pay for the professor wages, research, construction and administration required to maintain a college when you could completely do away with all of that and, instead, have a much cheaper process that used digital means.

In a few areas this has already happened, but not many.

James Strong November 9, 2011 at 11:06 am

By the way, I’m in no way arguing for the abolition of college or anything of the sort. College should be available for those who want it, but there should be alternatives to obtaining so-called “higher education.” Most of us don’t have 60k sitting in our pockets that we can fork out at any moment. It would be nice if there were more forms of standardized tests (offered by the private sector, not gov) that were universally recognized as being of high quality. Think TOEFL but for Calculus or anything. That way, those of us who aren’t particularly fond of the idea of graduating with our eyes in debt could study on our own and then pay a few hundred bucks for the accreditation exams.

Krishnan November 9, 2011 at 1:12 pm

There is a “race to the bottom” (in my opinion) with Colleges and Universities (OK, with some minor exceptions). Many colleges and universities are more concerned with recruiting, retention and graduation with an eye on the revenue side – the intense competition for tuition dollars has resulted in “brick and mortar” campuses examining what they can do to improve “productivity” (i.e. increase revenue) – and even as the quality of those seeking to get that “university degree” falls, graduation rates and GPA’s rise – just about most undergrad degrees have lost their worth – and it is getting worse

For those interested in improving themselves and actually getting educated, they have a HUGE amount of resources available for almost nothing … and so yea, you can self-teach using many of the resources available – and if you can identify a local mentor (mentors) who can work with you, you are far, far better off that those that go to “college” and waste their time and money

Oh, you CAN get an excellent education on many campuses/colleges – it is not as easy as it used to be – because the campus financial models have changed

EG November 9, 2011 at 4:04 pm

You can “self-learn” anything you want. It doesn’t mean anyone is going to pay you for your self-learning. Thats the difference between Wikipedia, and college. Education is not about information.

EG November 9, 2011 at 4:05 pm

“just about most undergrad degrees have lost their worth – and it is getting worse”

??? Seriously, do people who say such things ever look at the numbers? Or do they “self-learn” the statistics too?

EG November 9, 2011 at 4:02 pm

Sorry, but still not convinced.

1) In most universities, you certainly can take an exam and waive a class like calculus.

2) A college accreditation is not just a “test” you have to pass. Its a 4 year long test (or 5 or 6). It doesn’t just test your knowledge at one point. It tests it throughout the 4 years.

3) Its also not just testing your “knowledge” of “information”. It also tests your ability to apply this information every day, on a regular bases, in a team environment. It tests your ability to work with others, to work with your superiors (professors), to show up to class every day, to complete long and complex assignments within schedule…etc etc.

4) It accredits you as a work-ready adult. Now, of course, that level of readiness is different for different areas of study.

5) It grades your performance through this 4-5-6 year test against your peers. Employers get a pretty good idea what to expect from a 2.5 GPA vs a 3.5 GPA…and your job performance out of school, is probably highly correlated to your GPA.

6) Ultimately what a school charges you for a particular degree, is not based on the COST of that degree. It is based on the VALUE it generates for you, and conversely how much you are willing to pay.

7) If applied knowledge is a major driver of success in the job market, then the value you get out of a degree (depending in what area of course) is greater today than before. Why shouldn’t they charge you more? You’re willing to pay more, because you earn more.

8) Some free-market advocates (like in this blog, and elsewhere), don’t recognize that we are indeed dealing with a highly stratified market. MOST markets do NOT operate only on lowering costs. Some firms within a market will do that…some will maximize benefits instead. Same for universities. There’s lots of universities that lower costs per unit of value; community colleges, technical colleges, online colleges etc etc. And they have exploded in the last decade or so. And they attract lots of people. But on the other side of the spectrum you do have those institutions which focus on increasing value…and they’re not going to be cheap, because what they deliver is not cheap.

You as the customer, should be smart enough to chose for yourself. But I see no contradiction in MIT, for example, charging 50k a year to get an engineering degree from them. They should charge more, I think.

Jon Murphy November 9, 2011 at 4:21 pm

“MOST markets do NOT operate only on lowering costs. ”

That’s not wrong, but it’s not entirely correct either. Each economic actor will produce where the marginal benefits equal the marginal costs, therefore maximizing profit and net benefits.

Also, remember that firms are profit-seeking entities. In a competitive market, where no one firm has the ability to influence prices, the only way to gain more profit is to lower costs (thus lowering marginal costs and increasing the quantity that can be sold).

EG November 9, 2011 at 5:12 pm

We have to be careful what we are measuring here when we say “lowering costs”. Lowering costs…per unit of “something”.

If an MIT degree in 1960 produced x units of something for y cost, today it could still produce 30x units of value for 29y…and still be “lowering costs” of education, even if it costs 29 times more than it did in 1960.

You’re right that a profit maximizing firm would produce to where MR=MC, but if the MR is higher today than before, or higher for one institution vs another, than it would also be operating at a higher MC. Obviously the MR of a community college vs MIT, are not going to be comparable.

James Strong November 10, 2011 at 5:45 pm

1) Oh come on, placement exams have a limited scope, they are never worth as many credits as taking a course at the college.

2) The amount of time it takes you to learn is completely irrelevant. I could make my college take 30 years and that wouldn’t make my degree more valuable. Employers don’t care about -how- you get the knowledge they need you to have, they only care about you having that knowledge. That’s why employers care more about work experience than they do about you completing some “4 year course.”

4) Yeah, accreditation.

5) That’s what any test does. You don’t need to go to college for “test statistics.”

6 and 7) Opportunity costs. If I can get the value that college provides for one fifth the price, then the opportunity cost for going to college instead of choosing the alternative is enormous.

Jon Murphy November 9, 2011 at 4:39 pm

Here’s a WSJ article about the rise of the Liberal Arts major in American universities: http://online.wsj.com/article/SB10001424052970203733504577026212798573518.html?mod=WSJ_WSJ_US_News_6

Troy Camplin November 9, 2011 at 4:56 pm

I have a B.A. in recombinant gene technology with a minor in chemistry, two years of grad school in molecular biology, a Master’s in English, and a Ph.D. in the humanities. So, naturally, I publish academic papers on economics. I do sometimes wonder in what way what you study matters. I don’t have a job in any of those areas — or in any area, for that matter — so perhaps none of the above? I get frustrated at the fact that I haven’t been able to get a full time job since I graduated in 2004– well before the recession. But I would hardly use myself as an example of the problems with this economy. I’m an example, at best, of the narrowness of people’s thinking about what people are educated to do. (I was told that: “I’m just not sure what you do.”)

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