The Value of Education

Felix Salmon (one of my favorite financial writers) writes about MOOCs—Massive Open Online Courses—on his blog today.  I am a huge fan of online learning.  In just a few months, YouTube has done more to improve my culinary skills than the substantial collection of cook books (with exception to my Pierre Franey books) and food magazines stored, for years, on my apartment’s limited shelf space.  Mr. Salmon’s point is that easy access to the best that higher education has to offer, lectures from great teachers at top universities, will engender increased desire for more higher education.  In other words, demand for college education should increase. 

While I’m not sure this will happen as he describes, it is clear that classes accessible to anyone with an internet connection, like those offered by Coursera (I took several classes on this platform and loved the experience), will change how we learn and may impact the cost of higher education.  Perhaps this system will defray the costs of obtaining a degree.  A student who wants a computer science degree, for example, can familiarize herself with the discipline by taking several free online courses.  In the process, she could earn credits towards her degree.  This might limit the number of credits for which she needs to pay.  Online classes may also improve her academic skill level, which would enable better grades and reduce the incidence of dropped classes while in a costly college environment.  In this way, college may become more accessible to lower income students.  Replicate this millions of times, and the impact will be phenomenal. 

You don’t need a degree to acquire skills (employers often seem not to know this).  Even without an increase in diplomas, online education will improve the general skill and knowledge level of our workforce.  This should lead to a higher quality workforce.  It could also increase entrepreneurial activity.  

I can point to my own example as evidence.  As mentioned, because of online learning, my cooking techniques have improved.  So has my knowledge of programming and statistics.  I didn't need to pay several thousand dollars to sit in a class to acquire these skills.

Ultimately, it is people, not machines, property, securities, or other tangible or intangible assets, which generate true wealth (higher living standards).   As always, the value generated in our economy depends upon our collective efforts.  It depends upon human skill, knowledge, and health.  From my perspective, this is where the power of the information age will have its greatest impact.  By disseminating information and knowledge in new and ingenious ways to one and all, allowing us to more easily combine and improve upon that knowledge in ever more clever ways.  Of course, this will take time.  There will be lots of failures.  But the future is bright.

The State of the Consumer

We all hear that seventy percent of our economy depends on consumer spending.  While the magnitude is an exageration, it is nonetheless an important driver of our economy.  As a dominant retailer, Wal-Mart is often used as a bellwether of consumer spending activity.  So news that Wal-Mart executives are worried about customer spending is raising some concern among analysts and journalists.  The Washington Post article (linked above) does a good job of offering possible reasons for weakness in the consumer sector.  What the article fails to mention is that it is possible consumers may have shifted their spending patterns, and we may yet see sales increase at other, higher end stores (not likely, but possible). Nonetheless, several factors are at play which may weaken consumer spending, principal among these being the reinstated payroll tax and higher gasoline prices.  Even so, my firm belief is that, while our economy is far from healthy, the trend of an improving economic climate is durable, and will continue.  Of course, I am known to be wrong from time to time.

GDP Growth Aside, Economy Appears Steady and (Slowly) Improving

While data on fourth quarter 2012 GDP growth is disappointing, we should take comfort that are in the midst of a steady recovery, as evidenced by today’s decent economic reports from the ISM and Labor Department.  The economy added jobs, and manufacturing is expanding.  The Fed continues to pump the system with low cost money (in some cases, borrowing rates are lower than the cost of inflation, making it better than free).  Low mortgage rates for refinancing are one method of getting more cash into the hands of consumers. Unfortunately, that avenue has been held back by tighter mortgage underwriting, high unemployment, and other factors, but it is helpful nonetheless.  Here’s hoping that the economy keeps gaining steam for the remainder of 2013.