Selection Effects and...What?

In the comments section of Matt Yglesias' response to this morning's post on improving the higher education market, several readers raise the issue of selection and peer effects in higher education. This comes up a lot. Essentially the argument is that very selective colleges provide a lot of value to students, and are thus worth paying for and trying to get into, because:

A) It's good to go to college with a lot of other very bright students, from whom you'll learn a lot and strive to compete against.

B) Hanging out with those peers for four or more years is also valuable because you're accumulating a great deal of social capital in the forms of networks that will help you later in life.

C) The simple fact that you attend a selective college sends strong signals to the job market that you had what it takes to get admitted in the first place.

All of these things are true. By themselves, they're probably enough reason for people to rationally pursue an elite college education. But they have nothing whatsoever to do with the quality of education those colleges provide.

By this line of reasoning, if everyone collectively decided that the most elite college in America was the University of the District of Columbia, then UDC would, in fact, be the "best." Heck, if all a college did was provide a place for the smartest students to eat, sleep, socialize, listen to music, read books, watch sports, blog, and talk among themselves for four years, without ever offering a single course or actual formal educational experience of any kind, it would still provide all the benefits listed above.

In other words, if the best arguments in favor of elite higher education institutions are completely divorced from the actual practice of higher education, then that's a problem. And it's particularly problematic if that ethos influences national higher education policy, because of course the vast majority of students attend colleges that provide little or no peer or selection benefits and thus really need their institution of higher learning to actually teach them stuff and help them earn a degree.