Apr 6, 2021Liked by Rohit Krishnan

Thought exercise: suppose we knew a priori that college made exactly zero impact on earnings, but that the top 10% of young people (in some metric that combines IQ and sociability) decided to go anyway. The data would show a premium to going to college, since it definitely pays to be in the top 10%. Employers would hire college grads since HR departments are lazy and they can offload measuring the metric to the universities at the students’ expense.

At some point the 80th percentile would realize that they can go to college and be treated by employers as if they were in the 90th percentile. They’d get more money than their peers who eschewed college because employers would be slow to catch on that they were pulling from a diluted talent pool. So eventually everybody in that percentile would go to college.

Then the same thing would eventually happen at the 70th percentile, then the 60th.

Two things would happen. One: employers whose sweet spot is the 50-60th percentile would start requiring college degrees for positions where it used to not be necessary. Two: employers whose sweet spot is the 90th percentile would need to figure out some other way to filter out those below that level.

It seems to me this is exactly what’s happening. All along the way you’d see a go-to-college premium in the data, even though none of the above requires that college actually improve the quality of its students—all you’d need is an initial situation where most of the elite decide to go to college. This would even be true even if you controlled for our IQ-sociability metric, since those in the “bubbling-under” decile who went to college would get paid as if they were one decile higher.

So what new signal can come along for the 90th percentile to disrupt this model and bring about a new equilibrium where college is less important? So far I think the replacement signal for a college degree is… an elite college degree. Ivies and flagship state schools. Which really muddies the waters when it comes to giving advice to youngsters. Though maybe that’s a feature and not a bug, since it will be the upper-level students who will be best able to navigate through the murk.

You also can’t keep going down through the ranks forever. At the 40th, 30th, 20th, you start running into people who would never be able to reasonably afford college, even if the signal boost would be useful.

Something has to give at some point. I suspect the answer is the standard average-is-over story: the elite schools gain even more prestige, the low-end schools compete on cost, and the middle gets squeezed out.

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