Why Is College So Expensive?
Two hundred years of Yale tuition data tell a remarkable story
In the last two issues of Global Macro Update, Ed d’Agostino has been exploring the question of why the cost of higher education has outpaced the rate of inflation — by a lot (see Why Is College So Expensive? and Is College Worth it?). Both Ed and his colleague, John Mauldin, have been aware of my work since the publication of End Times, and both have used structural-demographic theory (SDT) to understand how the world around us is changing. Ed, in particular, refers to elite overproduction as an important factor driving up the cost of the college degree, as well as simultaneously diminishing its worth.
In today’s post I add to this discussion by analyzing two hundred years of data on the cost of annual tuition at the Yale College. It is fortunate that we have these data, because Yale is one of the premier universities in the United States; perhaps, even the most consequential one (although Harvard beats Yale in having produced a greater number of political elites, such as presidents and senators, Yale outperforms Harvard on elite production per graduate). Of particular interest, from the point of view of SDT, is Yale Law School, which (according to my informal calculations) has produced a remarkable number of counter-elites (including Stewart Rhodes).
If you want to understand why the price of college (especially, of elite universities) goes up or down, the first thing is to abandon the idea that a college degree is about education, that is, acquiring knowledge and skills. No, what you buy is credentials, which increase your chances of securing gainful employment and advancing in the world. And, of course, the connections you make while in college (“it’s not what you know, it’s who you know”).
In a country where the state doesn’t fund higher education and for a private college, we would expect that its price would be largely set by the market forces of demand and supply. And we wouldn’t be disappointed in making this assumption (as we shall see shortly). But what drives demand for a college degree?
