The higher ed system that we know today is built around assumptions about a continued willingness of the public to pay ever-inflating prices for educational credentials, prices that continue to rise faster than the general level of inflation, making education continually more expensive with respect to other goods. Until quite recently, most academic administrators assumed that this would just go on and that the public would pay escalating prices either directly through tuition, over time through loans, or indirectly through government support. Based on those assumptions, the higher ed system has developed in an unsustainable way and a lot of that excess capacity in outdated production methods is headed for the ash heap of history on a pretty fast train.
The higher ed bubble analogy refers not to the original financial market meaning of a bubble, but to the secondary and very long established extension of that financial metaphor into the industrial sector where bubble is habitually used to refer to overcapacity and asset prices, rather than to asset prices alone. A bubble develops in the steel market, for example, when erroneous beliefs about the future price of steel lead to over investment in steel plants. A relatively minor decline in the price of steel can then lead to dramatic changes in the steel industry as the formerly hidden overcapacity becomes evident.
The point of the higher ed bubble analogy isn’t to compare Harvard diplomas to tulip bulbs or shares in the South Sea company; it is to compare higher ed to overbuilt or poorly structured industries that are cruising for a bruising. It is saying that higher ed is like the automobile industry that has developed too much capacity and the wrong kinds of capacity.