TVs Versus Degrees
If colleges had been as innovative as TV manufacturers since 1997, a four-year degree would only cost $150.
In 1997, Sharp and Sony introduced the first large flat screen TV. It measured 42 inches and sold for more than $15,000. If you entered a public university at the time to get a four-year degree it would also cost you around $15,000. Today you can pick up a new full HD TV at Best Buy, Amazon, or Walmart for $150. Nominal wages have increased around 97 percent since 1997, so after adjusting for wages, you get 197 TVs today for the time it took to earn the money to buy one in 1997.
Today a public university four-year degree will cost closer to $40,000. Adjusted for wages, a degree costs 135 percent more than in 1997. Why has a degree gotten so expensive relative to TVs? Government heavily subsidizes demand and restricts supply in higher education. We should not be surprised when this translates into much higher prices.
The ratio of TVs to degrees illustrates the power of free market innovation. In 1997 the price for a degree and a TV were the same. Today you get 267 TVs for the price of one degree. Imagine if colleges had been as innovative as TV manufacturers since 1997? A four-year degree would now only cost $150.
So what will it take to get degrees down to $150? Higher education is at an inflection point with the optimal conditions to create a Cambrian explosion of innovation.
Sal Kahn, CEO and Founder of Khan Academy noted during a recent TED Talk “We’re at the cusp of using AI for probably the biggest positive transformation that education has ever seen, and the way we're going to do that is by giving every student on the planet an artificially intelligent but amazing personal tutor. And we're going to give every teacher on the planet an amazing, artificially intelligent teaching assistant.”
Marc Andreessen and Ben Horowitz recently did a podcast on the state of higher education. These two guys are successful entrepreneurs and venture capitalists, so their perspective and analysis on higher education is unique. What caught my attention is their idea of “start-up” universities. Expect the best professors in the world to collaborate with AI firms to create global learning brands and make college degrees as affordable at large screen TVs.
We describe the process of how we transform scarcities into abundances in our new book, Superabundance, available at Amazon. There has never been a better time to discover and share valuable new knowledge.
Gale Pooley is a Senior Fellow at the Discovery Institute and a board member at Human Progress.
Great article from Gale. TVs have gotten much better (and cheaper) because of technological improvements. Education, on the other hand, has gotten more expensive. I did a deep dive on this topic some years ago, it is quite evident that government-subsidized loans are the primary factor driving up the cost of education.
When the govt subsidizes something, it will also add regulations. The regs, naturally, favor incumbent players and tend to “lock in” the costly and low-productive nature of the industry.
Love this. I would call it a time-price inversion!