Daniel W. Drezner

The worst word of 2012

The worst word of 2012

This month Merriam-Webster highlighted their most looked-up words of 2012, with the rather boring conclusion that "capitalism" and "socialism" were the words of the year.  To spice things up a bit for those philologists in the crowd, I would like to suggest that every years, some words get temporarily "retired."  Not permanently, just for a yar or so.  Think of it as a word vacation. 

I don’t make this suggestion lightly — no writer wants to constrain their options as they craft their arguments.  Some words, however, find themselves abused to the point where, no matter how scintillating they might have been in the past,  they need some time in rehab.  Think Ryan Lochte after the post-Olympics publicity tour or Lindsay Lohan after making a Lifetime movie. 

So the worst word of 2012, the word that desperately needs a break is… bubble. 

Since 2008, analysts, commentators, pundits et al have been on the lookout for the next bubble.  To provide one example of how this search for the next bubble abuses the term, let’s look at the brouhaha surrouding the "higher ed bubble."  It was brewing in 2011, but this year, with the rise of online education, it’s been just lousy in the blogosphereMegan McArdle, Glenn Reynolds, and Walter Russell Mead have been hammering away at this concept. 

It is Mead’s latest post on the subject that has me thoroughly annoyed.  He links to the lead essay in The American Interest by Nathan Harden that opens as follows: 

In fifty years, if not much sooner, half of the roughly 4,500 colleges and universities now operating in the United States will have ceased to exist. The technology driving this change is already at work, and nothing can stop it. The future looks like this: Access to college-level education will be free for everyone; the residential college campus will become largely obsolete; tens of thousands of professors will lose their jobs; the bachelor’s degree will become increasingly irrelevant; and ten years from now Harvard will enroll ten million students.

We’ve all heard plenty about the “college bubble” in recent years. Student loan debt is at an all-time high—an average of more than $23,000 per graduate by some counts—and tuition costs continue to rise at a rate far outpacing inflation, as they have for decades. Credential inflation is devaluing the college degree, making graduate degrees, and the greater debt required to pay for them, increasingly necessary for many people to maintain the standard of living they experienced growing up in their parents’ homes. Students are defaulting on their loans at an unprecedented rate, too, partly a function of an economy short on entry-level professional positions. Yet, as with all bubbles, there’s a persistent public belief in the value of something, and that faith in the college degree has kept demand high.

The figures are alarming, the anecdotes downright depressing. But the real story of the American higher-education bubble has little to do with individual students and their debts or employment problems. The most important part of the college bubble story—the one we will soon be hearing much more about—concerns the impending financial collapse of numerous private colleges and universities and the likely shrinkage of many public ones. And when that bubble bursts, it will end a system of higher education that, for all of its history, has been steeped in a culture of exclusivity. Then we’ll see the birth of something entirely new as we accept one central and unavoidable fact: The college classroom is about to go virtual. 

Now, let’s stipulate that higher education may well be on the cusp of some interesting changes.  Let’s also stipulate that some colleges appear to have gone on a borrowing binge (though the linked story fails to note that these debt loads have been declining for the past few years).  Let’s further stipulate that Harden’s prediction might well be correct — though even he acknowledges later in the essay that traditional classroom instruction is a necessary component to a good higher education.

Here’s the thing, and it’s worth repeating:  This.  Is.  Not.  A.  Bubble. 

Here’s the FT definition of an asset bubble

When the prices of securities or other assets rise so sharply and at such a sustained rate that they exceed valuations justified by fundamentals, making a sudden collapse likely – at which point the bubble "bursts".

I think it’s possible that the first part of this definition might be happening in higher education — though I’d wager that what’s actually happening is that universities are engaging in greater price discrimination and trying to capture some of the wage premium effects from higher education that have built up over the past three decades. 

It’s the second part of that definition where things don’t match up.  Unless and until there is a sudden and dramatic shift in the valuation of a college degree, this is simply not like a bubble.  From a knowledge perspective, there are far too many professions in the economy where degrees are still considered a  necessary condition.  From a sociological perspective, there are also far too many people who got to where they are in their careers because of the social capital built up at universities. 

I think it’s possible that the American system of higher education might be facing what happened to American manufacturing over the past fifty years, in which structural and technological forces caused a slow, steady reduction in the workforce and dramatic improvements in productivity and output.  That’s something important — but it’s not a bubble. 

[Don’t you have some skin in this game?  Aren’t you just defending your interest group?–ed.  I teach at a graduate school in which demand for my courses has spiked rather than slowed over the past decade.  I’m also a full professor at an elite school.  I would personally benefit from the changes that Mead et al are describing.   So if I was arguing my own self-interest, I’d be nodding vigorously at what the higher ed bubble gurus are selling.]

Please, let’s give "bubble" a break before the term loses all meaning.