Liquid and Private

I subscribe to The Claremont Review of Books, because the reviews in it are extremely well-written and actually about the book being reviewed. This is published by The Claremont Institute, which any self-respecting lefty thinks is where Satan goes to party. The Institute is, to be sure, pretty right-wing, and by virtue of my subscription, they send me a lot of stuff via email other than the Review, which gets delivered on good old-fashioned paper.

Much of what is in these emails I ignore but I got a link to an article titled The College Replacement Economy that I think has something sensible to say, so I will lay it out in brief here. You can read the original here as there does not seem to be a paywall. The original is longer, as it covers more ground than I will.

The basic point of the article is largely captured in this quote from it – ‘Higher education now sells back what American society once provided for free.’

What American society used to provide for free was the social capital embodied in networks of people and organizations that allowed young adults to move into the world of work and family. That social capital included, again quoting from the article – ‘the free inheritance of trusted neighbors, functional public schools, safe streets, and marriageable norms that previous generations received at no cost’.

Nowadays, to get on in life is more expensive, meaning ‘expensive’ in monetary terms.

‘Because that commons has been liquidated and privatized, young people must now repurchase its components individually at market prices.’ Those now necessary components are ‘Expensive homes in good districts, private schooling, daycare, credentials, and more’.

The quote referring to the commons being liquidated and privatized also contains an implicit answer if we care to wonder ‘how did this happen?’

The liquidation was largely done by government, which fell down in its supposed duty to provide safe streets and functional public schools, while I would suggest that the erosion of trust in neighbors and norms regarding family and marriage were accomplished largely by the intelligentsia, who resided for the most part in the universities, and now in the education system more generally.

Private institutions willing to provide the substitutes at a price were quick to spring up: universities to provide credentials, real estate speculators and the entire home renovation industry to provide the means to construct good (meaning expensive) neighbourhoods and a cooperative effort by governments and private organizations to provide the hired daycare that allowed both parents to work and give young children a safe environment in which to grow.

I am not here suggesting, anymore than did the original author, that this all came about through a massive conspiracy among government and the educational industry. A conspiracy is hardly necessary for things to change for the worse. Inattention probably helps, though.

I think the job market presents the clearest illustration of this general thesis. I again quote from the article:

The [bachelor’s] degree became essentially mandatory in the professional economy, not because the jobs changed but because the free-sorting infrastructure was dismantled. Four years and $40,000 in debt now purchase legibility that a grandfather got with a [high school] diploma and a reference.

Having taught people getting their BAs for 42 years, I can say with confidence that nothing they learned in my classes (which were in the supposedly ‘practical’ discipline of economics) trained them for the jobs they got upon graduation.

We were, indeed, only providing a screening service. People who did well in our courses were likely smarter and more disciplined than average, and those who got a BA were able to maintain that for four years. And, to spend a lot of money. However, we also know that the price of a BA has increased much more than the CPI has gone up, particularly in the USA. This was certainly not because the product that student tuition purchased got better, hell it hardly changed at all. Rather, governments cut back their funding of universities while also increasing the demand for BAs by subsidizing university education, largely via low-interest, government-backed loans. The increase in the cost of Post Secondary Education is very much demand driven, and that demand increase has partly come from increased subsidization of the purchase of a BA.

There is another factor that has driven up demand, and the price. People, including economists, often point at what is called ‘the college wage premium’ as the reason to get a BA; it pays. This premium is the increase in expected lifetime earnings of someone with a BA relative to someone with a HS diploma. The article author writes:

This reframes the wage premium. A good can command a higher price because it becomes more valuable or because alternatives are destroyed. The college premium is overwhelmingly the second kind: not a bonus paid to the educated but a fine levied on the uncredentialed, whose access to stable employment collapsed.

I think he’s got a point. Another quote:

So the young are told the degree “pays,” and in the narrow accounting, it does—the way bottled water “pays” once the well is gone. They have spent four years and taken on five figures of debt to buy back, at retail and in degraded form, a certification their grandparents’ society produced for free as a byproduct of functioning schools and legible communities.

It is true, of course, that someone who skips university and becomes a certified master carpenter or electrician, or any number of other skilled trades, can do quite well in life. And, it remains to be seen whether – as some have predicted – the coming of AI will result in the end of university education as we know it. That is, if AI allows anyone to get a BA, the degree’s value as a screen disappears.

However, as a description of what has happened in the last 60 years or so, and the reason getting ahead in life has become more difficult and expensive for young adults, I think this little essay has something valuable to say.