 Welcome to the Mises Academy podcast. I'm Danny Sanchez, Director of Online Learning at the Mises Institute. For this episode, I interviewed Peter Klein, Executive Director and Carl Manger Research Fellow at the Mises Institute, about his Lou Rockwell.com article, Universities to MOOCs, We Will Assimilate You. Another thing in your article that you mentioned that is perennial about the universities is that there's a lot of hanky-panky and riotous behavior that goes on. And that's something that's been true since when Abelard was at the University of Paris in the Middle Ages. All the way, I remember reading about Thomas Jefferson when he founded the University of Virginia, that he had to deal with that a lot. And, of course, it's going on. Now, there's a great book by Tom Wolf called I Am Charlotte Simmons that just describes sort of the hookup culture in universities. To what extent has university life become a heavily subsidized luxury consumption good, even though it's billed as a production good, something that will help you be a productive and well-paid member of society? Is that what explains the ubiquity or is it something else? Is it the go-to-college propaganda that we've been inundated with? Is it just universities as some sort of a selection mechanism? Is it the networking opportunities that people get when they go to university? What explains the ubiquity? Well, I think it's all of the things that you mentioned. All of those factors play some role. Just to take some of them in more detail, this idea of consumption versus production, it's very important. Now, if you go back in history, higher education conventionally was always seen as a consumption good. This was not something that will increase people's productivity on the farm or in the trade shop or in the factory or whatever. It's a luxury for the well-to-do, for the elite. They can learn Greek and Latin and so forth. One could argue that this is good for a virtue. It's good for civil society to have an educated elite who are trained in the classical virtues and so forth, but it was never viewed as sort of a mass product that would improve the productivity of society at large. That was the original definition of a liberal education, wasn't it? That this was the education that the quote-unquote free man would get, meaning that the person who's free from having to work, free from labor, who basically lived off of his slaves or whatever. That's right. Now, what you've seen more recently is a strange sort of two things going on at one time. On the one hand, universities have become much more vocationally oriented than they used to be. Of course, I'm speaking primarily of the U.S. here, especially in the 1860s with the Land Grant Act that provided more big infusion of resources to American universities and allowed for the creation of some new universities that were explicitly tasked with pursuing the vocational arts, which in those days would have been primarily agriculture and engineering. And the idea was, well, we don't need people studying theology and philosophy. We need people understanding how to make the crops grow faster and better and how to build bridges, et cetera, et cetera. Now, there had always been training for those things, but they were in private trade schools and through apprenticeships and so forth. But so a whole new set of universities was established to emphasize those kinds of activities. Now, almost all universities in the U.S. and around the world do a substantial part of their training in these vocational activities, you know, accounting and marketing and so forth in business schools, agriculture, engineering, nursing, computer skills, et cetera. And the way this is sold to prospective students and their parents and other funders is exactly as you said, to have a job in today's productive economy, you must have these skills. Now, why someone who is getting those skills to get a better job also needs to take a philosophy course is never really explicitly spelled out? I mean, there's a bit of this idea of the liberal education in the background, but most universities are reducing their core requirements in philosophy and mathematics and biology or whatever and pushing students earlier into these more vocational courses. So that's one thing as the university is now seen as the idea is it has to provide practical skills that help people get better jobs. At the same time, some parts of the university, the ones that are being subsidized by these more practical areas like many of the liberal arts and social sciences are allowed to pursue all kinds of crazy things, you know, gender studies, departments and if you look at what goes on in sort of postmodernism, critical realist, sorry, critical studies in philosophy, critical legal theory, critical management studies and so on, which don't have any practical value whatsoever, but are there, again, to sort of pick up this vestige of the grand sort of liberal tradition. But because of the democratization of higher education, the huge expansion of budgets, now you have this sort of, you know, class of academics who are doing work that doesn't have any value classical or vocational to anybody. So that's part of what's going on. You also mentioned this idea that, you know, a four-year degree is a basic, that's the basic inheritance of every American or European or whatever. Everybody, yeah, everybody has to have four years of college. Well, that's never justified or explained in any way, nor has it ever pointed out that, you know, higher education is a very heterogeneous thing. It isn't the case that everybody needs one unit of higher ed where one unit equals four years of, you know, bachelor's degree with these courses and these programs. That doesn't make any sense at all. That's never explained whatsoever. It's worth pointing out, too, that I think a lot of the current demand for higher education is just signaling. Pure signaling is a famous model of signaling in higher education by Michael Spence, Nobel Prize-winning neoclassical economist. And Spence argues that even if education doesn't provide any value whatsoever in terms of skills that you learn, a knowledge that you acquire, if college is hard, if it's hard to take the tests and pass the tests, you know, by regurgitating whatever nonsense the professor told you, such that for people who are very intelligent and have a lot of skills, it's distasteful, but they can do it easily. Whereas people who are less capable have fewer valuable skills find it's just so difficult to jump through those hoops that they would prefer not to do it, then the university degree can function as a nice kind of screening mechanism, right? Somebody who comes out with a four-year degree must be capable enough that they could put up with all that nonsense. Therefore, they probably will be more productive in the workplace, right? Somebody who doesn't have the degree presumably made a rational decision that the benefits of the higher wages they would receive from having a degree are not worth the time and effort and discomfort and pain that would be involved in struggling to get the degree, so they're better off just not getting the degree. So therefore, employers could simply look out at the workforce and say, oh, if you have a degree, if you were smart enough and capable enough and hardworking enough to get a degree, we'll hire you. If you were not able or willing to get a degree, we won't. Even if the degree itself has no value whatsoever in terms of anything you actually learn, it's just a test you pass to see if you're good enough. And I think a large part of the demand for higher education is just this signaling effect. Now, could that signaling effect reverse? Could it come to a point where higher education is so obviously not a good investment and so obviously luxury consumption good that people who resist the propaganda of the go-to-college propaganda and go their own way that that will be a signal that they're of an independent cast of mind, that they're intelligent, that they make wise investment decisions? Absolutely. That's certainly possible. You do see in some industries, you know, in some parts of the tech sector in software and coding and so on, if the fact that you have a degree in computer science or electrical engineering does not provide much value on the job market for, you know, video game programmers, for example. The employers want to see your code. They want to know if you can code and if you can code, you know, it's probably better that you weren't, you know, corrupted by what some computer science professor told you about the right way to code, you know, when that professor has never actually produced a product and so forth. Now, if you look through history, certainly in the U.S., I mean, in some circles, there's been a stigma about a college education, you know, being a college boy. You might remember from the original Godfather movie, the fact that Michael, who ends up becoming the Don, of course, is a college boy, sets him apart from the other members of the Corleone family and it's not seen as a positive. It's like, okay, this is a guy who's, you know, he's too much of a Nambi Pambi to be very effective in our organization. We prefer to stay away from people like that. I mean, you never know. It is the case that there's a lot of inertia associated with these kinds of things. I mean, reputations take a long time to die and, you know, Harvard University, for example, could completely change its curriculum and could, you know, basically be teaching basket weaving for the next 25 years and it would take a long time for people to change their perception of that brand. The established brands in higher ed have a lot of value. It's not like in other industries, you know, in the free market. I'm just going to do a talk later today about BlackBerry, what was once, you know, a leading smartphone manufacturer. Indeed, the pioneer of the smartphone category, you know, that brand had a lot of cachet and there was a lot of brand loyalty in the 2000s as BlackBerry became the dominant company. But then after Apple introduced the iPhone for various other reasons, you know, now BlackBerry's kind of a laughing stock is basically, I mean, going private and has, you know, two or three percent of the market. That brand doesn't mean anything now. Brands rise and fall, brand values rise and fall very rapidly in most parts of a capitalist economy. But that's not quite the same thing with, you know, with nonprofits and with educational organizations, government entities and so forth. The brand names tend to, the value tends to persist for a long time because it's not easy, it's not hard to understand why. With mobile phones, I mean, you pick the thing up and you know right away if you want it or not. Your friends have it, they don't have it. It's pretty obvious whether the device is the one you want or not. With a product like higher ed, it's just not obvious. You know, again, because it has this sort of cult-like mysterious aura. You know, these eminent professors at the university are telling me X, Y and Z. X, Y and Z must be great. And it may take a generation or two for people to realize that X, Y, Z is a bunch of nonsense. But it's not something you can pick up on right away. Now, there are still, you mentioned programming and how you don't really need a degree to become a programmer. And it seems that with certain jobs that are, where the professions are, they're not even professions yet, that they're still just careers and that the gatekeepers haven't had a chance to organize yet. Like it hasn't had a chance to be cartilized and have guilds form. And I wonder if in the future, if those kinds of jobs will rise in importance and if, therefore, university education won't be as important. Because right now, if you want to be a doctor, if you want to be certain kinds of engineer, other professions, the license requirements are such that you have to go to a university. But now with programming, also with other white-collar jobs that are so new that there's no gatekeeping yet, with Mike Rowe of Dirty Jobs, the TV show, he talks a lot about high-tech and high productivity and therefore high-wage blue-collar jobs that are really good opportunities but are understaffed because of all this go-to-college propaganda that don't need a four-year degree. And then there's entrepreneurship itself, just creating a startup that there's no license to be an entrepreneur. With the way the economy is evolving, do you see those kinds of jobs becoming more important and the old guard kind of jobs becoming less important? It's a great question. It's definitely possible. No one can say for sure. But if you follow the trends, just the sorts of ones that you've described, I think you're exactly right to... It seems likely that in many sectors, the value added of the college degree will fall because this sort of signaling process that I described before, it's very expensive. I mean, that's a very costly signal if you have to four years and $100,000 in debt or whatever to prove that you have certain skills. Well, there are other ways that you can demonstrate your skills. Like we said before in programming, you can just show an example of what you've done. In entrepreneurship, you can demonstrate the success of your past ventures as you seek to attract capital for a future venture and so forth. So, yeah, it's certainly possible as the economy continues to be transformed that those industries for which the guild-like certification is the most important begin to shrink and become smaller. But in healthcare, the whole rise of so-called nurse practitioners and other techniques for getting people basic medical care without going through the standard, you know, going to the doctor's office. Exactly. I think it's obvious to most people that there are lots of aspects of, you know, healthcare or medical care, including exercise and diet and so forth for which you don't need a state-certified physician. And of course, what if the state-certified physicians do? They've tried to quash these and said, well, okay, nurse practitioners are all right, but you can only have them in our offices working under our supervision. You can't have them in Walmart, for example, because that would, you know, not be good for public safety, which is just a pure protectionist measure by the incumbents. So I think it's very possible, as you say, that if it becomes more obvious to people that there are other ways to certify your skills and your training, that it isn't necessary to have this traditional credential to be successful, then the value of the brands will fall, the value of the credential will fall. We could see a real upheaval. Thank you for listening to the Mises Academy podcast. 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