Peter Thiel’s Graph of the Year(m.washingtonpost.com)
m.washingtonpost.com
Peter Thiel’s Graph of the Year
http://m.washingtonpost.com/blogs/wonkblog/wp/2013/12/30/peter-thiels-graph-of-the-year/
23 comments
Wrote a little followup http://www.underageinvestor.com/the-american-middle-class-an...
That chart compares median income with total student debt. Also the scale for median income is not zero-based. The point is still valid, but this widespread use of misleading charts is awful.
Agreed. In an actual journal graphic competition, that one would not even be admitted to the contest. A time series with misleading scales? Its dis-educating people, not informing them. It correlates nothing; it scares folks with the exaggeration (student loans went from about par with annual income, to about 40% over; yet it looks like its 10X higher).
That graph is a bit of a lie. Student debt is summed over all students, so it grows if the student population grows (which it has; 2013 saw a decline, but that will not factor much in this data yet). It also integrates over many years. That makes the total debt look more threatening.
It would be more reasonable to show a per-year, per student debt (people graduating in year X had an average debt of $Y; people leaving without graduating had an average debt of $Z)
Such a graph probably still looks bad (median income has dropped, after all), but it will be more informative.
It would be more reasonable to show a per-year, per student debt (people graduating in year X had an average debt of $Y; people leaving without graduating had an average debt of $Z)
Such a graph probably still looks bad (median income has dropped, after all), but it will be more informative.
I knew that graph was misleading, but I still missed that it was total student debt vs per capita median income.
I nominate it for worst graph of the year: if you set out to make a biased graph, you couldn't do much better.
Drawing such an obviously bad graph undermines the point being made, in my view.
I nominate it for worst graph of the year: if you set out to make a biased graph, you couldn't do much better.
Drawing such an obviously bad graph undermines the point being made, in my view.
Note also that income is not shown on a zero-indexed scale, exaggerating its decline.
The scale is in 2012 dollars. That's indexed.
Indexed and zero-based aren't the same.
You're avoiding the distortion of inflation, but not that of starting the graph above the x axis.
You're avoiding the distortion of inflation, but not that of starting the graph above the x axis.
zero-indexed means that the axis of the graph starts at 0.
We can argue about the details but the underlying story is accurate: the cost of higher education has gone up a lot while the income of college graduates has been flat or declined slightly. This is not news[1a][1b].
The big question is will collage graduate wages rise in the future so that these debts become manageable - many are concerned they won't and these debts will consume many years of their earnings. And nobody is predicting college inflation will decline anytime soon so college may be even less affordable in the future.
BTW - Undergraduate and graduate enrollment was up only about 25% (flat since 2010)[2] while total student debt tripled since 2003. Average student debt probably nearly doubled since 2003 (up 58% 2005-2012[3] do the math to estimate 2003-2013 - up about 92%).
[1a] http://www.businessweek.com/the_thread/economicsunbound/arch...
[1b] http://theatlantic.tumblr.com/post/24693728700/dont-fall-for...
[2] http://blogs.wsj.com/economics/2013/09/03/number-of-students...
[3] http://www.forbes.com/sites/halahtouryalai/2013/01/29/more-e...
The big question is will collage graduate wages rise in the future so that these debts become manageable - many are concerned they won't and these debts will consume many years of their earnings. And nobody is predicting college inflation will decline anytime soon so college may be even less affordable in the future.
BTW - Undergraduate and graduate enrollment was up only about 25% (flat since 2010)[2] while total student debt tripled since 2003. Average student debt probably nearly doubled since 2003 (up 58% 2005-2012[3] do the math to estimate 2003-2013 - up about 92%).
[1a] http://www.businessweek.com/the_thread/economicsunbound/arch...
[1b] http://theatlantic.tumblr.com/post/24693728700/dont-fall-for...
[2] http://blogs.wsj.com/economics/2013/09/03/number-of-students...
[3] http://www.forbes.com/sites/halahtouryalai/2013/01/29/more-e...
the income of college graduates has been flat or declined slightly
Except that's not exactly true either. The average income of newly minted college graduates has been flat or declining, but the set which is being averaged is expanding -- and expanding downwards. Unless you think that college education is the sole determinant of income, it is unreasonable to compare the "average" college graduate from 30 years ago against the "average" college graduate today -- who would very likely not have been admitted to college 30 years ago.
The same fallacy is applied in the opposite direction by colleges who are seeking to increase their student numbers: "The average graduate earns $X more than the average non-graduate." True, but it ignores the fact that the average graduate is quite different from the marginal graduate.
Except that's not exactly true either. The average income of newly minted college graduates has been flat or declining, but the set which is being averaged is expanding -- and expanding downwards. Unless you think that college education is the sole determinant of income, it is unreasonable to compare the "average" college graduate from 30 years ago against the "average" college graduate today -- who would very likely not have been admitted to college 30 years ago.
The same fallacy is applied in the opposite direction by colleges who are seeking to increase their student numbers: "The average graduate earns $X more than the average non-graduate." True, but it ignores the fact that the average graduate is quite different from the marginal graduate.
Good points!
There must be a law of diminishing returns in education just like in almost everything else. As the opportunities to get more education have greatly expanded, the quality of both the students and that education have probably suffered. This at least partially explains the decline in the average income of college graduates. While we are probably better off as a society overall, it does mean the net benefit of education is narrowing.
And the margin is where we should focus. A basic law of decision making (in economics, business, public policy, engineering) is to always look at the marginal impact of decisions as that is where the impact will be. Unfortunately this analysis is very difficult in this case (forecasts, discounting, preferences, controls) and the results will not be very comforting: for some people, some subjects and some professions the costs will not be justified by future earnings. I don't see our society rationally acting on this kind of information. So the trend will continue or even exacerbated with more lending and subsidies. This is similar to the problems we have dealing with healthcare or global warming.
However the cost of college has increased by about 7% a year inflation-adjusted for over 30 years. This doubles the real cost every decade! Meanwhile median incomes of college graduates have been flat or declining since 2000. This clearly cannot go on forever and something that can't go on forever won't. But it is not clear to me how this will end.
My hope is that technology like MOOCs can bring down the cost of education and that incomes increase as the benefits of both that education and globalization are finally realized. Then we would have both a better educated and richer society. Alternatively more people may decide higher eduction is simply not worth it - probably resulting in negative outcomes for some. Or something more messy such as mass loan defaults and university bankruptcies resulting in even more negative outcomes. This may take a vey long time to fully play out.
There must be a law of diminishing returns in education just like in almost everything else. As the opportunities to get more education have greatly expanded, the quality of both the students and that education have probably suffered. This at least partially explains the decline in the average income of college graduates. While we are probably better off as a society overall, it does mean the net benefit of education is narrowing.
And the margin is where we should focus. A basic law of decision making (in economics, business, public policy, engineering) is to always look at the marginal impact of decisions as that is where the impact will be. Unfortunately this analysis is very difficult in this case (forecasts, discounting, preferences, controls) and the results will not be very comforting: for some people, some subjects and some professions the costs will not be justified by future earnings. I don't see our society rationally acting on this kind of information. So the trend will continue or even exacerbated with more lending and subsidies. This is similar to the problems we have dealing with healthcare or global warming.
However the cost of college has increased by about 7% a year inflation-adjusted for over 30 years. This doubles the real cost every decade! Meanwhile median incomes of college graduates have been flat or declining since 2000. This clearly cannot go on forever and something that can't go on forever won't. But it is not clear to me how this will end.
My hope is that technology like MOOCs can bring down the cost of education and that incomes increase as the benefits of both that education and globalization are finally realized. Then we would have both a better educated and richer society. Alternatively more people may decide higher eduction is simply not worth it - probably resulting in negative outcomes for some. Or something more messy such as mass loan defaults and university bankruptcies resulting in even more negative outcomes. This may take a vey long time to fully play out.
The "details" _are_ the underlying story, and if they're effectively the same as what the graph purports to present: why not present the correct graph?
For a bunch of people (myself included) bemoaning the state of analytical education in America, this is something that should be incredibly important.
For a bunch of people (myself included) bemoaning the state of analytical education in America, this is something that should be incredibly important.
I disagree the details are not the story. If the perfect information was available it would almost certainly tell the same story: the cost of college education is rising rapidly relative to the income benefit of that education. Do you disagree?
A details analysis could potentially allow us to understand the magnitude of this gap but it is certainly both positive and significant. The biggest error in the graph is using total debt versus median or average debts since we know the number of students has increased. I wish he had used median debt or median cost but as I noted above both median debt and cost has roughly double over the past 10 years - so the story stands.
Part of any good analytical education should include the skill to form judgements with imperfect, incomplete and/or inaccurate data. In the real world it is very rare you have a perfect experiment that gives you perfect data. That said I agree we need better analytical education. We also need better data.
A details analysis could potentially allow us to understand the magnitude of this gap but it is certainly both positive and significant. The biggest error in the graph is using total debt versus median or average debts since we know the number of students has increased. I wish he had used median debt or median cost but as I noted above both median debt and cost has roughly double over the past 10 years - so the story stands.
Part of any good analytical education should include the skill to form judgements with imperfect, incomplete and/or inaccurate data. In the real world it is very rare you have a perfect experiment that gives you perfect data. That said I agree we need better analytical education. We also need better data.
[deleted]
I agree; maybe this graph is a little better:
http://www.npr.org/news/graphics/2011/05/gr-avg-student-debt...
(from http://www.npr.org/2011/05/16/136214779/college-student-debt... )
EDIT: Or this maybe: http://www.worldwidehippies.com/2011/08/29/tax-breaks-for-ri...
(just doing an image search for student debt history)
http://www.npr.org/news/graphics/2011/05/gr-avg-student-debt...
(from http://www.npr.org/2011/05/16/136214779/college-student-debt... )
EDIT: Or this maybe: http://www.worldwidehippies.com/2011/08/29/tax-breaks-for-ri...
(just doing an image search for student debt history)
The NPR chart may also be misleading; it's unclear from the notes. There was ~60% inflation between 1992 and 2011.
First, I agree 100% with what you note above.
And furthermore, showing the salary of college grads in isolation is useless. You need to show the delta between those with vs those w/o college degrees. If the salary of those without college degrees is falling more than those with college degrees then it still may be a prudent financial decision.
It would also be interesting to see this broken down by school. For example, I suspect that top tier public schools end up looking a lot better than bottom tier private schools.
And furthermore, showing the salary of college grads in isolation is useless. You need to show the delta between those with vs those w/o college degrees. If the salary of those without college degrees is falling more than those with college degrees then it still may be a prudent financial decision.
It would also be interesting to see this broken down by school. For example, I suspect that top tier public schools end up looking a lot better than bottom tier private schools.
> If the salary of those without college degrees is falling more than those with college degrees then it still may be a prudent financial decision.
Do note that if you look at income data a little bit closer, you will notice that people with _only_ a bachelor's degree represent roughly 20% of every income bracket, which implies there is no significance to just having a degree as it relates to income.
It is only those with post-graduate degrees who see a sharp rise in the upper income brackets. However, we tend to lump them all into a "college degree" category, which allows the latter group to bring up the numbers. Unfortunately, this leads people to believe that getting any college degree is a prudent financial decision, even though the data does not back it up.
It is worth looking at the numbers, for sure, but be careful out there. There are a lot of traps that are easy to overlook.
Do note that if you look at income data a little bit closer, you will notice that people with _only_ a bachelor's degree represent roughly 20% of every income bracket, which implies there is no significance to just having a degree as it relates to income.
It is only those with post-graduate degrees who see a sharp rise in the upper income brackets. However, we tend to lump them all into a "college degree" category, which allows the latter group to bring up the numbers. Unfortunately, this leads people to believe that getting any college degree is a prudent financial decision, even though the data does not back it up.
It is worth looking at the numbers, for sure, but be careful out there. There are a lot of traps that are easy to overlook.
"It is only those with post-graduate degrees who see a sharp rise in the upper income brackets. However, we tend to lump them all into a "college degree" category, which allows the latter group to bring up the numbers. Unfortunately, this leads people to believe that getting any college degree is a prudent financial decision, even though the data does not back it up."
Incorrect:
http://www.bls.gov/emp/ep_chart_001.gif
Incorrect:
http://www.bls.gov/emp/ep_chart_001.gif
How are "weekly earnings" calculated? For instance, I get all of my income in lump sums, typically two or three times per year. Does that mean my weekly earnings are $0 (or some really large number if you get me on a specific week), or do they take yearly income and divide it by the number of weeks? If the latter, why bother breaking it down to per week?
Also, given that the Bureau of Labour is the source, do they include non-labour income sources? It seems pretty important, at least in my mind, to include all income sources. The average high school-only graduate will have $100K of potential to invest by the time someone in college graduates. Even with a low 3% interest rate, that is $3,000 in additional income for high school grads each year.
Educational Attainment by Annual Household Income:
http://content.gallup.com/origin/gallupinc/GallupSpaces/Prod...
Also, given that the Bureau of Labour is the source, do they include non-labour income sources? It seems pretty important, at least in my mind, to include all income sources. The average high school-only graduate will have $100K of potential to invest by the time someone in college graduates. Even with a low 3% interest rate, that is $3,000 in additional income for high school grads each year.
Educational Attainment by Annual Household Income:
http://content.gallup.com/origin/gallupinc/GallupSpaces/Prod...
The source is cited. If you truly care, you can look into the methodology to your heart's content.
The Gallup link you provide doesn't tell you anything about causality because the relationship is backwards ("educational attainment by income"), while still providing data to refute your original argument (there's a clear positive correlation between education and wealth).
The Gallup link you provide doesn't tell you anything about causality because the relationship is backwards ("educational attainment by income"), while still providing data to refute your original argument (there's a clear positive correlation between education and wealth).
> there's a clear positive correlation between education and wealth
I'm not seeing it. There is very little variance except on the lowest rungs:
If bachelor's degrees and incomes had a significant correlation, you would expect a considerable increase in each income bracket like you see for the postgraduates, not just a few percentage points between them.
The only interesting correlation is with those who have post-graduate educations, but that was never disputed. It was the argument all along.
I'm not seeing it. There is very little variance except on the lowest rungs:
<20K 5%
20-29K 8%
30-39K 11%
40-49K 14%
50-74K 18%
75-99K 22%
100-149K 25%
150-249K 25%
250-499K 24%
500K+ 23%
If bachelor's degrees and incomes had a significant correlation, you would expect a considerable increase in each income bracket like you see for the postgraduates, not just a few percentage points between them.
The only interesting correlation is with those who have post-graduate educations, but that was never disputed. It was the argument all along.
There's a positive correlation between those data series.
If you use the original data, instead of subtracting the columns (arbitrarily), the correlation is stronger. For both columns.
But hey, you keep arguing with facts. I have better things to do.
If you use the original data, instead of subtracting the columns (arbitrarily), the correlation is stronger. For both columns.
But hey, you keep arguing with facts. I have better things to do.
Do note that if you look at income data a little bit closer, you will notice that people with _only_ a bachelor's degree represent roughly 20% of every income bracket, which implies there is no significance to just having a degree as it relates to income.
That's probably not the right way to look at the data -- too many weird factors (what is the distribution in the brackets, how are the brackets defined, etc...).
The best study that I've seen that breaks this out is a bit old (2002), but still probably relevant is from the US Census:
http://www.census.gov/prod/2002pubs/p23-210.pdf
It shows that over a lifetime there is a significant benefit in having a bachelors. Furthermore, having a bachelors sets you up to get further degrees later in your career.
That's probably not the right way to look at the data -- too many weird factors (what is the distribution in the brackets, how are the brackets defined, etc...).
The best study that I've seen that breaks this out is a bit old (2002), but still probably relevant is from the US Census:
http://www.census.gov/prod/2002pubs/p23-210.pdf
It shows that over a lifetime there is a significant benefit in having a bachelors. Furthermore, having a bachelors sets you up to get further degrees later in your career.
Everyone should agree that a college degree has some positive impact on future earnings. The problem is that the real cost of that degree has been doubling every decade for more than 30 years while the real earnings of college graduates have increased very little both on an absolute basis and relative to those without a college degree. Assuming college is worth it today if these trends continue it's net value (benefit - cost) will rapidly decline. This is a problem.
If that is really Thiel's favourite graph, then I just lost an enormous amount of respect for him because of this obvious problem of the graph.
The goal of the stateless elite is to manipulate the masses into following them.
If all it takes is a graph to convince someone "hey, this rich person is right, I should do everything they say" they see that as a very small price to pay for brainwashing.
If all it takes is a graph to convince someone "hey, this rich person is right, I should do everything they say" they see that as a very small price to pay for brainwashing.
Really? You lost respect for this guy because he decided to present a graph that shocks readers into realizing there's a bubble in higher education?
It's certainly disturbing to see someone you respect misinform people in order to advance a personal agenda.
Yes! The point could've been made honestly, but Thiel used several different 'how to lie with charts and statistics' techniques instead.
My respect for people naturally declines when they've gone out of their way to deceive me. This happens regardless of whether or not I agree with the goal of their deception.
The Bible doesn't say 'Thou shalt only lie if it helps you further your personal agenda', it says 'Thou shalt not lie.'
My respect for people naturally declines when they've gone out of their way to deceive me. This happens regardless of whether or not I agree with the goal of their deception.
The Bible doesn't say 'Thou shalt only lie if it helps you further your personal agenda', it says 'Thou shalt not lie.'
> it says 'Thou shalt not lie.'
Derailing, but I bet you it doesn't. :P
Derailing, but I bet you it doesn't. :P
[deleted]
The entire economy looks bad, for all workers.
Median income has dropped for everybody. Household debt has increased for everybody.
Median income has dropped for everybody. Household debt has increased for everybody.
Not so sure about that.
Chinese peasants seem to be doing quite a bit better these days, for example.
Here's a graph for ya (stolen from elsewhere in the comments):
http://cdn.static-economist.com/sites/default/files/imagecac...
Chinese peasants seem to be doing quite a bit better these days, for example.
Here's a graph for ya (stolen from elsewhere in the comments):
http://cdn.static-economist.com/sites/default/files/imagecac...
Ah, of course. Nice call. I'd edit my post, but instead I'll leave it there to document the error. ;-)
It would be interesting to know the impact of US college education on global poverty.
It would be interesting to know the impact of US college education on global poverty.
How does "median income" drop for "everybody"?
At any rate, it depends on the timescale. The upper quintile (and decile, and percentile) took a really huge hit in the 2008 recession, but before and since that, they've been doing a lot better than the middle deciles.
At any rate, it depends on the timescale. The upper quintile (and decile, and percentile) took a really huge hit in the 2008 recession, but before and since that, they've been doing a lot better than the middle deciles.
> How does "median income" drop for "everybody"?
I believe the attempted claim is that "for these various populations that constitute 'everybody', their median income has dropped in each population".
So if "everybody" is these 6 guys over here ("say hi, Bob"), and you split them into 2 groups of 3 guys, and then check the median income of both groups, the claim is that both groups have a lower median income.
I believe the attempted claim is that "for these various populations that constitute 'everybody', their median income has dropped in each population".
So if "everybody" is these 6 guys over here ("say hi, Bob"), and you split them into 2 groups of 3 guys, and then check the median income of both groups, the claim is that both groups have a lower median income.
Agreed, comparing a median to a total is misleading. Even if it were an average-to-average comparison, it would not tell the entire story. There are more factors that determine one's debt situation in addition to money owned and money made. A much more telling graph would be monthly student loan payment -- at the prevailing interest rate and terms -- to disposable income. I imagine it would still be showing a worrying trend but, likely, not as bad as the original graph.
Total debt per student has substantially increased, and the number of students taking out debt has substantially increased. But actual monthly student loan payments for students with debt are only nominally higher, and perhaps largely due to jobs paying less:
"In 2009 65.6% of first-time bachelor's degree recipients took out student loans, compared with 49.3% in 1994. Of those who borrowed, the cumulative amount borrowed was $24,700 in 2009, as compared with $14,700 (2009 dollars) in 1994. [...]
Among first-time bachelor's degree recipients with loans and who were employed and repaying their loans 1 year after bachelor's degree receipt, the average monthly loan repayments were 13.1% of monthly salary in 2009, as compared with 11.1% in 1994. The median monthly loan repayments were 8.0% in 2009, as compared with 6.8% in 1994.
In 2009 51.7% had monthly loan repayments that were 1-8% of their monthly salary, 17.1% had monthly loan repayments that were 9-12% of their monthly salary, 11.7% had monthly loan repayments that were 13-17% of their monthly salary, and 19.4% had monthly loan repayments that were more than 17% of their monthly salary." Source: Tables 1, 6, 7: http://nces.ed.gov/pubs2013/2013156.pdf
So basically the macroeconomic view wildly exaggerates the situation; while it is a problem that students with bachelors degrees are getting shitty jobs, the idea that it's impossible for students to get an education without outrageous monthly loan payments is just wrong. The people getting fucked over by college debt are mainly the ones who enroll in scam for-profit colleges, rack up hundreds of thousands of dollars worth of debt, and then don't graduate. Getting an actual bachelors degree is only nominally to moderately more expensive than it was 40 years ago. The fact that college graduates aren't well-educated enough to get good jobs is an enormous problem, but the idea that college is suddenly unaffordable because of cost increases is complete BS. Consider also:
"The net TFRB (tuition/room/fees/board sticker price minus total grant aid and tax benefits) at public 4-year colleges for in-state residents increased from $7,400 in 1990-91 (2012 dollars) to $12,110 in 2012-13. At private non-profit institution the net price increased from $18,330 in 1990-91 to $23,840 in 2012-13." Source: CollegeBoard - Tuition and Fee and Room and Board Charges over Time in 2012 Dollars, 1972-73 through 2012-13, Selected Years, Table 7 - Average Net Price for Full-Time Students over Time - Public Institutions, Table 8 - Average Net Price for Full-Time Students over Time - Private Institutions
"The average net tuition (tuition and fees minus all grants) in 2007-08 was $4,900 at public doctorate-granting institutions, $16,400 at private non-profit doctorate-granting institutions, and $9,200 at for-profit institutions." Source: http://nces.ed.gov/datalab/tableslibrary/viewtable.aspx?tabl... http://nces.ed.gov/datalab/tableslibrary/viewtable.aspx?tabl...
"In 2009 65.6% of first-time bachelor's degree recipients took out student loans, compared with 49.3% in 1994. Of those who borrowed, the cumulative amount borrowed was $24,700 in 2009, as compared with $14,700 (2009 dollars) in 1994. [...]
Among first-time bachelor's degree recipients with loans and who were employed and repaying their loans 1 year after bachelor's degree receipt, the average monthly loan repayments were 13.1% of monthly salary in 2009, as compared with 11.1% in 1994. The median monthly loan repayments were 8.0% in 2009, as compared with 6.8% in 1994.
In 2009 51.7% had monthly loan repayments that were 1-8% of their monthly salary, 17.1% had monthly loan repayments that were 9-12% of their monthly salary, 11.7% had monthly loan repayments that were 13-17% of their monthly salary, and 19.4% had monthly loan repayments that were more than 17% of their monthly salary." Source: Tables 1, 6, 7: http://nces.ed.gov/pubs2013/2013156.pdf
So basically the macroeconomic view wildly exaggerates the situation; while it is a problem that students with bachelors degrees are getting shitty jobs, the idea that it's impossible for students to get an education without outrageous monthly loan payments is just wrong. The people getting fucked over by college debt are mainly the ones who enroll in scam for-profit colleges, rack up hundreds of thousands of dollars worth of debt, and then don't graduate. Getting an actual bachelors degree is only nominally to moderately more expensive than it was 40 years ago. The fact that college graduates aren't well-educated enough to get good jobs is an enormous problem, but the idea that college is suddenly unaffordable because of cost increases is complete BS. Consider also:
"The net TFRB (tuition/room/fees/board sticker price minus total grant aid and tax benefits) at public 4-year colleges for in-state residents increased from $7,400 in 1990-91 (2012 dollars) to $12,110 in 2012-13. At private non-profit institution the net price increased from $18,330 in 1990-91 to $23,840 in 2012-13." Source: CollegeBoard - Tuition and Fee and Room and Board Charges over Time in 2012 Dollars, 1972-73 through 2012-13, Selected Years, Table 7 - Average Net Price for Full-Time Students over Time - Public Institutions, Table 8 - Average Net Price for Full-Time Students over Time - Private Institutions
"The average net tuition (tuition and fees minus all grants) in 2007-08 was $4,900 at public doctorate-granting institutions, $16,400 at private non-profit doctorate-granting institutions, and $9,200 at for-profit institutions." Source: http://nces.ed.gov/datalab/tableslibrary/viewtable.aspx?tabl... http://nces.ed.gov/datalab/tableslibrary/viewtable.aspx?tabl...
"The fact that college graduates aren't well-educated enough to get good jobs is an enormous problem"
That line of thinking is also a major cultural problem. A kid learning a lot in school does not in any way either magical or practical imply the world will provide a good job upon graduation.
There is a practical concern of that which can't continue forever will not continue forever. Median incomes are permanently dropping, at least in the USA, and will continue to do so for at least a couple decades best case. Go ahead, keep raising the cost of education, see where that leads you in a supply-demand scenario where the supply of money to feed the system is permanently declining but the supply of available product is permanently increasing with substantial fixed costs. That couldn't possibly lead to a collapse in that business sector in the future, could it? The only question is how to maximally profit off it by investing at this time for the future. Now that is a hard question.
That line of thinking is also a major cultural problem. A kid learning a lot in school does not in any way either magical or practical imply the world will provide a good job upon graduation.
There is a practical concern of that which can't continue forever will not continue forever. Median incomes are permanently dropping, at least in the USA, and will continue to do so for at least a couple decades best case. Go ahead, keep raising the cost of education, see where that leads you in a supply-demand scenario where the supply of money to feed the system is permanently declining but the supply of available product is permanently increasing with substantial fixed costs. That couldn't possibly lead to a collapse in that business sector in the future, could it? The only question is how to maximally profit off it by investing at this time for the future. Now that is a hard question.
"A kid learning a lot in school does not in any way either magical or practical imply the world will provide a good job upon graduation."
No, but if you come out of college without being functionally literate, like 69% of US college graduates, then you're pretty much guaranteed not to get a good job. C.f nces.ed.gov/NAAL/PDF/2006470.PDF
No, but if you come out of college without being functionally literate, like 69% of US college graduates, then you're pretty much guaranteed not to get a good job. C.f nces.ed.gov/NAAL/PDF/2006470.PDF
For anyone else wondering, I believe the statistic comes from p. 15, Table 8.
The data from that table doesn't say what the other poster said.
From the document: "Basic indicates skills necessary to perform simple and everyday literacy activities." That sounds like functional literacy.
In Table 8 they break out 3 different types of literacy (prose, document, quantitative).
Those with college degrees that score at Basic or above are:
Prose: 97% (with 83% being above Basic)
Document: 98% (with 87% being above Basic)
Quantitative: 96% (with 74% being above Basic)
Note, if you compare this to people with less than High School (no HS degree or GED):
Prose: 50%
Document: 55%
Quantitative: 36%
From the document: "Basic indicates skills necessary to perform simple and everyday literacy activities." That sounds like functional literacy.
In Table 8 they break out 3 different types of literacy (prose, document, quantitative).
Those with college degrees that score at Basic or above are:
Prose: 97% (with 83% being above Basic)
Document: 98% (with 87% being above Basic)
Quantitative: 96% (with 74% being above Basic)
Note, if you compare this to people with less than High School (no HS degree or GED):
Prose: 50%
Document: 55%
Quantitative: 36%
I noticed that but wasn't sure what the OP meant with a "good job". Looking at the examples between Basic, Intermediate and Proficient, Proficient seems pretty required for what I would consider a non-menial, well paying job. Basic skills include "locating easily identifiable quantitative information and using it to solve simple,one-step problems when the arithmetic operation is specified or easily inferred" and "reading and understanding information in simple documents". The examples are comparing ticket prices and using a TV guide to find out what time a show is on.
Those are not skills I personally feel qualify you for a "good job", my definition of good job being defined as one where you work with your mind. However, basic literacy does not mean you cannot be a very skilled tradesman and know a craft extremely well.
However, the majority of college graduates are intermediate or proficient. Will they all become lawyers or programmers? No. Are they functionally literate and can they perform in a workplace? Most likely, yes.
Those are not skills I personally feel qualify you for a "good job", my definition of good job being defined as one where you work with your mind. However, basic literacy does not mean you cannot be a very skilled tradesman and know a craft extremely well.
However, the majority of college graduates are intermediate or proficient. Will they all become lawyers or programmers? No. Are they functionally literate and can they perform in a workplace? Most likely, yes.
> That sounds like functional literacy.
The term has an actual definition. The fact is that 'proficient' is the minimum necessary to read a newspaper article, as per their definition of 'proficient'. If you can't do that, you sure as hell can't do any sort of knowledge work.
The term has an actual definition. The fact is that 'proficient' is the minimum necessary to read a newspaper article, as per their definition of 'proficient'. If you can't do that, you sure as hell can't do any sort of knowledge work.
Construction -> Mortgage Borrowers -> Mortgage Securitizers -> Investment Banks -> Pension Funds
In the above scenario the demand form the right dried up, whereas with student loans the supply from the left is going to dry up, so it's a different scenario. However, who is the equivalent of the construction companies in this scenario? My guess is the companies who supply equipment etc to universities and are over reliant on their custom. If you can find them, short them.
Well anyway that's the best I could think up. Unlike other investments, a degree is something you keep forever, so it's interesting to analyse...
In the above scenario the demand form the right dried up, whereas with student loans the supply from the left is going to dry up, so it's a different scenario. However, who is the equivalent of the construction companies in this scenario? My guess is the companies who supply equipment etc to universities and are over reliant on their custom. If you can find them, short them.
Well anyway that's the best I could think up. Unlike other investments, a degree is something you keep forever, so it's interesting to analyse...
"the idea that it's impossible for students to get an education without outrageous monthly loan payments is just wrong."
- Can I ask why you defined it this way? One could very well argue that this is precisely the problem. Students are looking at "cheap" monthly payments and not looking at the actual debt amount they're accruing. Cheap interest rates for student loans may or may not go away. The total amount of debt they collect will certain not go away. So we let them get saddled with debt in the hope that historically low interest rates aren't going anywhere. Sounds familiar.
- Can I ask why you defined it this way? One could very well argue that this is precisely the problem. Students are looking at "cheap" monthly payments and not looking at the actual debt amount they're accruing. Cheap interest rates for student loans may or may not go away. The total amount of debt they collect will certain not go away. So we let them get saddled with debt in the hope that historically low interest rates aren't going anywhere. Sounds familiar.
"58.0% of all first-time bachelor's degree recipients still had outstanding student loans 1 year after graduation in 2009. The average amount owed by graduates with outstanding loans 1 year after graduation was $20,100, compared with $10,100 (2009 dollars) in 1994." Source: Trends in Debt for Bachelor's Degree Recipients a Year After Graduation: 1994, 2001, and 2009 (Tables 3, 4)
So 1 year after graduation, of students with remaining loans, the average amount owed was 20.1k, and the median monthly payment was 8.0% of salary at the same point in time. But after a year or two salary should increase substantially, so loan payments should be a much smaller percentage. And a total average remaining debt of 20.1k after one year certainly isn't ideal, but it isn't really that unreasonable either, nor should it be especially burdensome. Obviously some people are dramatically worse off than this, but for most people the system doesn't seem especially broken. But to answer your question, I think that you need to look wholistically at total net cost increases, along with total debt, along with monthly loan payments and employment statistics. Looking at any one on its own will be highly misleading. Also keep in mind that different types of institutions and degrees lead to dramatically different outcomes in all of the above. I'm really only concerned with 4-year degrees from public or private non-profit institutions, because 2-year degrees and for-profit colleges are largely scams.
So 1 year after graduation, of students with remaining loans, the average amount owed was 20.1k, and the median monthly payment was 8.0% of salary at the same point in time. But after a year or two salary should increase substantially, so loan payments should be a much smaller percentage. And a total average remaining debt of 20.1k after one year certainly isn't ideal, but it isn't really that unreasonable either, nor should it be especially burdensome. Obviously some people are dramatically worse off than this, but for most people the system doesn't seem especially broken. But to answer your question, I think that you need to look wholistically at total net cost increases, along with total debt, along with monthly loan payments and employment statistics. Looking at any one on its own will be highly misleading. Also keep in mind that different types of institutions and degrees lead to dramatically different outcomes in all of the above. I'm really only concerned with 4-year degrees from public or private non-profit institutions, because 2-year degrees and for-profit colleges are largely scams.
Isn't the interest rate locked in on student debt?
This brings up the interesting problem that educational expenses can be paid by parental home equity loans and credit cards.
The official student loan market quantity is nothing more than how much of a subsidy the .gov wants to pay off to the .edu. That doesn't necessarily imply much about the total cost of education other than its probably at least that much although it could be much more.
The official student loan market quantity is nothing more than how much of a subsidy the .gov wants to pay off to the .edu. That doesn't necessarily imply much about the total cost of education other than its probably at least that much although it could be much more.
> Isn't the interest rate locked in on student debt?
Depends on the particular kind of student loan.
Depends on the particular kind of student loan.
Yes.
You mean its a total lie, axis numbering and all.
Probably the right quantity for the graph would be CPI for education:
http://research.stlouisfed.org/fred2/series/CUSR0000SAE1
http://research.stlouisfed.org/fred2/series/CUSR0000SAE1
Summing student debt is actually pretty valid - it's showing how much we as a society have invested to date.
Not in combination with an 'average income' graph.
It would be valid if it were plotted on its own or in combination with, for example, summed marginal income (the total amount of dollars those graduates made more thanks to their education == what the investment older students made brought society). Of course, that is hard/impossible to quantify and it, ideally, should be done per cohort (hard to do, as we don't even know what graduates from 2010 will make 5 years after graduation), but it would be a telling graph, I think.
Another way to show the issue in a honest way would be to estimate the number of years it takes graduates to pay back their loans. Again, hard to estimate (a student with $40,000 in income probably _could_ pay back a $20,000 debt in a year, but is it reasonable to expect that?)
And, of course, it would probably be very useful to see the combined distribution of (debt,income) pairs. If all students have a debt of 20k, and income of 40k, there is little to worry about. It is more likely, however, that both debts and incomes show large variations, and are only poorly correlated. The data set will both contain that dropout with a company worth millions, a trained neurosurgeon with 100+ k in debt that gets into an accident that invalidates his/her hand just before (s)he has the money to pay for insurance, and a talented, but a bit slow art student with limited commercial talent.
It would be valid if it were plotted on its own or in combination with, for example, summed marginal income (the total amount of dollars those graduates made more thanks to their education == what the investment older students made brought society). Of course, that is hard/impossible to quantify and it, ideally, should be done per cohort (hard to do, as we don't even know what graduates from 2010 will make 5 years after graduation), but it would be a telling graph, I think.
Another way to show the issue in a honest way would be to estimate the number of years it takes graduates to pay back their loans. Again, hard to estimate (a student with $40,000 in income probably _could_ pay back a $20,000 debt in a year, but is it reasonable to expect that?)
And, of course, it would probably be very useful to see the combined distribution of (debt,income) pairs. If all students have a debt of 20k, and income of 40k, there is little to worry about. It is more likely, however, that both debts and incomes show large variations, and are only poorly correlated. The data set will both contain that dropout with a company worth millions, a trained neurosurgeon with 100+ k in debt that gets into an accident that invalidates his/her hand just before (s)he has the money to pay for insurance, and a talented, but a bit slow art student with limited commercial talent.
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uni is a binary [0,1] with several tiered exceptions. value to the degree is primarily as a sorting / funnel. as a result, its not really going to be linear. The problem with the current pricing is that what was once a "hack" (using the degree as a legal iq proxy) is now so far out of wack with the information content of the degree itself. After all, the distribution of iq doesn;t really change. so nobody is in aggregate all that better off by paying more for an iq test. there is sureley some productivity gains by "better" educaton over time (and these accrue to both students and to economies), but again...the rents are extracted from this production by people in structural positions of power (ie, not "productivty" in the normal sense; these are people who have the ability to get paid for not destroying value), long before they accrue to the more productive economic agents.
This disconnect between marginal productivity and actual wages for marginal work is evident in other data, eg
http://www.nytimes.com/2013/12/30/opinion/america-in-2013-as...
This disconnect between marginal productivity and actual wages for marginal work is evident in other data, eg
http://www.nytimes.com/2013/12/30/opinion/america-in-2013-as...
The cost which bothers me the most about the current university landscape is the amount of potential we as a society waste.
So much of our population goes straight from high school to a 4 year college program. That's while they're between the ages of 18 and 22.
Unless you're studying to be a doctor, lawyer, nurse, engineer, etc. then that's 4 years of lost productivity.
I think most professions could be trained for in under a year + on the job training.
Even if the argument is that college is largely social growth for the student it's insanely expensive if we need 4 years to do it.
So much of our population goes straight from high school to a 4 year college program. That's while they're between the ages of 18 and 22.
Unless you're studying to be a doctor, lawyer, nurse, engineer, etc. then that's 4 years of lost productivity.
I think most professions could be trained for in under a year + on the job training.
Even if the argument is that college is largely social growth for the student it's insanely expensive if we need 4 years to do it.
If you are interested in an alternative model: in Germany you go primary school age 6-10, then you go to secondary school which comes in 3 flavors: Hauptschule (general school, total 9 years), Realschule (total 10 years) or Gymnasium (total 12 years). Which one you will go usually depends on your academic performance.
If you go to Hauptschule/Realschule you can do an so called Apprenticeship, which is involves working at a company and going to school for 1 day per week (or so) for 2 or 3 years.
If you go to Gymnasium, you choose to do the same apprenticeship or go university where students will usually study for both a Bachelor and Masters degree (3+2 years). Students have to choose their major when they enroll.
Schools and universities are normally government run and as such free or at least heavily subsidized. Germans believe that education should be accessible to everyone (not sure about foreign nationals) regardless of economical background.
I don't know which model is better, but I think I favor the American one, if it wasn't so darn costly. In theory at least 3 years of collage should never be wasted time.
If you go to Hauptschule/Realschule you can do an so called Apprenticeship, which is involves working at a company and going to school for 1 day per week (or so) for 2 or 3 years.
If you go to Gymnasium, you choose to do the same apprenticeship or go university where students will usually study for both a Bachelor and Masters degree (3+2 years). Students have to choose their major when they enroll.
Schools and universities are normally government run and as such free or at least heavily subsidized. Germans believe that education should be accessible to everyone (not sure about foreign nationals) regardless of economical background.
I don't know which model is better, but I think I favor the American one, if it wasn't so darn costly. In theory at least 3 years of collage should never be wasted time.
I don't really understand the rationale behind making kids choose a master right from the start.
My experience at university and that of many others is that not only do we often end up choosing a master's that we wouldn't have thought of initially, we often even switch bachelor's early on, or change direction midway.
My experience at university and that of many others is that not only do we often end up choosing a master's that we wouldn't have thought of initially, we often even switch bachelor's early on, or change direction midway.
Another way to look at it is that we're so rich as a society that we can afford for most of our young people to take a four year vacation where they sex it up and dabble in underwater basket weaving.
Yet another way is to look at as the result of a shrinking job market and job pipeline clogged by boomers who won't retire. If there is no work, and there isn't, reducing eveyone's working life by 4 years isn't unreasonable.
Yet another way is to look at as the result of a shrinking job market and job pipeline clogged by boomers who won't retire. If there is no work, and there isn't, reducing eveyone's working life by 4 years isn't unreasonable.
This is the lump of labour fallacy. It's largely regarded as fallacious now; there's a decent Wikipedia article on the topic if you're interested.
>boomers who can't retire.
"reducing eveyone's working life by 4 years isn't unreasonable."
Unless you're simultaneously raising the retirement age.. My full retirement age per SS is 67, along with most of the people here on HN. You have to be quite old (no offense intended) to have a full benefits age of 65.
Unless you're simultaneously raising the retirement age.. My full retirement age per SS is 67, along with most of the people here on HN. You have to be quite old (no offense intended) to have a full benefits age of 65.
Exactly. 4 years for a psych degree and then spending the next 10 years as a receptionist is not exactly the right kind of training for it.
The graph is misleading.
The implication is that a bachelor's degree is costing more and generates less income, but what the graph shows is "total student loan debt" not the "cost of a bachelor's degree".
Technically this graph could be a good thing if we could graduating significantly more people who make more than someone without a degree (but 10% less someone who earned a degree 5 years ago), since more people would be better off.
Other things to note: The time period is arbitrary and mostly shows the impact of the recession over the past 5 years. The graph shows total student load debt which includes everything from vocational programs to PHD students in public and private institutions. The graph has two independent scales so the slopes are arbitrary.
The implication is that a bachelor's degree is costing more and generates less income, but what the graph shows is "total student loan debt" not the "cost of a bachelor's degree".
Technically this graph could be a good thing if we could graduating significantly more people who make more than someone without a degree (but 10% less someone who earned a degree 5 years ago), since more people would be better off.
Other things to note: The time period is arbitrary and mostly shows the impact of the recession over the past 5 years. The graph shows total student load debt which includes everything from vocational programs to PHD students in public and private institutions. The graph has two independent scales so the slopes are arbitrary.
That could be something the graph might be intended to show, but it's unnecessary.
What it does show, quite clearly, is that the burden on society as a whole from people pursuing (and attaining) college educations is growing out of control while whatever benefit that is providing is insufficient to bring up median incomes.
Maybe that's because a lot of people drop out and don't get degrees, whether that's true or not the ultimate facts still remain: a lot of people are being screwed.
What it does show, quite clearly, is that the burden on society as a whole from people pursuing (and attaining) college educations is growing out of control while whatever benefit that is providing is insufficient to bring up median incomes.
Maybe that's because a lot of people drop out and don't get degrees, whether that's true or not the ultimate facts still remain: a lot of people are being screwed.
It might be interesting to see the same chart, but just for the subset of people getting STEM degrees. (Science, tech, engineering, and math.)
Aside from the total debt vs median wage issue - the chart also doesn't mention that THE recession that happened. What happens in a recession? 1) parental wages and/or job security are lower [ie, more debt needs to be taken on] 2)median wages coming out are lower. That may be partly the cause of the relationship.
Median wages dropped (starting in 2007) because of a recession, and we are still in the adjustment process of that (ex. on the wage side). We notice that post popping of the 2001-2002 bubble, the median wages actually increased into 2007.
I don't have all the facts, but the chart is misleading.
Median wages dropped (starting in 2007) because of a recession, and we are still in the adjustment process of that (ex. on the wage side). We notice that post popping of the 2001-2002 bubble, the median wages actually increased into 2007.
I don't have all the facts, but the chart is misleading.
This is a failure of middle class.
Why people go into higher ed? Because that's how you keep in the middle class. Why do they want to be in it? Because it's either this or poverty. Why do debt rise? Because they are desperate. Why are they desperate? Because there is less and less jobs in middle class and even worse and worse condition outside. When the music stops most of young people won't have a chair to sit on. At least in the USA.
Why people go into higher ed? Because that's how you keep in the middle class. Why do they want to be in it? Because it's either this or poverty. Why do debt rise? Because they are desperate. Why are they desperate? Because there is less and less jobs in middle class and even worse and worse condition outside. When the music stops most of young people won't have a chair to sit on. At least in the USA.
I think these trends are largely irrelevant to the Thiel Fellows. After all, most of them come from elite universities and could easily find a high paying job after graduating. If Thiel wants to put his money where his mouth is, he needs to find a way to solve the problem of the bottom 50% not finding a job. And I don't think that spawning more startups will help - just look around the startups you know - how many of the people there would have been unemployed if they hadn't joined a startup?
I don't think that that is the right way to look at it. Yes those people employed by startups would be able to find work elsewhere, but if they did would they take a job that would otherwise go to someone else? Also the startups that succeed employ more people. If we have a shortage of jobs, more jobs sounds like a good thing.
> if they did would they take a job that would otherwise go to someone else?
No, I don't think they would. For example, the demand for developers is sky high right now, and yet we have very high unemployment rates. Not everyone is cut out to be a developer - jobs in the knowledge economy aren't so simply interchangeable.
> Also the startups that succeed employ more people. If we have a shortage of jobs, more jobs sounds like a good thing.
Yes, it's great when there are more jobs. But we're talking about a completely different order of magnitude.
At their zeniths, each of the Big Three automakers employed hundreds of thousands of employees. How many does Facebook (a startup that has most definitely suceeded) employ? Not even 6000. Snapchat, supposedly worth billions, has less than 30 employees. Instagram was acquired when it had only 13.
We have to realize and accept the fact that these startups just aren't. going to provide the sort of broad-based employment that's going to put the American people back to work.
No, I don't think they would. For example, the demand for developers is sky high right now, and yet we have very high unemployment rates. Not everyone is cut out to be a developer - jobs in the knowledge economy aren't so simply interchangeable.
> Also the startups that succeed employ more people. If we have a shortage of jobs, more jobs sounds like a good thing.
Yes, it's great when there are more jobs. But we're talking about a completely different order of magnitude.
At their zeniths, each of the Big Three automakers employed hundreds of thousands of employees. How many does Facebook (a startup that has most definitely suceeded) employ? Not even 6000. Snapchat, supposedly worth billions, has less than 30 employees. Instagram was acquired when it had only 13.
We have to realize and accept the fact that these startups just aren't. going to provide the sort of broad-based employment that's going to put the American people back to work.
Yea, that's the biggest question in society right now IMO. How can we take the people who are going to be made (or are) irrelevant and get them doing something productive that they enjoy.
That's his chart of the year?
How about this one: http://cdn.static-economist.com/sites/default/files/imagecac...
From this article: http://www.economist.com/news/briefing/21578643-world-has-as...
How about this one: http://cdn.static-economist.com/sites/default/files/imagecac...
From this article: http://www.economist.com/news/briefing/21578643-world-has-as...
Because that isn't the chart of the year, it's the chart of the century.
Also it does not support his narrative.
Also, it depends on setting an arbitrary poverty line (which in this case seems to be $1/day circa 1990, adjusted by PPP. Why $1? Probably because it sounded good and it was a round number. Since above/below the line is an all or nothing proposition, if you changed the line to $2, the graph could very well end up flat.
edit: You could argue that that's clearly an improvement in circumstances, but I would argue that it's clearly an improvement of people making less than $1 against PPP. Only a subsistence subset of the items used to calculate PPP would be relevant to someone who makes less than $1 a day, and the prices of those items (food, heating fuel, etc) could very well have tripled or quadrupled during that same period without a direct effect on PPP measurements.
edit: You could argue that that's clearly an improvement in circumstances, but I would argue that it's clearly an improvement of people making less than $1 against PPP. Only a subsistence subset of the items used to calculate PPP would be relevant to someone who makes less than $1 a day, and the prices of those items (food, heating fuel, etc) could very well have tripled or quadrupled during that same period without a direct effect on PPP measurements.
The $1/day figure was actually the estimate minimum survival income calculated for a number of poor countries then averaged and rounded. It's not perfect but not arbitrary either. In fact it is now usually quoted as either $1.25 or less frequently as $1.20. Wikipedia has a pretty good article on some of the complexities involved[1].
If you use a $2/day threshold (aka "moderate poverty") instead, the declines are not quite great but still pretty damn good - down 41% - from 69% below $2 in 1981 to only 41% in 2010 (calc from data here [2]). It is not flat! And it is also not an all or nothing proposition - the entire distribution has shifted! The distribution was graphed in Economist article above.
The issues with PPP are more complex but everyone involved is aware of the issues you mention[3]. While biases can occur it is not generally considered to be a problem for the global aggregates. Dig into the World Banks's ICP website for the details on PPP in poor countries[4].
[1] http://en.wikipedia.org/wiki/Measuring_poverty
[2] http://www.worldbank.org/en/topic/poverty/overview
[3] http://en.wikipedia.org/wiki/Purchasing_power_parity
[4] http://siteresources.worldbank.org/ICPEXT/Resources/ICP_2011...
If you use a $2/day threshold (aka "moderate poverty") instead, the declines are not quite great but still pretty damn good - down 41% - from 69% below $2 in 1981 to only 41% in 2010 (calc from data here [2]). It is not flat! And it is also not an all or nothing proposition - the entire distribution has shifted! The distribution was graphed in Economist article above.
The issues with PPP are more complex but everyone involved is aware of the issues you mention[3]. While biases can occur it is not generally considered to be a problem for the global aggregates. Dig into the World Banks's ICP website for the details on PPP in poor countries[4].
[1] http://en.wikipedia.org/wiki/Measuring_poverty
[2] http://www.worldbank.org/en/topic/poverty/overview
[3] http://en.wikipedia.org/wiki/Purchasing_power_parity
[4] http://siteresources.worldbank.org/ICPEXT/Resources/ICP_2011...
thank you for taking the time to explain this.
Compare and contrast:
http://www.bls.gov/emp/ep_chart_001.gif
Summary for the graphically challenged: unemployment in the US is low (<5%) for people with bachelor's degrees and up, and high (>5%) for people with less than a bachelor's degree. Unemployment rises directly in proportion to how little education one has.
http://www.bls.gov/emp/ep_chart_001.gif
Summary for the graphically challenged: unemployment in the US is low (<5%) for people with bachelor's degrees and up, and high (>5%) for people with less than a bachelor's degree. Unemployment rises directly in proportion to how little education one has.
While the underlying message might be true, this chart is constructed to look fatal.
1) Income scale is not zero based and makes a small change seem enormous
2) Student debt should be per person per year, not a total sum which is influenced by the number of students and numerous other factors.
1) Income scale is not zero based and makes a small change seem enormous
2) Student debt should be per person per year, not a total sum which is influenced by the number of students and numerous other factors.
I don't really agree with the people saying the income axis should be zero-based. The income drop is not tiny, it's 8%, and a zero-based axis wouldn't show that.
Not to pile on, but even if you disaggregated student loans on a per-individual basis, this graph would still be misleading because it does not include a line for the median wage of non-bachelor holders over the same period. In general, to know whether something is a good investment you must at least consider the next best alternative.
Even this suggestion wouldn't be that great. To make a simple apples to apples comparison, we would need the graph of salaries of representative samples of comparable bachelors and non-bachelor holders. I don't really know what 'comparable' means in this context but it might be something like comparing the salaries of kids who graduated from college with kids who didn't go to college but could have (and maybe received comparable on the job training).
One might also think that college affects, for instance, your likelihood of getting a job but we wouldn't want to get too complicated.
Even this suggestion wouldn't be that great. To make a simple apples to apples comparison, we would need the graph of salaries of representative samples of comparable bachelors and non-bachelor holders. I don't really know what 'comparable' means in this context but it might be something like comparing the salaries of kids who graduated from college with kids who didn't go to college but could have (and maybe received comparable on the job training).
One might also think that college affects, for instance, your likelihood of getting a job but we wouldn't want to get too complicated.
I like the story of the graph a lot more than the graph itself.
The two things I would like to see are:
- Per capita debt per person who attended college. (Or perhaps who graduated college) This would answer an implied question of "What if we're just getting more people going to college?"
- The salary legend should start at 0. This would put the relative movement of salary in a more accurate context.
I don't think fixing these changes the story of "The long term cost of college is going up, while the short term benefits are going down." but when I see tricks out of "How to lie with Statistics"[1] my BS detector goes up.
[1] http://www.amazon.com/How-Lie-Statistics-Darrell-Huff/dp/039...
The two things I would like to see are:
- Per capita debt per person who attended college. (Or perhaps who graduated college) This would answer an implied question of "What if we're just getting more people going to college?"
- The salary legend should start at 0. This would put the relative movement of salary in a more accurate context.
I don't think fixing these changes the story of "The long term cost of college is going up, while the short term benefits are going down." but when I see tricks out of "How to lie with Statistics"[1] my BS detector goes up.
[1] http://www.amazon.com/How-Lie-Statistics-Darrell-Huff/dp/039...
As long as the lifetime earnings are substantially higher, you should be willing to put up the NPV of your annuity (income). As long as you make even one dollar more than you would, you are better off.
If you compare the entire education investment to the return during year one in the workforce, it isn't going to look good.
If you compare the entire education investment to the impact it has on that person's lifetime, e.g. lower unemployment, easier time getting into grad school if the economy goes sour, easier time retraining, and just general high earnings, then the investment makes a bit more sense. I assume if this were a business, Thiel would wonder why education is underpriced.
If you compare the entire education investment to the return during year one in the workforce, it isn't going to look good.
If you compare the entire education investment to the impact it has on that person's lifetime, e.g. lower unemployment, easier time getting into grad school if the economy goes sour, easier time retraining, and just general high earnings, then the investment makes a bit more sense. I assume if this were a business, Thiel would wonder why education is underpriced.
I learned a long time ago from Edward Tufte to be wary of the two axis graph, especially when different scales are used. One can manufacture just about any point using one of these and still be telling the truth.
People are attacking this graph for the difference in scales, but the US population didn't increase by that much in 9 years (2003 to 2012): only about 10%. It's a shame that people are missing the forest for the trees here. If there were a 10-15% rise in student debt, that would be reasonable in the context of US population growth. But it's 200%.
Yes, the axes have been chosen in such a way to exaggerate the (still valid) point. This isn't any different from a visual model of the solar system that downplays the (vast) differences between the planets, relative to their sizes. Is it "misleading"? Only if it's presented and interpreted as a scale model. In this graph, the axes are clearly labelled, informing the reader of what's going on.
Thiel is right that there's a problem. The Satanic Trinity (housing, healthcare, tuition) that is killing the middle class is fundamentally extortive at this point, and extortionists are known for rapidly ratcheting up their demands. What's happening is that, as the middle-class breaks down, people are panic-buying the credentials and connections that might keep them alive in this game of musical chairs.
I don't support Thiel's solution (as an aside, he's an investor in Knewton, one of the most pro-establishment ed-techs out there) but he sees the problem with a clarity that few do.
Yes, the axes have been chosen in such a way to exaggerate the (still valid) point. This isn't any different from a visual model of the solar system that downplays the (vast) differences between the planets, relative to their sizes. Is it "misleading"? Only if it's presented and interpreted as a scale model. In this graph, the axes are clearly labelled, informing the reader of what's going on.
Thiel is right that there's a problem. The Satanic Trinity (housing, healthcare, tuition) that is killing the middle class is fundamentally extortive at this point, and extortionists are known for rapidly ratcheting up their demands. What's happening is that, as the middle-class breaks down, people are panic-buying the credentials and connections that might keep them alive in this game of musical chairs.
I don't support Thiel's solution (as an aside, he's an investor in Knewton, one of the most pro-establishment ed-techs out there) but he sees the problem with a clarity that few do.
In addition to the _total_ debt vs. _median_ income issue that others have mentioned, this is a classic case of how 2 y-axes on a graph can mislead. Or it can be used to tell any story you want. Thiel's graph "shows" that debt is taking off and way exceeding income. Here's a different version of the same data which "shows" that debt and income are converging: http://i.imgur.com/OBCyfVb.png
Lies, damned lies.. and charts with not only non-zero, but mismatched baselines!
This trend of overlapping unrelated data sets into a single 2-axis graph is completely disingenuous. At least this graph doesn't mix logarithmic and linear scaling for values on the y axis.
This is a bad visualization because it is hinting at a visual congruence that isn't there. When plotting things with two Y axes, you have to be really careful and honest about what you're trying to look at.
When you use a line graph, visually, you're displaying a trend (in the most naive way possible). When you have two Y axes, then you need to ask, "What is a valid way to compare two trends?" Remember, a trend is intrinsically about slope. If you arbitrarily adjust the min/max axis value, then you can arbitrarily adjust the appearance of the trend.
Here is a fixed version that shows the actual numbers on full, 0-based scales: http://i.imgur.com/xiS2OZq.png
Hopefully this shows you how deceitful Thiel's plot is, even though the axes are "clearly labelled". Iconic perception trumps reading numbers.
Here is a year-over-year plot: http://i.imgur.com/diDVNeE.png
An alternative, more meaningful visualization, would be to show % change from a baseline, in this case the 2003 value. That would be far more honest and informative. And here it is, as a bar plot, which is more effective for comparing values along a common scale. (Since we have computed percent change, we have a common scale.)
http://i.imgur.com/TQd2u22.png
*Note: I just read the numbers off of Thiel's plot and don't have the source data, so this plots are approximations. I can share a simple IPython notebook of this if anyone really cares.
When you use a line graph, visually, you're displaying a trend (in the most naive way possible). When you have two Y axes, then you need to ask, "What is a valid way to compare two trends?" Remember, a trend is intrinsically about slope. If you arbitrarily adjust the min/max axis value, then you can arbitrarily adjust the appearance of the trend.
Here is a fixed version that shows the actual numbers on full, 0-based scales: http://i.imgur.com/xiS2OZq.png
Hopefully this shows you how deceitful Thiel's plot is, even though the axes are "clearly labelled". Iconic perception trumps reading numbers.
Here is a year-over-year plot: http://i.imgur.com/diDVNeE.png
An alternative, more meaningful visualization, would be to show % change from a baseline, in this case the 2003 value. That would be far more honest and informative. And here it is, as a bar plot, which is more effective for comparing values along a common scale. (Since we have computed percent change, we have a common scale.)
http://i.imgur.com/TQd2u22.png
*Note: I just read the numbers off of Thiel's plot and don't have the source data, so this plots are approximations. I can share a simple IPython notebook of this if anyone really cares.