Posts tagged with: Economic bubbles

Blog author: jcarter
Wednesday, December 31, 2014
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In an interview on Christian distance education, Dylan Pahman, the assistant editor for Acton’s Journal of Markets & Morality, talks about the education bubble, rising costs of higher education, and whether Christian worldview integration in a distance education program is worth a premium:

Luke Morgan: As a blogger for the Acton Institute, you have written about the education bubble, the textbook bubble, and other items regarding what education costs, and how those things should work in a free market. Could you describe to me what you mean when you say: “the education bubble?”

Dylan Pahman: The idea of a bubble came up in relation to the housing bubble which took place in 2007 in the recent recession. Part [of what] happened is, the government started subsidizing home loans, because they decided “everybody aught to be able to own a home.” So there were good intentions, but what they were doing, was cutting away the calculation of risk… The bank is no longer turning people away, that they normally would have… you have easy access flooded into this market for something people really desire… a nice place to live. In doing so, [the market] ended up ballooning. Demand keeps going up, and as demand goes up the price goes up. So people are getting into more and more debt, for the same exact product until it gets to a certain point where it’s too much, too many people couldn’t handle it, and so a lot of people ended up foreclosing on their homes… it was pretty severe, and it went past the housing market, it effected our whole economy, it effected worldwide economies.

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I commented last week on the “textbook bubble” (here) and have commented in the past on the “higher-ed bubble” and the character of American education more generally (see here, here, and here). To briefly summarize, over the last few decades the quality of higher education has diminished while the cost and the number of people receiving college degrees has increased. The cost is being paid for, in large part, through government subsidized loans. But with the drop in quality and increase in quantity, a college degree is not as impressive as it used to be; in many cases it no longer signals to employers what it used to. When a critical mass of those loans goes into default, we will have another housing-bubble-esque crisis on our hands. At the same time, government loans, which are largely indiscriminate with regard to the risk of the applicant and guaranteed on the backs of taxpayers, have incentivized colleges and universities to raise the costs to students for the sake of increased expenditures, inflating the bubble even more. Now, Alex Williams of The New Times reports last Friday,

The idea that a college diploma is an all-but-mandatory ticket to a successful career is showing fissures. Feeling squeezed by a sagging job market and mounting student debt, a groundswell of university-age heretics are pledging allegiance to new groups like UnCollege, dedicated to “hacking” higher education. Inspired by billionaire role models, and empowered by online college courses, they consider themselves a D.I.Y. vanguard, committed to changing the perception of dropping out from a personal failure to a sensible option, at least for a certain breed of risk-embracing maverick.

An increasing number of students are realizing that they, to quote Good Will Hunting, do not want to be $150,000 in debt for an education that they could have gotten “for a $1.50 in late charges at the public library.” (more…)

Blog author: dpahman
Thursday, November 29, 2012
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According to AEI author Mark Perry, there is another education-related “bubble” to worry about: the textbook bubble. He writes that this textbook bubble “continues to inflate at rates that make the U.S. housing bubble seem relatively inconsequential by comparison.” He continues, “The cost of college textbooks has been rising at almost twice the rate of general CPI inflation for at least the last thirty years.” Given that many students use loan money to purchase books as well as pay for classes, we might think of this as one of the many sources pumping air into the student debt bubble. But what choice do students (or professors, for that matter) have than to surrender to the textbook “cartel,” as Perry characterizes it? This bubble popping, while a bad thing for the textbook bubble-boys committed to the old, cartel-style model, could be a small relief and contribute to slowing the growth rate of the student debt bubble. (more…)