Thursday, November 3, 2011

Higher Education: So Suddenly You Don't Believe in Markets?

I came across this piece in Investor's Business Daily by Alex Tabarrok (of Marginal Revolution fame) in which he argues that there are too many arts and humanities graduates and too few science, technology, engineering and math graduates (STEM). [See also this blog post]

Here is a taste:

If students aren't studying science, technology, engineering and math, what are they studying? In 2009 the U.S. graduated 89,140 students in the visual and performing arts, more than in computer science, math and chemical engineering combined and more than double the number of visual and performing arts graduates in 1985.

The story is the same in psychology, which graduates about 95,000 students a year, more than double the number of 25 years ago and far in excess of the number of available jobs.


There is nothing wrong with the arts, psychology and journalism, but graduates in these fields have lower wages and are less likely to find work in their fields than graduates in science and math.

As a result, more than half of all humanities graduates end up in jobs that don't require college degrees. Baggage porters and bellhops don't need college degrees, but in 2008 17.4% of them had at least a bachelor's degree and 45% had some college education. Mail carriers don't need a college education, but in 2008 14% had at least a bachelor's degree and 61% had some college education.

Not surprisingly, these graduates don't get much of a financial "bonus" from college. A college graduate in the humanities who finds a job requiring a college degree had median annual earnings in 2009 of $21,000. For those who ended up in jobs not requiring a college degree, the median was just $14,000.

So the obvious question here - especially since the author is a conservative economist pre-disposed to believe in the efficiency of markets - is: what is the market failure here?  The incentives to go into STEM are clear, the disincentives to go into these other fields are also clear and yet student freely choose them.  Clearly, there is more to a college degree than just how it pays off in the labor market in terms of salary.  The fact that many people choose them suggests that there are sizeable non-pecuniary benefits to these degrees.  If you believe in markets, then, you should see these stats as equilibrium and evidence of the efficient distribution of degrees across the population. And if a letter carrier's life is enriched by a college degree, then it is not the economist's place to judge - preferences are personal.

But Tabarrok next makes a different and more compelling argument: if the social returns to education are much higher in STEM than in other fields, why don't we subsidize them more?

Moreover, arts, psychology and journalism graduates are less likely to create the kinds of innovations that drive economic growth.

Economic growth is not a magic totem to which all else must bow, but it is one of the main reasons we subsidize higher education.

The potential wage gains for college graduates go to the graduates — that's reason enough for students to pursue a college education. We add subsidies to the mix, however, because we believe education has positive spillover benefits that flow to society. One of the biggest of these benefits is the increase in innovation that highly educated workers bring to the economy.

As a result, an argument can be made for subsidizing students in fields with potentially large spillovers, such as microbiology, chemical engineering, nuclear physics and computer science. There is little justification for subsidizing majors in the visual arts, psychology and journalism.
I am not sure there is good evidence to support the conclusion that the social returns to education are that much higher in STEM than in other fields.  Obviously the private returns are higher, one needs only to look at the salaries quoted in the article, but the social returns are another matter.  One could make quite a strong argument (and I do) that fields like journalism provide a social return per dollar that is much higher than STEM through the watchdog role they play that limits corruption and other social inefficiencies.  Similar arguments for psychologists, artists, librarians and the like are easy to make: in fact it is quite easy to imagine that society reaps huge benefits from those that are willing to accept relative low wages to take these roles.

Finally, I don't think it is at all correct to say we subsidize these fields equally.  There are huge government investments in STEM through research support that don't exist to remotely the same degree in arts, humanities and social sciences.  This support filters down to fund graduate and even some undergraduate students as well as create capacity for more undergraduates.  It takes a lot more infrastructure to train a STEM student (well, perhaps not math) as well, so the costs are higher but tuitions are the same in general no matter your field - which is the same as an extra subsidy.

Which is all to say that I buy none of it.  Students should know the facts about the job market post-college (and my experience is that they do), and then make the individual choice about major that makes them the most satisfied given that knowledge.


Marcus said...

Good summary, though I would contest your presumption that STEM degrees cost the same (esp. to students) as those in the humanities and arts: in fact, many STEM majors are charged a differential tuition to cover the increased costs.

Now, one can effectively argue that the student is paying more for a degree that a) just plain costs more to obtain, and b) projects higher earnings. But the fact is that most STEM degrees are more expensive to the student than arts and humanities, especially if it takes you more than four years to graduate.

Is it more expensive to where it is repelling a significant amount of students? I doubt it. But if there's any market-based influences, it's that the arts and humanities degrees are cheaper to obtain than STEM degrees; I'm surprised Mr. Tabarrok didn't notice this in his (well-thought but too narrow-scoped) analysis.

Patrick Emerson said...

Not having been a science major myself, I don't know too much about lab fees and other add ons, but if they don't reflect the full cost of the labs and equipment, it is a subsidy.

I should also mention that I am all for more STEM graduates, think they are vitally important to the US economy and have no problem promoting them through subsidy. What I dislike is the disparaging of individuals who choose other paths, which seems especially strange coming from an economist.

geotuc said...

Do you think student loan programs make students less sensitive to the poor long term payback for non STEM fields?

Dann Cutter said...

You also fail to take into account a very real and very significant issue when discussing STEM degrees. Availability. I, like many of my classmates, work through college. Science courses, particularly physics, enjoy a curriculum that prevents someone from easily adjusting around a common work schedule... or relationship schedule... or social growth schedule (these things matter to most students, and outside of economic rationality). However, as an example, Business did not. (until your eCampus efforts, the same difficulty could be said of Economics actually - Econ 311 was a hard class to schedule).

I had to try NOT to find a Business class offered at a convenient time. This is true on quick search for most of the social science and humanities. However, I went from Physics to NukEE to Chemistry to finally Environmental Science to find a schedule of science courses I could work into a workable daily schedule. Anecdotally, I knew many others in the same boat.

Compare times the number of second year science classes offered. Or Chemistry. Or Engineering. Its a chicken or egg problem - are there fewer classes due to low demand, or low demand due to fewer classes. Or more importantly, notice how few other majors require sequence classes which build upon one another and are only offered once a year.

Compare that now to colleges with much higher STEM graduate rates - the flexibility in times one could say spend 4 hours in a Chem lab is significantly higher.

My Bio 211 class had many many hundreds of students. My Chem class was honors and limited to 40, but both before and after were standard Chem at a capacity which overfilled the large lecture hall. My Physics class... well, it turned my love of the subject into a rush just to get the best seat OUTSIDE the classroom in order to hear. In the 200+ some credits I have taken at OSU, no other subject was treated so poorly. My other subjects embraced me with smaller classes, and an interest in my continued major. The sciences are treated as the stepstones for meeting graduation requirements.

All this is to say, that you need to consider the unconscious subsidization of programs. We teach and accept being taught in certain paradigms as it has always been done that way. We don't consider that even such small act as scheduling has a dramatic effect on major participation. Look at the College of Business for example. Almost all their classes have Friday off. Take your average slacker student, not yet really understanding what the job market or their education really means. One class is three days a week offered only at one time a day and a 3 hour lab, vs one class offered five times a day, only two days a week, 40 people tops and offered every term. For the same credits, that subject is gong to attract the students.

Follow that by an unconscious but very real subsidization in terms of mathematical education (the lite requirements of a BA or frankly, a BS) and you have a 'path of least resistance' problem to the social arts.

Subsidization doesn't have to be money - or as they say, time is money, and if you offer a path not as commonly filled with time constraints - you should expect a drift to these fields. Which is consistent with what we see.

In other words, we likely do subsidize these differently and equally, but we see a market failure as short term gains are prioritized over long term benefits.

The failure here is of timescale. Expecting rational analysis of long term benefits by students is not practical when classes are often a short term decision.