Attendance decisions are due May 1, so what should you do? If parents (and their children) are loaded with biases, is behavioral economics useful?
I suspect the core bias is parents wanting to feel they have done everything possible to help the kid, rather than maximizing the kid’s (or the world’s) expected return. This will lead parents to ignore the upsides of risky courses of action. Who wants to send the kid to the wrong school and feel guilty for the rest of your life? But if the school works out especially well — your kid wins a Nobel Prize rather than your kid "merely" receiving tenure at an Ivy League school — the parents are not so much happier. "More pride" is only a little better than "pride," and most of your kid’s accomplishments you will overvalue and exaggerate anyway. So parents put too much stress on the possible downside and not enough weight on the potential upside of a choice.
If your kid is very smart and takes plenty of initiative, maybe you should send him to a large school with lots of resources. He will be able to hook up with the interesting people and they will have a better choice of peers. If your kid has true intellectual upside, those extra resources will yield a very high return. Even if Middlebury gives a better undergraduate education than Harvard, the best undergraduate senior economics major at Harvard will have a bigger head start in his or her career.
That being said, if you follow this advice you probably will regret it. It is not geared toward the median case or the modal case. Perhaps you already are upset at this blogger for suggesting that your kid should be a sacrificial lamb, offered up to the altar of scientific progress. Or perhaps you (and your kid) feel flattered.
Another view is that most people overestimate the intelligence of their kids. Too many parents obsess over Harvard when they should be wondering about Podunk U.. That point is well-taken, but being a fan of overoptimism, I find the first story more plausible. So look at the total endowment of the school, not the per capita endowment.
Your thoughts? Don’t focus on general advice for parents, tell us what you think the relevant behavioral bias is, how to correct for it, and distinguish between returns for students, parents, and the broader world.