Saturday, February 19, 2011

Admissions arms race

The WSJ details the story of parents caught up in the battle to get their kids into the very best possible college, with expensive SAT consultants, campus visits, and all the rest. I have some thoughts on this, of course:

1. The article states:
Is going to a so-called "better" college worth it? Is the system fair? The first question is the subject of seemingly endless study, which almost always concludes: It depends.
In fact, every reasonably serious scholarly paper that I know of but one concludes that college quality increases earnings. Even the single exception, the famous Dale and Krueger piece, in the Quarterly Journal of Economics, in some sense proves the rule. They find college quality does matter for disadvantaged students and they examine a limited set of schools, the lowest quality of which is probably Penn State. With such limited variation in quality, it becomes more difficult to find strong effects in the data.

2. Having said that I think college quality increases earnings, the estimates in the literature are small enough that they are unlikely to imply that it is worth spending many thousands of dollars now for the future earnings differences that will result (in expectation!) from the sorts of very marginal quality differences the parents in the article are laboring after. Of course, that is exactly the sort of calculation the authors of the WSJ piece should have done, but did not.

3. There are many other margins besides college choice that affect post-college labor market and life outcomes. Parents need to be sure that they are equating across margins in terms of effort and dollars expended. These other margins include major choice, effort level in college, extracurricular activity participation and choices and so on. Any decent state school will provide an excellent education to a student who works hard, chooses their major and classes thoughtfully, and adds a light coating of high payoff extracurricular activities. In contrast, students who attend expensive, highly ranked colleges like the one I teach at can, if they choose, avoid class and drink their way through four years and not accomplish much at all. I think parents focus too much on the college choice margin and not enough on the effort, engagement and major choice margins.

4. Colleges are not one-dimensional. One can talk meaningfully about quality as I have done above and yet for some students, the key dimension may be size, or the presence or absence of a big city, or great athletics, or great theater arts. Match quality matters, and parents who focus only on a one-dimensional notion of quality may not be optimizing.

5. Is there any actual evidence on the relative effectiveness of expensive SAT coaches versus inexpensive SAT preparation books or websites? My guess is that there is not and my prior is that there is little difference between the two modes of preparation other than price. I suspect that doing a lot of practice questions in a book will do the job for the vast majority of students.

6. How much of this is really about the parents status competition with their friends and colleagues? I would guess quite a lot. Maybe almost all. Parents need to toughen up and mock their peers who waste money on this stuff rather than feeling obliged to copy them.

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