One clear cut side effect of this is less social mobility (only the already wealthy can really afford college) and therefore, rising inequality.

It should come as no surprise that, from 1968 to 2008 the Gini Coefficient for the US (which measures inequality) has risen from 38.6 (the lowest ever reported) to 46.6 - just shy of the highest ever reported.

Apparently the current US distribution of power and wealth now looks less like any European country, and more akin to somewhere like China.

One cannot simply make this stuff up. From the Cato Institute

Human Capital Contracts "Equity-like" Instruments for Financing Higher Education (pdf.)

A more appropriate title is "Of Human Bondage"

Human capital contracts are "equity-like" financial instruments used for financing higher education. These instruments are better suited than student loans to attracting the private capi- tal needed to finance higher education. Further, since repayment depends on earnings and thus adjusts to the student's capacity to pay, human capital contracts should be more attractive to students than traditional student loans. Finally, by making transparent the relative economic value of certain fields of study or the value of degrees from competing institutions, human capital contracts would improve the efficiency of the higher education market as a whole.
Under a human capital contract, a student receives funding in exchange for a percentage of his or her income during a fixed period of time. Human capital contracts are equity-like instruments because the investor's return will depend on the earnings of the student, not on a prede- fined interest rate. The effects of these arrange- ments are, among others, less risk for the stu- dent, transfer of risk to a party that can manage it better, increased information regarding the economic value of education, and increased competition in the higher education market.

To ensure the development of human capital contracts as a viable alternative for financing higher edu- cation, policymakers should assure investors that such contracts are fully enforceable and afford them the same legal protection that student loans receive today. Human capital contracts should be acknowledged as securities so that investment funds will be allowed to hold them. Finally, human capital con- tracts should receive tax treatment similar to that given other means of student financing.

Next they'll propose some derivative instrument so you can invest in Harvard students or whatever.

"Because the costs of attending college have risen so fast, students are choosing majors and careers that are remunerative since they are coming out with higher debt loads."

Milton Friedman is responsible for the rise of Trail Lawyers!  Isn't it ironic?  Don't'cha think?

Colleges and universities need to share in a very large part of the blame for skyrocketing tuition.  In some ways, I don't want to see government aid pouring into these institutions that seem to be much more interested in football and new construction than they are to fostering education and intellectual development among a notoriously hard-to-control demographic.

Milton Friedman is dead - I wish his ideas would die.

The hard data on the bankruptcy of  free market idea in America was produced by the Canadian Council for Social Development in 2000, a comparison of the USA, Canada, and Sweden. Sweden has much higher taxes, but it is a social democracy in which all basic services including education are government run. Education through college is free, even though they probably have private schools and universities. DK

This is the link to the study. Because the data are in tabled form, I could only reproduce the education variables, but I recommend a look-see for anyone interested in comparing the results of Friedman's free market economics with liberal-socialism.

http://www.ccsd.ca/pubs/2002/olympic/ind icators.htm

                                               Canada, USA, Sweden
EDUCATION

1. Adults/Post Secondary Ed. 38.8% 34.9% 28.0%
   
2. High Literacy (% Adults)  25.1% 19.0% 35.5%
   
3. Low Literacy (% Adults)   42.9% 49.6% 25.1%
   
4. Grade 12 Math Score        519   461   552
   

Thanks for posting this. I quoted from it on the Nevada Faculty Alliance blog.

Thanks for once again posting on the essentials.

But imo this is not the result of Friedmanite ideas or of Friedman himself. It overly personalizes what is really occurring.

what you describe is an effort to return elite education to the social elites and return other people to the vocation-appropriate type of ed required by the developing knowledge economy. (see my previous post on another thread, in reply to an earlier, also excellent post of yours.)
 No matter how much the evil-libertarians at Cato or their ilk  cash in on it, the ideological (as opposed to economic) lines were set in motion beforehand by political elites (i've posted on this recently) as evidenced in the Trilateralite book by Sam Huntington et al. On the (un) Governability of the Democracies.
In the US before WWII, education commentators blamed the German system of widespread access to a liberal education for  the rise of disaffected youth and therefore the rise of socialism, whereas the US had vocational ed. We are now returning to voc ed.]
 By the late 60s young people in the Western democracies were accused of being "overeducated" ; and of course the Bushes and their wealthy & privileged cohorts woud like to have the ivy credentialing & networking system for themselves again.

Free-market libertarianism in other words, is not the tail wagging the dog; as I suggested in the previous post I mentioned, this is all part of the effort to engineer a return to a society that will support a vast upflow of wealth from the lower echelons to the upper. THEY DON"T NEED EDUCATED PEOPLE.
Friedmanism is a symptom, not a cause; or better, it is a handy vehicle to clear the field for those who know that they can buy any good, service, or person they need, and steal the rest (too big to fail!)

And one that I have not seen quantified anywhere; so I would appreciate any thoughts you have on that.

Very high social inequities can retard economic development by slowing down innovation.  Let us take a hypothetical example of an innovator who wants to become an entrepreneur.  This person would like to start a small business, based on his/her idea; but also has a family to support.  He/she has enough money to tide over 18 months worth of normal living expenses ~ enough time to get the small business off the ground and into the black/blue.  

But what about abnormal expenses ~ like an unexpected health calamity, or an accident.  Even if the probability of such events are low, if the impact is sufficiently high, it will give this person reason to pause.

If the impact is sufficiently high, this person will stay put!

If that happens often enough, you have impacted the overall innovation process ~ and have impacted economic growth.

There are a few points I would like to add, having worked in the University system for a short while. The broken promise was the topic of my first diary here.

1. It is important to not conflate (there's that overused word again) public and private tuition costs. As noted above, until recently, private four year college tuition was accelerating far more rapidly than public four year tuition with respect to CPI inflation.

2. When you look at the public four year tuition cost, it has kept pace with inflation far more reasonably. But as you note, it is the American salary that has not kept pace with inflation. It is my opinion that the American salary needs to be addressed first before public university tuition costs.

3. I do not think it is sufficient to simply say that private tuition costs are increasing because they can. Public tuition has started to increase as well. Yet faculty salaries remain quite paltry. Universities are feeding off the student loan system and changes in society have virtually mandated that everyone use the University system, public or private option.

4. In my opinion, students trying to game majors, guessing which will be "remunerative" (I learned a new word today), is destructive not just because it homogenizes our society, but because it often fails, leaving cast aside and forgotten masses hugely in debt because their gamble didn't pay off. What companies are seeking one day is not the same as the next -- the world changes rapidly. My field is a classic example. When I started college in 1993, water resources were still a huge issue, large capitol projects still routinely following in the wake of the Clean Water Act (and other regulations of the 70's and 80's). A change in politics in the late 90's, and now, not so much. In a global society, I'd better move to China for work. Computer Science majors were hot, then the dot com bubble burst, so there's always Staples as a fall back (sarcasm). Today, biotech majors are huge, but that won't last forever.

5. Don't forget that students are required to choose majors increasingly early and increasingly specific, all the while trying to tailor themselves to future corporate needs. My radical solution? Abolish college majors at public universities. Or more reasonably, homogenize them into a handful of categories (arts, humanities, language, business, life sciences, physical sciences, engineering) and let students have increasing freedom under those majors in which classes they take. Create a national standard that must be upheld for each (such are already in place) and prevent private employers from viewing transcripts. Our society is increasingly juvenile, in that we are less mature by the time we reach a certain age. I do not believe it is moral to impose life altering decisions on College freshman through a premature and overly specific college major gamble.

6. Also don't forget that job training has virtually disappeared from the workplace. Colleges are offering increasingly specified majors (at our cost) so corporations can shirk this expensive responsibility. Meanwhile, pay discrepancies between the corporate caste and the worker caste are ever larger.