By Richard Vedder
My colleague, long-time co-author, and distinguished labor economist Lowell Gallaway is retired, but that does not mean he has stopped having important economic insights. Over lunch yesterday he exclaimed "I think Griggs v. Duke Power Company may be the most important reason tuition fees have risen over the last 35 years." Aided by Richard Epstein and other scholars, I long ago had decided that the Griggs decision had a real significant labor market impact so, as usual, I have concluded Lowell is almost certainly right.
Griggs (401 U.S. 424) was the 1971 case where the U.S. Supreme Court outlawed many forms of employer testing as a means of determining who to hire and promote,arguing such testing had a "disproportionate impact" on minorities and thus violated Title VII of the 1964 Civil Rights Act. (Ironicallly, in light of the discussion below, the Supremes declared that Duke Power also illegally required a high school diploma as a condition for promotion to high level positions).
Before Griggs, an employer hiring an employee could learn, fairly cheaply, a good deal about that person's aptitude for work through well designed tests. Most relevant here, the employer could learn whether a person without a college degree had roughly the same prospects for success in a career as a person possessing a piece of paper certifying he had a bachelor's degree. After Griggs, the cost of learning about employee skills and aptitudes rose dramatically, as certain forms of labor market information were denied to prospective employers.
In the post-Griggs world, an employee could still legally tell an employer that she had a college degree --and that provided real information. There is a striking positive correlation between the amount of education attained and a variety of personal traits, including maturity, discipline, cognitive abilities, and motivation. College grads by and large are fairly to very smart and work relatively hard. The value of a college diploma rose --as evidenced by a significant increase in the college graduate/high school graduate earnings differential. This increased the financial value of a college degree, and therefore enhanced the demand for higher education and, with that, led to higher tuition fees.
This also relates to the little televised contretemps I had the other night on Fox News with Jim Heckman, University of Chicago Nobel laureate in economics, an ordinarily insightful economist with whom I usually agree. I argued that much of the perceived higher productivity of college grads resulted from qualities that those individuals bring with them when they come to college -- qualities lacking in most high school graduates. Professor Gallaway pointed out to me the graph on page 152 of Richard Herrnstein and Charles Murray's overly maligned book The Bell Curve, which shows that persons of average or below IQ scores (100 or less) have less than one-seventh (roughly) the probability of graduating from college as those with high (130 or higher) IQs, after controlling for socioeconomic status and race. College graduates are in general brighter and that and other personal traits, more than the specific knowledge obtained in college, may explain why they earn almost twice as much as high school grads. That is why a college education may provide a good rate of financial return on the investment to many individual students, even while it does not necessarily provide a high return to society as a whole. College is a screening device, an expensive way of separating the bright, skilled and motivated students from the duller, less clever and lazier population.
College diplomas denote a high probability of strong cognitive talent (as measured by IQ or similar tests), information that employers previously could obtain by testing themselves. One of the many unintended consequences of Griggs, then, is that it increased the demand for higher education and contributed to the rise in tuition fees.
Thursday, August 31, 2006
Universities and Economic Growth
By Richard Vedder
Recently, I agreed to speak to a group of legislators and other nefarious persons at the Capitol in Lansing, Michigan, at a gig arranged by the estimable Mackinac Center, one of the premier state-based think tanks in the country. It seems that the Governor and other politicos are asserting that the state's lackluster economic performance can be reversed if the state "invests" more in higher education. The same line has been used in many other states by university presidents, higher education coordinating board leaders and others to justify funding increases.
In the University community, it is an article of faith that higher education is growth-enhancing. After all, college graduates earn far more than high school graduates, so if we simply increase the proportion of adults that are college-educated, we will raise productivity and income levels. This education-related earnings differential provides an empirical basis for the "positive externalities" argument supporting government subsidies to colleges and universities. If the colleges enhance overall economic growth, they help raise income for everyone --not just those people going to college.
It is a great argument, often eloqently delivered by politicians who fervently call for "investing in human capital" and "improving lives for our children and grandchildren." There is only one little problem with it: it is usually wrong. Moving from faith to reason, that is examining the empircal reality of the spending-growth relationship, we find no positive association between the amount of resources invested in higher education by government and the rate of economic growth. I detail this in my book Going Broke By Degree published by the American Enterprise Institute, and also in an article on the subject in the Journal of Labor Research.
To be sure, there is a problem with any statistical analysis. State government appropriations on universities might not have an impact of economic growth for many years, until students who are receiving an education get out into the world of work. There are issues of causation --do lagging economies increase higher ed spending in an attempt to improve the economy, or does increased higher ed spending lead to a lagging economy? There are alternative ways of measuring economic vibrancy. Yet, for all of these problems, it is hard to find much evidence to support the commonly held view that higher education spending by governments has positive economic growth effects. Indeed, the evidence that more public spending on higher education even leads to more college graduates among the adult population is also pretty weak. Many states with public university systems with low public support (e.g., Massachusetts, Connecticut, New Jersey), have high proportions of college grads.
All of this calls into question the common plea for more higher education funds in order to promote economic growth, or, for that matter, promote college access. A great deal of money dropped out of airplanes over college campuses (or the equivalent) gets spent on non-academic things, into making life better and easier for faculty and staff (e.g., higher salaries, lower teaching loads). After a university president shakes the hands of a legislator, the politican should count his or her fingers to be sure they are all there.
Recently, I agreed to speak to a group of legislators and other nefarious persons at the Capitol in Lansing, Michigan, at a gig arranged by the estimable Mackinac Center, one of the premier state-based think tanks in the country. It seems that the Governor and other politicos are asserting that the state's lackluster economic performance can be reversed if the state "invests" more in higher education. The same line has been used in many other states by university presidents, higher education coordinating board leaders and others to justify funding increases.
In the University community, it is an article of faith that higher education is growth-enhancing. After all, college graduates earn far more than high school graduates, so if we simply increase the proportion of adults that are college-educated, we will raise productivity and income levels. This education-related earnings differential provides an empirical basis for the "positive externalities" argument supporting government subsidies to colleges and universities. If the colleges enhance overall economic growth, they help raise income for everyone --not just those people going to college.
It is a great argument, often eloqently delivered by politicians who fervently call for "investing in human capital" and "improving lives for our children and grandchildren." There is only one little problem with it: it is usually wrong. Moving from faith to reason, that is examining the empircal reality of the spending-growth relationship, we find no positive association between the amount of resources invested in higher education by government and the rate of economic growth. I detail this in my book Going Broke By Degree published by the American Enterprise Institute, and also in an article on the subject in the Journal of Labor Research.
To be sure, there is a problem with any statistical analysis. State government appropriations on universities might not have an impact of economic growth for many years, until students who are receiving an education get out into the world of work. There are issues of causation --do lagging economies increase higher ed spending in an attempt to improve the economy, or does increased higher ed spending lead to a lagging economy? There are alternative ways of measuring economic vibrancy. Yet, for all of these problems, it is hard to find much evidence to support the commonly held view that higher education spending by governments has positive economic growth effects. Indeed, the evidence that more public spending on higher education even leads to more college graduates among the adult population is also pretty weak. Many states with public university systems with low public support (e.g., Massachusetts, Connecticut, New Jersey), have high proportions of college grads.
All of this calls into question the common plea for more higher education funds in order to promote economic growth, or, for that matter, promote college access. A great deal of money dropped out of airplanes over college campuses (or the equivalent) gets spent on non-academic things, into making life better and easier for faculty and staff (e.g., higher salaries, lower teaching loads). After a university president shakes the hands of a legislator, the politican should count his or her fingers to be sure they are all there.
Wednesday, August 30, 2006
Do We Need Colleges of Education?
By Richard Vedder
When I talk to legislative groups, which is fairly frequently, I often claim that one reform that would improve K-12 schools significantly would be to make it a felony for a principal or school superintendent to knowingly hire a graduate of a college of education. Everyone laughs, and I am not entirely serious, but the idea is not without its merit. On virtually every campus, the college of education is viewed as an intellectually lightweight part of the school, sometimes almost an embarassment. Good schools have largely rid themselves of undergraduate schools of education, in some instances keeping them for graduate study. The Holmes Group is a group of universities that has taken the the position that pedagogical training should come only after students have a good grounding in subject matter as undergraduates, a position with which I wholeheartedly agree in principle.
Yet the data I have been observing calls into question the utility of graduate work in education as well. One of CCAP's Whiz Kids, James Woodward, has been working with me on statistically explaining differences in high school drop outs in over 600 Ohio school districts. Over one-third of the huge attrition from entrance in high school to graduation from college comes from kids who simply do not make it out of high school. We are trying to explain why some school districts have far fewer dropouts than others.
One of the variables James and I have included in our model is the educational attainment of teachers. The expected result is that where a high proportion of teachers have at least a master's degree, teaching should be better and drop-outs fewer. After all, a large percentage of the master's degrees earned by teachers are from colleges of education, which should know something about good teaching. Yet we find NO statistically signficant relationship between high school dropouts and having teachers with a master's (as opposed to a bachelor's) degree.
Teachers usually want the master's degree for a simple reason --money. They earn more in virtually every school district in the country the more education they have. The fact that their productivity (as measured by student performance) does not seem to be closely associated with their educational attainment (or, for that matter, experience),suggests that teacher pay schedules are totally irrational at the K-12 level. These schedules based on experience and education (but not merit or market conditions) may be a reason why we cannot get many science and engineering majors in college -- we do not pay market rates for high school science teachers, paying them the same as elementary education teachers who are, relatively speaking, a dime a dozen.It points out one of the perversities of unionization at the K-12 level, a topic I will let my sidekick Bryan O'Keefe pursue in greater depth with you at a later date.
But my point today is: if graduate work in education schools seems to have little impact on such core issues as student graduation rates, why do we have them? Why don't state legislatures reduce or eliminate subsidies for students attending education schools, perhaps using the funds to finance student voucher programs where students can use the funds to attend any college (but not college of education) of their choice?
When I talk to legislative groups, which is fairly frequently, I often claim that one reform that would improve K-12 schools significantly would be to make it a felony for a principal or school superintendent to knowingly hire a graduate of a college of education. Everyone laughs, and I am not entirely serious, but the idea is not without its merit. On virtually every campus, the college of education is viewed as an intellectually lightweight part of the school, sometimes almost an embarassment. Good schools have largely rid themselves of undergraduate schools of education, in some instances keeping them for graduate study. The Holmes Group is a group of universities that has taken the the position that pedagogical training should come only after students have a good grounding in subject matter as undergraduates, a position with which I wholeheartedly agree in principle.
Yet the data I have been observing calls into question the utility of graduate work in education as well. One of CCAP's Whiz Kids, James Woodward, has been working with me on statistically explaining differences in high school drop outs in over 600 Ohio school districts. Over one-third of the huge attrition from entrance in high school to graduation from college comes from kids who simply do not make it out of high school. We are trying to explain why some school districts have far fewer dropouts than others.
One of the variables James and I have included in our model is the educational attainment of teachers. The expected result is that where a high proportion of teachers have at least a master's degree, teaching should be better and drop-outs fewer. After all, a large percentage of the master's degrees earned by teachers are from colleges of education, which should know something about good teaching. Yet we find NO statistically signficant relationship between high school dropouts and having teachers with a master's (as opposed to a bachelor's) degree.
Teachers usually want the master's degree for a simple reason --money. They earn more in virtually every school district in the country the more education they have. The fact that their productivity (as measured by student performance) does not seem to be closely associated with their educational attainment (or, for that matter, experience),suggests that teacher pay schedules are totally irrational at the K-12 level. These schedules based on experience and education (but not merit or market conditions) may be a reason why we cannot get many science and engineering majors in college -- we do not pay market rates for high school science teachers, paying them the same as elementary education teachers who are, relatively speaking, a dime a dozen.It points out one of the perversities of unionization at the K-12 level, a topic I will let my sidekick Bryan O'Keefe pursue in greater depth with you at a later date.
But my point today is: if graduate work in education schools seems to have little impact on such core issues as student graduation rates, why do we have them? Why don't state legislatures reduce or eliminate subsidies for students attending education schools, perhaps using the funds to finance student voucher programs where students can use the funds to attend any college (but not college of education) of their choice?
Tuesday, August 29, 2006
The Performance-Access Trade-Off
By Richard Vedder
A series of things in the last week have made me increasingly conscious of the fact that two goals of higher education sometimes conflict. On the one hand, we as a nation have a tradition of wanting to provide opportunities for all Americans to improve their lot in life --call it the egalitarian or equal opportunity ideal. At the same time, we want efficiency in our colleges and high performance per dollar spent. Therefore we want kids to go to college who will work hard,and will learn. By inference, we, appropriately, do not want to spend resources on kids who drop out and fail to succeed much academically.
Our goal of "equal access" leads us to massive student aid programs, such as Pell Grants and some of the student loan schemes. Our goal of improved productivity and efficiency leads us to anti-access policies, such as restricting enrollment of less qualified students. The plain fact is that many low income, disadvantaged students are poorly qualified for colleges. If we let these students have easy access to relatively expensive four year institutions, we squander a lot of resources and get the current 50 percent or so drop out rates. If we insist on high admission standards, however, we deny access to many low income students, and restrict access disproportionately to some minority groups, such as African-Americans and Hispanics.
There is no clear optimal way out of this dilemna. But there may be a middle ground that could help lower the increase in college costs while maintaining and even strengthening our commitment to access. That approach would be to promote, indeed insist, that students with low probability of success in college (based on test scores, high school performance, academic courses studied in high school) enter community colleges, which have relatively low per student costs, or that they demonstrate their competence for four year study through success in relatively low cost on-line programs. If they do reasonably well after one or two years, allow them to transfer to four year institutions. State financed four year schools should be pressured to ease transfer admission requirements and to be more willing to award the transfer of community college credits. To some extent, of course, this happens already, but perhaps it can be further encouraged, by financial incentives and otherwise.This would help reduce the annual growth in average postsecondary tuition costs.
That brings us to another dimension of the problem --financing student attendance. Before about 1975, most students simply financed their education from their own savings and that of their parents, as well as income earned while in college. It is interesting that the massive rise in student college participation largely occurred during this period of self-financing. The rise in both the student loan and student grant program coincides with a rise in the cost of higher education and a decline in the growth in student participation rates. As the demand for higher education increased relative to the supply as a consequence of new forms of student assistance, the price of higher education went up.
This brings us to the issue: what should be our public policy on financing student education? Leave it to the individuals involved and private charity? Continue the status quo, with loans growing 10 percent a year? Treating financing less like a bond (where a student borrows a fixed amount for future repayment) and more like a stock (where the student pays off his financial obligation by giving up a percentage of his income?) Or maybe something in between, like suggested by Arthur Beroz?
The disappointing thing about the Spellings Commission report is that it virtually ignored all the questions raised in the previous paragraph. Yet these are important questions, ones we should no longer duck answering.
A series of things in the last week have made me increasingly conscious of the fact that two goals of higher education sometimes conflict. On the one hand, we as a nation have a tradition of wanting to provide opportunities for all Americans to improve their lot in life --call it the egalitarian or equal opportunity ideal. At the same time, we want efficiency in our colleges and high performance per dollar spent. Therefore we want kids to go to college who will work hard,and will learn. By inference, we, appropriately, do not want to spend resources on kids who drop out and fail to succeed much academically.
Our goal of "equal access" leads us to massive student aid programs, such as Pell Grants and some of the student loan schemes. Our goal of improved productivity and efficiency leads us to anti-access policies, such as restricting enrollment of less qualified students. The plain fact is that many low income, disadvantaged students are poorly qualified for colleges. If we let these students have easy access to relatively expensive four year institutions, we squander a lot of resources and get the current 50 percent or so drop out rates. If we insist on high admission standards, however, we deny access to many low income students, and restrict access disproportionately to some minority groups, such as African-Americans and Hispanics.
There is no clear optimal way out of this dilemna. But there may be a middle ground that could help lower the increase in college costs while maintaining and even strengthening our commitment to access. That approach would be to promote, indeed insist, that students with low probability of success in college (based on test scores, high school performance, academic courses studied in high school) enter community colleges, which have relatively low per student costs, or that they demonstrate their competence for four year study through success in relatively low cost on-line programs. If they do reasonably well after one or two years, allow them to transfer to four year institutions. State financed four year schools should be pressured to ease transfer admission requirements and to be more willing to award the transfer of community college credits. To some extent, of course, this happens already, but perhaps it can be further encouraged, by financial incentives and otherwise.This would help reduce the annual growth in average postsecondary tuition costs.
That brings us to another dimension of the problem --financing student attendance. Before about 1975, most students simply financed their education from their own savings and that of their parents, as well as income earned while in college. It is interesting that the massive rise in student college participation largely occurred during this period of self-financing. The rise in both the student loan and student grant program coincides with a rise in the cost of higher education and a decline in the growth in student participation rates. As the demand for higher education increased relative to the supply as a consequence of new forms of student assistance, the price of higher education went up.
This brings us to the issue: what should be our public policy on financing student education? Leave it to the individuals involved and private charity? Continue the status quo, with loans growing 10 percent a year? Treating financing less like a bond (where a student borrows a fixed amount for future repayment) and more like a stock (where the student pays off his financial obligation by giving up a percentage of his income?) Or maybe something in between, like suggested by Arthur Beroz?
The disappointing thing about the Spellings Commission report is that it virtually ignored all the questions raised in the previous paragraph. Yet these are important questions, ones we should no longer duck answering.
Monday, August 28, 2006
Tie-In Sales and Universities
By Richard Vedder
One student on last night's excellent Fox news special on higher education really caught my attention. He was complaining how he had to pay a health center fee even though he had insurance and would never use the services. Other students complain that have to pay "activity fees" to support rec centers they never use, or to pay for seats for football games they never attend. These fees are often substantial, and are growing in both absolute and relative importance.
When the seller of a good forces the buyer to purchase two (or more) goods and services, it is called a tie-in sale. Antitrust officials are often suspicious of tie-in sales, although personally I see nothing inherently wrong with them. A cell phone provider will sell you a phone dirt cheap, but only if you agree to use its phone services for, say, two years.
The difference with university tie-in sales are two-fold. First, the second good or service that is "tied in" often is nothing remotely connected with the primary good. Second, universities often have a strong, near-monopolistic hold on students after they have made an initial selection of schools, given high movement costs because of limited transferability of credit and other considerations. On the first point, universities often make you buy housing services and food services along with educational services. They make you buy entertainment services (supporting intercollegiate athletics) along with instruction. They make you buy medical services.
Often these tie-in sales are used to disguise increases in the price of services. University A wants to raise its tuition 6 percent, but the legislature says it can raise it only 5 percent. To make up the revenue the university wants, it raises room and board charges 6 percent instead of the 4 percent needed to keep up with inflation.Or the school may initiate a new "technology fee" to pay for computer labs, with the fee paid for even by students with their own laptops who never ever use the computer labs.
The student gripes about mandatory fees have some basis to them, and we need to focus more of our efforts in measuring these fees, and exposing abuses of the use of them. Most often, universities should simply get out of the businesses financed by student fees, especially food and lodging, allowing seasoned firms specializing in those areas to provide the requisite services when requested by students.
One student on last night's excellent Fox news special on higher education really caught my attention. He was complaining how he had to pay a health center fee even though he had insurance and would never use the services. Other students complain that have to pay "activity fees" to support rec centers they never use, or to pay for seats for football games they never attend. These fees are often substantial, and are growing in both absolute and relative importance.
When the seller of a good forces the buyer to purchase two (or more) goods and services, it is called a tie-in sale. Antitrust officials are often suspicious of tie-in sales, although personally I see nothing inherently wrong with them. A cell phone provider will sell you a phone dirt cheap, but only if you agree to use its phone services for, say, two years.
The difference with university tie-in sales are two-fold. First, the second good or service that is "tied in" often is nothing remotely connected with the primary good. Second, universities often have a strong, near-monopolistic hold on students after they have made an initial selection of schools, given high movement costs because of limited transferability of credit and other considerations. On the first point, universities often make you buy housing services and food services along with educational services. They make you buy entertainment services (supporting intercollegiate athletics) along with instruction. They make you buy medical services.
Often these tie-in sales are used to disguise increases in the price of services. University A wants to raise its tuition 6 percent, but the legislature says it can raise it only 5 percent. To make up the revenue the university wants, it raises room and board charges 6 percent instead of the 4 percent needed to keep up with inflation.Or the school may initiate a new "technology fee" to pay for computer labs, with the fee paid for even by students with their own laptops who never ever use the computer labs.
The student gripes about mandatory fees have some basis to them, and we need to focus more of our efforts in measuring these fees, and exposing abuses of the use of them. Most often, universities should simply get out of the businesses financed by student fees, especially food and lodging, allowing seasoned firms specializing in those areas to provide the requisite services when requested by students.
Two Visions of the Academy
By Richard Vedder
Last night's Fox news special on higher ed has brought me a sizable number of emails. I was braced for a lot of negative criticism, but the emails are universally positive. I think the Higher Education Establishment (HEE) is totally unaware or indifferent to the increasing disconnect between their economic behavior and the attitudes of the American people.
American universities value their independence, and there is some justification for insulating them from the vagaries of politics. Yet they are dependent on the public purse. They are subsidized, while most human endeavor in our sainted Republic is taxed. Why? Supposedly because of the great positive spillover effects of higher education. Universities have a favored position in our society conferred upon them by public policy (e.g., tax deductions for charitable deductions, legislative subsidies for universities, federal student loans), so they snub public opinion at their peril.
This brings us to last night's somewhat manufactured debate between Jim Heckman of the University of Chicago and me. Prof. Heckman argued that tuition fees are too low, a view that could theoretically be justifiable if education's benefits acrue only to the users of educational services (e.g., students), not to a broader society. However,even in such a world where higher ed is considered only a private good, one could still legitimately complain that tuition levels are too high, that too little emphasis is placed on teaching, that universities don't take steps to maximize efficiency, etc. But the bigger point is that the third party payments that universities receive were given to them in large part to make the cost of education more affordable to Americans. We entrusted universities to wisely spend incremental resources to serve what the public providing the funds felt was important.
Prof. Heckman's views are similar to those of many in the academy. When asked why we teach so little, we repy " teaching is only a small part of our duties." But who decided that? The donors to universities? State legislatures? No. The universities themselves have decided to downplay instruction in order to do what the faculty wants --doing often marginal quality research of dubious value in order to enhance their own individual national recognition and marketability. We will continue to try to blow the whistle on this type behavior as we did last night.
Last night's Fox news special on higher ed has brought me a sizable number of emails. I was braced for a lot of negative criticism, but the emails are universally positive. I think the Higher Education Establishment (HEE) is totally unaware or indifferent to the increasing disconnect between their economic behavior and the attitudes of the American people.
American universities value their independence, and there is some justification for insulating them from the vagaries of politics. Yet they are dependent on the public purse. They are subsidized, while most human endeavor in our sainted Republic is taxed. Why? Supposedly because of the great positive spillover effects of higher education. Universities have a favored position in our society conferred upon them by public policy (e.g., tax deductions for charitable deductions, legislative subsidies for universities, federal student loans), so they snub public opinion at their peril.
This brings us to last night's somewhat manufactured debate between Jim Heckman of the University of Chicago and me. Prof. Heckman argued that tuition fees are too low, a view that could theoretically be justifiable if education's benefits acrue only to the users of educational services (e.g., students), not to a broader society. However,even in such a world where higher ed is considered only a private good, one could still legitimately complain that tuition levels are too high, that too little emphasis is placed on teaching, that universities don't take steps to maximize efficiency, etc. But the bigger point is that the third party payments that universities receive were given to them in large part to make the cost of education more affordable to Americans. We entrusted universities to wisely spend incremental resources to serve what the public providing the funds felt was important.
Prof. Heckman's views are similar to those of many in the academy. When asked why we teach so little, we repy " teaching is only a small part of our duties." But who decided that? The donors to universities? State legislatures? No. The universities themselves have decided to downplay instruction in order to do what the faculty wants --doing often marginal quality research of dubious value in order to enhance their own individual national recognition and marketability. We will continue to try to blow the whistle on this type behavior as we did last night.
Sunday, August 27, 2006
What Do They Do?
By Richard Vedder
When researching my book Going Broke By Degree a few years ago, I was horrified to learn that the number of "non-faculty professional" workers per 100 students has doubled since 1976. When I checked the statistic again the other day, I learned that the ratio of this type of employee to students continues to grow.
Why? What are these workers doing? How do they advance the teaching agenda of universities, and promote better learning? Do they materially lead to more and better research?
No doubt some of these workers DO a very good job and even are "efficient" in some economic sense. But I strong suspect many of them are non-essential, particularly those contributing to new layers of university bureaucracies. They certainly are a contributing factor in rising university costs. This is a matter that needs further exploration, but the ultimate answer to the questions raised above depends on developing new and better "bottom line" answers to the most fundamental question of all: what do universities do?
When researching my book Going Broke By Degree a few years ago, I was horrified to learn that the number of "non-faculty professional" workers per 100 students has doubled since 1976. When I checked the statistic again the other day, I learned that the ratio of this type of employee to students continues to grow.
Why? What are these workers doing? How do they advance the teaching agenda of universities, and promote better learning? Do they materially lead to more and better research?
No doubt some of these workers DO a very good job and even are "efficient" in some economic sense. But I strong suspect many of them are non-essential, particularly those contributing to new layers of university bureaucracies. They certainly are a contributing factor in rising university costs. This is a matter that needs further exploration, but the ultimate answer to the questions raised above depends on developing new and better "bottom line" answers to the most fundamental question of all: what do universities do?
Who Needs Conon O'Brien?
By Richard Vedder
Tonight at 8:00 p.m. EDT, Fox News has its special hosted by Newt Gingrich on college education in America, emphasizing the issues of cost and affordability. It is competing with Conon O'Brien, who is hosting the Emmy Awards at the same time. The Fox News show should be more informative, and, let's face it, most of you can wait until tomorrow to see who won the award for Best Supporting Actress in a Daytime Drama Series (the kind of award given out in the first hour of the show).
Hope you enjoy the Fox show.
Tonight at 8:00 p.m. EDT, Fox News has its special hosted by Newt Gingrich on college education in America, emphasizing the issues of cost and affordability. It is competing with Conon O'Brien, who is hosting the Emmy Awards at the same time. The Fox News show should be more informative, and, let's face it, most of you can wait until tomorrow to see who won the award for Best Supporting Actress in a Daytime Drama Series (the kind of award given out in the first hour of the show).
Hope you enjoy the Fox show.
Saturday, August 26, 2006
Are Private Schools Better?
By Richard Vedder
Controlling for tuition levels, SAT and ACT scores, the percent of applications that actually enroll (a measure of selectivity), demographic characteristics of the students, etc., should private schools perform any different than public ones with respect to the percent who graduate within six years?
The work that the Whiz Kids and I are doing suggests that that the answer is yes --a statistically significantly larger proportion of students at private four year institutions receive degrees than at two year institutions. This sort of surprised me, since in our regression analysis we have controlled for the major differences between the two types of institutions, admissions selectivity, test scores, and tuition costs. While in most areas of human endeavor, most researchers have found the private sector does things better, cheaper and more efficiently, I have never felt that applied to higher education. So-called "private schools" get a lot of direct or indirect government support, and the non-profit nature of both types of institutions is what governs human behavior more than the legal form of ownership. Unlike in the market economy, where the private sector has better incentives to be good and incentive, in higher education the incentive systems seem similar in both types of institutions. But maybe I am wrong.
Are private schools doing a better job of getting kids through school? It is worth further investigation. CCAP will be pondering and researching this issue. If it is true, it may have important policy implications for how we allocate governmental higher education resources. In particular, it strengthens the already strong case of giving money not to institutions, but to students, and let them choose their own school, public or private.
Controlling for tuition levels, SAT and ACT scores, the percent of applications that actually enroll (a measure of selectivity), demographic characteristics of the students, etc., should private schools perform any different than public ones with respect to the percent who graduate within six years?
The work that the Whiz Kids and I are doing suggests that that the answer is yes --a statistically significantly larger proportion of students at private four year institutions receive degrees than at two year institutions. This sort of surprised me, since in our regression analysis we have controlled for the major differences between the two types of institutions, admissions selectivity, test scores, and tuition costs. While in most areas of human endeavor, most researchers have found the private sector does things better, cheaper and more efficiently, I have never felt that applied to higher education. So-called "private schools" get a lot of direct or indirect government support, and the non-profit nature of both types of institutions is what governs human behavior more than the legal form of ownership. Unlike in the market economy, where the private sector has better incentives to be good and incentive, in higher education the incentive systems seem similar in both types of institutions. But maybe I am wrong.
Are private schools doing a better job of getting kids through school? It is worth further investigation. CCAP will be pondering and researching this issue. If it is true, it may have important policy implications for how we allocate governmental higher education resources. In particular, it strengthens the already strong case of giving money not to institutions, but to students, and let them choose their own school, public or private.
Friday, August 25, 2006
Loans, Grants and Student Performance
By Richard Vedder
The other day, in discussing some results that the Whiz Kids working for me are getting doing statistical analyses (in particular, Jonathan Leirer), I opined in this space that data for over 1,000 colleges suggests a positive relationship exists between student loans and graduation rates, but a negative relationship is present between the magnitude of grants made to students and the probability that they will graduate within six years. In short, subsidies to university students (grants) actually lead to lower levels of academic performance, even though they might encourage students to attend college. We can have more college-educated students, but at the cost of their achieving less. As enrollment rates go up, graduation rates go down.
One advantage of blogs is that readers sometimes share interesting things. Our ally and friend George Leef of the saintly Pope Center in North Carolina is one such person, and he told us about an absolutely superb paper done in 2004 by Avsegul Sahin of the Federal Research Bank of New York entitled "The Incentive Effects of Higher Education Subsidies on Student Effort." To quote from the abstract: "The findings are that subsidizing tuition increases enrollment rates; however, it also considerably reduces student effort. This follows from the fact that a high-subsidy, low-tuition policy causes an increase in the ratio of less able and less highly-motivated college graduates. Additionally...all students, even the more highly-motivated ones, respond to lower tuition levels by decreasing their effort levels."
Our own work is consistent with this finding. It fits into narratives of such persons as Jackson Toby and Harry Stilles, both of whom feel that too many persons enter four year colleges. At the margin, governmental subsidization of tuition in the name of "access" may have a very high price associated with it,and the costs of such a policy, broadly defined, may very well exceed the benefits. Harry believes that perhaps we should convert some four year colleges to two year institutions, and I think that is an idea worth exploring.
Remember, Sunday at 8:00 p.m. EDT is the Fox News Special on the costs of higher education. It should be interesting and provocative -- much more so than the first hour of the competing Emmy Awards, learning who made the best costumes for some dreadful situation comedy that pollutes our airwaves.
The other day, in discussing some results that the Whiz Kids working for me are getting doing statistical analyses (in particular, Jonathan Leirer), I opined in this space that data for over 1,000 colleges suggests a positive relationship exists between student loans and graduation rates, but a negative relationship is present between the magnitude of grants made to students and the probability that they will graduate within six years. In short, subsidies to university students (grants) actually lead to lower levels of academic performance, even though they might encourage students to attend college. We can have more college-educated students, but at the cost of their achieving less. As enrollment rates go up, graduation rates go down.
One advantage of blogs is that readers sometimes share interesting things. Our ally and friend George Leef of the saintly Pope Center in North Carolina is one such person, and he told us about an absolutely superb paper done in 2004 by Avsegul Sahin of the Federal Research Bank of New York entitled "The Incentive Effects of Higher Education Subsidies on Student Effort." To quote from the abstract: "The findings are that subsidizing tuition increases enrollment rates; however, it also considerably reduces student effort. This follows from the fact that a high-subsidy, low-tuition policy causes an increase in the ratio of less able and less highly-motivated college graduates. Additionally...all students, even the more highly-motivated ones, respond to lower tuition levels by decreasing their effort levels."
Our own work is consistent with this finding. It fits into narratives of such persons as Jackson Toby and Harry Stilles, both of whom feel that too many persons enter four year colleges. At the margin, governmental subsidization of tuition in the name of "access" may have a very high price associated with it,and the costs of such a policy, broadly defined, may very well exceed the benefits. Harry believes that perhaps we should convert some four year colleges to two year institutions, and I think that is an idea worth exploring.
Remember, Sunday at 8:00 p.m. EDT is the Fox News Special on the costs of higher education. It should be interesting and provocative -- much more so than the first hour of the competing Emmy Awards, learning who made the best costumes for some dreadful situation comedy that pollutes our airwaves.
Ward of the State
By Richard Vedder
David Ward, President of the American Council on Education, and I disagree on a lot of things. Indeed, we had a bit of a public verbal contretemps in the Wall Street Journal last year, with me claiming that massive increases in student assistance programs have aggravated tuition increases, and Dr. Ward arguing to the contrary. He indicated that he is not supporting the recent Spellings Commission report, while I have decided to sign it (although with many reservations).
Yet David personifies much of what universities are supposed to do beyond the mere mechanics of imparting knowledge and skills. He is a decent and tolerant person,a honest chap, a soft-spoken individual who uses evidence and not invective to make a point. Those who argue that colleges have positive "spillover effects" suggest that they help promote decency, tolerance, civility, good humor and a spirit of objective inquiry, even among the non-college educated population. They are thinking of a world of David Wards (However,I agree with many, including Harry Lewis of Harvard College, in believing in fact we are pretty deficient in promoting the positive characteristics mentioned above). If colleges turned out everyone to be like David, we would be better off as a nation. Strangely, based on an interview in the Chronicle of Higher Education recently, I think he feels much the same about me.
Having been uncharacteristically warm and fuzzy for a moment,however, let me make it perfectly clear (as Richard Nixon would have said) that David is a Ward of the State. Even so-called "private" universities today depend very heavily on governments for their well-being. Many problems of higher education, for example sky-high tuition fees are in large part the unintended consequences of a variety of government policies. As the Mandarin of DuPont Circle and titular head of the HEE (higher education establishment), David spends much of his time and effort hustling dollars from governments, warding off (no pun intended) government regulations, etc. Truth and beauty and knowledge necessarily take second fiddle in David's busy schedule to massaging and stroking the Welfare State to suit the goals of higher education.
David is a good and competent man who means well. His goals are noble. But in my humble judgment, he, like so many others, are blissfully unaware of (or, in some cases, indifferent to) the Unintended Consequences of government involvement in academic processes. When you decide to become a prostitute, like all universities (with a few exceptions like Hillsdale College) have, you reap gains in dollars, but you lose other things in the process. It is a debatable question whether the losses or gains are greater --particularly for society as a whole.
Whether I like it or not, the state is going to play a role in higher education. That is another reason, besides personal friendship, that CCAP and I will continue to dialogue with Ward of the State and his allies, hoping to find ways that the negative consequences of state intervention can be minimized, that the spirit of enterprise found in competitive markets can be nurtured in the academy, and that efficient learning can flourish in an atmosphere of true freedom of inquiry.
David Ward, President of the American Council on Education, and I disagree on a lot of things. Indeed, we had a bit of a public verbal contretemps in the Wall Street Journal last year, with me claiming that massive increases in student assistance programs have aggravated tuition increases, and Dr. Ward arguing to the contrary. He indicated that he is not supporting the recent Spellings Commission report, while I have decided to sign it (although with many reservations).
Yet David personifies much of what universities are supposed to do beyond the mere mechanics of imparting knowledge and skills. He is a decent and tolerant person,a honest chap, a soft-spoken individual who uses evidence and not invective to make a point. Those who argue that colleges have positive "spillover effects" suggest that they help promote decency, tolerance, civility, good humor and a spirit of objective inquiry, even among the non-college educated population. They are thinking of a world of David Wards (However,I agree with many, including Harry Lewis of Harvard College, in believing in fact we are pretty deficient in promoting the positive characteristics mentioned above). If colleges turned out everyone to be like David, we would be better off as a nation. Strangely, based on an interview in the Chronicle of Higher Education recently, I think he feels much the same about me.
Having been uncharacteristically warm and fuzzy for a moment,however, let me make it perfectly clear (as Richard Nixon would have said) that David is a Ward of the State. Even so-called "private" universities today depend very heavily on governments for their well-being. Many problems of higher education, for example sky-high tuition fees are in large part the unintended consequences of a variety of government policies. As the Mandarin of DuPont Circle and titular head of the HEE (higher education establishment), David spends much of his time and effort hustling dollars from governments, warding off (no pun intended) government regulations, etc. Truth and beauty and knowledge necessarily take second fiddle in David's busy schedule to massaging and stroking the Welfare State to suit the goals of higher education.
David is a good and competent man who means well. His goals are noble. But in my humble judgment, he, like so many others, are blissfully unaware of (or, in some cases, indifferent to) the Unintended Consequences of government involvement in academic processes. When you decide to become a prostitute, like all universities (with a few exceptions like Hillsdale College) have, you reap gains in dollars, but you lose other things in the process. It is a debatable question whether the losses or gains are greater --particularly for society as a whole.
Whether I like it or not, the state is going to play a role in higher education. That is another reason, besides personal friendship, that CCAP and I will continue to dialogue with Ward of the State and his allies, hoping to find ways that the negative consequences of state intervention can be minimized, that the spirit of enterprise found in competitive markets can be nurtured in the academy, and that efficient learning can flourish in an atmosphere of true freedom of inquiry.
Thursday, August 24, 2006
Fox News Special: New Time Sunday Night
By Richard Vedder
The hard-hitting Fox News Special on the costs of college will now air Sunday night at 8:00 p.m., instead of 10:00 p.m. announced earlier on this site and elsewhere. The tragic kidnapping of two Fox News staffers may require them to use the 10 o'clock slot for a special about that. We are pleased, however, that the show will air, and the 8:00 p.m. time should work fine. A central part of the show, other than interviewing Yours Truly fairly extensively and hearing from host Newt Gingrich, will be portraying the trials and tribulations of three college students as they finance their college education. Rachel Feldman (producer) and her crew at Fox News has done a great job, I predict, and it deserves the attention of anyone seriously interested in the cost of higher education in America.
The hard-hitting Fox News Special on the costs of college will now air Sunday night at 8:00 p.m., instead of 10:00 p.m. announced earlier on this site and elsewhere. The tragic kidnapping of two Fox News staffers may require them to use the 10 o'clock slot for a special about that. We are pleased, however, that the show will air, and the 8:00 p.m. time should work fine. A central part of the show, other than interviewing Yours Truly fairly extensively and hearing from host Newt Gingrich, will be portraying the trials and tribulations of three college students as they finance their college education. Rachel Feldman (producer) and her crew at Fox News has done a great job, I predict, and it deserves the attention of anyone seriously interested in the cost of higher education in America.
CCAP Op-ed in Columbus Dispatch
CCAP Director Dr. Richard Vedder has an op-ed in today's Columbus Dispatch, exploring the value of public investments in higher education. Check out the full op-ed here.
The Academic "GiGo" Principle
By Richard Vedder
More than two score years ago, when Bill Gates was scarcely out of diapers and Harry Potter's literary mother had not even been conceived, there was a favorite expression around newly created academic computer centers: Garbage In, Garbage Out, or GiGo for short. Even computers cannot do much with bad data.
The academic GiGo principle is that if universities take in marginally qualified students to begin with, they are likely to turn out something undesirable (perhaps not garbage, but not an educated human being).
I have been reminded of the academic GiGo principle recently by the visit to the outposts of the vast CCAP empire by Dr. Harry Stilles, a remarkable transplanted southerner (living in South Carolina) and good friend. Harry spent a career as a college professor, coach, inventor, and businessman until he lost his mind and became a politician, serving with distinction for a dozen years in the South Carolina legislature. Showing typical independence of mind, Harry served as both a Democrat and Republican.
In the legislature, Harry became increasingly alarmed at the waste and inefficiency of universities, but especially their tendency to take unqualified students -- kids without important college prep courses, or with terrible test scores. Unlike most politicians who just babbled about the problem, Harry went out and gathered evidence, not only for South Carolina but for the nation. He uses all sorts of data, but has some of the best evidence on institutional admission practices of anyone in America. CCAP will be working with Harry to publicize these findings, and, even more important, find out why they have happened and their consequences. Stayed tuned.
Already my young student colleagues, hereafter the Whiz Kids (Jonathan Leirer, James Woodward,and Matt Denhart, with an occasional assist from Kenyon College's Jacob Miller), have found some remarkable evidence regarding the determinants of college dropouts (or the reverse, graduation rates). The Whiz Kids are learning, for example, that private schools have a better graduation rate than public schools even after controlling for entering SAT or ACT scores, college selectivity, etc. Those who dig into their own pockets to pay for their education do better than those who get grants from others. And so on. Be patient, but soon you will learn more on this vitally important matter -- the fact that roughly half of the kids entering four year schools do not graduate within six years, arguably our largest academic scandal.
Speaking of staying tuned, remember Sunday night's Fox News Special at 10:00 p.m. on the collegiate financial crisis. My buddy and soul mate Bryan O'Keefe is driving from the Decadent East (D.C.) to join me in my Appalachian ivory tower (Ohio University) to watch it, and I hope you do to -- it will be provocative, I promise.
More than two score years ago, when Bill Gates was scarcely out of diapers and Harry Potter's literary mother had not even been conceived, there was a favorite expression around newly created academic computer centers: Garbage In, Garbage Out, or GiGo for short. Even computers cannot do much with bad data.
The academic GiGo principle is that if universities take in marginally qualified students to begin with, they are likely to turn out something undesirable (perhaps not garbage, but not an educated human being).
I have been reminded of the academic GiGo principle recently by the visit to the outposts of the vast CCAP empire by Dr. Harry Stilles, a remarkable transplanted southerner (living in South Carolina) and good friend. Harry spent a career as a college professor, coach, inventor, and businessman until he lost his mind and became a politician, serving with distinction for a dozen years in the South Carolina legislature. Showing typical independence of mind, Harry served as both a Democrat and Republican.
In the legislature, Harry became increasingly alarmed at the waste and inefficiency of universities, but especially their tendency to take unqualified students -- kids without important college prep courses, or with terrible test scores. Unlike most politicians who just babbled about the problem, Harry went out and gathered evidence, not only for South Carolina but for the nation. He uses all sorts of data, but has some of the best evidence on institutional admission practices of anyone in America. CCAP will be working with Harry to publicize these findings, and, even more important, find out why they have happened and their consequences. Stayed tuned.
Already my young student colleagues, hereafter the Whiz Kids (Jonathan Leirer, James Woodward,and Matt Denhart, with an occasional assist from Kenyon College's Jacob Miller), have found some remarkable evidence regarding the determinants of college dropouts (or the reverse, graduation rates). The Whiz Kids are learning, for example, that private schools have a better graduation rate than public schools even after controlling for entering SAT or ACT scores, college selectivity, etc. Those who dig into their own pockets to pay for their education do better than those who get grants from others. And so on. Be patient, but soon you will learn more on this vitally important matter -- the fact that roughly half of the kids entering four year schools do not graduate within six years, arguably our largest academic scandal.
Speaking of staying tuned, remember Sunday night's Fox News Special at 10:00 p.m. on the collegiate financial crisis. My buddy and soul mate Bryan O'Keefe is driving from the Decadent East (D.C.) to join me in my Appalachian ivory tower (Ohio University) to watch it, and I hope you do to -- it will be provocative, I promise.
Wednesday, August 23, 2006
Sunday Night
By Richard Vedder:
Earlier, I believe Bryan O'Keefe, my ever competent assistant, told you about the great Fox News Special this Sunday night at 10:00 p.m. EDT. The show, hosted by Newt Gingrich and including me in more than a cameo role, is entitled Why Does College Cost So Much and Is It Worth It? It will trace three families with college expenses facing them, and interview Jim Heckman of the University of Chicago (who thinks colleges are the greatest thing economically since sliced breat) as well as Yours Truly.
Hope you enjoy it.
Earlier, I believe Bryan O'Keefe, my ever competent assistant, told you about the great Fox News Special this Sunday night at 10:00 p.m. EDT. The show, hosted by Newt Gingrich and including me in more than a cameo role, is entitled Why Does College Cost So Much and Is It Worth It? It will trace three families with college expenses facing them, and interview Jim Heckman of the University of Chicago (who thinks colleges are the greatest thing economically since sliced breat) as well as Yours Truly.
Hope you enjoy it.
Coming Attractions
Set your VCR's -- this upcoming Sunday night at 10pm est, Fox News will air a special on higher education. The 1 hour program will feature CCAP Director Richard Vedder and will be hosted by Former Speaker of the House Newt Gingrich. The special will explore many of the issues that CCAP studies -- the rising cost of tuition, the wisdom of federal financial aid, higher education access, and accountability in the academy.
Sunday, August 20, 2006
Teaching Loads
By Richard Vedder
I have taught in the Economics Department at Ohio University (OU) for over 40 years, and a few weeks ago the Department decided to reduce its teaching load by about 17 percent. It simply agree amongst itself to do it, with no strong oversight or review by superiors, such as deans, the provost or president.
In 1960, the teaching load in the OU economics department was 12 hours a week When I started work in the mid 1960's, it was already reduced to 9 hours. In 1967, in moving to the quarter system, we reduced it to eight hours. Now, it is the equivalent of 6.7 hours, a 44 percent reduction in roughly 44 years. That is not at all atypical. Quality liberal arts colleges these days very often have a 6 hour load --two three hour courses per semester. Top research universities have still lower loads.
When my department voted to go from six courses a year (two per quarter) to five, it essentially eliminated at least 10 classes a year from being taught. To make up for that, my department could have hired two professors, at a cost of perhaps $200,000 a year (counting fringe benefits). Or, it could turn away more kids from classes needed to graduate, increasing the length of their education and thus the cost of it. Or, it could increase average class size. In fact, it is probably doing a combination of all three of these, for example, adding one professor at a total cost of perhaps $100,000.
Why are they doing this? Supposedly, to increase the research output of the faculty. My prediction is the departmental output of articles may rise from 15 to 16 or 17 a year - roughly 10 percent. Is it worth $100,000, bigger classes, and more closing out of students in classes to publish perhaps two more papers per year, each one of which will probably be read by a best a few dozen readers? Is anyone doing a cost-benefit analysis of the advantages of this move? The answer, of course, is no. Universities simply do what they want, namely the things they like (writing papers which help get faculty promoted and tenured), rather than the things the public that is paying the bills thinks is most important, teaching students. No one is accountable, the decisions are hidden from the public, and the returns on many of those decisions are very low in relation to the costs.
In picking on my own department, I am a tad unfair, because this behavior goes on all the time on hundreds of campuses and in many different academic disciplines. It contributes to rising costs, a downplaying of undergraduate instruction, and the arrogance, isolationism, and elitism that is the hallmark of the modern American university.
I have taught in the Economics Department at Ohio University (OU) for over 40 years, and a few weeks ago the Department decided to reduce its teaching load by about 17 percent. It simply agree amongst itself to do it, with no strong oversight or review by superiors, such as deans, the provost or president.
In 1960, the teaching load in the OU economics department was 12 hours a week When I started work in the mid 1960's, it was already reduced to 9 hours. In 1967, in moving to the quarter system, we reduced it to eight hours. Now, it is the equivalent of 6.7 hours, a 44 percent reduction in roughly 44 years. That is not at all atypical. Quality liberal arts colleges these days very often have a 6 hour load --two three hour courses per semester. Top research universities have still lower loads.
When my department voted to go from six courses a year (two per quarter) to five, it essentially eliminated at least 10 classes a year from being taught. To make up for that, my department could have hired two professors, at a cost of perhaps $200,000 a year (counting fringe benefits). Or, it could turn away more kids from classes needed to graduate, increasing the length of their education and thus the cost of it. Or, it could increase average class size. In fact, it is probably doing a combination of all three of these, for example, adding one professor at a total cost of perhaps $100,000.
Why are they doing this? Supposedly, to increase the research output of the faculty. My prediction is the departmental output of articles may rise from 15 to 16 or 17 a year - roughly 10 percent. Is it worth $100,000, bigger classes, and more closing out of students in classes to publish perhaps two more papers per year, each one of which will probably be read by a best a few dozen readers? Is anyone doing a cost-benefit analysis of the advantages of this move? The answer, of course, is no. Universities simply do what they want, namely the things they like (writing papers which help get faculty promoted and tenured), rather than the things the public that is paying the bills thinks is most important, teaching students. No one is accountable, the decisions are hidden from the public, and the returns on many of those decisions are very low in relation to the costs.
In picking on my own department, I am a tad unfair, because this behavior goes on all the time on hundreds of campuses and in many different academic disciplines. It contributes to rising costs, a downplaying of undergraduate instruction, and the arrogance, isolationism, and elitism that is the hallmark of the modern American university.
Thursday, August 17, 2006
CCAP in Des Moines Register
The Des Moines Register published an op-ed this morning by CCAP Director Richard Vedder and Research Assistant Matthew Denhart on college success rates for Iowa students.
Our Dysfunctional Financial Aid System
By Richard Vedder
One of the modest successes I achieved during my service on the Spellings Commission on higher education was to get the word "dysfunctional" inserted into the report with respect to the financing of the system, and in particular student financial assistance (Chairman Charles Miller liked the term as well, and pushed for its inclusion). One of the gravest weaknesses of the commision's report was that it spoke very little about our Byzantine system of providing financial assistance to students. Chairman Miller's one personal effort --to point out the useful role played by private unsubsidized lenders --was removed by him after some flak from misguided student groups (to my grave dismay).
It is important to note that the vast rise in participation in our system of colleges and universities occurred before the federal government got much involved in the lending business. In the era from 1945 to 1975, when college enrollments soared, the largest federal involvement in university education was the GI Bill. It was a type of voucher system that by all accounts was quite successful in improving student access. The era of massive new federal assistance programs has been a period where there has been an abrupt slowing in rising college participation. It may be on net that the major single impact of the "more than 17" (Spellings Commission) programs of the modern era has been to increase college tuition costs.
Catherine Reynolds, a fellow commission member who made a very good living in this business before retiring, showed me an interesting set of statistics at our last meeting, showing that of $135 billion in student lending (some of it consoldiation of previous loans) in a recent year, the overwhelming majority had no needs-based component to it. The federal government is in the business of lending to kids from moderately affluent middle class families, most of whom would go to college in any case (although perhaps not at the institution or in the style in which they do now). Question: in the absence of student loans, how many climbing walls and luxury dorms would there be at American universities?
The whole system needs revamping. I would have hoped the Spellings Commission would have recommended something really radical, like killing most of these programs, perhaps going to a single much expanded voucher (Pell Grant) system for lower income kids, and getting out of the loan business. As they are demonstrating by their rapid expansion, private, subsidized loans can do whatever job that needs to be done. The Commission ignored the compelling testimony of Miami University President Garland. On the loan side-- if there is going to be a federal loan program at all --we need to rethink what we do. Should we go from a debt to an equity approach to financing --students sell "stock" in themselves instead of issuing bonds? (the current IOU system is akin to bond financing). Should we look at alternative repayment schemes, such as used in Australia, or as proposed by the indefatigable Arthur Beroz? Why not talk to truly innovative thinkers on higher education finance, like Wick Sloane?
One of the modest successes I achieved during my service on the Spellings Commission on higher education was to get the word "dysfunctional" inserted into the report with respect to the financing of the system, and in particular student financial assistance (Chairman Charles Miller liked the term as well, and pushed for its inclusion). One of the gravest weaknesses of the commision's report was that it spoke very little about our Byzantine system of providing financial assistance to students. Chairman Miller's one personal effort --to point out the useful role played by private unsubsidized lenders --was removed by him after some flak from misguided student groups (to my grave dismay).
It is important to note that the vast rise in participation in our system of colleges and universities occurred before the federal government got much involved in the lending business. In the era from 1945 to 1975, when college enrollments soared, the largest federal involvement in university education was the GI Bill. It was a type of voucher system that by all accounts was quite successful in improving student access. The era of massive new federal assistance programs has been a period where there has been an abrupt slowing in rising college participation. It may be on net that the major single impact of the "more than 17" (Spellings Commission) programs of the modern era has been to increase college tuition costs.
Catherine Reynolds, a fellow commission member who made a very good living in this business before retiring, showed me an interesting set of statistics at our last meeting, showing that of $135 billion in student lending (some of it consoldiation of previous loans) in a recent year, the overwhelming majority had no needs-based component to it. The federal government is in the business of lending to kids from moderately affluent middle class families, most of whom would go to college in any case (although perhaps not at the institution or in the style in which they do now). Question: in the absence of student loans, how many climbing walls and luxury dorms would there be at American universities?
The whole system needs revamping. I would have hoped the Spellings Commission would have recommended something really radical, like killing most of these programs, perhaps going to a single much expanded voucher (Pell Grant) system for lower income kids, and getting out of the loan business. As they are demonstrating by their rapid expansion, private, subsidized loans can do whatever job that needs to be done. The Commission ignored the compelling testimony of Miami University President Garland. On the loan side-- if there is going to be a federal loan program at all --we need to rethink what we do. Should we go from a debt to an equity approach to financing --students sell "stock" in themselves instead of issuing bonds? (the current IOU system is akin to bond financing). Should we look at alternative repayment schemes, such as used in Australia, or as proposed by the indefatigable Arthur Beroz? Why not talk to truly innovative thinkers on higher education finance, like Wick Sloane?
Wednesday, August 16, 2006
Innovation and Privatization
By Richard Vedder
For years, traditional universities have grumbled about the for-profit institutions that are rapidly growing (although enrollment growth is now slowing down) and have been taking market share from the not-for-profits. For example, the University of Phoenix has gone from something like 50,000 students in the late 1990s to around 300,000 today.
Rather than complain about them, B. Joseph White, president of the University of Illinois, has decided to join them. With campuses in Urbana-Champaign, Chicago and Springfield, Illinois is clearly the flagship university in the state. Now it wants to open a fourth campus, a virtual site that will be a "Global Campus." Most interestingly, the U of I wants to run this operation on a for-profit basis, and it is out to raise an initial $15 to $30 million to get the project going in a big way.
On the whole, I admire this effort. It plans to use modern technology to serve students not only in Illinois, but around the world. It plans to ask taxpayers for nothing to fund the effort. It is a recognition that the for-profit model can and does work well --often far more efficiently than the traditional, bureaucratic, less competitive, model that dominates American higher education. Joe White (who is an impressive man) is to be commended for this move, as are the Trustees of the University who no doubt had to approve this major departure from current practice.
Are there potential pitfalls? Of course. Whenever you commingle for-profit and not-for-profit missions under the same umbrella, you have some potential problems. Is this new venture going to be largely or completely owned by the U of I, is it merely going to be a major stockholder, or is it simply going to share in the revenues (in return for providing instructional services)? How can an institution supported by taxpayers and designed to serve a broader public purpose also serve individual stockholders interested in private gain? Is their some implicit public subsidization of this private venture? Can individuals on public salaries be working for private companies at the same time?These are all good questions that will be answered, hopefully in a manner that does not embroil the university in scandal or controversy.
The U. of I. is taking a step already well advanced among the flagship state universities: privatization. Already, parts of the University of Virginia have, in effect, gone private. It has been openly talked about in other states. The University of Colorado, for example, once discussed the option of moving away from being a state supported institution. As state support as a percent of budgets declines, major universities might well consider going private --sacrificing some income in the short run in order to gain complete freedom to pursue whatever policies they want. An idea that both President James Garland of Miami University and I have supported is to accelerate this process by converting state appropriations to institutions into vouchers for residents to use at the college of their choice.
While Joe White is not yet ready to give up public support for his fine university, his new initiaitve is a bold innovation that moves traditional universities more into the hurly burly -- and efficiency --of the competitive marketplace.
For years, traditional universities have grumbled about the for-profit institutions that are rapidly growing (although enrollment growth is now slowing down) and have been taking market share from the not-for-profits. For example, the University of Phoenix has gone from something like 50,000 students in the late 1990s to around 300,000 today.
Rather than complain about them, B. Joseph White, president of the University of Illinois, has decided to join them. With campuses in Urbana-Champaign, Chicago and Springfield, Illinois is clearly the flagship university in the state. Now it wants to open a fourth campus, a virtual site that will be a "Global Campus." Most interestingly, the U of I wants to run this operation on a for-profit basis, and it is out to raise an initial $15 to $30 million to get the project going in a big way.
On the whole, I admire this effort. It plans to use modern technology to serve students not only in Illinois, but around the world. It plans to ask taxpayers for nothing to fund the effort. It is a recognition that the for-profit model can and does work well --often far more efficiently than the traditional, bureaucratic, less competitive, model that dominates American higher education. Joe White (who is an impressive man) is to be commended for this move, as are the Trustees of the University who no doubt had to approve this major departure from current practice.
Are there potential pitfalls? Of course. Whenever you commingle for-profit and not-for-profit missions under the same umbrella, you have some potential problems. Is this new venture going to be largely or completely owned by the U of I, is it merely going to be a major stockholder, or is it simply going to share in the revenues (in return for providing instructional services)? How can an institution supported by taxpayers and designed to serve a broader public purpose also serve individual stockholders interested in private gain? Is their some implicit public subsidization of this private venture? Can individuals on public salaries be working for private companies at the same time?These are all good questions that will be answered, hopefully in a manner that does not embroil the university in scandal or controversy.
The U. of I. is taking a step already well advanced among the flagship state universities: privatization. Already, parts of the University of Virginia have, in effect, gone private. It has been openly talked about in other states. The University of Colorado, for example, once discussed the option of moving away from being a state supported institution. As state support as a percent of budgets declines, major universities might well consider going private --sacrificing some income in the short run in order to gain complete freedom to pursue whatever policies they want. An idea that both President James Garland of Miami University and I have supported is to accelerate this process by converting state appropriations to institutions into vouchers for residents to use at the college of their choice.
While Joe White is not yet ready to give up public support for his fine university, his new initiaitve is a bold innovation that moves traditional universities more into the hurly burly -- and efficiency --of the competitive marketplace.
Good Cost-Savings Idea on College Textbooks
By Bryan O'Keefe
Inside Higher Ed had a story a couple of days ago about a very innovative idea on saving money on college textbooks. Through a combination of asking professors to use the same textbook longer and allowing students to purchase paperless, electronic "e-textbooks," students at New Jersey's Camden County College will be able to save quite a lot on college textbooks.
While saving a couple hundred bucks on textbooks isn't that much compared with rising tuition costs, Camden still deserves credit for thinking outside the box on how to save their students some extra money. The most promising of these reforms however seems to be the "e-textbook" idea -- we read everything else online these days, so why not textbooks?
Inside Higher Ed had a story a couple of days ago about a very innovative idea on saving money on college textbooks. Through a combination of asking professors to use the same textbook longer and allowing students to purchase paperless, electronic "e-textbooks," students at New Jersey's Camden County College will be able to save quite a lot on college textbooks.
While saving a couple hundred bucks on textbooks isn't that much compared with rising tuition costs, Camden still deserves credit for thinking outside the box on how to save their students some extra money. The most promising of these reforms however seems to be the "e-textbook" idea -- we read everything else online these days, so why not textbooks?
Moving into the Ritz
By Bryan O'Keefe
The Washington Post has a front page story this morning about a new, opulent apartment building near the
“a furnished single room with a double bed, private bathroom, cable and high-speed Internet. Her four-person suite has a full kitchen, a washer and dryer, a dining room table and black leather couches in the living room. Her high-rise building has a game room with video games, poker and pool tables and flat-screen TVs, rooftop deck, a pool and -- losing track here -- okay, and a big fitness center.
And tanning beds.”
While this is a private housing project which makes it less of a problem (at least the taxpayers aren't paying for it!), it's not entirely uncommon anymore to see similar housing in regular dorms too. The question that people should be asking is if this type of housing is really necessaryor just collegiate overspending and indulgence. Sure, the dorms of old might have been a little impersonal, but should colleges and universities be spending their precious few resources on building palatial dorms? Is it really worth raising tuition through the roof and asking state government for more appropriations just so we can build the next Taj Mahal complete with poker tables, swimming pools, and tanning beds?
Monday, August 14, 2006
Strategies to Reduce Tuition Increases: III
By Richard Vedder
The major difference between the for-profiit, market-driven sector of the economy and the not-for-profit sector is that incentives in the latter sector favor efficiency-enhancing measures that keep price increases down, a tendency helped by the existence of competition. Companies that cut costs increase their profits, and with that there are bigger profit sharing bonuses for key workers, capital gains from stock options for top managers, and huge increases in wealth and income for stockholders. Those incentives are largely lacking in the not-for-profit university sector that dominates American higher education.
One strategy to reduce tuition increases would be to try to become more efficient by emulating to some degree the incentives of the market. There are a variety of different ways it can be done.
One approach would be for state governments to tie appropriations to tuition price containment. For example, the legislature could give university A a 5 percent appropriation increase if it keeps it tuition increase to the rate of growth of family income or less, but reduce that apropriation by some amount, say one percent, for each one percent tuition increases exceed the growth of family income. This implies a sort of tax on excessive tuition increases, and sharply lowers the incremental income universities can earn from tuition hikes. Presumably, that may force universities to adopt more austere budgets and make more internal cost savings. This make seem like it smacks of price controls, but it is really rather different. Price controls apply to situations where the price of the good sold accurately reflects the costs of producing the good, which is decidedly not the case in higher education owing to massive subsidies. The scheme here ties the size of subsidy to university willingness to meet broader social goals.
Another approach would be for state governments to provide financial bonuses for university presidents and other key employees if certain key efficiency criteria are met. If per student spending rises by less than the rate of inflation (as determined by an outside auditing agency), for example, the president, provost, and other key employees could receive bonuses of, say, $50,000 to $100,000 a year. University presidents are under enormous pressures to increase costs and spending, and these financial incentives might offset the deleterious effects of the spending-enhancing pressures currently faced. Bonus payments ideally would not merely apply to costs, but also at outcomes (or, better yet, productivity, which relates to outcomes per dollar of resources expended). If it can be demonstrated students are learning more, they are dropping out of school less, they are completing their degree on time instead of over 5 or 6 years, etc., bonuses could be meted out. Legislators could require trustees of state universities to develop such incentive systems. Universities would no doubt try to find ways to circumvent the rules to earn bonuses that are undeserving, etc., so the devil of this approach is in the details. Nonetheless, it is an approach that deserves serious consideration.
The major difference between the for-profiit, market-driven sector of the economy and the not-for-profit sector is that incentives in the latter sector favor efficiency-enhancing measures that keep price increases down, a tendency helped by the existence of competition. Companies that cut costs increase their profits, and with that there are bigger profit sharing bonuses for key workers, capital gains from stock options for top managers, and huge increases in wealth and income for stockholders. Those incentives are largely lacking in the not-for-profit university sector that dominates American higher education.
One strategy to reduce tuition increases would be to try to become more efficient by emulating to some degree the incentives of the market. There are a variety of different ways it can be done.
One approach would be for state governments to tie appropriations to tuition price containment. For example, the legislature could give university A a 5 percent appropriation increase if it keeps it tuition increase to the rate of growth of family income or less, but reduce that apropriation by some amount, say one percent, for each one percent tuition increases exceed the growth of family income. This implies a sort of tax on excessive tuition increases, and sharply lowers the incremental income universities can earn from tuition hikes. Presumably, that may force universities to adopt more austere budgets and make more internal cost savings. This make seem like it smacks of price controls, but it is really rather different. Price controls apply to situations where the price of the good sold accurately reflects the costs of producing the good, which is decidedly not the case in higher education owing to massive subsidies. The scheme here ties the size of subsidy to university willingness to meet broader social goals.
Another approach would be for state governments to provide financial bonuses for university presidents and other key employees if certain key efficiency criteria are met. If per student spending rises by less than the rate of inflation (as determined by an outside auditing agency), for example, the president, provost, and other key employees could receive bonuses of, say, $50,000 to $100,000 a year. University presidents are under enormous pressures to increase costs and spending, and these financial incentives might offset the deleterious effects of the spending-enhancing pressures currently faced. Bonus payments ideally would not merely apply to costs, but also at outcomes (or, better yet, productivity, which relates to outcomes per dollar of resources expended). If it can be demonstrated students are learning more, they are dropping out of school less, they are completing their degree on time instead of over 5 or 6 years, etc., bonuses could be meted out. Legislators could require trustees of state universities to develop such incentive systems. Universities would no doubt try to find ways to circumvent the rules to earn bonuses that are undeserving, etc., so the devil of this approach is in the details. Nonetheless, it is an approach that deserves serious consideration.
Graduate Teaching Assistants Unite
By Bryan O'Keefe
Inside Higher Ed has a wrap-up this morning of a conference held this past weekend for graduate teaching assistants unions. I actually wrote about this very same issue in the latest edition of Labor Watch, which is available here. I also wrote about this last year for Doublethink – that article can be downloaded here.
As both my Labor Watch and Doublethink piece point out, the actual benefits of unionization for teaching assistants are almost nonexistent – and whatever increased benefits ta’s might receive are usually market driven (i.e. Yale raises its stipends, so Harvard does the same). Unfortunately, however, a lot of TA’s are looking for a “cause” and when union organizers swoop onto campus with their “anti-corporate” rhetoric, many teaching assistants are convinced that they too are being abused by “the man.” Of course, it’s a commentary on the state of organized labor that they are now searching for prospective members amongst teaching assistants at elite schools – this seems like a far cry from the steel mills and coal mines of yesteryear.
Never the less, even if the merits are questionable, there is no doubt that colleges and universities are a prime organizing ground for unions. This could have an enoromous negative effect on both the affordability and productivity of higher education and, in turn, hurt students, parents, taxpayers, and colleges themselves. CCAP will be studying this issue more in the future.
Inside Higher Ed has a wrap-up this morning of a conference held this past weekend for graduate teaching assistants unions. I actually wrote about this very same issue in the latest edition of Labor Watch, which is available here. I also wrote about this last year for Doublethink – that article can be downloaded here.
As both my Labor Watch and Doublethink piece point out, the actual benefits of unionization for teaching assistants are almost nonexistent – and whatever increased benefits ta’s might receive are usually market driven (i.e. Yale raises its stipends, so Harvard does the same). Unfortunately, however, a lot of TA’s are looking for a “cause” and when union organizers swoop onto campus with their “anti-corporate” rhetoric, many teaching assistants are convinced that they too are being abused by “the man.” Of course, it’s a commentary on the state of organized labor that they are now searching for prospective members amongst teaching assistants at elite schools – this seems like a far cry from the steel mills and coal mines of yesteryear.
Never the less, even if the merits are questionable, there is no doubt that colleges and universities are a prime organizing ground for unions. This could have an enoromous negative effect on both the affordability and productivity of higher education and, in turn, hurt students, parents, taxpayers, and colleges themselves. CCAP will be studying this issue more in the future.
A Head Start
By Matthew Denhart
This is the second in an occasional series by student research assistants at the Center for College Affordability and Productivity
While the national graduation rate from four-year colleges and universities hovers below the 50 percent mark, perhaps the more alarming statistic is that of those graduates, 44 percent take a fifth or sixth year to finish their degree. This data, from 2004, proves a harsh reality and reveals a driving factor behind increased college costs. In a time of already sharply rising tuition prices, it is of essential importance for students to graduate in a timely fashion. A number of options are open to motivated high school students giving them a head start toward college graduation, namely: Advanced Placement (AP) and International Baccalaureate (IB) courses, and post-secondary enrollment options.
In the past years I had the advantage of taking AP classes, finding them quite beneficial. Not only was I able to earn college credit, but also enjoyed and benefited from the increased academic challenge. In fact, many of my AP classes were more rigorous and demanding than college courses I have taken. Although my high school did not offer IB courses, I know other students who benefited greatly from them.
From an academic standpoint, often the senior year of high school is a wasteland. In my senior year I took college courses at Ohio University through the Ohio Senate Bill 140 program; completing 13 hours of coursework and finishing with a 4.0 GPA. The program covers the cost of virtually all aspects of participation to students in the top 20 percent of their class. The credits I’ve earned have satisfied many required courses, and placed me a quarter ahead of schedule, all with no cost to me. In addition, I was able to take courses that were not offered at my high school and explore different academic fields. Another advantage of the program is that students are able to familiarize themselves with college workloads and campus life. I quickly learned and adjusted to the differences between high school and college work. I feel that my experience has given me a huge advantage over other entering freshman here at Ohio University. Continued expansion of the program would be of great benefit to students.
Certain measures could be taken to make such programs even more successful. First, regarding AP classes, often students decide not to take the test, thus making it impossible to earn the college credit. If the state covered the $83 exam fee for all students, as is the case in Florida and South Carolina, there would be a better incentive to take the test and less risk for the student. Next, confusion over credit transferability policies are a problem in both programs. The transfer of credits is essential to ensure that vast amounts of time and money are not being wasted. Available published standards by various universities would make this process less ambiguous. Colleges and universities also need to remove all the red tape involved with transferring credits to reduce hassle and frustration. Finally, limited availability of the post secondary option is a major concern. Many high school students do not enjoy the luxury of having a college or university within a five minute drive. Expansion through technology and online courses could help reach a wider base.
With college tuition spiraling out of control it is increasingly necessary to graduate in a timely manner. The continued support and future expansion of such programs is essential in giving students a boost and head start in the world of higher education.
This is the second in an occasional series by student research assistants at the Center for College Affordability and Productivity
While the national graduation rate from four-year colleges and universities hovers below the 50 percent mark, perhaps the more alarming statistic is that of those graduates, 44 percent take a fifth or sixth year to finish their degree. This data, from 2004, proves a harsh reality and reveals a driving factor behind increased college costs. In a time of already sharply rising tuition prices, it is of essential importance for students to graduate in a timely fashion. A number of options are open to motivated high school students giving them a head start toward college graduation, namely: Advanced Placement (AP) and International Baccalaureate (IB) courses, and post-secondary enrollment options.
In the past years I had the advantage of taking AP classes, finding them quite beneficial. Not only was I able to earn college credit, but also enjoyed and benefited from the increased academic challenge. In fact, many of my AP classes were more rigorous and demanding than college courses I have taken. Although my high school did not offer IB courses, I know other students who benefited greatly from them.
From an academic standpoint, often the senior year of high school is a wasteland. In my senior year I took college courses at Ohio University through the Ohio Senate Bill 140 program; completing 13 hours of coursework and finishing with a 4.0 GPA. The program covers the cost of virtually all aspects of participation to students in the top 20 percent of their class. The credits I’ve earned have satisfied many required courses, and placed me a quarter ahead of schedule, all with no cost to me. In addition, I was able to take courses that were not offered at my high school and explore different academic fields. Another advantage of the program is that students are able to familiarize themselves with college workloads and campus life. I quickly learned and adjusted to the differences between high school and college work. I feel that my experience has given me a huge advantage over other entering freshman here at Ohio University. Continued expansion of the program would be of great benefit to students.
Certain measures could be taken to make such programs even more successful. First, regarding AP classes, often students decide not to take the test, thus making it impossible to earn the college credit. If the state covered the $83 exam fee for all students, as is the case in Florida and South Carolina, there would be a better incentive to take the test and less risk for the student. Next, confusion over credit transferability policies are a problem in both programs. The transfer of credits is essential to ensure that vast amounts of time and money are not being wasted. Available published standards by various universities would make this process less ambiguous. Colleges and universities also need to remove all the red tape involved with transferring credits to reduce hassle and frustration. Finally, limited availability of the post secondary option is a major concern. Many high school students do not enjoy the luxury of having a college or university within a five minute drive. Expansion through technology and online courses could help reach a wider base.
With college tuition spiraling out of control it is increasingly necessary to graduate in a timely manner. The continued support and future expansion of such programs is essential in giving students a boost and head start in the world of higher education.
Strategies to Reduce Tuition Increases: II
By Richard Vedder
If a larger percent of students in American higher education start attending relatively low cost schools, the average cost of higher education will start rising at a slower rate, even if each individual school continue to operate in the relatively inefficient fashion common for American colleges and universities, raising their price of attendance at a rate much greater than the general inflation rate.
Let me make the point more specific by using a little illustration. Suppose we had 10 students going to college, two at a prviate schools with a $20,000 tuition, five at state universities with an average $8,000 tuition, and three at community colleges with a $4,000 tuition. Total tuition costs for the ten students would be $92,000, or an average of $9,200 per student.
Fast forward one year. Suppose we had 3 percent inflation, 4.5 percent median family income growth (about 1.5 percent after adjusting for inflation), and 6 percent increases in tuition fees at all schools. For example, the private school tuition would go to $21,200. These figures are pretty close to the typical historical experience --tuition rising double the inflation rate and faster than family income.
Now, suppose we have two of our ten students still going to private schools, only four at four year state universities, and four at community colleges. The total tuition bill for the ten students would be $93,280, or $9,328 average per student, an increase of less than 1.4 percent from the previous year, and far less than the growth of overall prices or family income. Shifting the composition of college students towards lower cost institutions has real promise as a means of meeting the goal of the Spellings Commission of trying to keep tuition charges below the growth of family income.
Several questions arise. How do you accomplish the shift in enrollments? Won't this devastate the higher priced schools enrollment-wise? The answer to the last question is probably no, since enrollments are projected to grow anyhow, and if that growth goes exclusively to the low cost schools, the traditional universities will not face, on average, serious enrollment declines. State governments, anxious to reduce the incremental cost of educating more kids, might find it cost effective to offer some forms of scholarship aid usable exclusively at two year or low cost four year schools. Less desirable, they might impose strict enrollment limits on the more costly schools, forcing incremental enrollments to seek the less expensive schools (although some might confound those plans by going to more costly private institutions). Governmental capital constructions monies should go to the low cost institutions relative to the higher priced ones. Federal loan subsidies for upper middle class kids going to relatively costly schools could be ended, giving them greater incentives to seek the lower cost alternatives.
From the standpoint of educational policy, students whose probability of collegiate success are deemed rather low (based on grades, academic preparation or test scores) should be encouraged (forced?) to attend the low cost options. If they succeed in their first year or two, they should be able to transfer in a relatively seamless fashion to the more costly major four year universities. If they fail, they have been given a chance to further their education (in keeping with the American egalitarian ideal), at a relatively low cost both to them and the taxpayers.
If a larger percent of students in American higher education start attending relatively low cost schools, the average cost of higher education will start rising at a slower rate, even if each individual school continue to operate in the relatively inefficient fashion common for American colleges and universities, raising their price of attendance at a rate much greater than the general inflation rate.
Let me make the point more specific by using a little illustration. Suppose we had 10 students going to college, two at a prviate schools with a $20,000 tuition, five at state universities with an average $8,000 tuition, and three at community colleges with a $4,000 tuition. Total tuition costs for the ten students would be $92,000, or an average of $9,200 per student.
Fast forward one year. Suppose we had 3 percent inflation, 4.5 percent median family income growth (about 1.5 percent after adjusting for inflation), and 6 percent increases in tuition fees at all schools. For example, the private school tuition would go to $21,200. These figures are pretty close to the typical historical experience --tuition rising double the inflation rate and faster than family income.
Now, suppose we have two of our ten students still going to private schools, only four at four year state universities, and four at community colleges. The total tuition bill for the ten students would be $93,280, or $9,328 average per student, an increase of less than 1.4 percent from the previous year, and far less than the growth of overall prices or family income. Shifting the composition of college students towards lower cost institutions has real promise as a means of meeting the goal of the Spellings Commission of trying to keep tuition charges below the growth of family income.
Several questions arise. How do you accomplish the shift in enrollments? Won't this devastate the higher priced schools enrollment-wise? The answer to the last question is probably no, since enrollments are projected to grow anyhow, and if that growth goes exclusively to the low cost schools, the traditional universities will not face, on average, serious enrollment declines. State governments, anxious to reduce the incremental cost of educating more kids, might find it cost effective to offer some forms of scholarship aid usable exclusively at two year or low cost four year schools. Less desirable, they might impose strict enrollment limits on the more costly schools, forcing incremental enrollments to seek the less expensive schools (although some might confound those plans by going to more costly private institutions). Governmental capital constructions monies should go to the low cost institutions relative to the higher priced ones. Federal loan subsidies for upper middle class kids going to relatively costly schools could be ended, giving them greater incentives to seek the lower cost alternatives.
From the standpoint of educational policy, students whose probability of collegiate success are deemed rather low (based on grades, academic preparation or test scores) should be encouraged (forced?) to attend the low cost options. If they succeed in their first year or two, they should be able to transfer in a relatively seamless fashion to the more costly major four year universities. If they fail, they have been given a chance to further their education (in keeping with the American egalitarian ideal), at a relatively low cost both to them and the taxpayers.
Sunday, August 13, 2006
CCAP Appears in the Indy Star
An op-ed on college dropout rates in Indiana appeared this morning in the Indy Star. Congrats to Rich Vedder and our research assistant Jonathan Leirer for a job well-done!
Strategies to Reduce Tuition Increases: I
By Richard Vedder
The Secretary of Higher Education's Commission on the Future of Higher Education (hereafter, the Spellings Commission) recommends as a benchmark that tuition increases should be no greater than the growth in median family income. A very long article could be written on the politics of getting that into the report, but that is a story for another day.
How do we meet that objective? There are some moderately radical things that would certainly ultimately lead to achieving the goal, including the federal government getting out of the business of providing loans for relatively affluent students. These things, unfortunately in my judgment, are not likely to happen in the near term (although we should be working to see that they ultimately come about).
State college presidents argue that the solution is simple: increase state appropriations. Bigger state subsidies will reduce the need to rely heavily on tuition fees. There are two problems with this argument. First, the empirical evidence suggests that only a minority of incremental appropriated funds are devoted to moderating tuition increases. While our research on this is on- going, my best current guess (based on some solid econometric examination), is that for each new dollar of per student appropriation, tuition increases are reduced by only 30-35 cents. Universities use the rest of the money for other things -- they will say to improve research capability, but some of it ends up in greater income for working members of the university community.
The second problem with the "give us more money" argument is that it is very unlikely to happen, at least to the extent that the universities want. Until we rationalize the funding of Medicaid (and Medicare, for that matter), state government budgets are not going to allow big university funding expansion. Given a choice of helping poor people meet their health needs or subsidizing largely middle class college students, or even younger kids with their schooling, the politics demand that the money go to these other needs.
How then do we meet the Spellings Commission objective? Two options are worth exploring. First, increase the proportion of students going to relatively low cost institutions. Even if tuition rates within each type of institution continue to rise a good deal, the average tuititon for the entire population will rise less if relatively more students go to lower costs institutions such as community colleges and on-line universities like Western Governors University. The second option is to provide incentives to universities to reduce the rate of growth in tuition charges -- and increase the proportion of appropriation increases going to moderate tuition increases.
In coming epistles, I will elaborate on each of these two strategies.
The Secretary of Higher Education's Commission on the Future of Higher Education (hereafter, the Spellings Commission) recommends as a benchmark that tuition increases should be no greater than the growth in median family income. A very long article could be written on the politics of getting that into the report, but that is a story for another day.
How do we meet that objective? There are some moderately radical things that would certainly ultimately lead to achieving the goal, including the federal government getting out of the business of providing loans for relatively affluent students. These things, unfortunately in my judgment, are not likely to happen in the near term (although we should be working to see that they ultimately come about).
State college presidents argue that the solution is simple: increase state appropriations. Bigger state subsidies will reduce the need to rely heavily on tuition fees. There are two problems with this argument. First, the empirical evidence suggests that only a minority of incremental appropriated funds are devoted to moderating tuition increases. While our research on this is on- going, my best current guess (based on some solid econometric examination), is that for each new dollar of per student appropriation, tuition increases are reduced by only 30-35 cents. Universities use the rest of the money for other things -- they will say to improve research capability, but some of it ends up in greater income for working members of the university community.
The second problem with the "give us more money" argument is that it is very unlikely to happen, at least to the extent that the universities want. Until we rationalize the funding of Medicaid (and Medicare, for that matter), state government budgets are not going to allow big university funding expansion. Given a choice of helping poor people meet their health needs or subsidizing largely middle class college students, or even younger kids with their schooling, the politics demand that the money go to these other needs.
How then do we meet the Spellings Commission objective? Two options are worth exploring. First, increase the proportion of students going to relatively low cost institutions. Even if tuition rates within each type of institution continue to rise a good deal, the average tuititon for the entire population will rise less if relatively more students go to lower costs institutions such as community colleges and on-line universities like Western Governors University. The second option is to provide incentives to universities to reduce the rate of growth in tuition charges -- and increase the proportion of appropriation increases going to moderate tuition increases.
In coming epistles, I will elaborate on each of these two strategies.
Friday, August 11, 2006
Vive La Difference?
By Richard Vedder
The big news, if there was any, from yesterday's final meeting of the Secretary of Education's National Commission on the Future of Higher Education was not the relatively bland nature of the recommendations, but rather the failure of David Ward, the President of the American Council of Education, to support it. Of the 19 commissioners, Ward was alone in his dissent.
As I said prior to voting, accepting the report was a tough decision for me --only because I thought it was not hard-hitting enough, not mentioning many key factors (e.g., grade inflation, curricular incoherence) at all, and also being only moderately strong on the issues closest to CCAP --- affordability, efficiency, and productivity. But in the final analysis, the report did make some important and useful recommendaitons, so I supported it.
David Ward, an amiable and thoughtful man who is truly the chief Mandarin of DuPont Circle and the titular head of HEE (the Higher Education Establishment) in his role as President of the American Council of Education, was in a tough position, since several organizations of colleges opposed the report, in some cases almost rabidly, while one or two showed cautious support. As head of the umbrella organization that covers the entire establishment, David was in a bind, and his vote was understandable.
Yet this points out the problem. A large part of the higher education community just doesn't get it: Americans are increasingly fed up with the indifference of universities to issues such as soaring tuition costs. The Ward vote is a sign that, on average, universities are going to fiercely support the status quo, fight innovation, oppose accountability and transparency --yet still demand our financial support. It is time to tie public support for higher education (which is increasingly indefensible, in my judgment, on the basis of any rational analysis) to performance --keeping costs down, showing signs of learning improvements, etc.
By the way, kudos are to be given to Bob Mendenhall, president of Western Governors University, an innovative Internet institution, who says he is holding the line on tuition next year, and is starting to make public that school's already commendable data on measuring student progress , etc. Bob already is carrying rhetoric into action. We need more people like President Mendenhall in higher education.
The big news, if there was any, from yesterday's final meeting of the Secretary of Education's National Commission on the Future of Higher Education was not the relatively bland nature of the recommendations, but rather the failure of David Ward, the President of the American Council of Education, to support it. Of the 19 commissioners, Ward was alone in his dissent.
As I said prior to voting, accepting the report was a tough decision for me --only because I thought it was not hard-hitting enough, not mentioning many key factors (e.g., grade inflation, curricular incoherence) at all, and also being only moderately strong on the issues closest to CCAP --- affordability, efficiency, and productivity. But in the final analysis, the report did make some important and useful recommendaitons, so I supported it.
David Ward, an amiable and thoughtful man who is truly the chief Mandarin of DuPont Circle and the titular head of HEE (the Higher Education Establishment) in his role as President of the American Council of Education, was in a tough position, since several organizations of colleges opposed the report, in some cases almost rabidly, while one or two showed cautious support. As head of the umbrella organization that covers the entire establishment, David was in a bind, and his vote was understandable.
Yet this points out the problem. A large part of the higher education community just doesn't get it: Americans are increasingly fed up with the indifference of universities to issues such as soaring tuition costs. The Ward vote is a sign that, on average, universities are going to fiercely support the status quo, fight innovation, oppose accountability and transparency --yet still demand our financial support. It is time to tie public support for higher education (which is increasingly indefensible, in my judgment, on the basis of any rational analysis) to performance --keeping costs down, showing signs of learning improvements, etc.
By the way, kudos are to be given to Bob Mendenhall, president of Western Governors University, an innovative Internet institution, who says he is holding the line on tuition next year, and is starting to make public that school's already commendable data on measuring student progress , etc. Bob already is carrying rhetoric into action. We need more people like President Mendenhall in higher education.
Thursday, August 10, 2006
Back from the Commission Meeting
By Bryan O'Keefe
I just returned back from the final meeting of the Commission on the Future of Higher Education (which Richard Vedder sits on). Dr. Vedder will be posting a longer entry about the meeting either tomorrow or over the weekend -- he is at the airport right now however attempting to board a flight back to Ohio.
The short update is that the Commission overwhemingly approved the report, with one dissenter. David Ward -- President of the American Council on Education and the representative of the HEE (Higher Education Establishment) voted against it. Here is a link to his statement about why he voted against it.
Dr. Vedder did ultimately vote for it, albeit with reservations that the report did not go far enough in addressing critical issues facing higher education. He was also concerned about last minute changes that he wrote about on yesterday's blog. That of course made Mr. Ward's dissent very interesting since he voted against it because it was too critical of higher education.
Like I said, check back in the next day or so for more perspective on what this means.
I just returned back from the final meeting of the Commission on the Future of Higher Education (which Richard Vedder sits on). Dr. Vedder will be posting a longer entry about the meeting either tomorrow or over the weekend -- he is at the airport right now however attempting to board a flight back to Ohio.
The short update is that the Commission overwhemingly approved the report, with one dissenter. David Ward -- President of the American Council on Education and the representative of the HEE (Higher Education Establishment) voted against it. Here is a link to his statement about why he voted against it.
Dr. Vedder did ultimately vote for it, albeit with reservations that the report did not go far enough in addressing critical issues facing higher education. He was also concerned about last minute changes that he wrote about on yesterday's blog. That of course made Mr. Ward's dissent very interesting since he voted against it because it was too critical of higher education.
Like I said, check back in the next day or so for more perspective on what this means.
Wednesday, August 09, 2006
Bait and Switch?
By Richard Vedder
A depressing development has occurred this morning. The chair of the Higher Education Commission, Charles Miller had added some factually accurate and refreshing comments to the third draft report of the commission, a report to which alm0st all commissioners indicated they are prepared to sign. In his comments, he noted the positive role played by the private, unsubsidized lending market. He noted that "a private sector education lending market has fully developed (separate and distinct from loans subsidized by the federal government and made by private financial institutions)." and added "The Commission notes that wider recognition and wider utilization of these options by many families would result in the private sector providing more funding for higher education and in freeing scarce public funds on aid for economically disadvantaged students and families." Neal McCluskey, at CATO, for one, approvingly wrote about this passage.
Now Mr. Miller has told commissioners he wants that last sentence sentence removed. Why? Apparently pressure from the student loan community, broadly defined. If the Commission bows to political pressure even before they vote, how can they be the slightest bit effective in pushing for the implementation of their already rather mild, non-radical reforms? In my previous blog this morning "The Best of Times, Worst of Times," I predicted that the lending community would do everything it could to stop some proposed reforms. I didn't realize, however, however, that they would even water down the recommendations before they are even voted on.
My vote on the Commission report is now in the "undecided" camp, on principle. As Chairman Miller has indicated to me in conversation, the removed section says nothing substantive. But the broader issue is, if a group of persons can pressure him into caving on something as small as this, what will happen after the report is approved? I am very discouraged, and hope others who agree with me will register their displeasure with Mr. Miller. His e-mail is CM494@aol.com
A depressing development has occurred this morning. The chair of the Higher Education Commission, Charles Miller had added some factually accurate and refreshing comments to the third draft report of the commission, a report to which alm0st all commissioners indicated they are prepared to sign. In his comments, he noted the positive role played by the private, unsubsidized lending market. He noted that "a private sector education lending market has fully developed (separate and distinct from loans subsidized by the federal government and made by private financial institutions)." and added "The Commission notes that wider recognition and wider utilization of these options by many families would result in the private sector providing more funding for higher education and in freeing scarce public funds on aid for economically disadvantaged students and families." Neal McCluskey, at CATO, for one, approvingly wrote about this passage.
Now Mr. Miller has told commissioners he wants that last sentence sentence removed. Why? Apparently pressure from the student loan community, broadly defined. If the Commission bows to political pressure even before they vote, how can they be the slightest bit effective in pushing for the implementation of their already rather mild, non-radical reforms? In my previous blog this morning "The Best of Times, Worst of Times," I predicted that the lending community would do everything it could to stop some proposed reforms. I didn't realize, however, however, that they would even water down the recommendations before they are even voted on.
My vote on the Commission report is now in the "undecided" camp, on principle. As Chairman Miller has indicated to me in conversation, the removed section says nothing substantive. But the broader issue is, if a group of persons can pressure him into caving on something as small as this, what will happen after the report is approved? I am very discouraged, and hope others who agree with me will register their displeasure with Mr. Miller. His e-mail is CM494@aol.com
Are Colleges and Universities Hiding Something?
By Bryan O'Keefe
Inside High Ed has a good story this morning on a brewing controversy over congressional “earmarks” for colleges and universities. Earmarks are just a kinder, gentler name for “pork” and the best way to secure this type of funding is by paying lobbyists extravagant fees to insert them into appropriations bills. This whole dirty process has come under extra scrutiny because of the Jack Abramoff and Duke Cunningham scandals.
While “earmarks” and “pork” are generally undesirable, their presence in higher education presents a whole host of additional problems, as the Inside Higher Ed story points out. For example, “earmarks” are an end-run around the competitive grant process which is usually peer reviewed and has considerably more prestige. There is a strong argument to be made that pouring millions of dollars into lobbyist’s pockets while at the same time raising tuition through the roof is not exactly in the best interest of students either.
Now, somebody is finally shedding some light on this and it appears that colleges and universities are none too happy about it. Senator Tom Coburn (R-OK) has written a letter to 111 colleges and universities asking for information on their earmarks dating back to 2000. According to Roll Call however (Hat Tip: National Review Online), higher education lobbyists are frantic. One has urged his clients not to respond. Another is predicting a “very messy” September and October.
The obvious question to ask is: what does higher education have to hide with this investigation? If they have done nothing wrong, then why not just write Senator Coburn a polite letter explaining their earmarks? Or is it the more likely case that revealing how much colleges and universities have spent on earmarks (and possibly how little they have actually gotten in return) will be tremendously embarrassing, especially at a time when colleges are claiming they are strapped for money and must raise tuition?
Kudos to Senator Coburn and his staff for putting this issue on the map. We hope that he continues to follow this aggressively – students, parents, taxpayers and lawmakers deserve to know just how much higher education is spending unnecessarily on K Street.
Inside High Ed has a good story this morning on a brewing controversy over congressional “earmarks” for colleges and universities. Earmarks are just a kinder, gentler name for “pork” and the best way to secure this type of funding is by paying lobbyists extravagant fees to insert them into appropriations bills. This whole dirty process has come under extra scrutiny because of the Jack Abramoff and Duke Cunningham scandals.
While “earmarks” and “pork” are generally undesirable, their presence in higher education presents a whole host of additional problems, as the Inside Higher Ed story points out. For example, “earmarks” are an end-run around the competitive grant process which is usually peer reviewed and has considerably more prestige. There is a strong argument to be made that pouring millions of dollars into lobbyist’s pockets while at the same time raising tuition through the roof is not exactly in the best interest of students either.
Now, somebody is finally shedding some light on this and it appears that colleges and universities are none too happy about it. Senator Tom Coburn (R-OK) has written a letter to 111 colleges and universities asking for information on their earmarks dating back to 2000. According to Roll Call however (Hat Tip: National Review Online), higher education lobbyists are frantic. One has urged his clients not to respond. Another is predicting a “very messy” September and October.
The obvious question to ask is: what does higher education have to hide with this investigation? If they have done nothing wrong, then why not just write Senator Coburn a polite letter explaining their earmarks? Or is it the more likely case that revealing how much colleges and universities have spent on earmarks (and possibly how little they have actually gotten in return) will be tremendously embarrassing, especially at a time when colleges are claiming they are strapped for money and must raise tuition?
Kudos to Senator Coburn and his staff for putting this issue on the map. We hope that he continues to follow this aggressively – students, parents, taxpayers and lawmakers deserve to know just how much higher education is spending unnecessarily on K Street.
The Best of Times, Worst of Times
By Richard Vedder
Tomorrow, the Higher Education Commission created by Secretary of Education Margaret Spellings is meeting in the auditorium of the Department of Education main building in Washington, where, I am certain, they will vote to approve a report (I understand there may have to a formal signing of the official document at some later date, but that will only be of symbolic importance).
If Chairman Charles Miller gives the commissioners a chance to make a brief statement, here is what I will say:
"As Charles Dickens once wrote, these are the best of times, the worst of times. The good news is that the Higher Education Commission has come in with a report, that, if adopted, will improve American postsecondary education and impact positively on the quality of life in America. That is an important accomplishment, and one we can be proud to have contributed towards.
The bad news is two-fold. First, the report has a number of deficiencies, and second, the forces of evil will work mightily to keep sensible reforms from happening. Regarding the first point, I agree with my new friend and pal Bob Zemsky that the report is overly long and not bold enough. To cite merely one example, we say we should simplify federal student aid programs but we don't do something really bold, like saying we should go to one federak program, a national voucher-like extension of the current Pell Grant program. We don't say anything about grade inflation, a lack of coherence in the curriculum, indifference of faculty at most schools to the broader development of students as citizens, the deplorable lack of intellectual diversity on some campuses, the outrageous practice of congressional earmarks for various forms of academic research pork, and little about the excessive emphasis on non-academic things, ranging from intercollegiate athletics to running hotels and country club like facilities for students.
Even worse, however, is the fact that the enemies of change know a very important and fundamental principle of the science or art of public choice: the principle of diffused benefits and concentrated costs. Implementing reform will impose some significant short-term costs on a few thousand institutions of higher education, but will provide smaller but tangible benefits on literally millions of students and their families. While the benefits clearly outweigh the costs for the nation as a whole, those facing the costs will scream and fight change, while the American people who will benefit will likely remain what scholars call "rationally ignorant" of what is going on. Two major groups will lead the fight against change: some of the college associations, most notably David Warren's National Association of Independent Colleges and Universities, and the student loan providers, most notably Sallie Mae. I suspect that some of the opposition will not use reasoned arguments so much as money, indirectly threatening members of Congress with politiical retribution if they cut off the funding gravy train. Many colleges likewise will resist our call for transparency, for opening up their books and their operations to public scrutiny, or for asking them to prove that their students are actually benefiting from their university experience. In short, we have our work cut out for us as we enter the action phase. Let us work together to try to see that the Commission's work is not in vain."
Tomorrow, the Higher Education Commission created by Secretary of Education Margaret Spellings is meeting in the auditorium of the Department of Education main building in Washington, where, I am certain, they will vote to approve a report (I understand there may have to a formal signing of the official document at some later date, but that will only be of symbolic importance).
If Chairman Charles Miller gives the commissioners a chance to make a brief statement, here is what I will say:
"As Charles Dickens once wrote, these are the best of times, the worst of times. The good news is that the Higher Education Commission has come in with a report, that, if adopted, will improve American postsecondary education and impact positively on the quality of life in America. That is an important accomplishment, and one we can be proud to have contributed towards.
The bad news is two-fold. First, the report has a number of deficiencies, and second, the forces of evil will work mightily to keep sensible reforms from happening. Regarding the first point, I agree with my new friend and pal Bob Zemsky that the report is overly long and not bold enough. To cite merely one example, we say we should simplify federal student aid programs but we don't do something really bold, like saying we should go to one federak program, a national voucher-like extension of the current Pell Grant program. We don't say anything about grade inflation, a lack of coherence in the curriculum, indifference of faculty at most schools to the broader development of students as citizens, the deplorable lack of intellectual diversity on some campuses, the outrageous practice of congressional earmarks for various forms of academic research pork, and little about the excessive emphasis on non-academic things, ranging from intercollegiate athletics to running hotels and country club like facilities for students.
Even worse, however, is the fact that the enemies of change know a very important and fundamental principle of the science or art of public choice: the principle of diffused benefits and concentrated costs. Implementing reform will impose some significant short-term costs on a few thousand institutions of higher education, but will provide smaller but tangible benefits on literally millions of students and their families. While the benefits clearly outweigh the costs for the nation as a whole, those facing the costs will scream and fight change, while the American people who will benefit will likely remain what scholars call "rationally ignorant" of what is going on. Two major groups will lead the fight against change: some of the college associations, most notably David Warren's National Association of Independent Colleges and Universities, and the student loan providers, most notably Sallie Mae. I suspect that some of the opposition will not use reasoned arguments so much as money, indirectly threatening members of Congress with politiical retribution if they cut off the funding gravy train. Many colleges likewise will resist our call for transparency, for opening up their books and their operations to public scrutiny, or for asking them to prove that their students are actually benefiting from their university experience. In short, we have our work cut out for us as we enter the action phase. Let us work together to try to see that the Commission's work is not in vain."
Tuesday, August 08, 2006
A Student's Perspective
By Jonathan Leirer
This is the first in an occasional series of perspectives on higher education issues written by students who are research assistants at the Center for College Affordability and Productivity.
Higher Education has worked its way into the main forum of public discourse. With its growing importance in American society, the national spotlight is shining on higher education and that spotlight is revealing quite a few dirty little secrets including: deplorable graduation rates, scandalous salaries paid to top administrators, skyrocketing tuition, and general extravagance, excess and misappropriation. However, leading the discussion are not those most affected, the students, but other parties involved in a more ancillary manner that often have vested interests in non-transparency and the maintenance of the status quo. Therefore, I am taking this opportunity without the pretense of speaking on the behalf of all students but with the hope of bringing the voice of at least one student into the dialogue.
As the youngest of four children, coming from a family with modest means, I came into college knowing I would have to finance it myself. Falsely, I assumed that with an EFC (Expected Family Contribution, as determined by the FAFSA) of 0, the amounted awarded to me through grants and loans would be enough to pay for my education at a modestly priced public university, namely Ohio University. It wasn't, and I soon came to realize that I would need to find a job if I wanted to make it through four (or more) years. So for the past three years I've held at least one and as many as three jobs at any give time, sometimes working more than 20 hours a week, all the while taking on a full course load with a double major. Needless to say it has been more than a little stressful and probably a detriment, at least to some degree, to my achievements, socially and academically.
I cannot help but begrudge others who receive gift-aid yet appear to me to be less qualified. I can cite plenty of instances where athletes with poor academic performance get accepted into and financed through college not based on need or scholastic achievement, but based on athletic ability. Externalities such as leadership and teamwork aside, sports are a form of entertainment. Enjoyable? Yes, but I cannot justify an institution that ostensibly has a primary mission to educate yet invests its resources in entertainment. I can also cite plenty of instances where merit based scholarships are awarded to students whose parents make hundreds of thousands of dollars a year. While I understand it is desirable to bring in gifted and talented students, I feel that it is irresponsible to "purchase" those students and their accompanying statistics, at the expense of those truly in need of financial assistance. It may be the case that poor students are actually more talented and more qualified to receive those merit based scholarships, however, due to their situation did not have the luxury of time or the access to resources afforded to the more affluent. How many hours of studying were lost by students working after school to help their parents pay the bills? How much higher would their GPAs or SAT and ACT scores be if they were afforded those luxuries of time and resources?
I understand that my situation may be a little atypical, but I would venture to guess that similar situations are becoming increasingly common. I would also be emboldened enough to make a normative statement and suggest that this should not be the case. Tuition rates have long since broken away from anything I would consider reasonable, need-based aid is simply insufficient, and inexcusably large amounts of funding seems to be misappropriated to superfluous and extravagant means, funding some students unnecessarily at the expense of others.
I came to college to get a quality education, which I believe I am receiving, but it's not without a heavy burden of work now, and debt later. Were it not for some good luck in landing jobs whose pay was above average (relative to other campus jobs), I might not have made it this far and I imagine that there are many others like myself who have not been so fortunate, and have subsequently "fallen through the cracks."
This is the first in an occasional series of perspectives on higher education issues written by students who are research assistants at the Center for College Affordability and Productivity.
Higher Education has worked its way into the main forum of public discourse. With its growing importance in American society, the national spotlight is shining on higher education and that spotlight is revealing quite a few dirty little secrets including: deplorable graduation rates, scandalous salaries paid to top administrators, skyrocketing tuition, and general extravagance, excess and misappropriation. However, leading the discussion are not those most affected, the students, but other parties involved in a more ancillary manner that often have vested interests in non-transparency and the maintenance of the status quo. Therefore, I am taking this opportunity without the pretense of speaking on the behalf of all students but with the hope of bringing the voice of at least one student into the dialogue.
As the youngest of four children, coming from a family with modest means, I came into college knowing I would have to finance it myself. Falsely, I assumed that with an EFC (Expected Family Contribution, as determined by the FAFSA) of 0, the amounted awarded to me through grants and loans would be enough to pay for my education at a modestly priced public university, namely Ohio University. It wasn't, and I soon came to realize that I would need to find a job if I wanted to make it through four (or more) years. So for the past three years I've held at least one and as many as three jobs at any give time, sometimes working more than 20 hours a week, all the while taking on a full course load with a double major. Needless to say it has been more than a little stressful and probably a detriment, at least to some degree, to my achievements, socially and academically.
I cannot help but begrudge others who receive gift-aid yet appear to me to be less qualified. I can cite plenty of instances where athletes with poor academic performance get accepted into and financed through college not based on need or scholastic achievement, but based on athletic ability. Externalities such as leadership and teamwork aside, sports are a form of entertainment. Enjoyable? Yes, but I cannot justify an institution that ostensibly has a primary mission to educate yet invests its resources in entertainment. I can also cite plenty of instances where merit based scholarships are awarded to students whose parents make hundreds of thousands of dollars a year. While I understand it is desirable to bring in gifted and talented students, I feel that it is irresponsible to "purchase" those students and their accompanying statistics, at the expense of those truly in need of financial assistance. It may be the case that poor students are actually more talented and more qualified to receive those merit based scholarships, however, due to their situation did not have the luxury of time or the access to resources afforded to the more affluent. How many hours of studying were lost by students working after school to help their parents pay the bills? How much higher would their GPAs or SAT and ACT scores be if they were afforded those luxuries of time and resources?
I understand that my situation may be a little atypical, but I would venture to guess that similar situations are becoming increasingly common. I would also be emboldened enough to make a normative statement and suggest that this should not be the case. Tuition rates have long since broken away from anything I would consider reasonable, need-based aid is simply insufficient, and inexcusably large amounts of funding seems to be misappropriated to superfluous and extravagant means, funding some students unnecessarily at the expense of others.
I came to college to get a quality education, which I believe I am receiving, but it's not without a heavy burden of work now, and debt later. Were it not for some good luck in landing jobs whose pay was above average (relative to other campus jobs), I might not have made it this far and I imagine that there are many others like myself who have not been so fortunate, and have subsequently "fallen through the cracks."
The Dumbing Down of America
By Richard Vedder
I started my morning walk in the humid Washington, D.C. heat by strolling down the Mall to the Lincoln Memorial. As always, I was awed by a magisterial words of Lincoln carved on the walls, the great expressions like "with malice towards none and charity for all," and, of course, the "government of the people, by the people, and for the people" closing of the Gettysburg Address, the best three minute, 20 second speech ever delivered. Then I remembered -- Lincoln never went to high school, much less college. The levels of literacy and fluency in our language attainable at any given level of education have declined sharply over time, even amongst ordinary folks less gifted than our sixteenth president.
This dumbing down of the people continues to this day. The average level of literacy of adult Americans in the 2003 Adult Literacy Survey of the U.S. Department of Education was exactly the same as in 1992. That may sound not too bad --at least there was no decline. Yet over that 11 years, the average amount of education received by Americans rose. At any given level of educational attainment, literacy declined. Only because Americans in 2003 had more years of schooling on average did we prevent an overall decline in literacy. Moreover, the decline was greatest among college graduates --suggesting the colleges are doing a less good job of helping Americans learn how to read and interpret passages. To economists like me, this implies a loss of productivity -- it takes more inputs (years in school and the resources needed to provide that schooling) to get the same outcome. To be sure, that may not be true for all forms of learning, but literacy in our language is a basic, vital fundamental skill. My wife tells me that Bill Gates was bragging on Oprah the other day about a technologically advanced school where there were no books. Maybe I am old fashioned, but getting rid of books, other things equal, is not a sign of educational progress.
This is all the more reason why the Commission on the Future of Higher Education's likely call for adopting measures of what student actually learn in college is so very important. They are asking that the Adult Literacy Survey be administered more often and that statewide results be provided. Maybe the survey should be universally administered to entering and departing undergraduate students. Did Johnny or Janet become any more literate while attending College X? Did students at College X on average become more literate than students at College Y? Students, their parents, and taxpayers have a right to know if we are getting any learning for the literally hundreds of billions of dollars spent annually on American higher education, and, if so, who is giving the most bang for the buck.
I started my morning walk in the humid Washington, D.C. heat by strolling down the Mall to the Lincoln Memorial. As always, I was awed by a magisterial words of Lincoln carved on the walls, the great expressions like "with malice towards none and charity for all," and, of course, the "government of the people, by the people, and for the people" closing of the Gettysburg Address, the best three minute, 20 second speech ever delivered. Then I remembered -- Lincoln never went to high school, much less college. The levels of literacy and fluency in our language attainable at any given level of education have declined sharply over time, even amongst ordinary folks less gifted than our sixteenth president.
This dumbing down of the people continues to this day. The average level of literacy of adult Americans in the 2003 Adult Literacy Survey of the U.S. Department of Education was exactly the same as in 1992. That may sound not too bad --at least there was no decline. Yet over that 11 years, the average amount of education received by Americans rose. At any given level of educational attainment, literacy declined. Only because Americans in 2003 had more years of schooling on average did we prevent an overall decline in literacy. Moreover, the decline was greatest among college graduates --suggesting the colleges are doing a less good job of helping Americans learn how to read and interpret passages. To economists like me, this implies a loss of productivity -- it takes more inputs (years in school and the resources needed to provide that schooling) to get the same outcome. To be sure, that may not be true for all forms of learning, but literacy in our language is a basic, vital fundamental skill. My wife tells me that Bill Gates was bragging on Oprah the other day about a technologically advanced school where there were no books. Maybe I am old fashioned, but getting rid of books, other things equal, is not a sign of educational progress.
This is all the more reason why the Commission on the Future of Higher Education's likely call for adopting measures of what student actually learn in college is so very important. They are asking that the Adult Literacy Survey be administered more often and that statewide results be provided. Maybe the survey should be universally administered to entering and departing undergraduate students. Did Johnny or Janet become any more literate while attending College X? Did students at College X on average become more literate than students at College Y? Students, their parents, and taxpayers have a right to know if we are getting any learning for the literally hundreds of billions of dollars spent annually on American higher education, and, if so, who is giving the most bang for the buck.
Monday, August 07, 2006
Pay Daze II
By Richard Vedder
A few days ago, I pointed out that university president's pay has risen far faster than both inflation and the income of the general public over the past several decades. I forgot to add that in some respects this understates the pay increases given because of a modern tendency for schools to give their presidents very generous pay packages after they retire, often with only nominal work required in return. For example, Kent State University has decided to keep retiring president Carol Cartwright on the payroll at full salary --while her work responsibilities will diminish dramatically. The Cleveland Plain Dealer, perhaps unaware of how widespread this practice is, castigated Kent State roundly, saying in a period of rapidly rising tuition charges it was unwarranted to, in effect, pay two presidential salaries. I am inclined to agree.
The salary explosion is not confined to presidents or other senior administrators, like provosts and deans (business school deans often make well over $300,000 a year, for example). Senior research professors at top private research institutions make on average at least 60 percent more than their counterparts did in 1980, for example. By contrast, salary increases adjusted for inflation for assistant professors in community colleges rose hardly at all. There are growing salary disparities within higher education. The rewards for research and administration, not to mention coaching teams are rising sharply relative to the rewards for teaching, particularly undergraduate students. Adjunct faculty are paid peanuts to teach the masses, while senior faculty are given low teaching loads and big pay to think great thoughts -- and lure grants to support that thinking. Is all of this good? I doubt it. Is this partly a product of public policies that unintentionally and indirectly have made higher education more expensive, more elitist, and less interested in its core instructional mission? I think so. Stay tuned CCAP will be shining more light on these practices and their causes in the days and weeks ahead.
A few days ago, I pointed out that university president's pay has risen far faster than both inflation and the income of the general public over the past several decades. I forgot to add that in some respects this understates the pay increases given because of a modern tendency for schools to give their presidents very generous pay packages after they retire, often with only nominal work required in return. For example, Kent State University has decided to keep retiring president Carol Cartwright on the payroll at full salary --while her work responsibilities will diminish dramatically. The Cleveland Plain Dealer, perhaps unaware of how widespread this practice is, castigated Kent State roundly, saying in a period of rapidly rising tuition charges it was unwarranted to, in effect, pay two presidential salaries. I am inclined to agree.
The salary explosion is not confined to presidents or other senior administrators, like provosts and deans (business school deans often make well over $300,000 a year, for example). Senior research professors at top private research institutions make on average at least 60 percent more than their counterparts did in 1980, for example. By contrast, salary increases adjusted for inflation for assistant professors in community colleges rose hardly at all. There are growing salary disparities within higher education. The rewards for research and administration, not to mention coaching teams are rising sharply relative to the rewards for teaching, particularly undergraduate students. Adjunct faculty are paid peanuts to teach the masses, while senior faculty are given low teaching loads and big pay to think great thoughts -- and lure grants to support that thinking. Is all of this good? I doubt it. Is this partly a product of public policies that unintentionally and indirectly have made higher education more expensive, more elitist, and less interested in its core instructional mission? I think so. Stay tuned CCAP will be shining more light on these practices and their causes in the days and weeks ahead.
Sunday, August 06, 2006
Working Hard
By Bryan O'Keefe
As everyone probably already knows, CCAP gets very excited when we read about innovations at traditional colleges and universities that attempt to move higher education into the 21st century. I read about an interesting innovation this past week in Inside Higher Ed, dealing with the federal work study program. Rhodes College in Tennessee has started a new student work study program called the “Student Associate Program” – here is the description from the story:
“…The Student Associate Program that allows undergraduates to compete for positions in departments across campus, earning upwards of $12 per hour for 10 to 15 hours of work each week. The program is funded in part through the institution, as well as through federal work-study monies and support from the Lumina Foundation for Education. Sixty students have participated to date in the steadily expanding program, with plans of eventually including 160 a year, about 10 percent of all Rhodes students.”
The theory behind this new program is that most work study jobs are meaningless, only pay the minimum wage, and contribute very little to the student’s career goal.
The jury is still out of course on whether the Rhodes program will be a success, but at least it’s a different idea and, on its face, looks like a way to make work study programs more productive and meaningful for students. When students are given meaningful jobs, they are usually more productive, work harder and put more effort into it. There is also a good arguement to be made that it’s a better allocation of intellectual resources to have a bright college student working in the type of job that Rhodes program supports than having that same student wash dishes at the cafeteria.
When I attened the George Washington University as an undergrad, I receieved a federal work study grant. Luckily for me, GWU had partnerships with many off-campus employers and I was able to land a job working for the Alexander Graham Bell Association in Washington, DC. I ended up working there for 3 years and the “work study” funtioned more like an extended internship – and I have no doubt that the general office experience that I gained while working there made me better prepared for the jobs that I have had since graduating. Of course, most colleges are not located in big cities with lots of offices, making my work study experience atypical. But I’m obviously happy that some college administrators are looking at ways to change the “status quo” for work study programs, making them more like the one that I had.
An official with Kenyon College, which is also considering a new work study structure, was quoted by Inside Higher Ed as saying, “I believe that higher education can be made more cost effective through new ideas. Anything that allows tuition not to be raised is a good thing.” Amen to that!
As everyone probably already knows, CCAP gets very excited when we read about innovations at traditional colleges and universities that attempt to move higher education into the 21st century. I read about an interesting innovation this past week in Inside Higher Ed, dealing with the federal work study program. Rhodes College in Tennessee has started a new student work study program called the “Student Associate Program” – here is the description from the story:
“…The Student Associate Program that allows undergraduates to compete for positions in departments across campus, earning upwards of $12 per hour for 10 to 15 hours of work each week. The program is funded in part through the institution, as well as through federal work-study monies and support from the Lumina Foundation for Education. Sixty students have participated to date in the steadily expanding program, with plans of eventually including 160 a year, about 10 percent of all Rhodes students.”
The theory behind this new program is that most work study jobs are meaningless, only pay the minimum wage, and contribute very little to the student’s career goal.
The jury is still out of course on whether the Rhodes program will be a success, but at least it’s a different idea and, on its face, looks like a way to make work study programs more productive and meaningful for students. When students are given meaningful jobs, they are usually more productive, work harder and put more effort into it. There is also a good arguement to be made that it’s a better allocation of intellectual resources to have a bright college student working in the type of job that Rhodes program supports than having that same student wash dishes at the cafeteria.
When I attened the George Washington University as an undergrad, I receieved a federal work study grant. Luckily for me, GWU had partnerships with many off-campus employers and I was able to land a job working for the Alexander Graham Bell Association in Washington, DC. I ended up working there for 3 years and the “work study” funtioned more like an extended internship – and I have no doubt that the general office experience that I gained while working there made me better prepared for the jobs that I have had since graduating. Of course, most colleges are not located in big cities with lots of offices, making my work study experience atypical. But I’m obviously happy that some college administrators are looking at ways to change the “status quo” for work study programs, making them more like the one that I had.
An official with Kenyon College, which is also considering a new work study structure, was quoted by Inside Higher Ed as saying, “I believe that higher education can be made more cost effective through new ideas. Anything that allows tuition not to be raised is a good thing.” Amen to that!
The U.S. News & World Report Rankings
By Richard Vedder
Some university presidents are gloating a bit or giving a bit of a sigh of relief because the price of for-profit higher education stocks is down a good bit this year. Apollo Corp., for example, is down more than 30 percent. But what has happened to the University of Michigan or Colorado College? Are they up or down? Who knows? There is no clear "bottom line" in most of higher education, with the conspicious exception of athletics.
US News & World Report (hereafter, USNWR) knows the American desire to compete, to be the best, to excel. So they have created a bottom line, their annual college rankings. They are to be commended for offering the consumers a much desired service.
Yet the USNWR rankings are based in considerable part on inputs -- the quality of incoming students, the proportion of alumni giving money, the amount of faculty hired, class sizes, etc., and not on outcomes. When Consumer Reports rates cars, they drive them; USNWR does the equivalent of measuring the amount of steel used in cars, rather than their performance.
Colleges in their zeal for USNWR recognition thus have a bias to turn down deserving but only "good" as opposed to "outstanding" students, therey reducing access and restricting supply; similarly, they have incentives to spend rather than conserve resources.
We need some new "bottom lines" that are outcomes based-- what did the kids learn in college? The Higher Education Commission;s draft report comes down pretty strong in pushing to provide consumers new outcome-based measures and other easy-to-understand indicators of performance. This is good, and in large part for that reason, I will be voting to adopt the report (as a member of that commission). Let us give USNWR some real competition in the rating business.
Some university presidents are gloating a bit or giving a bit of a sigh of relief because the price of for-profit higher education stocks is down a good bit this year. Apollo Corp., for example, is down more than 30 percent. But what has happened to the University of Michigan or Colorado College? Are they up or down? Who knows? There is no clear "bottom line" in most of higher education, with the conspicious exception of athletics.
US News & World Report (hereafter, USNWR) knows the American desire to compete, to be the best, to excel. So they have created a bottom line, their annual college rankings. They are to be commended for offering the consumers a much desired service.
Yet the USNWR rankings are based in considerable part on inputs -- the quality of incoming students, the proportion of alumni giving money, the amount of faculty hired, class sizes, etc., and not on outcomes. When Consumer Reports rates cars, they drive them; USNWR does the equivalent of measuring the amount of steel used in cars, rather than their performance.
Colleges in their zeal for USNWR recognition thus have a bias to turn down deserving but only "good" as opposed to "outstanding" students, therey reducing access and restricting supply; similarly, they have incentives to spend rather than conserve resources.
We need some new "bottom lines" that are outcomes based-- what did the kids learn in college? The Higher Education Commission;s draft report comes down pretty strong in pushing to provide consumers new outcome-based measures and other easy-to-understand indicators of performance. This is good, and in large part for that reason, I will be voting to adopt the report (as a member of that commission). Let us give USNWR some real competition in the rating business.
Saturday, August 05, 2006
A New Breed of Higher Education Entrepreneur
By Richard Vedder
With the rapid growth in for-profit higher education, there is a new breed of successful entrepreneurs. Of course the most successful of these ventures has been the University of Phoenix (Apollo Corporation), whose founder, John Sperling is a certified billionaire. To be sure Apollo has had a series of problems in the past year, such as declining enrollment growth, management changes, and investigations into stock options, but the company still has nearly an $8 billion capitalization and makes tons of money.
Watch out, however, for the new kid on the block, Randy Best. Texas-based Mr. Best has made and lost many fortunes over a lifetime in a wide variety of businesses. He is the only person I know who ever made really big money in K-12 education. Most big efforts (e.g., Edison Schools) find in nearly impossible to compete with public schools that, for whatever their defects, are "free" to the consumer. Mr. Best focused on a reading program, not trying to run an entire school system, and he and his partners made several hundred million dollars when he sold out a year or so ago.
Mr. Best is back at it again, in higher education. His most promising venture, perhaps, is Early College, an Internet-based program designed to get high school kids to take college courses while in high school, condensing the 8 year (which often turns out to be 9 or 10 year) high school/college experience, saving students money, preparing them for traditional university study, and making better use of their time. He has made severalf shrewd moves. Mr. Best hired such education powerhouses as Rod Paige (former Secretary of Education), Mike Moses (who ran Texas's schools), and Reid Lyons (a much admired researcher and senior staff person at the Department of Education). He bought a struggling Catholic liberal arts college, some claim in order to get accreditation (paying several million dollars, maybe a sort of an initiation fee into the higher education fraternity). And, knowing consumers would worry about the quality of his product, he brought in a respected external examiner, the ACT, to test kids to see if they have learned college-quality material in an acceptable manner. His program is getting started now, but I expect it may be a real winner. Charlie Reed, head of the California State University system, characterized the senior year in high school as a waste of time in recent testimony before the Higher Education Commission, and Randy Best is trying to make that "dead time" far more productive. As a father of a kid who got an "A-" in a college English course while still in eighth grade, I suspect Randy Best is on to something. Some in the HEE (Higher Education Establishment) are critical of his efforts, but I think higher education needs more efforts like this, not fewer.
Randy is also aware of the dismal state of America's colleges of education, and the huge market out there for graduate degrees in education by existing or wannabe teachers. So he has started also the American College of Education on-line. Beyond that, he dreams of offering college degrees globally at a very low cost (less than two thousand dollars a year), using modern Internet technology and research-backed approaches to teaching.
I became familar with Randy and many of his able lieutenants when he asked me to do some major consulting work for him a year or so ago. In the interest of full disclosure, I even invested a nominal amount of my own money in this new venture. So I guess I am biased. But I think it is entrepreneurs like Randy Best who increasingly will force the existing traditional educational institutions to become more innovative, more cost-effective, more willing to demonstrate that their students are learning (e.g., by having some sort of external evaluation of their progress). The for-profit sector hopefully will use its profit-based incentive system to innovate, to be more productive, and to drag, perhaps kicking and screaming, traditional higher education into 21st century.
With the rapid growth in for-profit higher education, there is a new breed of successful entrepreneurs. Of course the most successful of these ventures has been the University of Phoenix (Apollo Corporation), whose founder, John Sperling is a certified billionaire. To be sure Apollo has had a series of problems in the past year, such as declining enrollment growth, management changes, and investigations into stock options, but the company still has nearly an $8 billion capitalization and makes tons of money.
Watch out, however, for the new kid on the block, Randy Best. Texas-based Mr. Best has made and lost many fortunes over a lifetime in a wide variety of businesses. He is the only person I know who ever made really big money in K-12 education. Most big efforts (e.g., Edison Schools) find in nearly impossible to compete with public schools that, for whatever their defects, are "free" to the consumer. Mr. Best focused on a reading program, not trying to run an entire school system, and he and his partners made several hundred million dollars when he sold out a year or so ago.
Mr. Best is back at it again, in higher education. His most promising venture, perhaps, is Early College, an Internet-based program designed to get high school kids to take college courses while in high school, condensing the 8 year (which often turns out to be 9 or 10 year) high school/college experience, saving students money, preparing them for traditional university study, and making better use of their time. He has made severalf shrewd moves. Mr. Best hired such education powerhouses as Rod Paige (former Secretary of Education), Mike Moses (who ran Texas's schools), and Reid Lyons (a much admired researcher and senior staff person at the Department of Education). He bought a struggling Catholic liberal arts college, some claim in order to get accreditation (paying several million dollars, maybe a sort of an initiation fee into the higher education fraternity). And, knowing consumers would worry about the quality of his product, he brought in a respected external examiner, the ACT, to test kids to see if they have learned college-quality material in an acceptable manner. His program is getting started now, but I expect it may be a real winner. Charlie Reed, head of the California State University system, characterized the senior year in high school as a waste of time in recent testimony before the Higher Education Commission, and Randy Best is trying to make that "dead time" far more productive. As a father of a kid who got an "A-" in a college English course while still in eighth grade, I suspect Randy Best is on to something. Some in the HEE (Higher Education Establishment) are critical of his efforts, but I think higher education needs more efforts like this, not fewer.
Randy is also aware of the dismal state of America's colleges of education, and the huge market out there for graduate degrees in education by existing or wannabe teachers. So he has started also the American College of Education on-line. Beyond that, he dreams of offering college degrees globally at a very low cost (less than two thousand dollars a year), using modern Internet technology and research-backed approaches to teaching.
I became familar with Randy and many of his able lieutenants when he asked me to do some major consulting work for him a year or so ago. In the interest of full disclosure, I even invested a nominal amount of my own money in this new venture. So I guess I am biased. But I think it is entrepreneurs like Randy Best who increasingly will force the existing traditional educational institutions to become more innovative, more cost-effective, more willing to demonstrate that their students are learning (e.g., by having some sort of external evaluation of their progress). The for-profit sector hopefully will use its profit-based incentive system to innovate, to be more productive, and to drag, perhaps kicking and screaming, traditional higher education into 21st century.
Friday, August 04, 2006
Higher Education and the State
By Richard Vedder
My previous articles have dealt with some of the details of higher education, such as the pay of college presidents, or college dropout rates. I want, however, to return to first principles today. Why does government so heavily finance higher education, not only in America but globally?
I hear two major arguments for such funding. First, higher education is allegedly a "public good", meaning some of the benefits accrue to the broader society --not just current users of its services (primarily students). Second, we have a national egalitarian tradition, one that argues that any American, no matter how poor, can rise up the economic and social ladder to success. Education is an important means to achieving that end.
The first argument suggests that universities have what economists call "positive externalities" or spillover effects. For example, the knowledge gained through education allegedly makes us more discerning citizens, more likely to elect level-headed leaders and not charlatans. The advance in higher forms of literacy facilitates communication, making markets function better. Tolerance learned in the course of advanced study ultimately reduces divisiveness, rancor, and arguably civil uprisings. Those subscribing to this view argue that since some of the gains of higher education accrue to the broader populace, it should subsidize it --via appropriations for universities, grants for students, etc.
Yet maybe college has "negative externalites" as well. For example, maybe the celebration of multi-culturalisim in universities has reduced social cohesiveness that binds diverse persons together in a nation. Maybe universities preach a moral relativism that ultimately leads to more crime, greater corruption, etc. Maybe universities promote sin more than virtue, ideology more than knowledge. Maybe the taxes used to finance government support have severe disincentive effects on private activity, and that the "crowding out" of such activity by universities lowers GDP since private market activity in general is more efficiently generated than that at our largely not-for-profit universities.
It is very difficult to measure externatlities or spillover effects. The limited work that I have done in the area, however, leads me to believe that the negative externalities may well exceed the positive ones. For example, states that spend more on higher education, other things equal, tend to have lower rates of economic growth. People do not flock to higher education-intensive areas because of their alleged higher quality of life (the reverse is closer to the truth). If the negative externalities dominate, not only should we stop subsidizing higher education, but probably we should tax it (a point made to me first by Milton Friedman in an e-mail).
What about providing equal opportunity? It is true college grads earn more than high school ones, and access to higher education is usually important in earning sizable incomes. Yet even here the evidence is somewhat disturbing. We do not see, for example, markedly higher levels of higher educational participation in states that spend a lot more on their universities. For every dollar in added state appropriations per student to universities, the vast majority of the money goes for higher college spending -- not lower tuition charges than otherwise would exist. In short, there is very little positve (maybe, no) association between actual spending on higher ed by state governments and the incidence of college graduates. Similarly, the explosion in the federal student loan program since 1980 has been accompanied by a slowing down in the historic rise in college attendance and graduation.
Hence, there are legitimate reasons to be skeptical of the impact of increased federal and state involvement in higher education. Indeed, I applaud the trend for government higher education spending to fall relative to private spending. We are partly privatizing higher education at the state level as governmenting spending has become a reduced share of state university revenues. The HEE (Higher Education Establishment) decries this trend; I applaud it. CCAP will be researching this whole area more in the week and months ahead.
My previous articles have dealt with some of the details of higher education, such as the pay of college presidents, or college dropout rates. I want, however, to return to first principles today. Why does government so heavily finance higher education, not only in America but globally?
I hear two major arguments for such funding. First, higher education is allegedly a "public good", meaning some of the benefits accrue to the broader society --not just current users of its services (primarily students). Second, we have a national egalitarian tradition, one that argues that any American, no matter how poor, can rise up the economic and social ladder to success. Education is an important means to achieving that end.
The first argument suggests that universities have what economists call "positive externalities" or spillover effects. For example, the knowledge gained through education allegedly makes us more discerning citizens, more likely to elect level-headed leaders and not charlatans. The advance in higher forms of literacy facilitates communication, making markets function better. Tolerance learned in the course of advanced study ultimately reduces divisiveness, rancor, and arguably civil uprisings. Those subscribing to this view argue that since some of the gains of higher education accrue to the broader populace, it should subsidize it --via appropriations for universities, grants for students, etc.
Yet maybe college has "negative externalites" as well. For example, maybe the celebration of multi-culturalisim in universities has reduced social cohesiveness that binds diverse persons together in a nation. Maybe universities preach a moral relativism that ultimately leads to more crime, greater corruption, etc. Maybe universities promote sin more than virtue, ideology more than knowledge. Maybe the taxes used to finance government support have severe disincentive effects on private activity, and that the "crowding out" of such activity by universities lowers GDP since private market activity in general is more efficiently generated than that at our largely not-for-profit universities.
It is very difficult to measure externatlities or spillover effects. The limited work that I have done in the area, however, leads me to believe that the negative externalities may well exceed the positive ones. For example, states that spend more on higher education, other things equal, tend to have lower rates of economic growth. People do not flock to higher education-intensive areas because of their alleged higher quality of life (the reverse is closer to the truth). If the negative externalities dominate, not only should we stop subsidizing higher education, but probably we should tax it (a point made to me first by Milton Friedman in an e-mail).
What about providing equal opportunity? It is true college grads earn more than high school ones, and access to higher education is usually important in earning sizable incomes. Yet even here the evidence is somewhat disturbing. We do not see, for example, markedly higher levels of higher educational participation in states that spend a lot more on their universities. For every dollar in added state appropriations per student to universities, the vast majority of the money goes for higher college spending -- not lower tuition charges than otherwise would exist. In short, there is very little positve (maybe, no) association between actual spending on higher ed by state governments and the incidence of college graduates. Similarly, the explosion in the federal student loan program since 1980 has been accompanied by a slowing down in the historic rise in college attendance and graduation.
Hence, there are legitimate reasons to be skeptical of the impact of increased federal and state involvement in higher education. Indeed, I applaud the trend for government higher education spending to fall relative to private spending. We are partly privatizing higher education at the state level as governmenting spending has become a reduced share of state university revenues. The HEE (Higher Education Establishment) decries this trend; I applaud it. CCAP will be researching this whole area more in the week and months ahead.
Thursday, August 03, 2006
The National Commission Report: First Impressions
By Richard Vedder
I have just read the just prepared latest, and hopefully near-final, draft of the report of the Secretary of Education's Commission on the Future of Higher Education.
Is the report what I would have written if I were czar with dictatorial powers to change things? No. Does the report address or even mention all the important issues facing higher education today? Again, the answer is no. Does the report give very specific and detailed recommendations on the major problems of interest to me, namely issues of affordability and productivity? In general, no. Is the report, therefore, highly imperfect as the definitive policy document for higher education for the next decade? Here, the answer is "yes."
Having said all of this, does this mean that I, as a member of the Commission, will not be signing the report? No. I plan to sign it, barring some last minute revisions that soften its tone, water down its recommendations, etc. Why? While imperfect, I ask the question: will the Commission's recommendations, if implemented, improve higher education and America? I think the answer is clearly yes.
Here are a few things the report recommends that are positive:
1) Higher education should be made more transparent. Colleges should report their finances in an uniform, easy-to-understand manner. Performances indicators, such as 4, 5, and 6 year graduation rates should be clearly published so consumers can compare them. Most important, colleges should be encouraged to develop measures of "value added" during college --what did the kids learn? This is a modest attempt to bring about some sort of "bottom line."
2) A commitment must be made to reduce per student growth in costs, and reduce the rise in tuition fees. Although a bit vague as to how this will be done, the rhetoric is pretty good. Promoting greater student mobility between institutions by easing transfer of credit, for example, will foster greater competition.
3) While a bit vague, the financial aid recommendations are clearly a step in the right direction. Increase the Pell Grant amounts; Pell grants are essentially a student voucher, which is the preferred way of subsidizing universities if subsidies are going to be given. Implicitly, the report recommends reducing federal subsidized loans for relatively affluent students, and for privatizing more of the student loan market. If higher education has the high rate of returns that its proponents claim, then people should be willing to invest in themselves by borrowing at competitive market interest rates.
4) Ease barriers to entry into higher education, and make accrediation more open, transparent, and outcomes based.
5) Promote able students taking more college classes in high school.
The report does not propose voucherizing all federal funds for higher education, drastically clamping down on student loan growth (although that is clearly implied in some of the recommendations), encourage year-round utilization of facilities, question teaching loads, comment on redundant and expensive graduation programs, or a host of other issues. It says too little about for profit education, and does not explore ideas such as privatizing state universities. It does not acknowledge that many students do not work hard, or even mention, much less condemn, grade inflation. Intellectual intolerance and a frequent scorn for diversity of opinions is not condemned. While some mention of inadequate learning occurs, the shameful state of student learning (or, better, lack of learning) about our own heritage is not discussed, nor is graduate education or research (except tangentially). No discussion exists about over-specialization, or a lack of a coherent core curriculum. It does not have explicit recommendations how, for example, we can rid ourselves of the current student loan system and replace it with an alternative -- the Australian model, the idea of Arthur Beroz, etc. Perhaps students should be allowed to sell stock in themselves (equity) rather than bonds (current IOU lending arrangements) -- none of these novel ideas are explicitly discussed.
Having said all of this, however, the report is a step, albeit not as bold of one as I would like, in the direction of promoting greater efficiency and accountability in American higher education, and, for this reason, I will likely vote for it next week (if a vote is taken, as I expect).
I have just read the just prepared latest, and hopefully near-final, draft of the report of the Secretary of Education's Commission on the Future of Higher Education.
Is the report what I would have written if I were czar with dictatorial powers to change things? No. Does the report address or even mention all the important issues facing higher education today? Again, the answer is no. Does the report give very specific and detailed recommendations on the major problems of interest to me, namely issues of affordability and productivity? In general, no. Is the report, therefore, highly imperfect as the definitive policy document for higher education for the next decade? Here, the answer is "yes."
Having said all of this, does this mean that I, as a member of the Commission, will not be signing the report? No. I plan to sign it, barring some last minute revisions that soften its tone, water down its recommendations, etc. Why? While imperfect, I ask the question: will the Commission's recommendations, if implemented, improve higher education and America? I think the answer is clearly yes.
Here are a few things the report recommends that are positive:
1) Higher education should be made more transparent. Colleges should report their finances in an uniform, easy-to-understand manner. Performances indicators, such as 4, 5, and 6 year graduation rates should be clearly published so consumers can compare them. Most important, colleges should be encouraged to develop measures of "value added" during college --what did the kids learn? This is a modest attempt to bring about some sort of "bottom line."
2) A commitment must be made to reduce per student growth in costs, and reduce the rise in tuition fees. Although a bit vague as to how this will be done, the rhetoric is pretty good. Promoting greater student mobility between institutions by easing transfer of credit, for example, will foster greater competition.
3) While a bit vague, the financial aid recommendations are clearly a step in the right direction. Increase the Pell Grant amounts; Pell grants are essentially a student voucher, which is the preferred way of subsidizing universities if subsidies are going to be given. Implicitly, the report recommends reducing federal subsidized loans for relatively affluent students, and for privatizing more of the student loan market. If higher education has the high rate of returns that its proponents claim, then people should be willing to invest in themselves by borrowing at competitive market interest rates.
4) Ease barriers to entry into higher education, and make accrediation more open, transparent, and outcomes based.
5) Promote able students taking more college classes in high school.
The report does not propose voucherizing all federal funds for higher education, drastically clamping down on student loan growth (although that is clearly implied in some of the recommendations), encourage year-round utilization of facilities, question teaching loads, comment on redundant and expensive graduation programs, or a host of other issues. It says too little about for profit education, and does not explore ideas such as privatizing state universities. It does not acknowledge that many students do not work hard, or even mention, much less condemn, grade inflation. Intellectual intolerance and a frequent scorn for diversity of opinions is not condemned. While some mention of inadequate learning occurs, the shameful state of student learning (or, better, lack of learning) about our own heritage is not discussed, nor is graduate education or research (except tangentially). No discussion exists about over-specialization, or a lack of a coherent core curriculum. It does not have explicit recommendations how, for example, we can rid ourselves of the current student loan system and replace it with an alternative -- the Australian model, the idea of Arthur Beroz, etc. Perhaps students should be allowed to sell stock in themselves (equity) rather than bonds (current IOU lending arrangements) -- none of these novel ideas are explicitly discussed.
Having said all of this, however, the report is a step, albeit not as bold of one as I would like, in the direction of promoting greater efficiency and accountability in American higher education, and, for this reason, I will likely vote for it next week (if a vote is taken, as I expect).
Subscribe to:
Posts (Atom)
