More than a century ago, the sociologist Thorstein Veblen coined the term “conspicuous consumption” to describe the practice of buying luxury goods in order to display social status. In its purest form, conspicuous consumption involves purchasing expensive goods precisely because they are expensive, which means that the true conspicuous consumer will have what economists call an inverted demand curve.
Normally, when the price of a good rises, demand for it will fall. Demand for a Veblen good, by contrast, goes up as it becomes more expensive. The purpose of buying it is to display wealth, so the fewer people that can afford to buy a good, the more valuable it becomes to conspicuous consumers…
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.
This reminds me of the argument Mitchell Stevens makes in Creating a Class. After a prolonged study of college admissions, Stevens suggests prospective college students tend to select the school they will attend primarily based on status (my note: which is often tied to price). The emphasis is not on learning but rather on the economic benefits this can lead to (better jobs, better social networks) as well as the status the college confers to its graduates.
I encountered a bit of this with my graduate education at the University of Notre Dame. While Notre Dame does not have one of the highest ranked sociology programs, people who heard I was at Notre Dame expressed they were impressed since it is viewed as a good school. The implication was that I must be a good student if Notre Dame thought highly of me – a transfer of status from the university to the individual. However, I suspect their claims were based on the undergraduate ranking (usually between #15-20 in US News) and not on the specific of the sociology graduate program.