I wrote recently on the narrow way we often think of wealth, and how that can be very misleading about people’s true economic well-being.
The points I made there are relevant to a post on The Econonmist blog, about student debt. Some of the connections are these:
- Another way to think about student debt is to consider the intellectual capital that is gained, and offsets the financial debt that may have been undertaken. This is the point I originally made as an example of how in statistics someone with healthy prospects can appear to be worse off than a truly poor person, who does have a modicum of savings.
- Of course there is more to studying than simply enhancing one’s financial prospects. Some of the commenters on the post point out that large debts prevent talented people from working in non-profits or the public sector, where they are very much needed. This relates to my thoughts on private and public wealth.
- The Economist suggests that maybe if all students were required to take on a large loan, that would actually level the playing field because it would:
- When you consider “social capital” it is clear that the playing field cannot be so easily levelled. Someone who knows that in the worst case they can always go and live in comfort in an affluent parental home is in a very different position to someone whose debts might end up as a burden not only to themselves, but their hard-pressed family. And there is a great deal more to social capital than just that. For example, is a law degree sufficient to gain entry to a lucrative legal career? Or is the right accent and demeanour also a requisite?
- Remember that decisions are made in conditions of bounded rationality. It’s not sufficient that education is a good investment. It must also be clear to a young person with little experience of the world that it’s so. If that young person comes from a background where this is taken for granted, their decision will be obvious. If they hardly know anyone with a university education, the risks may appear great, whether they are or not. And it is actually the case that the less capital you have, social and otherwise, the more any given financial loss would impact you.
- Maybe most pertinent from my earlier post is the point that most often people are not interested in any real or rigorous thinking, simply in latching on to evidence to justify their own existing point of view. The discussion on the Economist blog – from whatever point of view – illustrates this only too well.
- In fact I wonder, was the original Economist post written to shed light on an important question? Or was it like much else written simply from the perspective of “What can I say today to get some traffic to this blog and earn my paycheck?” Questions that we would all do well to ask ourselves often.
“put the children of the middle class in at least somewhat the same position as the less affluent students who compete with them for places”