Arguing Against a Higher-Ed Bubble

by George Leef

I just happened across this Huffington Post piece making the case that there can’t be a higher-education bubble because college degrees are not assets that can be traded. True, but irrelevant.

The bubble isn’t just the fact that some students will have trouble paying off their loans, like the people who took out ill-advised mortgages. The bubble is mostly the overinvestment of labor and capital in a sector that may suffer a significant contraction. The housing bubble is still being felt by investors whose companies were hit hard if not ruined when the housing market went south, and if the demand for generic college credentials also contracts, the impact will be felt by all the colleges, faculty, administrators, and other people affiliated with this business.

Austrian business-cycle theory doesn’t apply only to profit-making industries. If the government overstimulates any sector, it will unduly expand. When the stimulus wears off or is removed, the malinvested resources must find new uses. That can and probably will happen in higher education.

Phi Beta Cons

The Right take on higher education.