Is There An Education Bubble?

Jeff Carter:

If you pull some free market logic from Finance and apply it to the education market, you might frame things differently. Eugene Fama from the University of Chicago says that there are no such things as "bubbles" in financial markets. If there are, you ought to be able to predict them and act accordingly. He correctly points out that all publicly known information is incorporated into the price of an asset. Are asset bubbles in financial markets directly comparable to intangible assets? Probably not, but Fama's theory on efficient markets should at least give us a touchstone to think about.

In this case, our asset is a college education. The asset is not physical like a stock or a piece of real estate, but intangible. Hence, there are properties to that asset that are subjective. For example, what is the real value of the Coca-Cola brand name? In turn, what is the real value of a college education-and within the finite range of colleges, what's the individual value?

Here is the hypothesis: We will assume that there is an education bubble.

Posted by Jim Zellmer at January 16, 2011 4:07 AM
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