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Friday, August 29, 2014

A College Degree and the Law of Supply and Demand

I don’t know how many times I have seen the statistic that a college education results in career earnings of more than $one million over the individual’s lifetime.  Well I call BS on this number every chance I get.  The figures do not factor in the IQ, family wealth and the socio-economic background of individuals that graduate from college versus those that do not.

But most importantly these amateur statisticians forgot one major economic factor – the Law of Supply and Demand.

The rarer the asset (in this case a college diploma), the more valuable it is.  The more common the asset, the less valuable it is. In 1960 about 8 percent of Americans 25 years old and older had college degrees.  By 2009 the percentage had reached 30 percent.

And here is where it really gets nuts.  Despite the fact that so many recent college graduates are back working as waiters where they toiled during college, some suggest that the answer to our economic challenges is for far more high school grads to attend traditional college.

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1 comment:

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