Consumption vs. Investment: What Do College Students Want?

When an economist observes your choice set, and can describe how the choices differ and when she sees which choice you actually make, through basic revealed preference logic we learn about your priorities and goals.   This approach has been applied to a huge number of questions ranging from car demand to housing demand to university demand.   In a new NBER Working paper,  Jacob, McCall and Strange conclude that most students want college amenities over quality.  To quote them,  “We find that most students do appear to value college consumption amenities, including spending on student activities, sports, and dormitories. While this taste for amenities is broad-based, the taste for academic quality is confined to high-achieving students. The heterogeneity in student preferences implies that colleges face very different incentives depending on their current student body and the students who the institution hopes to attract.”  It would interest me whether public universities and private universities respond differently to these demand side forces.

Author: Matthew E. Kahn

Professor of Economics at UCLA.

7 thoughts on “Consumption vs. Investment: What Do College Students Want?”

  1. You might have quoted this line in addition: “We estimate that the elasticities implied by our demand model can account for 16 percent of the total variation across colleges in the ratio of amenity to academic spending”.

    And this, of course, assumes a) that incoming students have good ways to assess academic quality and b) that academic quality and academic spending are essentially the same thing.

    Given that students don’t really have good ways to assess the quality of the education they’ll be getting (which is in any case hugely variable within institution) you’re reduced to a ceteris paribus preference (and even there, you require the assumption that all kinds of student consumption amenities are effectively interchangeable.)

  2. +1

    I cannot count the number of high achieving high school seniors I have spoken with over the years who were excited about being accepted at University X because some Nobel laureate or other well-publicized scholar was there. It is true that Richard Feyneman taught freshman physics at Cal Tech. It is also true that he was very much an exception.

  3. I’m not convinced that Jacob, McCall, and Strange identified the customers correctly. The particular set of students I am going to launch over the next eight years will have to negotiate vigorously with me and their mom if they want to go for a place with high ‘college consumption amenities’ over a place with low overall costs, with apparently the same academic value. I have already told them the sad story of Cortney Munna. As the guy paying the bills, I have about zero interest in climbing walls. And my chance of grandchildren goes way up if they are not paying off student loans at 35.

    1. Good for you! Unfortunately, too many parents conflate cost with quality. Many private schools have found that they can recruit more and better students if they just jack up the tuition.
      (This is a confounding factor in the analysis. Amenities and high tuition are related, and both could attract students/parents.)

  4. “[The] taste for amenities is broad-based, the taste for academic quality is confined to high-achieving students.”

    Well duuuh! I hope they didn’t spend a lot of research funds to discover that most college students like a nice dorm room, but only the high-achievers like tough profs.

  5. It’s possible that students are not just boozing and screwing around but investing in networking and growing up. In that case, teaching has to be good enough but doesn’t have to be excellent.

  6. Just a quick editing note. It is Professor Kevin M. STANGE not STRANGE.

    Though it would be kind of cool to be Doctor Strange.

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