Via Steve Hsu, a GNXP post about the benefits of elite college educations, based largely on a graph of income vs. US News ranking. While the post text shows some of the dangers of taking social-science data too literally (the points on the graph in question are clearly binned, so I would not attribute too high a degree of reality to a statement like “The marginal benefit of getting into the next highest ranked school is actually higher the higher the rank of your current school. In other words, Yale grads should really really want to go to Harvard”), the apparent effect is pretty significant. And Hsu reposts the text of a comment he left at GNXP, in which he identifies a likely cause: grads of the really elite schools are highly over-represented in the world of finance, and that over-representation is perpetuated by selective recruiting. If you’re not a student at one of the places where Goldman Sachs actively recruits, you’re not that likely to get into that world, or even to know that it’s an option. (See also Timothy Burke on similar issues related to the class background of students.)

Continuing in this vein, Hsu even offers an alternate metric:

To see the elite / non-elite divide most starkly, look at the probability of (earned) net worth, say, $5-10M by age 40. This cuts out almost all doctors and lawyers and leaves finance, startups and entertainment (i.e., movies or television; let’s ignore sports). Even after controlling for SAT, I would guess elite grads are 3 or maybe even 10 times more likely to achieve this milestone.

He’s almost certainly right about the distribution of wealth. But when it’s put that way, I’m not certain this should be seen as a Good Thing. I mean, maybe it’s just the third straight day of dreary rain getting me down, but when I look at the news of the day, I see a political and economic system that is pretty thoroughly broken. And it’s broken in ways that can be laid directly at the feet of the finance industry, the members of which have been handsomely rewarded for breaking, well, pretty much everything they touch.

So, while I am the product of a highly elite school, and teach at a moderately elite school, Hsu’s argument actually makes me question my support of elite-college education. While finance is the surest path to personal wealth (entertainment and startups have a greater element of luck to them), I can’t help thinking that we’d be a whole lot better off as a society if we had more doctors and fewer high-finance types. If not sending your kids to Harvard means they’re less likely to end up at Goldman Sachs, then not sending your kids to Harvard might be the responsible thing to do.

Comments

  1. #1 JAS
    October 6, 2010

    I can’t help but wonder if you are now deliberately trying to annoy a certain fellow alumnus of your highly elite school who now works in finance. Which is not to say I disagree.

  2. #2 Eric Lund
    October 6, 2010

    Recall the definition Ambrose Bierce gave in The Devil’s Dictionary:

    FINANCE, n. The art or science of managing revenues and resources for the best advantage of the manager. The pronunciation of this word with the i long and the accent on the first syllable is one of America’s most precious discoveries and possessions.

    IOW, something that shouldn’t be left to the best and brightest, let alone the best-connected. That it has become so is an inevitable consequence of having a system of elite universities which provide concentrated recruiting grounds for talent.[1]

    It’s well known in this business that Harvard’s quality of undergraduate education is not significantly better than what you can get at a flagship state university. What going to Harvard gets you that historically has been worth the price is membership in the Harvard Alumni Association.[2] I’m sure similar statements can be made about most other elite schools, and some of those statements are even true.

    [1]FD: I say this as someone who has attended elite universities myself.

    [2]Past performance is no guarantee of future results.

  3. #3 chad
    October 6, 2010

    Chad, in what universe is University of Maryland College Park a highly elite school? Moderately elite brings to mind top 30 schools like Brown, U Mich Ann Arbor, U Col Boulder etc. Union College is not even close to moderately elite. In fact, an honest description would not contain the word elite. I like your blog and all but I just thought to comment since no one had already.I’m sorry however if your post about the school contained satire or sarcasm as I did not pick this up.

  4. #4 not chad
    October 7, 2010

    @”chad”,10/6,11:47pm – I think Chad was referring to Williams College by “highly elite school”.

  5. #5 Chad Orzel
    October 7, 2010

    My Ph.D. is from a not-particularly-elite school, but my BA is from Williams College, which is right at the top of the US News small college list, and as elite as it gets. At the risk of being a little circular in my definitions, Goldman routinely hires a half-dozen or more Williams grads every year– many of my college friends spent at least a couple of years working for them.

    Union’s well down the list from there, but still in the US News top 50 liberal arts colleges, which I think is fairly classed as “moderately elite,” given that that list goes down a lot farther than you might think. We certainly have the price tag to be put in that category. And again, a significant number of our graduates every year go into finance, many at big-name firms.

    As for deliberately annoying the particular Williams alumn in question, I don’t have to do anything to do that. He’s plenty good at finding excuses to go all ranty all on his own.

  6. #6 anon
    October 8, 2010

    “…when I look at the news of the day, I see a political and economic system that is pretty thoroughly broken. And it’s broken in ways that can be laid directly at the feet of the finance industry, the members of which have been handsomely rewarded for breaking, well, pretty much everything they touch. ..”

    So well put! This (supremacy of finance) cannot last long. Sure, finance serves a purpose, but now it has reached the level that it is disproportionally large and is actually damaging the economy.

    “…I can’t help thinking that we’d be a whole lot better off as a society if we had more doctors and fewer high-finance types…”

    And engineers…

  7. #7 Rob Knop
    October 9, 2010

    When it comes to Physics graduate schools, Univ of Maryland is pretty elite. It may not be “top 7″, but it’s getting very close to it.

    The rankings of the very top graduate schools (no matter who’s doing it using whatever criteria– and most, if not all, are at some level bogus, of course) are not going to match the rankings of undergraduate institutions. It’s a whole different set of things that you think and worry about. Yes, there is going to be some correlation, but it’s not 1:1.

    For instance, you don’t hear University of Arizona mentioned as one of the very top undergraduate schools, but if you’re talking graduate programs in astronomy, it’s pretty high up there.

  8. #8 Roman
    January 6, 2011

    Quite a lot of bright people would not have gone into finance if they were given an opportunity to stay in science after the PhD.

    My wife is finishing her PhD in theoretical physics. She had several good papers, got an international award for one of them, had a successful collaboration with a top experimental group. Yet her postdoc applications are being rejected, one after another. What can you tell her to convince her not to go working in a bank?

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