Academic

One of the great things about being at an amazing university is that on a Friday afternoon, you can walk down tree-lined streets to hear a talk in a different department about something that you are very interested in.  (And the weather was just chilly enough that it felt like Fall.)

Today I went to see a presentation of this paper, The Consumption Value of Postsecondary Education.  As our readers know, I'm very interested in the parallels between subprime financing of residences and the student loan financing of legal educations.  As I mentioned earlier, it is hard to tease out whether housing expenditures are investments or consumption (and whether homes are luxury goods or staples).  In every house, there is some investment, but some consumption.  When we installed a fence, the contractor told me specifically that fences add no resale value to your home.  You may like pink walls everywhere, but this will not add to your investment. 

What about education?  This paper is just about 4-year universities, not law schools.  And arguably, there is more "consumption" in a college degree (rec centers, intramural sports, intercollegiate sports, dorm living) but also more "investment" (the difference in salaries betwee college and non-college graduates).  But how do you define or separate out the consumption portion?

Some things may look easy:  rec centers, student union, intramural sports, student organizations.  However, if these social networks that you create there help you stay connected to school and engaged, then they protect your investment.  Dorms where everyone has their own bathroom may not have a tangible effect on your college success, but some degree of involvement probably does.  (The author considered all of these consumption expenditures.)

And what about courses to make you well-rounded, but not marketable?  If college is an investment, then you should try to maximize your rate of return by only have a major or taking classes that maximize your after-graduation salary.  But most people don't do that.  First, not everyone chooses the major/career with the highest salary potential even if they were capable of the coursework.  Presumably this is because they see a higher value to a lifetime of that career, which may be a consumption value.  (The authors talk about this -- the difference between present consumption value and future consumption value.)  Second, some people choose majors that aren't very marketable at all because they like the subject matter, not because it will lead to a career or profession.  Some commentators feel very strongly that higher education, either liberal arts educations or maybe any kind of higher education, is a positive investment because it makes the student a better citizen of the world, or more introspective, aware, engaged, etc.  Is becoming a better participant in the process of life a consumption good or an investment good? 

And then something that I was thinking:  At some point demand for consumption will create a better investment.  Bear with me.  So, if students for 10 years apply to a particular college because it has a great NCAA basketball team, then eventually the school will become a better investment.  The increased applications will allow the college to choose the most competitive students, increasing USNRW rankings and increasing the vigor of academic life at the college.  Recruitment of prominent faculty will be easier because of the attractive student profile and rankings.  Maybe?

Fun stuff to think about on a Friday afternoon!