By Bryan Caplan
Over at Cato Unbound, I praise Murray for highlighting the fact that many “investments” in education end in foreclosure – also known as “dropping out”:
[L]abor economists normally estimate the return to completed education. It only takes a small drop-out rate to drastically reduce the expected return of trying to complete a year of school.
If the rate of return for a completed year of education is 10%, but 6%
of students who start a year don’t finish (and waste a year of their
lives plus tuition), the expected rate of return is only 3.4%! If
the marginal student is less likely to finish than the average student,
the effect is even more drastic.
Murray’s critics can’t dismiss him merely by waving around standard
estimates of the return to education. One of Murray’s main points is
that for many students, the “standard” return is just a honey trap.
My point seems too obvious for labor economists who estimate the return to education to have overlooked. But they’ve missed the obvious before…