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Bachelor in Arbitrage

May 12, 2010

Assume:
The purpose of University is to qualify people for complex jobs for which they earn more than people without degrees.

Hypothesis:
University fees will continue to increase until the expected financial gain from having a degree reaches approximately zero. (taking into account the effort it takes to get a degree, it probably will remain slightly above zero)

Corollary:
Universities will find ways to make it look like fees pay for something other than arbitrage because the cost of educating someone to the degree level is not high enough to zero out the difference in income.

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2 Comments leave one →
  1. May 12, 2010 8:07 pm

    no competition between universities?

  2. May 12, 2010 8:28 pm

    hmm, perhaps even competition between universities might lead to your situation. the first thing competition would do would be to reduce price to price of university to its marginal cost. then if every individual had the same amount of wealth, talent, commitment etc., every individual would want to enrol in this course. an important assumption you’ve made is that there are a fixed number of high-skill/high-wage jobs. in that case, once people complete the qualification but there are a limited number of jobs available, any extra university becomes a signal that the person is slightly better than the person with the minimum qualification. so i propose an alternative outcome: credential spirals!

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