Competition to Get Into the Best Colleges—Posner

It makes sense, as Becker points out, that increased earnings of graduates of top colleges will attract more applicants to those colleges, enabling the colleges to be more selective. Furthermore, as colleges stopped discriminating against Jews and Asians, who tend to be the best students, the quality of the applicant pool rose. In addition, colleges want to have wealthy alumni, and if the financial return to IQ rises because of the increased complexity and sophistication of the economy, high IQ students become increasingly attractive as future alumni and therefore potential donors. 

Another causal factor may be the correlation between parental income and kids’ IQs. Obviously not all wealthy people are smart and have smart children, but in general there is a positive correlation between income and IQ and between parental IQ and children’s IQ. As the advantages of attending a top college became more apparent, well-to-do parents began investing more in tutoring for their kids and in sending their kids to top (and very expensive) private schools, and this further increased the quality of the college applicant pool. 

But this does not explain the relation between having attended a top college and having a higher income than students with similar intellectual promise who attended a lower-ranked college. The possibility explored by Becker, and by Caroline Hoxby, whose study he cites, is that a student benefits from the company of very bright students. One can learn from one’s fellow students as well as from one’s teachers, and moreover the presence of very bright students may stimulate the teacher to greater exertion in teaching. But at least three alternative possibilities should also be considered. The first is that potential employers consider graduation from a top college a certification of the graduate’s ability. The second is that what students mainly learn from their fellow students is social rather than intellectual—the students at these schools tend to come from prosperous, sophisticated households, which equips them to succeed in fields in which social sophistication (charm, poise, self-confidence, articulateness, etc.) is an employment asset, as it is in many fields. And third is that students at the top schools make valuable contacts—with their classmates who are marked for success. These contacts are business assets. 

Becker makes the interesting point that insofar as a student’s future earnings are bolstered by reason of his attending a college that has many bright students, the future earnings of those students are reduced because the students face more competition than they would if less-bright students were not admitted. But this effect could be offset by the external benefits generated by those students. The student whose employment prospects are enhanced from what he learns from his fellow students may turn out to be a highly successful entrepreneur who business activities generate lucrative employment or investment opportunities for other top-college graduates. 

Even though the greater selectivity of the top colleges increases the earnings of their graduates, and so, prima facie, their contribution to aggregate economic welfare, a question remains whether some alternative method of sorting applicants to colleges would be more productive. I am dubious. Suppose high-school graduates who passed a test designed to determine whether a student would benefit from a college education were assigned to colleges randomly. Parents would invest less in tutoring and other forms of college preparation for their children. Colleges would employ tracking to segregate the brighter students from the less bright ones, which would reduce the opportunities for the less bright students to learn from the brighter ones. Colleges would compete less vigorously for top-flight faculty, as better faculty would not attract better students. 

Moreover, if the benefits (for example in higher lifetime earnings) of association between bright students are multiplicative rather than additive, random assortment will reduce those benefits. (Becker has made a similar point with respect to assortative mating, in his work on the economics of the family.) Suppose that A is a 4 in intelligence or other attributes and B a 3, while C is a 2 and D a 1.5. If B studies, works, or converses with A, their total productivity will be 12 (3 x 4); then D will be assigned to C and their total productivity will be 3 (1.5 x 2). The grand total will thus be 15 (12 + 3). If instead D were assigned to A and C to B, the grand total would be only 12 (1.5 x 4 + 2 × 3). I think this is likely to be the case in the sorting of students. When there is a significant disparity in ability, communication will be difficult and neither will learn much from the other. 

I conclude that the current system is superior to one that would try to homogenize the quality of students accepted to different colleges.

Comments

[Jim Harlan]

I'm responding specifically to the statement, "In addition, colleges want to have wealthy alumni, and if the financial return to IQ rises because of the increased complexity and sophistication of the economy, high IQ students become increasingly attractive as future alumni and therefore potential donors."

I have a non-supported position, i.e., lack of facts just opinion, that high-IQ graduates, for the most part, are less likely to have school spirit while in school that translates to a lack of interest in donating as an alum. If the goal is for the school to graduate quality students who donate after graduation, then the objective should include attracting socially-minded students, e.g., those who get into school spirit, etc., who are also able to meet the college admission requirements.

Specifically, when a school such as the University of Texas at Austin has a guaranteed admission for the top 10% of public school students, I'd be curious to see data between a correlation of those students and those who donate post-graduation. Sure they may have higher-IQs, maybe, or maybe they just worked harder or went to an easier school.

Regardless, interesting read.

[Rod TheBod]

"Even though the greater selectivity of the top colleges increases the earnings of their graduates, and so, prima facie, their contribution to aggregate economic welfare..."

I'm wondering about this. GDP growth hasn't been all that great through these years of ever more exclusive college admissions. Maybe the elites and their Janissary corp have learned to watch out for themselves instead of practicing a little more noblesse oblige.

[Terry Bennett]

I think Jim Harlan is onto something. When my law school asks me for money, I scratch my head and wonder why apparently intelligent people would expect me to contribute to the betterment of my competition.

Education has been democratized by technology - first the mass production of textbooks, and now the Internet. Maybe at some very top end post-doctoral program you can still benefit from mentoring by some guy who knows more than anybody else, but knowledge is for the most part available for the taking. There are probably free A-bomb instructions on a website somewhere. Maybe in 1890, one would have had to enroll at the U. of Chicago to get the knowledge locked away in the heads of our hosts, but today every law school can and does use Judge Posner's work, and I'm sure Dr. Becker's work is similarly ubiquitous in Economics curricula worldwide.

I therefore see higher education as a three-tiered system. There are a few incompetent schools. There are a few schools so prestigious that they are worth the name recognition and networking. And there is an enormous middle, of schools where the education is available just like a top school, or at least 99% of it. Apart from that upper tip of knowledge, education is a commodity, and I advise everyone to buy it as cheaply as you can. Want to be a doctor? Get an AA at a community college, with straight A's. See if they have an online co-op with a 4-year school as my local 2-year college does. Get your bachelor's, get A's, smoke the MCAT, and get in a medical program somewhere. Graduate, pass the license exam, and be a doctor. You have minimized your student debt. What you haven't done is bought yourself the name degree that gets you recognized immediately as elite.

In my first year of law school, a classmate told me her fiance was planning on getting a law degree starting the next year, but was considering a school other than ours because we were ranked 58th I think, and he had been accepted at the school then ranked 54th. This stratification is entirely artificial, even imaginary. There is NO difference between these two schools. My advice for the confused fiance was to go to the one school where his fiancee was available to him, and where presumably he would be able to rank higher due to the weaker competition and offset the lesser prestige of our school on his resume.

If you can get into a top school - and I only mean a very, very top school - your classmates will be many of the movers and shakers of the next generation, whether by virtue of their family's status or their own merit or both. Being able to phone your Senator and call him by his first name is bound to pay dividends at some point during a career. Second, a resume that says Harvard instantly identifies you as smart, rightly or wrongly. Having graduated may not be so impressive, but having gotten accepted definitely is. It shows you competed, and you accomplished. For these two reasons I believe the very top schools are worth the extra money. In 2013, I don't think the putatively higher quality of education amounts to a hill of beans.

[Wally Hendricks]

A fairly large portion of the return to schooling must be the signal that a particular degree gives to potential employers. As high schools make it easier to graduate and get high grades, the return to graduation declines. As public universities make it easier to be admitted the value of their degrees will also fall. This will require more students to get advanced degrees even though there may be little additional learning. If liberal arts colleges start to allow much easier admission, the value of their degree would go down tremendously. All of this is predicted by the signaling model of education. The value of the quality of classmates is easily explained by this model.

[Neilehat]

As for "top tier" education in the modern age, it appears that "marketing and branding" has taken control of the wheel. Such that, it's much like buying a car. Who wouldn't prefer to be seen driving around in a Bently, Rolls, Mercedes, BMW or a Cadillac. While the fact of the matter is a Chevy or a Ford can get one from point A to point B just as well as a any of the product of the "top brands". As a matter of fact I've dealt with some of the top tier school graduates, both nationally and internationally, and I can say some are babbling idiots. So much for the "high priced spread".

Then there are some of the greatest minds of human history who never had the benefit of a post-secondary education or primary or seconday education for that matter. Four come immediately to mind, George Washington, Ben Franklin, Thomas Edison, Abe Lincoln to name a few. Education imparts certain advantages, even an "overpriced" one, but it is not the end all and sometimes can be hindrance...

[Glen Magder]

If the top school's were selling anything of educational value, they would be turned into a commodity. In truth they are selling nothing more than membership to an exclusive club.

Author Matthew Smith eloquently describes his experience, which is similar to mine, with this issue;

"During the seven years that I worked as a management consultant, I spent a lot of time trying to look older than I was. I became pretty good at furrowing my brow and putting on somber expressions. Those who saw through my disguise assumed I made up for my youth with a fabulous education in management. They were wrong about that. I don’t have an M.B.A. I have a doctoral degree in philosophy—nineteenth-century German philosophy, to be precise. Before I took a job telling managers of large corporations things that they arguably should have known already, my work experience was limited to part-time gigs tutoring surly undergraduates in the ways of Hegel and Nietzsche and to a handful of summer jobs, mostly in the less appetizing ends of the fast-food industry.

The strange thing about my utter lack of education in management was that it didn’t seem to matter. As a principal and founding partner of a consulting firm that eventually grew to 600 employees, I interviewed, hired, and worked alongside hundreds of business-school graduates, and the impression I formed of the M.B.A. experience was that it involved taking two years out of your life and going deeply into debt, all for the sake of learning how to keep a straight face while using phrases like “out-of-the-box thinking,” “win-win situation,” and “core competencies.”

[Gertrud Fremling]

You discussed the benefits of being around others students who are smart and hard-working: I totally agree to the extent that a very specific skill is supposed to be learned. Class discussions are held at a higher level and you can learn from other students.

However, there are other factors at play and I strongly believe that in some cases it is wiser to choose not the very "top" college but a bit below, where you are among the better students at that college. There are a few reasons for that:

1) At the very top schools, a student used to being a top high school student can end up being at the bottom. That can make it hard to follow the discussions in class, especially in such areas as mathematics, where one absolutely has to understand certain concepts in order to grasp the next level concepts. Suddenly being one of the "dumber" students can also be an emotional challenge. Students at high-ranking schools seldom drop out but instead switch to some easier, less rigorous major.

2) If you are one of the best students at a lower-ranking college, you are more likely to become one of the few students to stand out and interact with the professors rather than just feeling like an anonymous "number" in large classes.

3) Not having to spend almost every waking hour studying, a smart student at a lower-ranking college has more time to spend on extracurricular activities and has a better chance to get into various teams and leadership positions. For instance, a student might be able to become an editor at the school newspaper only at the lower-ranking college.

4) Being able to be one of the leaders in student organizations can be good practice for the future. After all, in many professions, top positions require motivating and teaching people "below" oneself. That goes for entrepreneurs, teaching, politics. Constantly interacting only with equally-brilliant fellow students might cause too much of a "bubble".