As long as employers insist that a degree is necessary, it will continue to be
These days, getting a college degree is a pretty good idea. Indeed, if you're someone who can get into college, going is practically a no-brainer. Those who go to college make more money and have more opportunities than those who don't. This argument has been soundly and easily made a number of times, this week by New York Times columnist David Leonhardt and earlier today by my colleague Derek Thompson. But saying that college is important in practice is different from saying that it is important in theory.
First, let's quickly summarize why college is important right now. There's currently a big demand for college graduates. Since the demand outweighs the supply (see Leonhardt), college graduates obtain relatively higher wages. Even though college is expensive, the lifetime earning potential it provides results in its being worth the cost (see Thompson).
These arguments are completely correct, but they're also completely irrelevant if a broader question is asked: should college degrees be important in the economy today?
Demand Does Not Always Signify a Need
Imagine an economy where people understand an asset to have some value, but get carried away into believing that it is worth more than it actually should be. For example, maybe homes are that asset, so people begin flipping houses, buying second homes, and purchasing investment properties all to cash in on the beloved asset of the moment. As a result, they take on more and more mortgage debt, through ultra-cheap government-guaranteed financing. But before long, the exuberance over houses becomes more clearly irrational and the market comes crashing down. Of course, this describes the recent housing bubble.