Thursday, 1 November 2012

The Education Bubble - DA Post

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More Evidence of that Education Bubble

Many top tier schools have lately been praised for allowing more and more people access to their education system. UC Berkeley and MIT offer all of their lectures for free on Youtube. Harvard, as well as many other schools, offers an “extension school“, where people can take classes part time or remotely.
While this is undoubtedly good public relations, one may start to wonder: “If I can get a full MIT education for free online, why would I want to pay upwards of $40,000 per year for the same privilege?”. And then one will wonder, if everyone else starts thinking in the same manner, won’t MIT et al lose all of their students, and therefore all of their money?
Well, they won’t. These schools have discovered that the most valuable part of a college education is not the education itself, but the “signalling” (or signaling) that goes along with it. A person who went to MIT will receive a diploma from MIT, and therefore be allowed to add it to their resume. Someone who followed the courses online will not. Likewise, someone who attended a Harvard extension course will only receive the extension course certificate, not the diploma. When looking for a job, most interviewers (or human resource departments) will not test the applicants on what they really learned and retained, but they will notice the degree (or lack thereof).
Once again, a bubble occurs when a certain product (or service) is bought not for its inherent value, but purely as an investment. If enough people keep purchasing something as an investment without regarding its value, the discrepancy will become larger and larger, until people decide to abandon the whole ordeal. In other words, I will choose to attend MIT because I know it will raise my expected salary by x%. MIT knows this as well, so it charges quite a bit. Of course, more money attracts better professors, but if smart professors worked solely for more money they would all become consultants. So I will be paying a lot solely for that degree on my resume (although these days being a Harvard dropout seems in vogue as well).
Unfortunately, in this global economy, people will start noticing that they can learn just as much at a good school in a foreign country, or simply my following the online lectures diligently. They will be at a disadvantage when job seeking, but will perform just as well once they have the job.
You could also make the networking argument, that you go to Harvard or MIT for the classmates (who will surely be very powerful in the future). If, however, over the years people of the same (or higher) caliber come from other places, the influence will wane, slowly but surely. Company bosses (and human resource departments) will start to notice that Harvard graduates are not the best people for the job.
At this point, these schools will be charging $40,000 for something that can be obtained for free, and they will be doling out degrees that are worth less and less, and students may wonder what the benefits are. And then, one day, these schools will lose a huge percentage of their students and realize they need to lower their tuition fees. Way down.

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