Because our educational system is such a worthless piece of
crap, most Americans cling to the ignorant belief that if something is good for
an individual or a business, then it is automatically good for the economy.
Thus many people have been fooled into thinking that if we increase the supply
of people getting college degrees, then it will be good for the economy because
people with a college degree generally make more money than those people who do
not have a degree.
In order to understand why this is not the case, you need to
be able to recognize that all economic activity is based upon trade. When I get
a job, I am agreeing to trade my labor for wages (I give my labor to the
company and in exchange the company gives me wages). I can then take my wages
and trade them for the goods and services that I desire. Thus, the only things
that are going to have any economic value in our economy are those things that
have trade value.
What is
the most valuable resource on this planet? Clearly it is air;
without air nothing else even matters. Yet, air is practically worthless in economic
terms. Why? Because everyone has air,
thus
it has no trade value.
In the long run, the same thing will happen to the value of a
college degree if we make it easier for everyone to get one. The supply of
people holding college degrees will go up, thus the trade value of having a
college degree will go down.
Imagine if everyone in this country worked really hard and
managed to graduate from college with straight A’s. Would this help to rebuild our middle class? No; it would do just
the opposite. It would exacerbate the destruction of the middle class. Why? Because companies would no longer
have to bid up the wages for people who hold a college degree.
In today’s world people who hold a college degree are
generally able to command a higher salary because the supply of degree holders
is relatively limited. If we dramatically increase the supply of degree
holders, we will necessarily drive down the trade value of a degree. In the
process we will actually drag down the wages for current degree holders as businesses
would quickly seek to replace them with the “cheaper” newly minted degree
holders.
As always, please share with friends so that we can try and
restore some sanity to our discussions about the economy.
No comments:
Post a Comment