Talk:Blog:Economics of Education

My roommate in college decided not to go to graduate school for this very reason. Though he added to the argument the lose of interest on investments also. I think your last sentence is spot on and was part of my argument. However, for me it was less about the money or potential money and more about the education.

If I have sometime I will add compounded interest on something fraction of salary (investments) to see how long this extends the "time to recoup lost income."

--njk 14:37, 15 April 2009 (PDT)

Evan, I do think your model is too simple. It doesn't take into account potential advancement during the years getting your degree. It also assumes that a you won't reach the Ph.D salary range without getting a Ph.D. I think both of these assumptions are probably incorrect.

Truthfully, I think looking only at potential salary lost during getting a graduate degree is the wrong way to look at things. If your main concern is money lost while getting your degree, you probably are not a good candidate for a graduate degree in the 1st place.

--Mike 16:05, 15 April 2009 (PDT)

Hi Evan,

I'm really glad you wrote this. Twitter doesn't provide me with enough characters to express all my thoughts on that quote. I always doubt the veracity of unsubstantiated blurbs of 140 characters or less, but I found this one interesting if only to hear what others thought about it. So, it's good that you looked into it further.

I think one of the reasons that people find the quote so interesting is that they immediately equate overall utility to income and conclude that grad school does not increase utility (or at least not for a very long time, ~50 years as the quote suggests).

In general, when prompted to think about it, I'd guess that most people would agree that income is not the sole measurement of utility (or happiness, if that term works better). So, looking simply at the economics of grad school isn't really a fair way to measure its utility. Expected financial income itself doesn't take into consideration the additional opportunities that might be afforded by grad school or made available after graduation.

On the other hand, I think that, unfortunately, a lot of Americans think of college/universities simply as a way to secure a bigger paycheck. Maybe, then, for these people grad school isn't such a great idea.

--Doug 20:57, 15 April 2009 (PDT)

Evan,

  I am not stating whether or not I agree with the 50 years estimate or not, but your model has some flaws in it.  I will state what I feel are probably the biggest three:
  1)  Your income for the first five years out of school is not a constant, in fact it is expected to change greatly over those 5 years.  In fact I would not be surprised if that at the end of the first 5 years your income is either equal to or greater then your starting salary with a Ph.D.
  2)  Other benefits over the first 5 years, such as health insurance, 401k, and profit sharing programs.  Now these benefits vary greatly from person to person and I do not claim to know the "average" amount over the first five years.  However, from at least my limited circle of friends in the industry these amounts tend to be non-trivial and can often be the deciding factor between jobs.
  3)  The non-Ph.D student will have more disposible income available to them.  Giving the students the benefit of the doubt, they should be investing this money or at the very least using it to pay down some of their existing debt.  Assuming they invest it in some simple mutual funds it shouldn't be that hard to come up with a conservative estimate of how much additinal income will be created.  Also, there are a lot of wonderful stats out there about how much difference in savings for retirement based on what age you start with a fixed set of investment per year.  It would be interesting to see how much difference in savings they estimate for a 5 less years of investing.

I know you were going for a very simple model to ballpark the validity of the 50 years claim but I do not feel these three factors can be left out because they constitute a significant portion of a person's income.

Finally, I do not know whether or not I agree with the 50 years estimate but I can say that it does not surprise me either. My gut reaction guess is that it is probably between 25 to 35 years, if ever, before you start reaping the financial benefits of a Ph.D program. However, there are many other benefits to the pursuing a graduate degree other than financial.

--Kris M. 09:04, 27 April 2009 (PDT)

Trying this again to fix the formatting problems:

Evan,

  I am not stating whether or not I agree with the 50 years estimate or not,

but your model has some flaws in it. I will state what I feel are probably the biggest three:

  1)  Your income for the first five years out of school is not a constant, in
      fact it is expected to change greatly over those 5 years.  In fact I
      would not be surprised if that at the end of the first 5 years your
      income is either equal to or greater then your starting salary with a Ph.D.
  2)  Other benefits over the first 5 years, such as health insurance, 401k,
      and profit sharing programs.  Now these benefits vary greatly from
      person to person and I do not claim to know the "average" amount over
      the first five years.  However, from at least my limited circle of
      friends in the industry these amounts tend to be non-trivial and can
      often be the deciding factor between jobs.
  3)  The non-Ph.D student will have more disposible income available to them.
      Giving the students the benefit of the doubt, they should be investing this
      money or at the very least using it to pay down some of their existing
      debt.  Assuming they invest it in some simple mutual funds it shouldn't
      be that hard to come up with a conservative estimate of how much
      additinal income will be created.  Also, there are a lot of wonderful
      stats out there about how much difference in savings for retirement
      based on what age you start with a fixed set of investment per year.  It
      would be interesting to see how much difference in savings they estimate
      for a 5 less years of investing.

I know you were going for a very simple model to ballpark the validity of the 50 years claim but I do not feel these three factors can be left out because they constitute a significant portion of a person's income.

Finally, I do not know whether or not I agree with the 50 years estimate but I can say that it does not surprise me either. My gut reaction guess is that it is probably between 25 to 35 years, if ever, before you start reaping the financial benefits of a Ph.D program. However, there are many other benefits to the pursuing a graduate degree other than financial.

--Kris M. 09:08, 27 April 2009 (PDT)