A flagging model

摘要

In his proposal for reforming the curriculum at William and Mary College in Virginia, Thomas Jefferson wrote that it should nurture "those talents which nature has sown as liberally among the poor as the rich, but which perish without use, if not sought for and cultivated". Inspired by Jefferson, Americans expect higher education to boost the chances of disadvantaged people, but it seems to be failing in that task-and in some of the other jobs its customers want it to do. Higher education has two sets of customers: students and the government. Students want all sorts of things from it-to make friends, sharpen their minds and get away from home. But most of all they want it to improve their economic prospects. Despite rising costs, college still does that. An investment in a four-year degree offers a return of around 15% a year for somebody working until the age of 65, a figure that has been steady since 2000. But the returns have held up not because graduates have done so well but because those with only high-school degrees have done so badly (see chart 5, next page). And although average returns remain decent, the range is vast. According to Payscale, a pay consultancy, it varies from +22% to -21%. Rising inequality increases the range of possible outcomes, and hence the risk of taking on student debt.