Monday, July 31, 2006

The Establishment in Denial

July 31, 2007

By Richard Vedder

Two events over the weekend demonstrated once again something that I already knew -- that the Higher Education Establishment in America is in a state of denial about the reality that America's colleges and universities are increasingly costly and inefficient -- and probably, at the broader social level, not a sector on which we should be devoting huge amounts of new resources without some fundamental changes.

In Boston on Saturday, I got into a bit of a civilized contretemps with a man I greatly admire, Professor Gary Becker of the University of Chicago, a Nobel laureate in economics and truly a great economist. I had suggested that empirical work I had done shows that perhaps new government investments in higher education have low rates of return, since state government appropriations and state economic growth are negatively correlated -- more spending, lower growth. He replied that we as a nation underestimate the true rate of return on higher education. College graduates commit fewer crimes, are less likely to be unemployed, have fewer low birth weight babies, etc. (Some other data from the estimable postsecondary.org even suggests that college educated drunk drivers are more likely to wear seat belts than their less educated drunken colleagues).

Like most good scholars, Becker is usually very fastidious about taking into account other factors that might explain the phenomenon he is investigating. But not here. I would speculate that if the individuals who graduated from college had gone into construction as semi-skilled or unskilled laborers, they likely would have been more responsible citizens than average Americans. College students are, on average, brighter, more motivated, more disciplined, etc., than non-college graduates. College admissions is a screening process, and the truly non-bright, poorly motivated, undisciplined individuals either do not apply for admission or are rejected. Many of the positive virtues attributed to college education may have been largely (or even completely) developed elsewhere -- in the home, through church attendance, etc. Becker seemingly dismisses or ignores some evidence that might suggest higher education's role in determining the quality of our lives may be less unambigously positive.

To be sure, not all scholars turn their head to this type of evidence. In eating lunch with Tom Sowell of Stanford's Hoover Institution 10 days ago, I detected his willingness to look at the evidence, and his openness to the possibility that the inefficiencies of higher education may be so great as to lead to low rates of return on new resources devoted to this endeavor. Another example: Milton Friedman once emailed something to the effect that the issue of the whether higher education has positive or negative spillover effects is an empirical question, and possibly we should tax rather than subsidize it. Like all good scientists, Friedman said "let us look at the evidence." Even in his 90s, Friedman exudes academic integrity and shrewdness.

No one better personifies the Higher Edducation Establishment than Peter McPherson, President of the National Association of State Universities and Land-Grant Colleges (NASULGC) . Along with other leaders of trade associations (quasi-cartels?) like David Ward and David Warren, McPherson often speaks for America's colleges and universities. McPherson wrote the members of the Commission on the Future of Higher Education (on which, somewhat improbably I am a member) on Saturday.

Let me pick just a few snippets from McPherson's email. "The draft's suggestion that universities have declined in efficiency. This is incorrect." Putting the grammatical problems in the sentence fragment that starts this statement aside, McPherson shows that total per student spending from 1991 to 2005 showed a very small decline. Aside from some data problems (excluding the one-third of four year university students attending private colleges, for example), efficiency is determined by relating output (or outcomes) to inputs (or financial resources). Who knows whether those "outcomes" are improving or worsening? What little data we have (e.g., the National Assessment of Adult Literacy of the U.S. Department of Education) often shows that outcomes are worsening. Staffing data show a rise in the number of staff to students. Of course, McPherson correctly points out that universities do more than serve students. Yet even here I sense an arrogance, an elitist view that undergraduate education is no longer the prime mission, but rather more of annoying burden that is needed to obtain government funding for the important things -- graduate education and research.

McPherson opines that "public universities deeply lament the increased burden of educational costs that is now borne by college students." That is just plain bull, and rather sanctimonious and pious bull at that. (University presidents increasingly remind me of the lead character in Moliere's great play Tartuffe, that students seldom read anymore since we have largely decided that Western civilization's past is not much worth studying). If that were true, they would have gotten serious about real reductions in labor costs. They would have not gone on a spree of building luxury facilities, giving university presidents double digit raises, and would have moved more aggressively to cut out outdated and costly graduate programs for which there is at best modest demand. They would have contracted out services that outsiders can do more efficiently. They would have moved more quickly to do research into finding ways to use computer technology to offer truly effective, low cost instruction. They would have developed measures of efficiency, information vital to trying to increase outcomes per dollar spent. They have not done this, because there are few incentives to do so. Rather than changing their ways, they have simply complained more about inadequate funding from governments, and raised tuition levels sky high, aided and abetted by a soaring student loan debt.

In fairness to McPherson, his longish memo has some constructive thoughts. For example, I was delighted to read "I support the Commission's call for accountability data, including testing of core educational outcomes." Similarly, he accurately mentions some things that colleges have and can do to rein in costs. But still far more needs to be done, and the culture of uiversities needs to change to where watching costs becomes an important institutional objective.

CCAP is dedicated to cutting through the bull, and to suggesting new ways of doing things better and more efficiently. We are the new kid on the block, but we are going to beJul heard, trust me.

2 comments:

R.A. Shaw said...

Dr. Vedder: I admire your work on the economics of higher-ed -- long overdue. I've also observed Peter McPherson, former president of Michigan State.

For many years, Peter led MSU to restrain costs with "The MSU Promise."

http://www.msu.edu/~presofc/speeches/msupromise.html

That is: MSU's costs would be held at the national rate of inflation.

Needless to say, that did not win him many friends with the faculty, but did with students and their parents.

Today, Peter works for different people, with different goals. He's an executive, trying to work with various groups, toward workable and acceptable solutions. Perhaps one common area of agreement would be, authentic transparency about revenues and costs -- that would be a real advancement.

Keep up the good fight. America's students and parents will go BK if you give up.

R.A. Shaw said...

Dr. Vedder: I admire your work on the economics of higher-ed -- long overdue. I've also observed Peter McPherson, former president of Michigan State.

For many years, Peter led MSU to restrain costs with "The MSU Promise."

http://www.msu.edu/~presofc/speeches/msupromise.html

That is: MSU's costs would be held at the national rate of inflation.

Needless to say, that did not win him many friends with the faculty, but did with students and their parents.

Today, Peter works for different people, with different goals. He's an executive, trying to work with various groups, toward workable and acceptable solutions. Perhaps one common area of agreement would be, authentic transparency about revenues and costs -- that would be a real advancement.

Keep up the good fight. America's students and parents will go BK if you give up.