Our elected leaders are currently working up a head of steam to reform healthcare. Good luck with that. The mere fact that they vaguely call the effort "reform" tells you it’s going to be a very steep hill to climb. What nobody wants to say out loud is that the big problem with healthcare is that we spend so much on it, and we can’t spend meaningfully less on it without getting less of it. Like I said, good luck.
In the US, we spend about 12.5% of GDP on healthcare, a higher percentage than any other developed country. However, I think we can all agree we get rather a lot for our money. In contrast, we spend 2.6% of GDP on higher education, also the highest developed world percentage. And of course, we get something for our money here too. I for one am glad our doctors went to medical school. But dollar for dollar I think we’re getting a lot more value from healthcare.
Why do we spend so much on higher education? And why isn’t it considered a crisis worthy of reform? Part of the problem is a cultural attitude that higher education is a kind of higher calling. Attending college is a good thing in an abstract and noble way that doesn’t lend itself to cost benefit analysis. Asking if it is a wise investment in dollar terms just seems tawdry.
There are those who try and make the case for a cost benefit analysis. For example, Liz Weston and Free Money Finance have made the rather simple argument that going deeply into debt without an economic payoff in terms of a higher paying career is foolish. But the fact that they have to patiently make these arguments at all tells you how unaccustomed people are to thinking of college in this way.
So what are the benefits of going to college that might be worth so much? I can come up with three major motivations for college: to learn stuff, to have fun, and to get a credential.
Learning is the noble reason, what most people, if pressed, would offer as an explanation of why college is a good idea. And it is not merely a question of vocational training for a future career. American colleges provide a liberal education, enlightening students with a broad selection of knowledge from many fields. In college young people learn to think and become well-rounded intellects.
The flaw in this justification for spending four years and six figures is that you don’t need to go to college to learn stuff. What is not available on the web can be had cheaply at your local library, nearby bookstore, or Amazon.com. And some of the most elite institutions, such as Yale and MIT, have made some of their courses available on-line. For free. Being able to go to class and argue with the professors (or more realistically, the teaching assistants) is worth something, but nowhere near what college costs.
Then there is having fun. And college really is fun. Four years of extended adolescence without close parental supervision. What could be bad about that? But it is hard to imagine anybody seriously putting forward having fun as a justification for the expense.
No, whether they are willing to admit it or not, the reason that Americans happily pay tremendous sums for college is the third motivation, to get a credential, a degree that identifies them as a college graduate.
If you don’t think that is the primary motivation, ask yourself this. Suppose your son came up with a scheme in which he would move to a college town after high school and room with his college student buddies. He would read the same textbooks, do the same assignments, and even sneak into the same lectures as his roommates for four years. In other words, he would get the same education as his friends without getting a degree or spending $100,000 on tuition. Even if you were 100% sure he would really learn as much as his friends, is there any chance you would agree to this?
It is the credential that counts. And although it is a social distinction that has non-monetary aspects, it is ultimately a question of money. College graduates are assumed to be more intelligent and/or hard working than non-college graduates, so they make more money. (The reality may not be as simple as this, but it is the widespread perception.)
The problem is that, of course, everybody wants to be in the college graduate category. And with no structural limit on how many college degrees are issued in a year it becomes a sort of self-perpetuating bidding war. As the percentage of young people who attend college increases, the value of the degree goes down, but the stigma attached to being in the shrinking non-college pool gets bigger. As of 2000, the US had 4,100 colleges and universities and 5.3% of its population in college. (I estimate that Americans between 18 and 21 made up 5.7% of the population in 2000.) In 1940 it was 1700 institutions and 1.1% of the population.
So we have the situation where instead of only a small list of professions that legitimately require a college degree, today the vast majority of occupations de facto require one, because so many people have them. Why hire a high school graduate when there are college graduates available? Ours is a nation where receptionists and police officers commonly have degrees.
Is college a good investment? From the point of view of a prospective student, you are almost undoubtedly better off going than not going. Wise advice on the topic would be that you should try to do so cost-effectively, but that you should certainly go.
But in the big picture, all this spending to acquire a piece of paper is a tremendous waste, and a drain on the economy. I don’t think the folks in Washington will have any success in reducing the 12.5% of GDP spent on healthcare. In fact, I expect they will claim victory if they keep it from growing above 12.5%. If it were up to me, and it most certainly is not, I would spend time reforming college instead.