Charles Murray and the education bubble

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.

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42 Responses to Charles Murray and the education bubble

  1. Chuck Rudd says:

    Interesting hypothesis. So you’re saying that college is pretty much like “Millionaire Matchmaker”?

    But the causality could also be in the opposite direction. It could be that the availability of government funding and loan subsidization – which could have created the bubble – created a situation where a premium was placed on a college education in the first place. Once a bachelor’s became accessible to everyone, people differentiated themselves more along the lines of status. If anyone could get a degree at the nearest state school, an Ivy or a fancy liberal arts college became the next highest differentiating status marker.

    But if the college bubble were just about people paying a premium for status then it would be hard to explain why 2 years, 4 years, private, public, for profit and non profit colleges and universities tuition rates have increased at a far faster clip than inflation over the past decades.

    Roissy also has an interesting hypothesis that the bubble inflated because of the inability of employers to gauge the IQ of applicants in the Griggs decision.

    I don’t know. I’m glad people are talking about this though.

    • Foseti says:

      Honestly, I don’t know either. I think Roissy is on to something with Griggs, for sure. His explanation and the “bubble!!” theory seems a bit too simple though.

      I’m glad people are talking about it too.

    • Phlebas says:

      The underlying reason why so many young people enter higher education essentially for signalling purposes is because government via the minimum wage law and other unwaivable employee rights brings about a marked undersupply of training (apprenticeships, internships, low pay entry-level jobs) positions.

      Decent opportunities to get a first foot on the employment ladder (Tesco doesn’t count) are therefore lacking to young people – and available training positions are likely to go to those who can best signal not only their intelligence but their work ethic and conscientiousness.

      I don’t like the “Griggs” explanation as a fundamental cause because:

      a) I don’t think that it’s particularly hard to roughly gauge someone’s intelligence via interviews and other selection procedures that firms have in place. In the UK, I’m not sure if IQ testing is outlawed but I do know that graduate employers provide mental aptitude tests which serve a similar purpose – yet there is still an education bubble here.

      Also, much as leftists are wrong to dismiss the concept of IQ testing, some rightists overplay both the value of an individual IQ score – IQ is much more reliable for groups – and the value to most employers of innate intelligence in comparison to other positive character traits.

      b) Even if firms could test IQ, ceteris paribus artificially scarce training positions are still likely to go primarily to those who can provide better signalling of their general quality (remember that employers are loath to pay an unnaturally high wage and offer unfair dismissal protection etc. to someone whose qualities are not clearly adequate for the job). IQ testing doesn’t completely screen off the qualities signalled by a good degree.

      The irrational phenomenon of people obtaining “Mickey Mouse” degrees, which are hardly good for signalling still needs to be explained. Part of the explanation for this is that people are unusually irrational in this situation because they (parents and students) trust the government and its institutions too much. Also, because severe dilution in the quality of signalling provided by possession of a degree in general is still a fairly recent phenomenon, people – parents in particular – may not have yet fully caught onto this fact. In recent memory, obtaining any degree (of course, David Beckham studies was not such a popular choice at that time) was for most students a very good way of signalling one’s qualities and securing good job opportunities.

      Another part of the explanation is that young people are often dumbed down by awful state schooling, making them unusually susceptible to misleading information about the value of higher education and inapt at identifying alternative methods of finding a good job. Yet another is that for some people university provides social benefits in terms of “middle class” credentials and 3 or 4 enjoyable years besides its value for job purposes – although this sense of prestige may diminish as the reality of diluted higher education enters the public mind more fully.

      • asdf says:

        College is fun. Kids want to have fun. Parents + loans + 18 year olds not being able to do cost benefit analysis.

        There just aren’t enough good jobs folks. Given this, and given that the costs of college are mostly externalized from the firms perspective, why not demand college.

      • Alex J. says:

        asdf has a good point: Many former students enjoyed the school experience, but regret the fact that they incurred so much debt. After the fact, the payout was negative for many. Though the question is whether the expected payout ex ante positive or also negative. It seems to me that many people are making bad decisions, and everything in the system is encouraging those choices. This is consistent with the college experience getting physically nicer while also “unaffordable”.

        I have heard that a top-5 (or even just top-3) education is expensive, but worth it, while a top 6-50 education is nearly as expensive, but, in income terms, not nearly as fruitful. To me, this is most consistent with the signalling arms race theory, and also consistent with the bad-decision theory. (Bad decisions and signalling by parents as well.)

        Undergrads are poor. Debt encumbered liberal arts grads are especially poor. Theoretically, lefties would want to favor their interests. But instead, the professoriat encourages them to over-educate themselves. In the case of liberal arts phd students, the forgone-income costs are enormous. The bubble is in government subsidies to education, and the brain of the government is the intellectual class, who in turn are motivated to funnel more and more money to their institutions. The flyover rubes can be conned with the “affordable” education schtick. But if that were the real story, the government would be paying out a pittance for tuition rather than indenturing baristas for fortunes spent on fancy dorms.

  2. Samson J. says:

    As such, you can live basically your entire life among people within a narrow range of cognitive ability similar to your own.

    This is a fascinating topic for those of us who, for whatever reasons, fall outside the paradigm because we *do* interact with folks from other social classes/educational backgrounds. I socialize with less-educated people at church, and when visiting relatives because about half of my extended family is of lower-middle/working class extraction. When I reached the higher tiers of education, I began meeting people who had never really (socially) known anyone outside their intelligence stratum, and it’s been weird for me to learn how to relate to these people, since, oddly, I feel like my class background actually gives me a less insular outlook.

    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…

    Therefore, the increases in college tuition that we continue to see are justified by the increasingly valuable service that colleges are providing.

    Interestingly, this is only a problem in America, and not here in Canada, where the university you went to doesn’t really matter because they’re all considered to be more or less in the same league. Perhaps no coincidence, there are no $40,000 per year schools here, either.

  3. asdf says:

    “As such, you can live basically your entire life among people within a narrow range of cognitive ability similar to your own.”

    Have you ever considered that’s the point?

    Let’s say I’m hiring for Goldmen Sachs. My business objective is to rip people off. My best employees are psychopaths. Specifically, psycopaths that obey a specific set of rules and behaivor patterns. I want them to work well enough with either psycopaths for the firm to function, but I certainly don’t want them to feel sympathy for the common man or ask a bunch of complicated questions. Thus, its best that my employees interact mainly with people like themselves, that the believe we live in a just world, and that they and those like them deserve to be on top. Seems like the system does a good job of imparting those beliefs.

  4. I don’t buy it.

    Your analysis is reasonable describing the benefits of the sorting. I’m entirely unconvinced that these benefits is monetarily quantifiable. There’s no way to do an actual Net Present Value analysis on this.

    And that’s precisely why this looks like a bubble. You know that you’re in a bubble when everyone is acting like you’re in a bubble, and you can’t get the quants to show you that you’re not. Q.E.D.

    • Foseti says:

      “There’s no way to do an actual Net Present Value analysis on this.”

      Absolutely true, but it doesn’t necessarily mean I’m wrong.

      There is a definitely a bubble for education, but we both know no one is buying an education. It’s hard to figure out what people are really buying, so it’s hard to know if there’s a bubble.

      • Alex J. says:

        We have every reason to believe that undergrads’ discount rate calculations are bad. Tuition as credit card debt. Why else is it non-dischargeable?

  5. isamu says:

    Foseti, I fail to see why you have such a hard time grasping the “Education Bubble”. Its not a traditional bubble such as housing or beanie babies in that college degrees are non-transferable assets, but the dynamics are similar. People get college degrees to get higher paying jobs (the “value” of the degree). The Fed began to guarantee and eventually originate no-questions-asked student loans (Sallie Mae). This caused colleges to jack up tuition, because they could (tution costs have risen at rates far above inflation). People were willing to borrow more money to pay for higher tuitions because they expected the value of their degree to be higher than the cost. We’re well past the point that most degrees will never bring in enough extra income to cover their cost. At this point a bubble would have collapsed, but tuition costs haven’t. Why? Because the government is still giving out loans, no-questions-asked, and stupid kidds keep taking them. It won’t collapse until these loans become unprofitable, or someone has the political balls to just end them.

    Forget about Harvard, Yale and all the top-tier 1%, that’s not where this story is happening.

    • Foseti says:

      “People get college degrees to get higher paying jobs (the “value” of the degree).”

      But if I’m right, a degree buys much more than a high paying job. It buys a better chance at a lasting marriage, for instance. It buys a better chance at getting your kids into a higher ability group, etc.

      What’s that worth to you?

      A lot, I suspect.

      • isamu says:

        Who goes to DeVry or Univeristy of Pheonix to find the right mate? Or to the hundreds of Directional Univeristies, community colleges and other third tier toilets? There were 600,000 people enrolled in U of P at its peak, and the vast majority of tuition money came from the Fed. This is where the Bubble is happening, not Harvard.

        A good school filters its student by being selective, not by raising the tuition. It must set a tuition price that the market can bear or it prices out too many qualified students. But the same programs that allow Jalquan to borrow a couple thousand for a semester at DeVry before he drops out can be used by Kaitlin Middleclass to fund her four years at that adorable $40K/year liberal arts college. The easy access to money raises prices across the board.

  6. AC says:

    I buy your explanation and that’s why I think colleges are able to continue raising tuition with no problem filling slots. NPV is positive – insanely positive for elite schools – so it’s rational. But this leaves the whole edifice massively vulnerable to disruption. If someone comes up with a programming exam that Google will recognize as the equivalent of a degree from Princeton, then the incentive for the marginal programmer to go to college shrank just a bit. And it’s domino-style collapse from there on out.

    Elite schools will probably remain undamaged from all this, but Podunk U will find it hard to justify $40k in a world of multiple signalling channels.

    • Alrenous says:

      I’m not sure I buy the theory, but agree on the logic. There’s a metaphorical bubble here either way.

      I read Foseti’s analysis as: the conventional bubble only works if the point of college is to make more money, but it’s dubious that the point of college was ever pecuniary.

  7. Remnant says:

    1. It’s noteworthy that Murray discounts or ignores the effects of affirmative action in the equation. I’m sure this was intentional, not an oversight. Reason: the true cognitive elite factor in AA as a “cost of doing business”; they all know that it is there and they just go about their business with a wink and a nod pretending that it is “a wonderful thing” while redoubling their efforts and focus on making connections with the other true cognitive elite. “AA and ethnic studies for thee (and thine); high performance, ECON and POLI-SCI for me (and mine).”

    2. On the ability of the bubble to perpetuate, Murray is overestimating the ability of this cognitive sorting to continue to occur and to matter in a truly dismal economy. Foseti mentions access to marriagable material for women as one of the main benefits. But if college girls have a “marriage meter” that enables them to test a man’s potential, in a bad economy that meter becomes less useful and less responsive. The meter used to be able to jump and tic up at the prospect that he suitor would be interning at [X], working at [Y], etc. Now, if that suitor has no prospects to speak of, he just becomes an undifferentiated loser among many, maybe a smarter loser, but from an economic perspective a loser nontheless. Thus, the value of a college education has dropped, and will continue to drop.

    3. That the elite do not come into meaningful contact with those significantly leftward on the bell curve is, in my view, an extremely pernicious phenomenon from a public policy perspective. Most elite, progressive voters vote progressive precisely because they literally cannot imagine the effect their policy preferences have on the less able, less intelligent and less wise. One reason why traditional societies were well ordered was because the elites lived with and could empathize with the real (not imagined) needs and limits of the lower classes.

    • Hail says:

      Most elite, progressive voters vote progressive precisely because they literally cannot imagine the effect their policy preferences have on the less able

      This is different from the Sailer Hypothesis that elite whites vote ‘progressive’ as an implicit assertion of their higher-status. They do understand that their policies hurt the White Working Man, but they self-righteously point themselves and grin about how moral they are, despite it not affecting them much. Perhaps this can be seen as a form of class-based sadism,=. Diversadism?

      When speaking of American elites, a certain religious-cum-ethnic group comes into the equation, too, of course. As Tom Wolfe pointed out in ‘Mau Mauing the Flak Catchers’, much of the USA elites’ Diversadism emanates therefrom. But we must only speak in whispers about that.

      • nydwracu says:

        There’s definitely a sadistic aspect to it; if there weren’t, I wouldn’t have gotten death threats in Massachusetts for seeming too ‘redneck’.

        But I think the sadism itself is a performance: the would-be sadists are simply trained to attach value to such displays of sadism, so when they perform such displays themselves, they feel absolved of some of their white guilt. “Yes, yes, look how Enlightened I am, look how Progressive, I am a Good Person.” (I speak from some experience here; I was raised in that particular church.)

  8. Simon Grey says:

    “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.”

    I’m not convinced that there is a practical difference between signaling theory and sorting theory. Macro-level signalling (e.g. graduating from college) has micro-level components (e.g. graduating with a JD from Harvard). This can be seen as a signal and as sorting, and the effects aren’t altogether different. I think that trying to differentiate between the two is simply splitting a non-existent hair.

    (And yes, I understand Heartiste’s point as well. However, one must always keep in mind that assessment tests are also a signal, albeit a very direct one. And just because something might be a signal doesn’t mean it can’t also have a sorting function.)

  9. Vladimir says:

    Simon is correct. The signaling theory and the sorting theory are just two names for the same thing. They both assert that the primary purpose of higher education is to sort people visibly according to their pre-existing traits and abilities — as opposed to the standard view that it makes people smarter and more productive.

    The bubble hypothesis is, in my view, simply incoherent. What’s actually going on is a signaling arms race. (The argument from your post is, of course, just a different way of stating this.) However, since people are largely unfamiliar with this notion, they try to match their observations with the more familiar notion of a bubble, which has a lot of superficial similarity with signaling arms races, but is in fact a fundamentally different thing.

    • Foseti says:

      I’m not so sure.

      Signaling seems to imply a lack of inherent value.

      Sorting, on the other hand, is hugely valuable when you recognize that being in a higher group has a huge pay-off in many many aspects of life.

      • asdf says:

        I think what he means is that while Harvard does do a sorting job, there are probably many multiple possible Harvard classes out there. You could take the next 2000 people in the class and they would be as impressive as the ones they picked.

        So if you have two people of equal ability, but one got into Harvard and the other didn’t, the signaling factor of Harvard is going to be way better then the other guy.

    • Richard Sharpe says:

      It is perfectly possible for education to serve both a signalling function and a sorting function.

      Different groups are using it for different things.

      Individuals use it for signalling their ascent into highest ranks (or their escape from the ranks of the great unwashed masses) while (some) employers are using it to sort out the best candidates for (some) positions.

  10. Dave says:

    I think the sorting theory is also borne out by the movement of some elite (mostly technical) schools to give away their education for free.

    Look at MIT OpenCourseWare or the Stanford AI classes – they are open and available for free. One could almost educate one’s self without attending either school. But you would not have an authentic diploma to prove it – and that makes all the difference.

    For now – it’s possible that some form of post-graduate testing could fill the same signaling role for much less money.

  11. Fake Herzog says:

    Well, one thing we do know for sure is that Murray himself is on record with saying that too many people go to college. Murray’s book Real Education goes into the details. I think Murray would agree with commenter AC that there should be better ways (i.e. cheaper) ways to train programmers (or accountants, or other professions). The interesting question is whether or not we still need to pay $40K a year for the other beneficial effects of education — signaling effects but also the benefits of what used to be considered (in the best sense) a liberal education?

  12. Handle says:

    Via HalfSigma, Whiskey’s got an interesting Sexual-Liberation / Game-related hypothesis to explain some of Murray’s described phenomena.

    Now whatever the truth value of Whiskey’s explication, I like his approach and perspective. The pseudo-scholarly Left used to be quite fond of doing “Marxist Analysis” of everything. Trying to explain all contemporary phenomena in terms of the class struggle, the capitalist-imperial hierarchy, and in the vocabulary of dialectical materialism, yadda yadda yadda. Journals of Law and the Humanities were full of this crap for decades. After the wall fell – it’s a little passe to use the word “Marxist” overtly.

    Feminists have their own “Feminist Analysis” of the patriarchy, and then there’s Racism Analysis (Seductive lies to be contrasted with the hatefacts HBD analysis of the right). There’s Anti-Colonialism analysis, and even the Libertarians have their persuasive “class analysis”: http://lewrockwell.com/burris/burris21.1.html

    But how many people are trying to explain the world in terms of Game? Whiskey – that’s who. Roissy a little, but Whiskey, despite his, um, hyperbolic (and occasionally mildly bitter) passion for the subject, is doing the yeoman’s work almost single-handed in exposing the underlying root causes of major social phenomena.

    It needs a name. Maybe “Sexual Selection Social Analysis” (SSSA) or, more simply, “Game Analysis”, but if you can think of a more apt and homophonous coinage I’m certainly all ears.

    Indeed, that’s what the smart New Right really is – the alternative narrative and collection of ideographs explaining our world in terms of the ugly realities (HBD, Game, etc..) the Left tries constantly to deny with their pretty lies (HNU, Absolute Egalitarianism, etc.) SSSA ought to be one of our scholarly disciplines.

    • asdf says:

      I’m a fan of Whiskey’s pop culture stuff. I don’t really watch TV or all this different stuff but its nice to read about the zietgiest every once in awhile.

    • Phlebas says:

      >But how many people are trying to explain the world in terms of Game? Whiskey – that’s who.

      And that’s just as dumb as trying to explain everything in terms of class struggle. Reversed stupidity is not intelligence.

      The white class divide that Murray describes – the existence of an underclass with low marriage rates, high rates of single parenthood, low industriousness and high crime – is also seen perhaps more notably in the UK. They are known as “chavs”.

      This is parsimoniously explained by the fact that low-IQ, high-time-preference people are disproportionately harmed by a society lacking in structure. The destruction of social structure in this context has been accomplished mainly via the welfare state.

      A good book describing the destructive effects of the welfare state on the UK is James Bartholomew’s The Welfare State We’re In. Incidentally as the book describes, before the welfare state existed in England the rich participated widely in charitable endeavours, for example by founding hospitals that often treated paupers for free. This suggests that the welfare state is a cause both of the existence of a degenerate underclass and of the relative isolation of the different social classes seen today. If the welfare state supposedly looks after everyone in society, why bother getting involved with people outside of one’s own social group?

      To complete this explanation to a satisfactory stopping point, the welfare state is a leftist concept brought forth by Universalism, leftists being people whose values and inclinations (when treated as ideals) cause them to behave in such a way as to break down structured civilisations.

      Here is Whiskey’s explanation: “Murray is only partly right, in the solutions because again he does not understand the cause — the sexual liberation of women, and the concentration of wealth and power among Upper Class White women, who switch votes based on personal attributes of candidates. Thus, getting their way, more often than not (the power of being the deciding votes).”

      This seems to embody three claims:
      a) Wealth and power is concentrated among upper class white women in America
      b) Sexual liberation caused this
      c) Upper class white women in particular vote in such a way as to bring about the existence of a white underclass, and isolation between the rich and the poor

      This explanation is also supposed to stand alone, i.e. “sexual liberation” is just some random thing that happened and doesn’t need to be explained further.

      I think this speaks for itself.

      • Handle says:

        I didn’t say trying to explain everything in terms of the progressive-encouraged revolution in cultural norms of sexual selection, mating behavior, and reproduction out of wedlock (especially among the lower classes) – but, just like HBD, it fills a taboo, hatefact, and indispensable gap in the full account of our social circumstances.

  13. sgtelf2006@optimum.net says:

    I rather like Jim’s Blog’s response to Murray: Cognitive elite? Cloned leftist monkey’s all spouting the same PC $!@+.

    These people may have native intelligence, but they are clones of each other – and their rule of experts is destroying civilization at the speed of light. Since we’ve never had GLOBAL Hyper-inflation before, combined with Global bankruptcy, and Global loss of faith in said cognitive elites. The isolated condescending snobbery doesn’t help either.

    • B says:

      The ability to internalize and facilely expound the dogma of Marxism’s latest system update is a great social marker for top-quintile intelligence and cynical ruthlessness (itself requiring a certain cunning,) so I disagree with Jim-these people are, in fact our cognitive elite. Sickening as it is to admit.

  14. Ariston says:

    And last night, Obama proposed inflating the higher ed bubble. (Of course he did.)

  15. 1) Murray argues that America is increasingly efficient at sorting people by cognitive ability.

    I, on the other hand, argue that America is less and less efficient and sorting people by cognitive ability: that our elite universities are dumbing their stuff down, as the increasingly select people by culture and politics, rather than ability. Exhibit A being the worlds most influential scientist Michael Mann, who had he done physics in community college instead of Harvard, probably would have failed, instead of being switched to less and less demanding courses.

  16. [...] – Whiskey on Charles Murray . . . and Handle on Whiskey. [...]

  17. Jim says:

    I’ve always thought it’s less about cognitive abilities and more about what I might call “social malleability”. Above a certain base level of cognitive abilities, it’s the individual’s receptiveness, his ability to accept whatever is presented by his “betters” that really determines academic performance (at least in the humanities & liberal arts). People who have their own ideas and don’t care what their professors think will do poorly. People who easily absorb and internalize their professors’ opinions and worldview do exceptionally well.

    • Ariston says:

      Well put.

      (I once got a C in a class my freshman year which was explained by the professor as not due to “the quality of [my] work” but some nebulous metric of having “missed the point” of the class in some sense. This from a woman who confused a mention of “Murder in the Cathedral” in one of my essays with “Beckett”.)

  18. The welfare state was invented in the 1950s, but only became a problem in the late 1970s when large numbers of manufacturing workers started getting laid off and ended up on the dole.

    Britain’s situation is particularly acute because Britain suffered the most dramatic industrial decline of any western nation.

    Liberal elites decided that it was cheaper to keep Chavs on the dole than try to protect industry on give them incentives to take up whatever kind of employment was available.

    One solution would be have been to subsidise their wages if they take up low paid service jobs (so they can compete against immigrants from low wage countries).Paying some of the no hopers (such as junkies) to get sterilised would also be quite cost effective.

    However, third world immigration plus housing subsidies which discourage poor whites from moving to more economically prosporous areas means low skilled native Britons have little opportunity or incentive to find employment.

  19. [...] Arnold Kling has some thoughts that nicely follow my earlier ones on sorting versus [...]

  20. [...] thoughts on this topic are here. Like this:LikeBe the first to like this [...]

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