Sunday, October 28, 2007

We Are All College Dropouts

By Richard Vedder

Everyone who enters college ultimately drops out. My wife and I did --but only after receiving three degrees (our son did us one better--he earned four). The question is one of timing. Using the framework of modern economics, we can predict that people will stay in college as long as the expected future marginal benefits of college attendance equal or exceed the expected marginal costs. When the marginal costs of attendance rise above the marginal benefits, college attendance lowers satisfaction, and so people drop out. In calculating benefits, however, people estimate the expected benefits of continued attendance even if at the moment the benefits are low relative to current costs; the lure of a diploma months or years ahead raises the perceived future benefits, and keeps people attending school.

In reality, the learning benefits of college probably decline slightly as one proceeds through school--the latter doses of knowledge obtained are probably a little less vital than those earned early on. Nevertheless, the financial benefits from attending college are modest and low for several years of attendance ---and then soar when the piece of paper is given out certifying "graduation." At that point, most people "drop out."

The actual marginal financial benefits are very low through most of the college career but become huge at certification points --getting an associate’s degree, bachelor’s degree, master’s degree, etc. The same is true of law school. Those going for two years do not get two-thirds of the financial benefits of completing a three year program and passing the bar exam. This is because information costs to employers are high, so they allow the certification (diplomas) to guide their hiring decisions, when in reality there are students who have earned 97 percent of a bachelor's degree who are almost as well trained as those with 100 percent.

Maybe we should tell employers –“Joe (or Joanna) has earned 82 percent of a bachelor's degree.” Instead, it is a binary situation --you either graduated from college or you are a college dropout. Maybe we should increase the certification points --all students at four years colleges would get an associate’s degree after two years of satisfactory work, a normal bachelor’s degree after three years, and a super-bachelor’s after four years. If employers are educated in such a system, we probably would have fewer students lingering around waiting for a degree which has huge financial value. In redefining student progress, we should consider making the three year degree the bachelor norm, as in Europe, maybe giving a master's degree after 4 or 4.5 years of work. I think this might reduce the dropout rate, and increase the welfare of students and society alike.


TC said...

A very interesting perspective - more incentive. I think you make a key point in your statement regarding marginal expected benefits exceeding the expected marginal costs (possibly even known costs).

Regarding one as a "drop out" upon receiving the paper that bestows the honor of being a college graduate - this can be taken figuratively or literally. In the literal sense - how many college grads actually use their college degree for something other than a credential to get that first job?

In a very general sense, I used some of what I learned in college - I became a deeper thinker, more open minded (which has deteriorated on a lot of issues to a degree... no, probably to a great degree - I admit it. This is an opening for you sciencedoc), better communication and social skills, and more competitive than I was prior to college.

A problem that I have is cognitive dissonance, or "buyer's remorse". If I were to do it over again, I would not have majored in what I majored in. If I had been smarter, I would have thought, "Wouldn't it be great to have a degree that serves my interests all day long - because I enjoy the subject?"

But the degree I do have would little serve me at home. In other words, I have a "briefcase degree". The kind of degree one would take to work and use, and at the end of the day, put it back in the breifcase and go home.

I guess I better put this post in the breifcase as I have srayed far from the original topic.

maxheadroom said...

tc, you may have strayed from the original post, but i feel like you do. i got a degree in engineering two years ago and i already don't like what i do - it is tedious and boring. although i am mechanically inclined, i can only use my engineering degree at work. i don't need it at home for any do it yourself stuff. i don't need a degree to fix plumbing or electrical, or to build a house for that matter. i wish i had majored in finance because i find investing and the economy very much. i can only wonder how many people like us there are.

sciencedoc said...

Max -- I always tell people -- students -- if you possibly can, find something you like doing, don't become such and such simply because there is good money in it or because of social pressure.

Why not try to use your engineering degree to move on to something you like doing? Like take some finance part-time and see how you like it and then maybe work in some area where you can use both.