Do we need universities?

I know that's hardly the right question for somebody sitting in an elite educational institution to ask. And it may sound dumb coming from anybody- who could argue against higher education? But the case needs to be made rigorously. Tim Harford, the undercover economist, takes a look at the pros and cons.

Pro: a recent study suggests that universities boost the growth of economies in the region:

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.

Con: a degree from a reputed university is no more a signal of talent. You got into a good school, so you must be worth something. It's not that you have learnt something at the university that is useful at the workplace:

....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.

In other words, as we at B-schools understand very well, universities, more often than not, are about placement, they are not about learning. But one mustn't carry this too far. What people learn at engineering and medical schools is, indeed, of value. To put it differently, you may start off as a trainee at a company without any B-school degree and rise to become CEO. But it's doubtful that somebody can simply land up at a hospital and be trained to become a doctor.