Wednesday, March 02, 2005

Investing in My Kids' Educations

I had the following question pop into my head the other day: given that a college degree is not nearly as unique as it was years ago, and that some form of graduate school is probably necessary in order to reach the upper socioeconomic strata (outside of the entrepreneurial route), do such facts imply that an investment in a top-notch undergrad education are not as wise?

Harvard may be far better than a much cheaper state school, for example, but for the student who has a choice between both, does the Harvard bachelor's degree hold the same economic advantage it once held over an equivalent state college degree? Certainly a Harvard degree would improve the chances of getting into a top-notch grad school over a state college degree, and this has earnings implications. But if ultimately your lifetime earnings are better predicted by the grad program you attend, the economic difference between the two degrees might be much smaller than it once was.

Add to this the fact that rampant grade inflation (which occurred post-1990) has blurred the signal of student quality coming out of undergrad programs, and as a result standard test scores have probably become more important determinants of grad school entry, and the conjecture becomes even more plausible. And we can take it a step back to high school - why pay for an elite high school when your kid still stands a legitimate shot at getting into a good grad school without necessarily getting into the best college?

Finally, there is also the peer group effect - perhaps as important as educational credentials to our ultimate financial succes is our perception of where we rank, which may depend upon experience within our peer group. Stick your kid with a bunch of geniuses, and even if he is just below that level, he'll walk around thinking he's a dunce and he'll play foosball all day long instead of applying himself (a story which may sound vaguely familiar to my grad school chums). Stick that same kid in a place where he will excel, and he'll be more motivated to excel.

All this leads to one overriding conclusion - I can send my kids to a public college! It is, after all, what is best for them. That's a load off of my mind.


Anonymous Jim O said...

Funny how grade inflation hit just AFTER you got out with a bachelor's degree, huh?
With inflated grades, you could have gone on to grad school wherever you wanted, and they'd have been pounding on your door and stuffing money down your pants to go their grad school. Instead, you had to walk to grad school uphill both ways in the snow, and do your dissertation with a piece of coal on the back of a shovel. Shame about the timing.

6:20 AM  
Anonymous Anonymous said...

The choice between public and private is a mixed bag. I felt link things turned out well for me despite going to Minnesota- a school that recruited economics faculty by promising that "'ll never have to teach our undergraduates". On the other hand, only 5 percent of the undergrads there completed a degree is 4 years (compared to an 80 or 90 percent figure at elite private schools).

I've been on graduate admissions committees at Harvard and Stanford in Econ. The very best graduate schools are hesistant to take risks- they don't have to. If they can convince themselves that, despite coming from a big state school you are a good bet, they might admit you. However, this frequently a hard sell given that many faculty at big state schools don't get to know any undergraduates.

At Stanford, one person from a big state school would probably be admitted to the Econ PhD. per year. Takashi Amemiya could identify these students and they would always be near the top of their class (he had a real gift for this). The rest of the US students came form "tier one" or maybe "tier two" US universities. We had a list and were strongly encouraged to follow it by Takashi who was the chair of admissions.

It's pricey, but if I had the dough, I'd send my kid to Harvard if he/she was motivated. The kids at top US universities have much better options than kids from big state schools. My undergrads are spending their summers working at Goldman Sachs, the State Department, Hollywood or a high powered consulting firms. I didn't have one friend from Minnesota that had these opportunities as an undergrad. They spent their summers like me working construction or other jobs where not much human capital is formed. This definitely has an impact on career prospects later on in life. Also, it definitely raises your odds of getting into a good grad, law or professional school.


6:29 AM  
Anonymous Hans Irr said...

This is a discussion currently running rampant in my household. With the impending doom of 4 college educations to pay for, and recognizing the limited value of my own college experience, my wife and I are strong proponets of alternative education.

My experience as an entrepeneur is much different from my parents and sister who are trapped in their own version of acedemia stereotypes. Why can't our children to go out and experience the world - work as an intern, paint in Paris, explore new horizons all while furthering their education at a state school (or heaven forbid a community college)? I want my children to live their interests prior to committing to them and becoming a middle-aged economist who's life is self admittedly meaningless (sorry Hatch it was too easy).

Of course, my kids are lucky - they will always have a spot in my company to fall back upon - where there will more than likely earn more than if they were out in the job market. Who knows, maybe their father will be a roll model and they will set off on their own entrepreneurial journey and truly enjpoy their lives.

7:14 AM  
Anonymous greg s said...

This does offer insight into why I saw you at the foosball table so often in our undergraduate days. Given the environment at Paul VI, you probably had no time for the sport.

7:17 AM  
Anonymous Anonymous said...

You're a Virginian now. Send them to the University of Virginia. One of the best and nicest public Us around. It is also loaded with hot conservative chicks.

7:22 AM  
Blogger Incredible Dirigible said...

Loaded with hot conservative chicks?? Is that UVA or U-topia??

10:27 AM  
Blogger Professor Vic said...


1:32 PM  
Anonymous Anonymous said...

The literal interpretation of Utopia is "no place." So UVa is no Utopia, but the commenter is right about hot conservative chicks. Why did I go to Lehigh? Why? Why? Why?

1:41 PM  
Blogger Professor Vic said...

Yet again great minds think alike. I once more agree entirely with Pat. Having spent a couple of years at Williams College, the #1-rated small liberal arts college in the country (at least the two years I was there. Coincidence? I don't think so.)

The kids there were clearly smart, but no more so than the best students at other places I have taught. The opportunities open to these students, however, were simply amazing. There are also simply an unbelievable number of prominent alumni willing to give a helping hand to a young Williams student. At Holy Cross, the only famous alum who immediately comes to mind (aside from Bob Cousy) is Clarence Thomas. Sheesh!

I would say that the education a student receives is pretty much the same at in Ivy League as it is in the Patriot League (except for Lehigh, which by revealed ability is clearly a cut below). However, that Harvard name on the transcript is gold.

1:42 PM  

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