Via Instapundit.

The whole point of paying thousands of dollars for a Louis Vuitton bag is that other people can’t. If they could, the bags would instantly lose almost all value in the eyes of those who buy them. Hence, the more such things cost, the more desirable they become.

In economic terms, higher education is a positional good: It is valuable to have a college degree because other people don’t have one. It is also to a significant extent a Veblen good: Sending one’s children to college, and most especially a prestigious (meaning expensive) college, is a way of signaling social status via the conspicuous consumption of a luxury good.

All of this helps explain why college tuition has increased three times faster than the cost of living over the past three decades. University administrators have discovered that, to a remarkable degree, the more they charge for what they’re offering, the more people will want to buy it.

The law school at which I teach provides a particularly striking example of this inversion of the normal laws of supply and demand. The school’s annual tuition increased from less than $5,000 in 1997 to more than $31,000 in 2011. This represented a 348 percent increase in constant, inflation-adjusted dollars. In other words, it was as if a car company — say, Honda — suddenly decided that it would prefer to charge $90,000 for an Accord rather than $20,000.

Honda probably wouldn’t sell very many $90,000 Accords, but the law school’s applications actually skyrocketed, from 1,846 in 1997 to 3,175 in 2011. Remarkably, the number of applicants increased by 72 percent even though almost exactly the same number of people applied to American law schools in 1997 and 2011.

In other words, even though demand for admission to law school had not risen (in fact it declined relative to population), and even though law graduates were finding it increasingly difficult to get jobs as lawyers, demand for admission to our law school went through the roof, despite — or perhaps more accurately, because of — the quadrupling of the price of attendance in real terms.

The claim that higher education is to a great extent both a positional good and a form of conspicuous consumption scandalizes the industry’s cheerleaders, who continue to lobby for policies designed to ensure that, within another decade, a large majority of adult Americans have college degrees.

This makes about as much sense as lobbying the government to enact policies that will ensure most Americans own Louis Vuitton handbags.

Some corollaries.

1. The number of luxury goods suppliers is always limited and staying in that select group requires considerable effort and expense. For most nations and for most training, this is a waste of time and money: New Zealand education at tertiary level is reasonably good but it is not a luxury good.
2. Consider how universities are founded, and why. The first were set up as an alternate to taking holy orders for lay clerks and for nobles: the crown set up such institutions in the middle ages. During the enlightenment they were designed to train priests in theology and the gentry in how to rule. Hence the Puritans founded Harvard to train ministers of the gospel. Later still, they were designed to train gentlemen in how to lead armies: this is the land grant universities.  Most universities should be doing these things, not trying to compete for the luxury good market:
3. Keeping tuition costs low helps the state. It means that rural students get to medical school (and are more likely to return to rural areas). It means that the middle class leave with the credentials they need and without a crippling mortgage — and that they then can afford to stay in middle income countries.
4. The rich will be foolish and seek luxury goods. Let them. But do not fund or support such institutions.

And remember that there are only a few ateliers, only two high-end camera makers (Leica and Hassleblad) and only a few luxury car makers for a reason. The need for quality and prestige is hard-won and difficult to preserve.  It is better to make something that is good and reasonably priced: think Korean cars and Japanese cameras.

Education, particularly professional education  is too important to be merely a luxury good.