The economics behind college decisions

So I never have time to publish here, and the original purpose of this blog was to find and highlight local Provo cuisine, but I am currently taking an economics class at BYU and wanted to share my thoughts on a recent story published by the Wall Street Journal. Yesterday, The WSJ published a story on how elite colleges don't necessarily make for a happy and self-fullfilled life down the road. Here is my take on the economic side of things:

Douglas Berkin’s article led me to think about the economics behind a student’s decision in deciding where to study. Most students make their education decisions based on a perceived “Return on Investment”: Where can this degree take me? What kind of salary can I make with a degree from this university? With this new information from Gallup, it seems that an elite school is not necessary to be successful, thriving, and engaged in a career.

The survey suggests that professor-student mentoring, and not the college itself, makes the difference in determining the overall well-being of new professionals. This makes a diploma from any college or university a competitor and substitute for a degree from an elite college. Although the author did not mention it specifically, this brings up the economic principle of supply and demand. According to the Law of Supply and Demand, the price of goods will adjust to bring the quantity supplied and the quantity demanded into balance. Looking strictly at the market for “education from elite colleges,” the demand for education from an elite college will decrease because an equal substitute can be found at a cheaper price at other schools. Graphically, this is represented in a shift of the demand curve to the left.

The implications of this devaluation of elite education are that tuition prices can be expected to fall at Ivy-League schools to meet consumer demand. In the long run, we can expect to see fewer admissions into these schools as the quantity demanded will also decrease. In the market for “education from state and local colleges,” we can expect an upward shift in the demand curve, increasing tuition prices and number of admissions at these schools.

In conclusion, this new study shows that happiness in a career is not determined by whether or not you went to Yale or Harvard. Students who realize that they can achieve equal life satisfaction at half the cost are more likely to attend state or local colleges. If an ivy-league degree is on the same level as a state or local degree, they can be considered substitutes, and an increase in the price of one will increase the demand for the other. For the price-conscientious student working his or her way through school, a state college or trade school is an excellent way to achieve lasting self-fulfillment. Although Douglas Berkin did not directly address the economic principles and implications of a perceived devaluation of elite education, the new information most certainly will cause a shift in prices in the near future.

-S