AI is driving down the price of knowledge – universities have to rethink what they offer

For a long time, universities worked off a simple idea: knowledge was scarce.

- by Patrick Dodd

You paid for tuition, showed up to lectures, completed assignments and eventually earned a credential.

That process did two things: it gave you access to knowledge that was hard to find elsewhere, and it signalled to employers you had invested time and effort to master that knowledge.

The model worked because the supply curve for high-quality information sat far to the left, meaning knowledge was scarce and the price tuition and wage premiums-stayed high.

Now the curve has shifted right, as the graph below illustrates. When supply moves right that is, something becomes more accessible the new intersection with demand sits lower on the price axis. This is why tuition premiums and graduate wage advantages are now under pressure.

According to global consultancy McKinsey, generative AI could in annual global productivity. Why? Because AI drives the marginal cost of producing and organising information toward zero.

Large language models no longer just retrieve facts; they explain, translate, summarise and draft almost instantly. When supply explodes like that, basic economics says price falls. The “knowledge premium” universities have long sold is deflating as a result.

Employers have already made their move

Markets react faster than curriculums. Since ChatGPT launched, entry-level job listings in the United Kingdom have. In the United States, several states are removing degree requirements from public-sector roles.

In Maryland, for instance, the share of state-government job ads requiring a degree between 2022 and 2024.