If I’m reading Charles Murray’s thesis correctly (and it’s certainly possible that I’m not, since I haven’t read the book), I think there’s an argument within his thesis that the education bubble is not in fact a bubble.
There are two points to Murray’s argument that I’m concerned with here.
1) Murray argues that America is increasingly efficient at sorting people by cognitive ability. As such, you can live basically your entire life among people within a narrow range of cognitive ability similar to your own.
2) The closer you are to the top end of this intellectually sorted landscape, the better your life will be, by virtually every measure of success.
Let me draw some conclusions and add some premises.
I would suggest that colleges are the mechanism by which the sorting described in 1) is accomplished. The main function of colleges is not education or signalling, or whatever your favorite theory is. Their main function is to sort people into groups based on cognitive ability. (Note that this theory explains why people would be willing to pay $40,000 to attend certain schools that are not necessarily top-tier – it’s worth it, as long as it gets you in a different cognitive ability grouping than the state school alternative).
I would also suggest that this sorting service is a very valuable service – and it is getting exponentially more valuable over time, as society becomes more efficiently sorted and the benefits of being in a high-ability group become more pronounced.
Therefore, the increases in college tuition that we continue to see are justified by the increasingly valuable service that colleges are providing. Unfortunately, it’s a service that: nobody wants to discuss; and that colleges will adamantly deny they provide. Perhaps everyone will continue to moan about an education bubble while shelling out $50,000/year for their kid to attend a college, much like they currently moan about lack of diversity in the public schools in their hometown which they moved to because it has good schools.