« Compensation as an Incentive for Talent | Main | Gender and Policymaking »

August 16, 2012

The difficulty in applying economic thinking to the value of college

By Cindy Ivanac-Lillig

Freakanomics.com has a new podcast out on the value of college: Is college really worth it? The podcast features a series of interviews with people ranging from college students to professors to education economists. The podcast avoids oversimplifying the conversation and tries to apply economic thinking to answer the question.

Most experts interviewed in the podcast seem to agree that the benefit of college is almost always greater than its cost (with the notable exception of students who might consider going into a trade); however, exactly why this is remains somewhat of a mystery...even to the experts.

One interviewee discusses how students don't remember much from their coursework and yet something about the process is transformative. It’s unclear if the benefit lies principally in knowledge acquisition, new perspectives, peer effects or simply being subject to higher expectations. Further, it is possible that the benefit is different for every individual.

And if the benefit side of this economic equation is a bit blurry, looking at the cost side might be even tougher. Another interviewee dwells on the fact that the gap between the sticker price and the actual price paid for college has widened, making price discrimination much more prevalent. Price discrimination is when you charge different prices for the same or similar service. A popular example of this concept in textbooks is usually airline ticket sales. In the case of college, this means that students are routinely charged vastly different prices based on a variety of factors. Therefore, the average actual price paid by students and their families, when available, is not that helpful when attempting to conduct a cost/benefit analysis.

Economists and thought leaders are somewhat stumped as to how to apply economic thinking to this issue, but they all seem to agree that only in limited cases is going to college not worth the price tag. What do you think?

If you happen to teach in a high school or university setting, consider having your students listen to the podcast and see what they think.

Posted by Cindy at August 16, 2012 4:28 PM

Trackback Pings

TrackBack URL for this entry:


I think -most experts agree that the benefit of college is almost always greater than its cost. The benefit side of this equation is a bit blurry. And it is remains of a mystery.-:)

Posted by: http://debtstips.com at October 18, 2012 6:28 PM

Hey I am so happy I found your blog page, I really found you by mistake, while I was searching on Yahoo for something else, Anyways I am here now and would just like to say thank you for a incredible post and a all round enjoyable blog (I also love the theme/design), I don’t have time to look over it all at the moment but I have bookmarked it and also added in your RSS feeds, so when I have time I will be back to read more, Please do keep up the superb work.
red sole shoes http://www.red-sole-shoes.us

Posted by: red sole shoes at October 21, 2012 2:54 AM

It's a pity you don't have a donate button! I'd most certainly donate to this brilliant blog! I guess for now i'll settle for bookmarking and adding your RSS feed to my Google account. I look forward to fresh updates and will share this blog with my Facebook group. Chat soon!

Posted by: Jody at December 3, 2012 9:21 PM

Great post and nice website.

Posted by: Gregory Despain at December 20, 2012 5:22 AM

I like this post, enjoyed this one thanks for posting .

Posted by: Lorrine Challis at December 26, 2012 2:01 AM

Very interesting points you have observed, appreciate it for putting up.

Posted by: Phone chat at January 1, 2013 1:22 AM

Voice of America (blog)

Posted by: Ezra Rairdon at January 10, 2013 12:54 PM

Great delivery. Great arguments. Keep up the good spirit.

Posted by: diablo 3 gold at January 26, 2013 4:19 AM

You are so awesome! I do not think I've truly read through anything like this before. So nice to find someone with a few genuine thoughts on this subject. Seriously.. thank you for starting this up. This web site is one thing that is required on the internet, someone with some originality!|

Posted by: shanghai social media marketing at January 28, 2013 11:48 AM

I just want to tell you that I am newbie to weblog and honestly liked you're website. Most likely I’m likely to bookmark your website . You definitely have tremendous articles. Bless you for sharing your web site.

Posted by: Chung Casarz at February 6, 2013 9:20 PM

I'm still learning from you, while I'm trying to reach my goals. I definitely liked reading all that is posted on your website.Keep the posts coming. I liked it!

Posted by: Repair Options for Japanese Cars at March 24, 2013 4:05 PM

Great! I like Marginal Thoughts: The difficulty in applying economic thinking to the value of college.

Posted by: Cheap Nike Air Yeezy 2 at April 11, 2013 6:01 AM

salutations from across the ocean. informative article I shall return for more.

Posted by: Ollie Saumier at August 5, 2013 4:34 PM

thank you for all your efforts that you have put in this. Very interesting info. "Aim at heaven and you will get earth thrown in. Aim at earth and you get neither." by Clive Staples Lewis.

Posted by: Tracee Lindel at June 22, 2014 8:25 AM

Post a comment

Commenting Policy:
All comments and links posted to FRBC blogs are reviewed. The Federal Reserve reserves the right to protect against spam, off-topic and profane comments and links; any such comments or links will be deleted and the domain address of the poster blocked.

Remember Me?

Please type the 6 digit security code as it appears below:

Please enter the security code you see here