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The Education Industry Is Traversing a Broad, Multi-Decade Social Mood Peak


Elliott patterns can be seen in education data.

Our February 2011 education study charted a number of long-term Elliott patterns in education data, including college enrollment, PhDs granted, tuition prices, grade inflation, and academic performance. We forecast "a massive shift in society's attitudes toward education" that would reverse a century-long, upward trend in the popularity and cost of higher education.

1. The "Creative Destruction" of the Industry Has Begun

What We Said

Traditional educational institutions may eventually lose control of the manufacture and distribution of education much as the music and publishing industries lost their grip on music and text. Bear markets topple dominant players and open the field to nimbler entrepreneurs, who will develop alternatives to institutional education.

What Has Happened Since

Seven months later, in an October 2011 article titled "The University of Wherever," the New York Times practically quoted our study:

Two recent events at Stanford University suggest that the day is growing nearer when quality higher education confronts the technological disruptions that have already upended the music and book industries....

As Pete Kendall reported in the October 1995 issue of The Elliott Wave Theorist, intense technological advancement is common to advances leading to major peaks in the economy. Today's technological breakthrough is the Internet, of course, which the July 1998 issue of The Elliott Wave Theorist called "a massive engine for falling prices in countless businesses and professions." Education is no exception. From the upstart Khan Academy to the Massive Open Online Courses now embraced by universities, motivated students around the world are gaining free access to elite university education. In a threat to the traditional bricks-and-mortar model, many of these online courses "now come with an informal credential."

2. Education's Image Is Shifting

What We Said
"Society's feelings about education shift in concert with social mood," we wrote. We presented evidence that the public becomes critical of colleges and universities during negative trends in the social mood.

What Has Happened Since

Six months later, USA Today reported the results of a new study by the educators' association Phi Delta Kappa International:

Since 2001, Americans have soured on schools in general: When 1,002 adults were asked June 4-13 to give a letter grade to "public schools in the nation as a whole," only 17% gave them an A or B, down from 23% in 2001 and 27% in 1985.

The recrimination is spreading to higher education, too. Much of it is coming from within education. In his March 12 op-ed in the New York Times, journalist and Columbia University professor Thomas B. Edsall wrote, "Instead of serving as a springboard to social mobility as it did for the first decades after World War II, college education today is reinforcing class stratification." Even presidential candidates expressed the new hostility toward higher education. In late February 2012, Republican candidate Rick Santorum said, "President Obama once said he wants everybody in America to go to college. What a snob."

3. Academic Performance Is Slipping

What We Said

We wrote, "Social mood determines educational, business, and asset price performance."

What Has Happened Since

In September 2011, The College Board reported:

Scores on the critical reading portion of the SAT college entrance exam fell three points to their lowest level on record last year, and combined reading and math scores reached their lowest point since 1995.

In December 2011, The Center on Education Policy, an independent advocate for public education, issued a report showing that half of US schools failed federal standards for student performance.

4. Student Debt Continues Its March

What We Said

We wrote, "The US government continues to encourage people to borrow for an education.... This is exactly what it did with housing, to a disastrous end."

What Has Happened Since

The issue of student debt burst into the nation's conscience. For example, in October 2011, Ezra Klein of the Washington Post reviewed a number of stories told by the Occupy Wall Street protesters:

College debt shows up in a lot in these stories, actually. It's more insistently present than housing debt, or even unemployment.... college debt represents a special sort of betrayal. We told you that the way to get ahead in America was to get educated. You did it. And now you find yourself... buried under debt. You were lied to.

5. The Era of the Academic Scandal, Once Unthinkable, Is Upon Us

What We Said

In February 2011, we wrote, "We may see academic versions of the Madoff scandal."

What Has Happened Since

Just five months later, the Christian Science Monitor ran the headline, "America's biggest teacher and principal cheating scandal unfolds in Atlanta." The Atlanta cribbing proved to be only "the largest of dozens of major cheating scandals unearthed across the country... an ongoing problem for US education."

The cheating is not confined to high-school grades, however. In August 2011, four states and the Department of Justice filed an $11 billion fraud suit against the Education Management Corporation (NASDAQ:EDMC)-the nation's second-largest for-profit college company-charging that it was ineligible for state and federal financial aid it received from July 2003 through June 2011. "The depth and breadth of the fraud laid out in the complaint are astonishing," said a former federal prosecutor. EDMC is down over 75% since the fraud suit was filed (and since our study first appeared). The New York Times reported that the lawsuit is one of many filed against the expanding for-profit college industry.

6. Tuition Prices Are Still Going Up - For Now

What We Said:

Our February 2011 issue showed a three-century, rising Elliott wave in tuition prices. The pattern appears to be complete, which means that a major decline is due.

What Has Happened Since:

Several universities cut tuition and fees in 2011. But according to USA Today, overall tuition prices rose 8% at public colleges in 2011. At the same time, 41 states cut their spending on public higher education. The result? Students and their families must cough up even more cash. The president of the American Council on Education said, "It has become all too common for state legislatures to dip into the pockets of students and families to balance state budgets."

All of which means that the higher education tuition bubble remains, for the moment, un-popped. On March 12, an Atlanta Journal Constitution article, "College Students Majoring in Debt," reported, for example, that the University of Georgia's spending "on deans and vice presidents... jumped by more than a third" throughout the recession and 2011.

7. Here Is One Development We Did Not See Coming: the College Sugar Daddy

Socionomics can anticipate the tendency of the social system and sometimes nail specific predictions. But it cannot foresee every expression of society's mood. For example, we never contemplated this possibility: "Sugar daddies: The new way to pay off college loans?" That was the headline on an August 2011 story in The Week. The article reported that websites such as ",, and allow young, mostly female students to post 'sugar baby' profiles and hook up with a 'sugar daddy.'" The founder of said he's seen "a 350% jump in verified college-going 'sugar babies' since 2007, and he now actively advertises his site as a way to pay off student loans." The Pulitzer Prize-winning newspaper The Oregonian reported on March 12 that the respected 20-year editor of its editorial pages died at age 63 of cardiac arrest following a sex act with a 23-year-old college student. The woman told deputies that he had been giving her money for textbooks and other school expenses in exchange for sex.

If EWI's outlook for the looming negative mood is correct, the truly radical changes for the educational system still lie ahead. So far, social actions support that outlook.

Editor's Note: This article by Alan Hall originally appeared in the Socionomist.

On April 13, 2013, Todd Harrison, founder and CEO of Emmy-winning website Minyanville and 21-year Wall Street veteran, will speak at the 2013 Social Mood Conference. Alan Hall is a senior researcher for the Socionomics Institute. Hall has traveled widely, and has authored numerous socionomic studies including in-depth looks at Russia and Vladimir Putin, the European housing bubble and crisis, commodity prices and environmentalism, stock prices and epidemics, and authoritarianism. On April 13, 2013, Alan Hall will speak at the 2013 Social Mood Conference. Join Hall, Murray Gunn, head of technical analysis at HSBC, Algorithmic Finance editor Philip Maymin, Topsy Labs founder Rishab Ghosh, former ANZ Private Bank CIO Kevin Armstrong, Robert Prechter, and some of the brightest financial, academic, and entrepreneurial minds in the world to see how today's leading social mood researchers are tearing down old barriers and building new standards for social mood research. Learn more at:
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