Arguing past each other again

by Andrew Gillen

Kevin Carey’s recent piece calling for a government mandate on information disclosure for colleges attracted the attention of libertarian D.A. Ridgely, who disagrees.

As I see it, they are largely talking past each other, so I’ll try once again to clear this up. The easiest way to see what is going on is the following. Let

A = government funding of higher education
B = government mandates for information disclosure to see how (A) is being spent
C = government regulation of the day to day activities of colleges

Carey wants (A), and thinks that (B) is needed to make sure we’re using the money wisely. Libertarians (Ridgely, Cato) see (B) as leading to (C), which they strongly oppose, and conclude that the only way to avoid (C) is to avoid (A), which is just as well, since they don’t like levying taxes to pay for (A).

This is problematic when they talk to each other, because they are talking about different things. Carey takes (A) as a given, and goes from there, which naturally causes him to focus on (B). Libertarians respond by saying, you shouldn’t take (A) as given, since (A) leads to (B) which leads to (C), which is really bad, so we’d better avoid it by eliminating (A). As a result, they both basically ignore the main point the other is trying to make.

Libertarians ignore Carey’s point that if you have (A), you really need to have (B) too:

Ridgely: I would prefer (as libertarians so often do) to address the various problems with higher education first and foremost by the removal of government funding and the control that is invariably tied to that funding.

And Carey ignores the libertarian point that if you want to avoid (C), you should avoid (A) too.

Carey: It’s almost as if libertarianism as currently practiced by the likes of Ridgely is less a coherent way of thinking about balancing state and individual power and more a way of dressing up reflexive anti-government thinking in the trappings of philosophy…

On a completely different note, a better known Andrew G - Andrew Gelman - picks up on different argument in Carey's piece.

Carey: colleges don't figure out how much money they need to spend and then go get it. Instead, they get as much money as they can and then spend it.

Gelman

But doesn't it really describe almost anybody?...

I don't see at all what's special about universities here--this just seems like a cheap shot to me. Universities are like other organizations: they're happy to take money that people are willing to give to them. I mean, I don't see Apple saying, "Hey, we have enough money--we're gonna give out i-pods for free."

Gelman is absolutely right that any individual or institution, university or not, will take all the money people will give. But the crucial difference is what they do with it. For instance, if we keep giving Apple more money, diminishing returns will at some point lead them to stop using it to make i-pods, and do something else with it (commenter Paul on Gelman’s blog sort of gets at this point). But because universities are mostly government run or non-profit, they won’t respond to diminishing returns the same way. They’ll keep doing what they’ve always done, such as writing the 21,674th piece of analysis of Shakespeare.

If you think we need all those, then everything is going according to plan. On the other hand, if you think that might be a bit of overkill, then we really should consider changing the revenue streams and incentives that allow and encourage universities to behave in this manner with our money.

Links for 12/30/09

Edububble

there’s no money out there. They’ve already overloaded the middle class students with debt. They’ve already squeezed the parents into taking out second or third mortgages. They’ve jawboned the Federal government into pouring an endless stream of money into research. The state governments get pushed and pushed to fund campuses and the college presidents just keep raising the prices because they’re frickin addicted to paying for that assistant professor to skip teaching for a semester to go on a research gathering trip to Europe.

Cool infographic by Online Colleges and Universities

The Information Age Will Render Sales Taxes Obsolete

by Daniel L. Bennett

Kevin Carey has an interesting post concerning Amazon's unwillingness to collect and pay taxes for its online sales. He relates this to education by making a back-of-the-envelope estimation that $160M in education funding is being left off the table from Amazon's refusal to collect and pay sales taxes for its sales. I agree with Carey that the enforcement of sales taxes for online purchases is a thorny issue from a policy standpoint. My disfavor of the regressive nature of a sales tax aside, I question the method of financing state and local government, and hence education, via consumption taxation. In the past, collecting such taxes at the point of sale was efficient because almost all transactions occurred at bricks and mortar markets and as Carey points out, enforcement and compliance were convenient.

The internet age, however, has created not only national, but also international online marketplaces for goods and services (g&s). Consumers, as well as businesses, can now competitively shop for g&s from a much greater number of providers that often don't have the high overhead costs of a bricks and mortar shop. This heightened competition, as well as greater economies of scale being realized, leads to lower prices and more consumer surplus.

As Carey pointed out, it would cost him $25.95 plus $1.49 in sales tax ($27.44 total) to "walk up Connecticut Avenue to Kramerbooks and buy a copy of 'The Girl Who Played With Fire', whereas he could purchase a copy brand new from Amazon for $13 plus $3.99 shipping & handling ($16.99 total). Carey argues that the failure of Amazon to collect sales tax puts Kramerbooks at competitive disadvantage due the total price differential. Even if Amazon collected a 5.75% sales tax, he would still realize a $9.47 savings by purchasing the book online from Amazon. These same principles of competition and economies of scale could apply to online higher education to help lower the cost for students.

As consumers continue to be more price conscience and do more shopping online due to the costs savings, the collection of sales taxes will become increasingly difficult due to the allocation problem of which state the taxes are due - point of production, sale, receipt, etc? This could eventually render the sales tax as a means of public finance obsolete. In my opinion this would be a good thing, as sales taxes are incredibly regressive.

Links for 12/29/09

Chad Aldeman

Question: What do you get when you add a bad stock market + equally bad state budgets + generous pension benefits + an enhancement of those benefits + rising health costs + an aging workforce?

Answer: A large unfunded liability…

in 2002, feeling flush with money, the state set employer contributions at ridiculously low rates at the same time they increased benefits. A stock market crash later, and they’ll be paying for these decisions for at least the next 30 years…

Felix Salmon on Harvard’s endowment troubles.

swaps adviser Peter Shapiro as saying that “December 2008 was, by an enormous amount, the worst time in history” to terminate the swaps by borrowing money…

In hindsight, the decision to exit the swaps was just as disastrous as the decision to enter them: swap rates are now back up to their December 2004 levels, which means that had Harvard simply waited, it could have exited at no cost whatsoever.

Doug Lederman

the announcement last week that Indiana's commissioner of higher education recommended distributing budget cuts to state colleges based in significant part on a set of performance measures was so extraordinary…

The Indiana Commission for Higher Education's decision to disproportionately cut the budgets of some institutions because their per-student costs are higher and their completion rates are lower is consistent with the state's recently expanded performance funding system.

Steve Kolowich

Carnegie Mellon set out to design software for independent learners taking courses through the university’s Open Learning Initiative…

the researchers seem more excited by a hybrid application of the open-learning program that, instead of replacing professors, tries to use them more effectively. By combining the open-learning software with two weekly 50-minute class sessions in an intro-level statistics course, they found that they could get students to learn the same amount of material in half the time.

“If they’re all getting that baseline information, [faculty] can spend that class time going deeper and doing something much more interesting, so they can really leverage that you’re an expert,” says Candace Thille, director of the Open Learning Initiative, “because right now, oftentimes the faculty expertise is wasted.”

Obama Hires University of Phoenix Graduate

by Daniel L. Bennett

Our friend Kevin Kuzma at Career College Central has passed along some fascinating news. After a nearly year long search, Obama has appointed Howard Schmidt as the new Cybersecurity Coordinator. As Kevin pointed out,

Schmidt holds a bachelor's degree in business administration and a master's degree in organizational management from the University of Phoenix and holds an Honorary Doctorate in Humane Letters

This is somewhat of an amazing announcement, as the current Administration and Department of Eduction has been highly critical of the career college sector, threatening increased regulation. The Apollo Group, owners of UoP, has particularly been a target of heightened scrutiny. Kevin called out the double standard of this action quite nicely by stating:

this is a confusing choice given Schmidt’s background. Why choose someone who graduated from an institution whose reputability your very own administration is calling into question? Such a move has encouraged me to question Mr. Obama and his thought process. He’s shown himself to be an intelligent man. Given the impression that his administration has created about the University of Phoenix, this is more than just a bad PR move. Using his own logic, he’s hired Schmitt … someone who might not be qualified … and yet we all know that’s not the case.

Priorities

by Andrew Gillen

The NSF reports that there were 7,862 doctoral degrees awarded in Engineering in 2008. In 2006-2007 (the 08 numbers aren't out yet), there were 43,486 lawyers minted.

Net Price Transparency

by Andrew Gillen

How much faith should we put in the ability of the soon to be mandatory net price calculators to temper tuition increases? Perhaps not much.

I still think they're a good idea, but we shouldn't expect too much from it.

Links for 12/28/09

Kristin D. Conklin and Suzanne Walsh

To increase the percentage of Americans with high-quality degrees and credentials to 60 percent by 2025, as President Obama aims to do, the nation needs quantum improvements in productivity…

the first and hardest step toward productive creativity is penetrating inertia. When the going gets tough, there is comfort in the status quo…

Daniel Luzer

Considering there’s so much government money surrounding academia, it’s probably damn time to figure out where all of the money goes.

Tony Bates

My biggest disappointment this year ... has been with open educational resources. Yes, we have seen more initiatives, not just in North America but also in Europe and Africa. But what are we getting? Digitally recorded 50 minute classroom lectures and digital textbooks. What we are not getting are materials designed from scratch for multiple use, with learning objectives, contextual materials (such as links to other open source materials and possible assessment questions), student activities, and guides for instructors...

Edububble on lawyers:

the biggest problem is that we have way too many educated people and not enough work for them to do.

A couple of old letters.

Santa Claus’s Trade Infractions

This is highly amusing.

Santa Claus’s Trade Infractions

Dear Santa

It is with regret that I am serving you with a Section 415 Cease and Desist order in the matter of delivery of gifts and/or presents on the occasion of the Night Before Christmas on behalf of Mr. and Mrs. Dean (hereafter “My Parents”).

My Parents note the following violations of international trade rules which constitute a prima facie case of unfair competition...

CCAP: A Personal Reflection

By Richard Vedder

As Christmas nears, I am reminded that Jesus Christ had 12 disciples who helped him in his ministry during his life and especially after his death. Many of us, in our own way, have our own disciples. I roughly have 12 disciples at CCAP, employees who have made the mission possible and provided much joy in my life. In Ohio, the disciples are the Whiz Kids --students of extraordinary talent. If Peter and Paul were first among equals among Christ's Apostles, so Matt Denhart is my Peter, and Jonathan Robe is my Paul amongst the Whiz Kids. These guys are simply spectacular in their dedication to our mission, and have shown a competence, a maturity, a degree of innovation that is simply extraordinary amongst persons of their age (about 22).

Today, I want to tell you a little bit about Jonathan, because if America had more Jonathans we would have far fewer social problems, far more prosperity,
and a higher quality of life. Sadly, he is moving on, having just graduated from Ohio University as a Honors student in electrical engineering. He will be attending Oxford University beginning next month. He was the top student in EE at Ohio University at the time of his graduation.

Whenever, I needed anything quick --I could call on Jonathan. Facts about student
loan default rates, per student spending on colleges in North Dakota, the growth in non-academic staff in public universities --whatever I needed, Jonathan found it --quickly, accurately, and without complaint. He also authored, with me, some studies on a variety of issues, some non-related to CCAP, and showed a maturity in his writing rarely found among persons so young.

Jonathan owes his success, I think, to several things that are increasingly rare in America. First, of course, he is a bright kid, possessing a lot of genetic human capital (high IQ). God gave him that, and he has been a good steward of that gift. Second, he has wonderful, devoted, loving parents and grandparents who inculcated
into him a sense of personal responsibility, honesty, and integrity. Two things helped here: a strong and unwavering Christian faith and home schooling. Jonathan never went to a formal school until he attended college, a remarkable achievement since there are 10 children in his family.

As Americans become more secular, less connected with family, and more willing than ever to send their kids to mediocre schools, it is not surprising that we have dramatic dropout rates from high school and college, and score low relative to students from other nations on international tests. The "Little House on the Prairie" environment that Jonathan grew up in is increasingly rare.

As I muddle through my 52nd year in American higher education, it is a joy knowing that I am going out with a bang --with superstar students who make me as enthusiastic
about American higher education and its potentialities as I was in 1958, when as a geeky 17 year old, I entered Northwestern University to begin a lifelong adventure that I have loved. And Jonathan Robe has been there with me for several of those years, and I am grateful --and wish him the best on what, no doubt,
will be a promising future.

Death to Accreditators?

By Richard Vedder

Judith Eaton, Mother Superior of the accrediting agencies in America (head of the Council of Higher Education Accreditation) probably breathed a sigh of relief when Margaret Spellings, Sara Tucker and others packed their bags at the end of the Bush Administration. The era of intense scrutiny of accreditation was, it was hoped, over. In fact, the opposite has occurred: the accrediting folks are on the ropes, reeling from multiple attacks from an increasingly activist Department of Education.

The latest incident is the Inspector General of the Department of Education's blistering attack on the North Central Association, the largest of the nation's comprehensive regional accrediting agencies. It seems the North Central's Higher Education Commission accredited a for profit institution without qualification, when it knew full well there were serious questions regarding the rewarding of credit. The IG thinks the North Central unit should be put out of the accreditation business.

I know nothing about the current dispute, and find it a bit odd that the Inspector General is reviewing accreditation decisions of individual institutions. But I have been noting for years that for all the expense, accreditation does very little --rarely putting an institution out of business for poor performance. I have lamented the fact that the accreditors are governed by the universities that are accredited, to me a grievous conflict of interest. I have complained that accreditation costs have been a significant barrier to entry for several entrepreneurial for-profit institutions that it appeared to me should be allowed to operate. Also, some accrediting agencies (notably the despicable American Bar Association) have used racist and other un-American criteria rather than academic standards as a prime determinant of accrediting criteria.

In a world where there were good data on student performance in college, on what faculties do, on the nature of research, etc., we simply would not need accreditation. General Motors did not get into trouble because it was going to lose its accreditation, but rather it got into trouble because people stopped buying its cars. Markets can and do perform a role, and more effectively, than accreditation does. To be sure, given the dubious presence of federal monies in higher education, probably there is some minimum threshold level below which federal monies should not be dispensed to institutions or their students. But that can be accomplished by a small federal agency that reviews data from the thousands of colleges and decides which ones are outside the parameters of acceptability. Since the colleges do not collect or report much worthwhile data on performance, it is impossible to use this approach. Margaret Spellings and Sara Tucker were right in their attempt to force colleges to provide some performance measures as a condition for accreditation, but the colleges ran to their favorite congressional puppet, Senator Lamar Alexander (sometime university president) and got Congress to block the attempt to require accountability.

Good luck to Arne Duncan's crew as it takes on the accreditors. Prediction: they will be as unsuccessful in the final analysis as the Spellings/Tucker crew, but they at least might scare the colleges into a modicum of responsible behavior.

Why So Much Secrecy With All Things Accreditation?

by Andrew Gillen

Today’s papers bring a story that could only happen with accreditation. For those of you unfamiliar with accreditation, the federal government didn’t trust itself to regulate institutions of higher education, so it allows accrediting bodies to act as the gatekeepers to federal money. If a college wants its students to have access to federal financial aid money, it has to satisfy the accreditors that it knows what it’s doing when it comes to providing an education. It’s a reasonable approach in theory, but the implementation is entirely screwed up.

One of the main problems is that everything is kept a secret. For instance, one very important question concerning higher ed is how much value they add (as opposed to just performing a signaling/screening function). Several weeks ago, I heard Judith Eaton, president of CHEA, the accreditors group say “Our research shows that there is value added.” This is great news. Where can you find the studies showing all this value added? You can’t, because the accreditors keep them secret.

Other methods of addressing the issue, such as NSSE and CLA, also keep their results secret, but this is because they are voluntary. If they didn’t agree to keep them secret, no schools would participate. Accreditation is different – there is no need to keep the results secret because the schools are required to participate. Keeping the results secret serves no beneficial purpose.

All this secrecy is why today’s stories are not that surprising.

Doug Lederman

the Education Department's inspector general issued a stinging rebuke Thursday of the country's largest regional accreditor and urged department officials to consider terminating the agency's authority…

Exactly what issues that the Higher Learning Commission found (and that the inspector general accuses it of underemphasizing) is impossible to tell from the heavily redacted eight-page memo that the inspector general published…

Eric Kelderman

News of the report also sent shock waves through the for-profit higher-education sector. Nearly all of the major for-profit companies whose institutions seek regional accreditation do so through the Higher Learning Commission, and all of them, like American InterContinental, operate extensive distance-learning programs…

It "suggests a whole new level of hostility on the part of OIG to what and how the for-profit schools operate, particularly online,"

Is the government simply ensuring that accreditors are doing their job, or are they trying to scare them away from accrediting evil for profits? It’s easy to adopt a conspiratorial mindset and [potentially] read too much into these types of things when everything is kept secret.

Secrecy is the enemy. The excessive reliance on secrecy with all things accreditation translates into the following:

1. The accreditors approach to regulating colleges: trust us, we’re experts
2. The government’s approach to regulating accreditors: trust us, we’re experts

This would be great, except for the fact that our friends over at CAP, New America, and Education Sector detail the reasons we shouldn’t trust private entities, especially for profit ones, and our friends over at Heritage, AEI, and Cato detail the reasons we shouldn’t trust the government.

Perhaps we'd be better off if we eliminated all this secrecy so that we could fulfill the latter part of that old slogan: trust, but verify.

Links for 12/18/09

Sue Shellenbarger

Students are increasingly skeptical about the value of a college degree; the proportion who are willing to borrow money for college if necessary has fallen to 53% from 67% in the past year…
[AG: be sure to note the awesome uniforms of the Tailwaiters staff]

Neal McCluskey

According to a story out yesterday, the federal government is starting a new campaign to promote financial literacy among high school students. That’s right, federal politicians, who have given us Fannie, Freddie, the Community Reinvestment Act, endless pork binges, and a national debt surpassing $12 trillion have the absolutely staggering hubris to think that they somehow have what it takes to teach your kids about sound financial practices!

David Glenn

while it is easy to criticize simplistic measures of citations and "impact factors," it is not so easy to find agreement about how to improve those metrics. Faculty members sometimes suggest that evaluators should de-emphasize numbers and instead look qualitatively at how research projects affect the public good. But a version of that proposal might be put into practice in Britain, and the idea is now causing anger and anxiety among scholars there.

Tim Ranzetta

Texas's Guaranteed Tuition Plan (closed to new participants) appeared not to be so guaranteed in April when the program administrators announced a change in their refund policy "...so that investors could withdraw only the money they put in. They would have received no earnings, no matter how long their money had been in the program…

Just in time for the holidays, the state is touting their new Tuition Promise Fund…

So, what is the promise of this plan? As far as I can tell, as long as college tuition increases remain muted and stock market returns click along at 7-8% a year, you should be fine. However, if declining state support of higher education leads to significant annual tuition increases and we have a few stock market corrections along the way...well this very well could be another promise not kept…

Government Intervention Distorts the Market, Permitting Economic Rent Seeking

by Daniel L. Bennett

I've managed to stir up a nice dialog with Ben Miller concerning the default rates of career college students. On Monday, Miller posted some excellent graphs depicting the newly released 3-year default rates by sector, which showed (as expected) that the for-profit sector has a disproportionately high share of defaulters.

I responded by highlighting the fact that the for-profit sector also enrolls a disproportionately high share of disadvantaged (low-income and minority) students -who are more likely to drop out or default regardless of institution attended- and suggesting that further research that investigates the outcomes of socioeconomically similar students at various types of institutions is needed to provide a correct diagnosis of the institutional effect of student loan defaults.

Miller replied this afternoon, denigrating my use of the term "market funded" (one that a remarkably well-intentioned, luminary education entrepreneur turned me on to) to describe the for-profit industry as semantics, stating that

Were Congress to pass a law tomorrow saying “no for-profit institution can access the federal student aid programs,” the sector would be largely bankrupt by the end of the workday. In that respect, for-profits are no more market-funded than your average community college.

I disagree slightly with Miller's assertion that for-profit institutions are not market funded in that they received their seed capital from private investors, whereas community colleges and public universities were funded directly from the public purse (in most cases). However, I agree with Miller that a significant portion of the for-profit sector would fold if Congress were to remove the sector from its dole; however, the same would hold true for all but the elite public research universities, (which would likely convert to private not-for-profit status and price most students out of the market) if Congress were to cut them off from federal student aid programs.

Therein lies the problem: our system of higher education is overly reliant on taxpayer money (notably student loans) and thus, has distorted the market by removing price consciousness from the decision making process. By making large loan sums available to all, it has exacerbated the rapid tuition inflation. This, in turn, has created an opportunity for private investors to enter the market and seek economic rent by pricing its product competitively, in compliance with existing regulation, and applying efficient business practices that reduce the cost of production. It is not uncommon of for-profit institutions to report 20 to 30 percent profit margins. Does this suggest that such schools are evil and need to be regulated out of business? No, it suggests that there are huge inefficiencies in the public sector that need to be reconciled in order to make college more affordable and accessible to all those who wish to seek a college education.

Increased government intervention via funding and regulation is not the antidote to higher ed's ailment of widespread inefficiency and rent-seeking. In fact, it may be a symptom. What's needed is the innovation that is the product of unadulterated entrepreneurship. This innovation is more often originating in the market driven sector, although I admit that there are some sour apples making the entire sector smell with their abusive recruiting tactics and seeming disregard for imposing exorbitant debt on students, due to the competitive nature of profit-seeking private enterprise. In time, the rotting apples will fall and the remaining tree will blossom into the envy of the orchard, if markets are permitted to work their magic. If not, then expect more of the same with the bad apples clinging on by adjusting to whatever new regulations emerge, financed by increasingly expensive tax burdens for all.

Links for 12/17/09

Edububble

I can’t decide who bothers me more: the cities piling on the back of the students or the colleges with their righteous claim to all of the freedom of private business (unfettered tuition increases!!) and all of the benefits of a charity (no taxes!!!).

Mikita Brottman

Perhaps learning objectives make sense for most courses outside the humanities, but for me—as, no doubt, for many others—they bear absolutely no connection to anything that happens in the classroom.
[AG: I came to interpret this sentence at least three different ways over the course of the piece.]

David Glenn

Almost certainly, you were told that your instruction should match your students' styles… Now four psychologists argue that you were told wrong. There is no strong scientific evidence to support the "matching" idea…