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michael choe

here is a graph i saw on greg mankiw's blog that shows the increasing returns of a college investment.



anyone aware of any data segmented into sub-categories defined by majors, GPA, other?

it strikes me that the cost-benefit trade for the "average college grad" isn't particularly useful for an individual facing the "college-no college" decision. eg, if one plans to major in a field with limited employment prospects and isn't much of a student, it seems plausible that the cost-benefit trade could be decidedly against a $100K "investment".



The expected return of college education might be very high but what about the level of risk of such an investment?
If one looks at education as an asset, then finance tells us that there is no free lunch: higher expected return means higher risk.
Not only is it hard for someone to evaluate how well she will do in college (otherwise, less people would drop out), but it is also notoriously difficult to predict what kind of skills will be demanded on the job market 5 years from now.
This might partially explain why people "under invest" in education.

Does anybody know of any data/empirical paper about the riskiness of investing in education?




Here's a link to the Altucher column:



Correct but where is the money going to come from!


Prof. Becker opines:

"Research increasingly demonstrates that education improves performance in virtually every aspect of life. Educated persons on the whole are healthier, are better at investing in their children, have more stable marriages, smoke much less and in general have much better habits, commit many fewer violent crimes, are better at managing their financial resources, and at adjusting to unexpected shocks, such as hurricane Katrina."

I wonder about such research. Many folks across America exhibit the behavior that Prof. Becker cites without the benefit of higher education.

For example, the notion that educated people "have more stable marriages," in my limited experience, is simply laughable. I transitioned from blue collar work to so-called white collar work about 25 years ago, admittedly by attending and completing college. Of many old college friends and acquaintances, a tiny minority, at best, remain married today to the spouse they had back then.

I know, I know, it's just anecdotal evidence.


I'm curious as to whether the returns on education differ for "elite" private university education vs. state university education. How does an individual's average lifetime return on a $60,000 investment in a 4yr degree from a state school compare to a $180,000 investment in a 4yr degree from a private school? (I'm getting old- my numbers could be too low.)

I imagine that for some students, the returns on a private school education are sub-optimal. In particular, it would seem that there are many "elite" students that opt-out of the workforce after investing in a pricey degree. Likewise, the value of an elite degree may be primarily in the networking and social connections, rather than the education itself.

I could be totally wrong here, but I speculate that the biggest gains to education accrue to state school students.

As an alumnus of both a large state university and a small private university, I noticed a striking difference in the makeup of the student bodies, in terms of economic demographics, family backgrounds, level of motivation, etc. Naturally, I wonder how the returns compare?


As for Altucher's article in the "F" Times, it has a lot too do with British humor and is most satirical. What I find most strange, is that the value of an education is now viewed in the most pedestrian and plebian vein. Such that pecuniary value is the most pressing concern, not the aspect of broadening ones mind or the honing of it so that it becomes sharp in handling critical and creative thinking and its application to problem solving. Which in the end, creates the pecuniary value in the first place.

As for the degrees granted, the B.S. (bull****), M.S. (more ****), and finally the Phd.(piled higher and deeper) speaks for itself. Or is this just a little more British humor?


I find it deliciously ironic that Altucher is promoting part of the old Timothy Leary/Summer of Love agenda by means of economic arguments.


"... the value of an education is now viewed in the most pedestrian and plebian vein. Such that pecuniary value is the most pressing concern, not ..."

this totally predictable criticism is fair to neither the article, the post, nor to people seriously thinking about issues in education.

the article - as noted in the quoted comment - had an aura of tongue-in-cheek about it, and additionally it addressed exactly the aspects encompassed by my ellipses. mr altucher's essential argument (right or wrong) is that the time and money expended in acquiring the full benefits of a formal "elite" education may not produce results commensurate with those expenditures. there was no hint that he viewed an education as merely a meal ticket.

the post took up the quantifiable aspects and argued that they are enhanced by education. intangibles, being rather by definition unquantifiable, were appropriately not addressed.

OTOH, a legitimate complaint about both is that they inadequately address the pros and cons of formal vs informal education. while I can easily imagine an informal approach to "soft" subjects like philosophy, literature, etc (eg, a "great books" study group of the like-minded providing a forum for discussion), it's harder to imagine anything analogous for "hard" subjects like science and engineering with their requirements for expensive labs, relatively structured curricula, etc. so, as suggested in an earlier comment/query, it might be better to narrow the focus a bit before drawing any conclusions about the economic value of an education, in particular a formal one.

anecdotally, two of the more educated (in the broad sense) people I know personally have little or no college, and some of the least educated have multiple degrees. If one is really going to college to become educated as opposed to trained, it may well be the case that a formal program at a high cost institution is not worth much sacrifice. of course, if you have rich parents ...



ctw, Actually, your distinction of breaking education up into only two categories, "formal & informal" is sophmoric at best. Let's broaden a it a little bit as follows:

1. primary education
2. secondary education
3. post secondary education (academic,scholastic)
4. alternative education (Army, Navy, Marines, A.F., Timothy Leary, etc.)
5. self education (Abe Lincoln etc., etc.)

You need to lighten up a little bit. The seriousness you bring to the subject creates myriad stressors which affects the educational process and may be a cause as to why individuals don't pursue it. A little levity can go a long way in maintiang the interest of less than stellar students.


well, my two categories may be "sophmoric" [sic] but if so we're in the same grade. the topic under discussion is the "formal" process of "college and university education", so scratch 1 and 2. 4 doesn't make sense (the military services and timothy leary have exactly what in common?). that leaves 3 and 5 which I call "formal" and "informal" respectively.

and the concern indicated by the psycho-babble is irrelevant and unwarranted (I'm retired and very relaxed), but the thought is appreciated.



Educational Psych. irrelevant? No wonder American education is having problems. As for the importance of 1 and 2, it's like building a structure without a solid foundation in the fundamentals. The above ground structure stands on shifting sands.


Just as an aside to educational theory, I wonder if Altucher is a major shareholder in any of the named Educational companies? He sounds an awful lot like a front man, ad man, marketing man, carnival barker, or what have you, for the stocks in such companies. ROI (return on investment)? Always a good thing to check out, but the intangibles never show up in the analysis. There is something to be said for "face time on the Quad." Even if it's just soaking up the rays and watching the pretty girls walk by. ;)

Basil F

Salutations Professor,

While I understand and agree with most of your arguements, I am at a bit of a standstill in regards to your point of school vouchers.

If vouchers increased competition amongst students in gaining attendance to certain schools, than wouldn't poorer students be at a further disadvantage in gaining admissions to those public schools? Was that not the problem meant to be solved in the first place?

Thank you ahead of time to whoever decides to shed light on the subject.


Josh Wexler

I don't think Prof. Becker's response addresses Altucher's precise claim. Becker convincingly argues that the average of ALL college students fare better than the average of ALL non-attendees. I think a more charitable reading of the column would yield the following:

1)Altucher is asserting that finding alternative PRODUCTIVE uses for one's time and money is better than spending 4+ years and $200,000+ dollars on a university education.

2)Altucher is claiming that HE and THE READERS OF THE FINANCIAL TIMES would be better off finding alternative productive uses of their resources- ie, (presumably) highly intelligent people, mostly from wealthier, more educated, and more cultured families.

So, citing evidence that, on average, THE ENTIRE POPULATION of non-attendees fare worse does not address the more interesting point that Altucher is attempting to make. Most all of those people did not do what Altucher suggests: taking about $100,000 and using it for a couple years of traveling, and then working. I would love to see evidence that supports or counters this provocative view.

Furthermore, I'd like to see data on how much college does for students from poor families vs wealthy families. I'd guess that college is very important for the prospects of poor kids. I'd also guess that many rich kids could do without it and find a better life via The Altucher Way.


Josh, The Times article is a "sales blurb". It should be read, "Post-secondary education really doesn't have the ROI. So forget your kids, your responsibilites to them or yourself and invest your money in Education stocks; the p/e, p/s ratios are superb. Buy now before the boom takes off!"

As for the educational value of travel, I was once told, "Join the Navy and see the world!" Through a port hole, if your lucky enough to get near one. ;)

Ted Sternberg

Becker writes:

"Not only have the earnings benefits of education increased during the past 30 years, but so too have health benefits, the advantages of education in raising children, and the benefits of education in managing one's assets."

This makes it clear that despite the best econometric efforts, cause and effect here have yet to be disentangled.


Sure, you could skip college, but why on earth would anyone want to? It was the best four-years of my life.


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بنت الزلفي


great post,and you will lovetiffanys,


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