In my last post I went over a variety of fake investments. What I didn't get into is why this can be bad outside of the low or negative returns that will accrue to the fake investments. The reason these fake investments are bad basically boils down to the idea that willpower is finite.
Researchers have found that exerting self-control on an initial task impaired self-control on subsequent tasks: Consumers became more susceptible to tempting products; chronic dieters overate; people were more likely to lie for monetary gain; and so on. As Baumeister toldTeaching of Psychology in 2008, “After you exert self-control in any sphere at all, like resisting dessert, you have less self-control at the next task.”
One aspect of self control is delaying consumption and investing. With fake investments the person is using some of their finite self control that might have otherwise gone towards something actually useful. So the student who is fresh out of college who decides to get a master's degree in humanities at a low tier university probably isn't planning for their economic future in other ways because they believe they have already addressed it by continuing their education. The cost is higher than "This investment will turn out to be useless" because there is the large opportunity cost of the real investments that aren't made after a person makes a fake investment. Economically useless education that a student can't afford is even more pernicious because they will be saddled with debt that doesn't go away in bankruptcy.