Yes, Oxford is the least affordable place to buy a house in the country, which causes no end of headaches for residents — but even that problem is a symptom of success.
.. Valero and Van Reenen find that universities do indeed seem to boost the income of their region. Double a region’s count of universities — say from five to 10 — and GDP per person can be expected to rise by 4 per cent. Double the university count again, from 10 to 20, and that’s another 4 per cent on GDP per person. Neighbouring regions also benefit. This is not a trivial effect.
.. Caplan’s answer is that education is a signal. If employers have no way to tell who is smart and diligent, a student can prove that she fits into that category by excelling in, say, Latin. The Latin is like a peacock’s tail: costly and useless in its own right but a necessary investment.
To the extent that Caplan is right, undergraduate degrees have no value to society: they enable employers to pay higher wages to smarter workers, but lower wages to everyone else — and in order to enjoy these higher wages, smart people must waste time and money going to the trouble of acquiring a degree. Everyone might be better off if the whole business was abandoned.
Who is right? My heart is with Valero and Van Reenen. But Caplan strikes an important note of discord. Collectively, we have allowed university admissions and examiners to become gatekeepers for a successful career. Is that really wise?