Education: The Betting Continues
By Bryan Caplan
Samuel Knoche, a student at Fordham University, has taken me up on an old bet:
I bet at even odds that 10 years from now, the fraction of American 18-24 year-olds enrolled in traditional four-year colleges will be no more than 10% (not 10 percentage-points!) lower than it is
However, we’ve slightly modified the earlier terms.
First, the time window has shifted. Since the most recent data is for 2015, we are betting that when the 2025 data comes out, Samuel wins if the fraction of 18-to-24-years-olds enrolled in four-year colleges has fallen more than 10%. I win if it’s fallen less. Since the current rate is 29.9%, he wins if the rate is 26.6% or less. If the data series is discontinued, we call off the bet and I refund his money with 3% annual interest.
Second, Samuel has bet – and prepaid – $500. I’ve agreed to pay him 3% annual interest on his payment whether he wins or loses. That would imply that if he loses, I pay him $171.96, and if he wins, I pay him $1,171.96 – his original $500, plus my $500, plus interest. However, we also agreed that if I die, my heirs will keep the money. To compensate him, our final terms specify that if he loses, I pay him $200, and if he wins, I pay him $1200.
By the way, I’m now doing very well on my earlier education bets. When the first bets were made using 2009 data, the fraction of American 18-24 year-olds in traditional four year colleges was 29.6%. The latest figures put the rate even higher, at 29.9%.