Is College A Scam?
https://www.cnbc.com/2019/10/24/why-college-tuition-keeps-rising.html
The article linked above covers the rise in college tuition over the years and the impact this has had on society. A college degree remains one of the biggest expenses a person incurs during their life, second only to buying a home. But the gap between an individual’s two biggest lifetime purchases is closing as public data reveals that college tuition has historically increased by roughly 3% every year.
The impact of higher tuition extends beyond the individual as it harms society in the form of collective debt. According to the article, about 70% of college students use loans to fund their education with the majority owing almost $30,000 upon graduation. Their continued contribution to the $1.6 trillion dollars in outstanding student debt leads many economists to believe that we are living in a bubble. So why do people still attend college? Have the accomplishments of Bill Gates, Steve Jobs, and Mark Zuckerberg not proven that a college degree isn’t a requirement of success?
Information Cascades provide a reasonable explanation for this phenomenon. This topic enables us to see “network effects” without an explicit network and allows us to understand how the choices of others affect individual decision making. In lecture we defined the model for information-based cascades as a situation in which: 1) there is a decision to make, 2) people make decisions in a sequence, 3) each person has private information to help them, and 4) you can see the decisions that earlier people made, but not what they knew (their private information).
The questions posed earlier satisfy all requirements of the model which means we can break down the decision to go to college into direct benefits and information-based benefits. A direct benefit of the decision is that an individual would be on near equal standing in the job market as they would meet the expectation to have a college degree. An information-based benefit of the decision is knowing that a person would fit into the adult world because going to college is the popular choice. Both kinds of benefits present perfectly rational reasons to follow the crowd, meaning attending college is a perfectly rational decision.