Bailout

The no-college option

By Felix Salmon

What are the chances that James Altucher won’t send his daughters to college? Roughly zero, is my guess. Yes, it’s expensive, and yes, it’s possible to make more money as an entrepreneur than as an employee. But only a small minority of people will ever have the necessary skillset to thrive in a business they founded. And many of those will actually go to college in an attempt to acquire that skillset. In any case, the point is that the option value of a college degree is enormous: it gives you potential entry into thousands of careers (including blogging for Reuters) which would otherwise be off-limits.

Altucher is right that college is largely wasted on those who don’t graduate — but that is unlikely to apply to his middle-class daughters, as failure to graduate is highly correlated with being poor. He’s also right that there are other things that can be usefully done with the money which would otherwise be spent on going to college, although I’m not sure that putting it all in a savings account would be top of my list. But he completely ignores the compelling non-financial reasons why people go to college, including the fact that for any given income, a college graduate is likely to be happier in their work (and life) than a non-graduate.

It’s just as well that lots of people go to college for non-financial reasons: collectively, a well-educated population is much more productive, and such countries become much more prosperous as a result. A few entrepreneurial free-riders here and there are fine, but they have to be in the minority.

The US has big problems with its colleges, and they need to be fixed. Let’s not kid ourselves that avoiding going to college entirely is a remotely sensible or scalable solution.

Full post as published by Macroprudential on January 04, 2010 (boomark / email).