THERE'S A HIGHER EDUCATION BUBBLE. But one must look in the right place for its evidence. Excess demand by itself is not evidence.

The crunch [as the bubble deflates] will be particularly bitter for the institutions that drained coffers to build "country club colleges" complete with luxury dormitories, spas and top of the line sports complexes to lure choice students, hoping that a sharper crowd would lead to more accretive diplomas, entering a profitable cycle of more successful alumni and increased donations.

Many had little choice. "If a college decides we're not going to have fancy dorms or build a shiny new gym, students are not going to that college," says [Skidmore College's Sandy] Baum. "People are not choosing the lowest price college, and that's a consumer issue, not a public policy problem."

Adds William Powers, the president of the University of Texas at Austin: "The market is choosing quality regardless of incremental costs."

The excess capacity is in access-assessment-remediation-retention, and perhaps in wannabe upscale colleges that invested heavily in student amenities and slighted their faculties. A paragraph from the article mischaracterizes the flight to quality as evidence of the bubble.

It's a scenario familiar to anyone who watched the housing bubble blow. "We are at a trend line that cannot be sustained," says Matt Snowling, an analyst at Friedman, Billings and Ramsey, who covers the student loan industry. "Tuition must go down, or there will be limited demand at high-priced private schools."

There's ample evidence that the highest-priced and highest-regarded private schools are pricing to generate excess demand (thus boosting their selectivity: what the rating services reward they get more of) and shuffling resources among students (thus boosting their perceived diversity). Those demand curves will have to shift inward in a nontrivial way before the high-priced and high-performance private universities change their behavior. The University of Texas recognizes this.

At UT Austin — a public university in a state with a $12 billion budget surplus and a football program that brings in $5 million a year — the only cuts Powers is looking to make involve thinning out the number of five- and six-year undergraduate seniors on his campus. Getting students to graduate "expeditiously" saves a bundle, he says.

One can work on that overhang of fifth- and sixth-year seniors in at least two ways. One can look at the transcripts and determine how many of those students spent their first year or two in remediation. And one can look at the majors and determine how many of the students have schedule completion troubles because their major departments are being denied resources. Those are not the adjustments one would expect of a bubble-economy hustle.

(Via Phi Beta Cons, where Candace de Russy inadvertently alerted me to Mr Snowling's howler.