Over or Under Investment in Higher Education?

By Richard Vedder

I seldom agree with Tom Mortenson's interpretation of data, but I always admire the way he gathers and reports it, with unfailing accuracy. The last issue of Postsecondary Education Opportunity makes this point once again.

Tom shows that bachelor's degree attainment among young adults has risen sharply in other industrial democracies relative to the U.S. Looking at 25 to 29 year old adults, 37 percent of them in Norway have degrees, compared with 30 percent in the U.S. Korea, with substantially lower per capita income, has a slightly higher proportion of young adults with college degrees than the U.S.

This could be interpreted to say "the U.S. is falling behind its competitors, and needs to invest more in higher education." Yet the issue is whether additional college graduates means higher productivity and a decline in non-economic problems (like deaths related to smoking). I am skeptical. Alison Wolf and I have argued that the positive economic growth/university investment relationship is spurious at best. Charles Murray has argued that intelligence trumps formal education every time as an explanation for financial success. Moreover, incremental government subsidies, in the U.S. at least, seldom have much of an impact on actual graduation rates. Remember, a large proportion of those entering college do not finish in a timely fashion.


For example, from 2000 to 2004, France closed one-third of the gap between it and the U.S. in terms of the proportion of the young adult population with bachelor degrees. But this was not a happy period for that nation, and increased "human capital" was not associated with economic vitality. More systematic analysis is needed, but I am not going into panic mode over the relative decline in our leadership with respect to college graduates.