Tradeoffs, Rankings, and College Costs

By Richard Vedder

A host of people, including George Leef and my sidekick Bryan O'Keefe, told me that I had to read yesterday's New York Times piece on public universities. I did, and it gave a good depiction of the strategies propelling public schools on the make, like the University of Florida.

Economics is about trade-offs. Everything has a price. Consider two objectives for public universities. The first is to maximize access to a good quality education for residents of the state who have modest or average financial means. This goal is in keeping with American egalitarian ideals, and the notion that public universities exist to promote social and economic mobility and equal educational opportunity.

The second goal is to maximize prestige and rankings, as determined by US News & World Report. The strategy to obtain this goal is to get the very best students possible (buying them if necessary), to have a good reputation among peer institutions, obtained in part by luring big-name scholars, by having a large proportion of alumni who make donations, etc. Since the best students usually come from affluent families, since buying big name scholars means downplaying undergraduate instruction and also raises costs, etc., the second strategy tends to make universities less egalitarian, more elitist, more like private schools.

In the past decade, the second strategy has dominated the thinking of flagship universities, almost all of which want to be in the top 10 or 20 on the best public university list. It is not possible, and the pursuit of this goal has made colleges much more costly and elitist. As the Education Trust study on scholarships pointed out recently, institutional aid to low income kids has actually declined in real terms as universities strive to buy (through tuition discounts) kids with 1500 SAT scores --who often come from families with $150,000 or $200,000 incomes.

Most schools try somehow to compromise between the two conflicting goals, offering low or no tuition fees to some lower income students, but still giving main emphasis to the merit-based aid/superstar professor approach.

There will be no real solution to this dilemma until the "bottom line" changes. We need a new, much utilized ranking of educational excellence that stresses outcomes, incremental learning, vocational success of recent graduates, and other similar measures of accomplishment. Or, we need more for-profit education, where the bottom line is simple: profits.