A sobering thought

The United States circa 2012 is one of the most productive economies of all time, arguably the most productive if you take into account size and diversification (rules out Norway, etc.).  Internationally speaking, in the richest and most productive global economy of all time, which is our most competitive sector?

Hollywood?  Maybe, but it could well be higher education.  Students from all over the world want to go to U.S. higher education.  If we had nicer immigration authorities, this advantage would be all the more pronounced.

In other words, I work in what is perhaps the most competitive and successful sector in the most competitive and successful economy of all time.

And yet what I see around me is a total, total mess.  And I believe my school to be considerably above average in terms of how well it is run.


I believe it's called a bubble.

"arguably the most productive if you take into account size and diversification (rules out Norway, etc.)" i.e the mostest as long as you change the definitions to ensure that it is the mostest. Brilliant!

Isn't this slight evidence against your "no more low-hanging fruit" thesis?

Just because you have a lot of customers doesn't mean your sector is competitive. Look at public utilities like water or electricity.

No but if your customers are flying in from other nations to buy your product, you must be better than what they got at home. In other words, you are very competitive.

Yes, Cowen should be asking himself, what is there about the US system that other systems cannot replicate? I'd suggest three answers, all of them unrelated to the university system per se, but rather its location.

(1) the US market is the most important world market, both for its size and openness.
(2) the US is the world's biggest empire; if you have connections here you have a good chance of getting a job in your country, either in its government or in some Western NGO.
(3) English is the world's lingua franca.

Come on Mr. Cowen,
Pray define "total mess". A "total mess" compared to whom? Germany? Canada? France? Uzbekistan?

Inquiring minds would like to know.

Yeah. Even if you double the word "total", it's still not analysis.

Sobering or empowering? If the cup is 98% empty, that just means more room for juice.

"Competitiveness" must be different from productive. Our horrible utilization of the smartest people is just better than theirs.

We have a comparative advantage in signaling.

I'd guess that higher education only looks good internationally by comparison.

I'd guess that tech companies are our most competitive sector - but, then, I work in tech. :)

Our tech sector is tightly coupled with the university system. It could possibly exist otherwise, but as with other evolving industries (ie, our industries of comparative advantage) teaching and research at university is part of the industry. Or the industry is an extension of university. Drawing distinct lines for all relationships is too difficult.

In what way, exactly, is our tech sector tied to our university system? I seriously have no idea what you're talking about.

University research is 99.9% irrelevant to actual tech work, and getting a degree is barely helpful (and often hurtful) as far as getting a job or actually being able to do the work.

If you don't know what tech sector we're talking about, then maybe you need a refresher in 20th century technology companies. Half the Microprocessor companies (HP, Intel, Texas Instruments, and others) were founded by University graduate students who applied what they learned in their research to work in industry. A good chunk of the aerospace companies were started by recent grads from U.S. technical universities, another half of the biotech companies in the U.S. and most of the viable internet companies came from University labs--Google was a grad student project at Stanford, Facebook was originally founded on a Harvard campus, the World Wide Web was invented in a joint university research lab, etc.

I don't know how you can be so misinformed and still feel like you should share your opinion with people?

"And yet what I see around me is a total, total mess. And I believe my school to be considerably above average in terms of how well it is run."

I've mentioned this before, but someone in Japan wrote a book about life inside Toyota during the peak of it's dominance. His theory was that while Toyota was a massively dysfunctional bureaucracy, it's global dominance and success was based on being ever so slightly less bureaucratically dysfunctional that its competitors.

I'd venture to guess even folks at Apple or Google and certainly Exxon-Mobil and Intel often have days where they wonder how the whole things stays in business.

If the reason students from all over the world want to come to the US to study is just to get the US credential, then the sector isn't truly productive is it? All it does, in that case, is transfer income from the Nigerian who would otherwise get the job, to the Nigerian who does get the job because he has the US degree.

That is, if education doesn't much improve the productivity of the student (which I'm pretty certain is true in fields like English Lit), then the cost of education is a deadweight loss to the world overall. Isn't it?

Before I went to college I was just awful at writing, and my reasoning was pretty much limited to "If I read it is NR, then it must be correct." Then I majored in History, and had to write a lot of papers and think critically about things. In doing so, I went from being an awful writer and thinker to merely a bad writer and thinker. I don't know if I'm more productive in terms of getting more stuff done faster, but what I do get done is of a higher quality. That should count for something, right?

Yes, for firing your high school teachers.

Because economic productivity is the only metric of a human?

Productivity is a useful metric in that it measures output of labor per unit. But it fails to capture the intangible contribution that an advanced humanities degree (even English Lit.) provide to certain sectors (entertainment?). It's understandable for those more inclined toward say engineering, who have the advanced skills to command higher wages, to see an army of 25 yr old's with liberal art BA's as deadweights. But that doesn't diminish the value of critically studying History or Philosophy or Literature. These things are part of how we make sense of the present. Are career pursuits in over-supplied labor markets worth subsidizing? Is it the role of the tax payer or private universities to fund departments with little measurable economic gain? Should education focus more on technical schools? I don't know. But though Korea may be more prepared for the 21st century economy with low wage, high skilled labor, the lack of emphasis in the humanities breeds generations often unconcerned with their past, and consequently disengaged from the present.

This can't be serious. The fact that students want to go there shows that it's productive? Have you forgotten what productivity means?

The easy answer is that education is not competitive -- certainly not in the sense that only the best-run firms survive! And if you measure success in terms of outcomes -- student learning -- it's not successful either.

Perhaps you're seeing constituencies capturing rents, suggesting that the sector is more successful than it is competitive (in a "pure competition" sense).

+1. Yet recurse this backwards. What does it mean to say that even in the most successful economy in the world, the most successful sectors are mostly rent-seekers? Is the economy itself dysfunctional and succeeding only by being slightly less screwed up than other economies?

If you are talking up US economic size, productivity and profits, why not select your sector based on that, rather than personal experience and anecdote? From that perspective, tech, finance, insurance, or even farming makes more sense?

My guess is that the US higher ed sector is incredibly heterogeneous. Within a single large institution, there are outfits that are close to a pure Brooks Economy 1 play and those that are at the extreme of Economy 2. As Brooks was pointing out for the entire US economy there are already real tensions between the two Economies (could be the new version of C.P. Snow's two cultures?). Within a single institution, those tensions play out as a "mess".

Understood. However, everything is relative and a total mess from an absolute perspective can still be the best relative option.

Absolute perspectives do not exist. Having lived, worked, and played in cultures of various sizes "a total mess" can be a good thing. The system as a whole may be messy, but that is a useless metric for non-bureaucrats. I'd be surprised if this wasn't a negative reaction to a messy situation between Cowen's department and some other portion of the institution. If people were Agile, these situations would be viewed as good and necessary events rather than unfortunate hurdles.

The second sentence should be: "A total mess" can be a good thing. The first portion should have been erased.

I was thinking similar things last night regarding the average American employee and even at my job which seeks to only hire superstars. Either, we're horribly inefficient and will get beat eventually, or things are just so much worse every where else.

Human's are remarkable, yet when you slice into them, they are messy as well.

I'm with Ben. I cannot think of a better reason for optimism about escaping stagnation. You work in the most productive sector ever — perhaps an exaggeration, but still — and there's plenty of room for improvement.

"And yet what I see around me is a total, total mess. And I believe my school to be considerably above average in terms of how well it is run."

Hmmm ... substitute the word "country" for "school." It's still a pretty cogent observation. Sorta like Winston Churchill's observation about democracy.


If you were inside the competition, you'd see much greater messes.

Hold on.

The USA might be the most competitive and successful economy of all times but what makes the US higher education the most competitive and successful sector? I cannot see this sector being exposed to much competition and it's trading on the overall cache of the US.

Hence it could be horrendously ineffective and still manages to extract huge premiums from customers, no? As to the 'total, total mess', join the club. Somehow you wonder how things got to be the way they are and why no one is bothering fixing them...

How can you say the US has the best education system in the world when 40 million people live in poverty and each hour taught at a graduate institution costs 300$?

I'm from Germany, economically one of the most competitive countries in the world and there is no tuition and I assume most people can't even name a single university from Germany.

The American education system continuously re-breeds an elite, based on the exploitation of the poor. This leads to a selected few, that get a good education, and more important: the good network.

When people get out of college or grad school they are forced to spend a decade of their lives working in jobs that pay enough to pay back their student loans. So there is no way they can chase alternative dreams, like having a profession that offers little pay but high personal gratification. This system reinforces the class structure.

You don't get a high profile job when you don't come from the best schools in America, because the network matters so much. It doesnt matter if you are the best, and you spend all the time studying your subject of choice endless hours, reading the very same texts that your peers read in their Ivy League classrooms. Because if you don't have the right university name on your degree or you dont know the right people, your application is going to the dump.

The private education system is one of the prime reasons for poverty in America. It divides and polarizes.

Heidelberg University. And no, I didn't use the Internet. I imagine your assumption should be interpreted "most people /who don't read economics blogs for fun/ can't even name a single university in Germany."

As to your ultimate point: "The private education system is one of the prime reasons for poverty in America. It divides and polarizes." You've created a false choice between a "high-profile job" and poverty. There are many other prime reasons for American poverty that have primacy over private education, the decrepit state of public elementary education being a much bigger factor.

"I’m from Germany, economically one of the most competitive countries in the world and there is no tuition and I assume most people can’t even name a single university from Germany. "

I would be tempted to conclude that you get what you pay for.

"When people get out of college or grad school they are forced to spend a decade of their lives working in jobs that pay enough to pay back their student loans."

Not even close to the truth. Average student loan debt in 2009 was $24K. Average starting salaries are around $50K.

Isn't it interesting that the fallacy of composition exists?

“When people get out of college or grad school they are forced to spend a decade of their lives working in jobs that pay enough to pay back their student loans.”

Yes, whereas in germany you do it slowly all your life through slightly higher taxes, I mean I assume the staff of the university don't work for free and it's tax payer funded.

Doesn't Germany have some of the oldest and most prestigious universities in Europe? The University of Leipzig is the first to come to mind that wasn't Heidelberg. And I'd imagine my trouble naming more was that they're all as boringly named as American public universities. Harvard sticks in the mind while University of Oregon brings up thoughts of Oregon.

Being better at something than everyone else does not make one good at it. In higher education, the US is simply the best of what could all be dramatically better.

And that's the principle of compatative advantage, isn't it?

I do not believe US higher education is a highly competitive sector.

The old antitrust model is based on counting the number of firms. Granted, by that measure, higher education is competitive. So is health care and insurance and banking.

But the sector is highly regulated and subsidized.

It is very hierarchial. I find that competitive industries, like high tech, tend to have flatter organizations.

The teacher positions are largely tenured, meaning their is no competition at all once tenure is reached.

The sector is overwhelmingly nonprofit. There are lots of restaurants, so it must be competitive, eh? If 99% of all restaurants were nonprofits, and much of them owned by and operated by the government, would it make a difference? The Obama Administration has all but declared war on the profit education system.

Students often pay little of their education directly. They get grants from the school or the government, or funds from family. The tuition goes to the school, not the teacher.

Adam Smith recommended that students pay teachers directly. If teachers had to compete DIRECTLY for paying students to get an income, do you think schools would look different?

There are plenty of smart people in universities. But does the university system boost or retard their productivity?

You know, people come from all over the world to go to US hospitals and doctors. I suppose that means we have the best medical system in the world.

The university system was hatched over 800 years ago in Europe, and it still functions much like the medieval model. We don't have to wear academic robes any more except at graduation, at least in the US, but the mentality remains antique.

Look around. Large sectors of society and economy are still working with a medieval model. (Our legal-police-penal system, relationships with doctors, schools, sporting events). Were the Middle Ages really that good that we keep the model, or are we just failing to progress. Talk about a Great Stagnation! We have had one for a millennium.

No, I think what we have is not the most competitive education industry, but the most expensive (because of how it's subsidized) -- it's attractive, but probably not worth anything like what we spend on it.

It's sort of like if Saudi Arabia took all their oil money and spent it on making the best bassinet factory in the world. They might waste tons of money and yet still produce the world's finest bassinets.

Whoa! Why does "competitive" equal "productive"?

You are conflating high demand with competitiveness with productivity.

I think you are also conflating different types of productivity. (That is, if I encounter an uncivilized person in the jungle, it is enormously productive of me to tell him about fire, etc. I don't have to be very good or efficient at this in order for the net result to be huge increase in productivity. Most of the production occurs after I'm long gone, but if I can convince the primitive of the value of what I'm going to say, I can demand a large sum regardless.)

I doubt education is even in the top 50 of productive enviornemnts. Fast food and supermarkets -- now you are talking.

And the point isn't how good US higher ed can be. It is how bad everyone else is right now.

The Comments feature on this site appears to be broken. I click to read the comments, and I get taken directly to the "Leave a Comment" box without seeing any of the comments (this is at 12:30 PM EST).

So this is probably repeating what some of the twenty-seven other comments have said, but there is some evidence that U.S. higher education is an asset bubble.

You've got to factor in that our higher education is in high demand, in part, because it is prestigious and inaccessible. Opening the doors to immigrants might make the the average IQ go up but it's going to make the prestige (and demand) go down, maybe rapidly.

Look at Singapore. That country is very aggressive in recruiting smart immigrants, esp. from China. But that hasn't helped it develop any prestigious universities so they've turned to buying Yale's name hoping that will do the trick.

This is an overlooked point. If everybody has a baccalaureate, then the process will extrude so the upper percentiles will have to slog it out for a Ph.D. There are also a ton of subsidies, rent-seeking and externalities at play.

This is an overlooked point. If everybody has a baccalaureate, the process will just extrude so only certain schools and only graduate degrees will provide effective signalling. And as noted, there are a ton of subsidies, rent-seeking and externalities involved.

Counting from when I began my undergraduate education, I've been continuously on college and university campuses for 47 years. And I have never been impressed by the overall quality of the "management," so I'm not surprised when what you see all around you is a mess. But keep in mind that the incentives of most institutions of higher learning are not structured so as to avoid messes.

On another note. My own institution decided to begin a major push to attract students from other countries in the spring of 2001. And several programs were in conversations with a number of institutions in several countries to link our grad programs to their undergrad programs. Then, just as things began to look really like they were going to take off...visas became much, much harder to get, particularly for students from (say) Pakistan...or Malaysia...or Indonesia,,,to mention three countries involved...

Hey don't worry about higher education. The FBI is on the case. Working to make it safe for nobody.


I have been told in not so tactful terms that my time studying abroad was a red flag in certain employment circles. Why is it that Chinese are so loyal that 4 years in a US uni doesn't make them into American spies, but a 4 month trip to Russia makes an American into a drooling Russophile? Our national insecurity about our own citizens' loyalty borders on paranoia.

The Chinese are not exactly trusting. Remember, we're talking about a country in which a very large proportion of communication is monitored and merely criticizing the gov't can get you locked up, tortured or dead.

On a more practical level, the Chinese and Russians have relatively little we would want.

I wasn't talking about Russians or Chinese trusting American students. I was talking about the US not trusting American students that have spent time abroad. The Chinese and Russians don't seem to worry too much about their own citizens betraying them even after significant time abroad.

Well, do they?

I wasn't talking about American students either.

Again, the Chinese at least are far more paranoid even about citizens that never leave the country. I'm not sure why you think they aren't worried about visitors to the U.S. going native-- they spend MASSIVE amounts on indoctrination to prevent that, and it was only a few months ago a major official was arrested en route to trying to defect to a U.S. embassy.

[...] In other words, I work in what is perhaps the most competitive[...]

nop: the most *relatively* competitive sector (nail plants are less messy, but not a relative advantage for the US).

"Competitive" implies "relative". One can't compete against oneself for customers...

Easy. They are buying a signal, not the education. And the signal can only be bought through age and prestige. Age and prestige can't be produced by a new entrant.


That's not right. This just means that our university system is better than other countries' university systems*, not that our university system is better than other sectors of the economy. Given that education has a strong signaling component, it's to be expected that universities would be badly run everywhere.

*Is this even true, or are foreign students just attending US universities to learn English, get some US job leads, network with Americans, etc.?

Does "competitive and successful" = "high productivity" or "efficiently run"? I can think of very efficiently run sectors (say, global OEM electronics or auto manufacturing) that are highly automated, very productive on a per worker basis and where domestic U.S. manufacturers aren't particularly competitive.

I would think tech is a much better choice.

Why would you define the most successful & competitive sector in terms of international competitiveness? The U.S. economy is better at serving its own consumers in retail & entertainment than any other country is at serving its own, and that's where the success lies.

Consider the model that there are actually two sectors in higher education: call them "elite" higher education and "common" higher education. US elite higher education is the envy of the world, and will continue to be so for the foreseeable future because its excellence is self-reinforcing: it's the best because it attracts the best people and it attracts the best people because it's the best. On the other hand, US common higher education is a debacle--that's where the bubble is. The factors that make the sector as a whole a total mess just aren't as big a factor on the elite level--they still make things more difficult, but the quality of the faculty and students wins out.

However, there's lots of international demand for the U.S.'s "common" higher education, too. I don't believe this is reciprocal - very few American students want to study abroad at anything other than a top-flight university, especially for their entire degree program, excepting possibly Caribbean medical schools.

There may be some level of belief that having a U.S. degree will make it easier to obtain U.S. residency, but at least for Chinese students, having a degree from a third-string U.S. university is better than having one from a third-string Chinese university, and it's probably easier to get a place if you can afford it.

I started with a comment that debated the nominal and real economic aspects of education. Then I decided it was easier today, just to stick with what could eventually make both education and healthcare unrecognizable: Quit buying knowledge for our hopeful dreams of employment. Buy, trade for and seek out knowledge to use with only one restriction: whether someone will actually accept the services we offer, either in return for theirs or as a community 'tax'. And if someone finds fault with what we offer, let them shout it to the heavens and give us the freedom to rebut.

Perhaps there is a lesson here? Maybe something about tenure and unionization not being productivity killing?

Well, the US probably has the least unionized university sector, especially among the top 100 institutions. U.S. schools are incredibly flexible compared to those in other nations with respect to tenure rules, compensation, choice of research topic, and choice of curricula. And compared to the rest of the world?? Bad as our schools can be, they look like textbook paragons of efficiency compared to what I've seen at lots of leading institutions abroad.

I think this says more about how terrible education is in general. Human civilisation may have never had good education. Consider that every advanced civilization that ever existed has subsidized education to a very large extent. In the whole of human history education markets have never been free from intervention, distortion, or massive subsidization.

If you want to see what very effective, high quality education looks like then hire an expensive, experienced math tutor. Here in Reno, NV the most expensive one I've been able to find was charging $45 per hour. Now imagine the price/quality ratio of that product in an efficient, lightly regulated education market.

So we should abolish public eduation and rely on parents to hire (or choose not to hire) tutors? If we take $45/hr multiplied by six classes (for elementary school aged children, say: math, english, health, social studies, PE, science), that's $270/day, $1350/week, $5400/month, $48,600/school year. I thnk that's actually more expensive than Harvard-Westlake here in Los Angeles. Even at half of $48,600, you have just priced a large number of children out of education. That would, undoubtedly, increase the number of hoodlums who want to vandalize and/or steal my car. I like my car. It tells me if there's somebody in my blind spot. Therefore, I would vote "no" on the bill to abolish public education so everybody can hire efficient, lightly-regulated tutors.

When you stop subsidizing goods the price goes down and the quality goes up.

Abolishing public education doesn't necessarily only leave you the option of hiring tutors...That's a rather large non-sequitur on your part.

Apparently you failed to understand Corey's proposal. That's a rather large reading comp failure on your part.

Obviously, if you abolished public education, you could have private schools instead of private tutor. However, if your evidence in support of abolishing public education is that you can hire a good math tutor in Reno for $45/hr, you need to get some better evidence. Theory is nice and all, but I need more than that before I undo a hundred plus years of policy.

Dear Tyler:

One thing that never ceases to amaze is how much more expensive "learning" (both in terms of "raw cost" and opportunity cost) to become a lawyer is in the US compared to the UK. Let me give you a hypothetical example:

4 years of college (say, Vassar @ $55,135 per annum)= $220,540
3 years of law school (say Columbia Law School @ $77,000 per annum)= $231,000
Total cost $451,000 before financial aid, lets assume (and this is a generous assumption) that our hypothetical student gets a 50% scholarship at Vassar and a $10K pa grant from CLS, it still comes out to $311,270.
Total opportunity cost: 7 years

3 years of law at university (say Oxford, @ $18,750 per year before the tuition fee increase, @ $27,000 after the tuition fee increase).
1 year of LPC (if you want to be a solicitor, usually funded by your employer), 1 year of BPTC (if you want to be a barrister sometimes funded by your future employer/scholarship, if unfunded around $35,000)
Total cost (after tuition fee increase, assuming you want to be a solicitor): $81,000
Total cost (assuming you want to be a barrister): $106,000.
Total opportunity cost: 4 years

Having experienced educational systems across four continents, it never ceases to amaze me how ridiculously overpriced American higher education is, law in particular. While the quality of the education system is higher than in most places, the "bang you get for your buck" is simply a farce.

I would be happy to provide further information (and partake) for any potential study on this topic.

Kind regards,


Please, you English keep your riff raff out via public schools and a hidden class system. America is far too capitalist for that old world crap, anyone can take the LSAT and do well on it without having to go to Eton or whatever. So the way clap trap is kept out of the American legal system is via expensive-as-hell graduate school.

That's all well and good, but Law Schools are almost a completely different animal since 1) You can't become a U.S. Lawyer by going through a U.K. Law School, and 2) The U.S. system is set up to make you learn both the duties of a solicitor and a barrister if you want to be a U.S. lawyer, even though most lawyers specialize in one or the other type of job. Which is basically why it costs a comparable amount as learning to be both a solicitor and a barrister. It's really an apples to oranges compared to the OP's description of the university system in general.

Point 1) is true- that's why they get away with charging such exorbitant fees.

Which brings me to two different things:
A. Lawyers, particularly at the early stage of their careers, earn way more in the US than in the UK (especially taking account of the higher cost of living in the UK). That is why they have so many people willing to pay so much. Although once you think about the higher costs (both in money and years) of becoming a lawyer in the US that difference disappears.
B. The salaries (not to mention the benefits) of US law professors are way higher than those in the UK. This is where I guess much of the money goes.

Point 2, about the fact that US has a fused profession may also be true (although the division between barristers and solicitors has become much more blurred in the UK over the past decade, with members of each profession doing work which was traditionally done by the other and people switching from solicitors to barristers during their career and vice versa, which one is allowed to do once one has qualified), although I don't think this justifies the huge cost difference.

"And yet what I see around me is a total, total mess."

That seems to be an indication you are looking at the wrong factors then.

In the sciences at least, it helps that the graduate education is free (well, not free, we pay them). Its in English (except for the communication between graduate students). And, we have really nice stuff that is generally well-maintained and accesible to use.

I'm also an academic.
The main reason foreign student come to the US is that it gives them
a leg up on potentially immigrating. If they can find a US employer, then
they are on the path.

So what you're seeing are largely rents from the ability of potential immigrants
to use a US college degree as a way to increase their odds of permanent residence.

Nothing to do with the product you are providing.
The second reason is that, if they go back to their home country, their time in
America will be useful in terms of being able to help their home country land business
deals in the US or read US technical literature or understand US social trends with
an eye toward developing products that appeal to the US market.

The main thing of economic value that foreign students get from going to a US school is a better understanding
of American, not the academic content that we are teaching. The other is getting a leg up in
the immigration process.

I think there are very good points. However, I do not think you can separate the desire to immigrate from the education experience or larger Americana. You present it as though immigration in the ultimate objective and education is a variable that allows one to get there. But it is more intertwined than that. Part of what makes the US a desirable place to immigrate to is access (until recently affordable) to acceptable quality education. In turn access to acceptable quality education helped make the US great. In turn .... And of course English helps. Language, economic vitality, and acceptable education work together.

Only higher education is competitive, and mostly because of the "English effect".

All companies look like a total mess from the inside.

This suggests that living in the US is competitive and popular among international students. Students chose a college based more on issues of student lifestyle than academic quality.

Tyler - not sure what part of your industry is a "total total mess"? Is it the quality of the teaching/research? That's a pretty harsh comment on your colleagues, and generally I don't think it is true. Actually, in terms of new insights, I would say that US universities are by far the most productive in the world. They are the most meritocratic, so actually have a competitive system in hiring (mostly) unlike other countries. That's why I chose to study my MBA in the US, the ability to be taught by a text book writer instead of a text book reader. There is a virtuous circle effect as well as meritocratic approach. Because the US universities are so successful (able to attract high paying customers), even average ones can pay good money for academics, which makes them successful in attractive more customers and so on. Looking at other countries, pay and conditions in academia are so low, you would be mad to go into that industry for a career unless you were particularly obsessive about your subject, or you are so good you can actually get into one of the elite universities, where you can get compensated through prestige (every country has a few elite universities). The phenomena that now you always needs a second degree means that a lot of the elites end up going to the US anyway for the second one, just to signal that they are elite.

The vast majority of non-US universities are simply holding pens for young adults - free and available for most of the population means that average quality is really low.

I suspect what Tyler was referring to was the quality of the administration when he called his industry a "total total mess". This matters a lot to the academics I suspect in terms of frustration and office politics, but has little serious impact on the performance of the industry. It's like HR in most industrial companies, usually the most dysfunctional department, because it can be as it has little impact on the company performance.

Maybe Robin Hanson has some input. If your product is signalling, what does it matter how well the industry is run?

The answer on labor productivity is cigarette manufacturing. TFP wise education isn't even in the ballpark once you include nonprofit universities and count endowments as capital.

Are you dealing with productivity, efficiency or competitivity issues? The US might be the one of the most productive nation on an absolute or per capita basis, but I am not certain that this means that the US is much more efficient than other countries (i.e. on a per hour worked basis). Same thing for education, high quality in the top universities, maybe; but as mentionned above, the "bang for the bugs" might be not very good, particularly once signalling effects are removed.

The most prestigious universities in the world used to be in Germany. Now, the most prestigious universities are in America and Britain. How come?

We won the War and Germany lost.

Moreover, the Continentals felt they had to democratize their elitist universities to escape the taint of Fascism, while the victorious Anglo-Americans could just make their elite universities more elitist. And, East of Suez, elitism sells.

Wait - is Tyler saying that the mess is good, or that even the best in the world is too messy?

Bubble?! The US is a very productive producer of dollars which people will always want to buy. Forever.

If only the US didn't have such a harsh anti-immigrant policy, why we could replace Whitey overnight instead of taking 20 years.
I get the game alright, but the future has yet to be written.

Moving back to the OP. I think part of the issue with University governance is that it is more democratic than corporate governance. Many important decisions in any department are voted on at some level, which makes it very messy as many important decisions are political. However, American Universities are exceptionally well funded compared to the rest of the world. This means that you can do quality research at even mid-tier or lower institutions.

It's not just about signaling, it's due to the fact that individuals, state and local governments, and successful corporations are all willing to pour money into these institutions. If you throw enough smart people and money at a problem, the chances are good you're going to come up with something worthwhile at the end of the process, even if it is messy.

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