Friday, March 02, 2007

Would You Buy A Used Car from a University President?

By Richard Vedder

While University presidents, like all humans, vary enormously in terms of honesty and integrity, increasingly they condone deceptive and unethical practices in order to advance their university's mission. Aside from being morally wrong, in the long run, I think it contributes to declining public support for higher education.

That was driven home to me twice in the past 24 hours. A prominent editorial person at a major American newspaper recounted to me in an email how he had met with several university presidents recently, and had asked them if they were familiar with my book Going Broke By Degree. They all professed ignorance of the book. In reality, I had seen copies of the book on the office bookshelf of one of the attending presidents and am almost certain that I had talked about it with a second president present. They simply lied to the newspaper -- because they did not want to discuss what Al Gore would call "inconvenient truths" raised in the book. This may be what the Catholic Church once called (and probably still does) a "venial sin."

Daniel Golden, my favorite investigative reporter on higher education issues, raises another scam in today's Wall Street Journal that might come closer to what the church would call a "cardinal sin." Colleges lie and distort numbers to raise the reported percent of alumni who contribute to the institution. Using Albion College as the main example, Golden shows how graduating seniors who give, say, $25, to the school, see their gift spread out in $5 annual increments over five years for book-keeping purposes, all to raise the giving rate for those five years, years in which the graduating student is still in grad school and desperately worrying about accumulating student loans. Why bother to engage in this deception? The alumni giving rate is a factor in the all-important US News & World Report (hereafter, USNWR) rankings. Nationwide, alumni donor giving rates have surprisingly not declined a good deal over time, but you wouldn't believe it reading the numbers reported in USNWR.

All of this is doubly upsetting. It is bad that the college lies. Their defense is that they are following "industry standards" (translation: all of us lie), or standards created by CASE, a trade association (cartel?) of university money hustlers. It is morally bankrupt, and helps explain why Americans are increasingly failing to see the distinction between universities and used car dealers. We subsidize the former, and tax the latter -- why, when both have similar ethical standards regarding the goods and services that they sell?

Beyond that, however, is the other issue --why is giving money --a resource --considered a measure of how good a college is, or whether it is performing its missions? Colleges do not give us information on what kids learn in schools, so USNWR and others reach out for other data, but data that really measures inputs, not outcomes. We are engaging in a silly, expensive, and morally degrading game to distort alumni giving rates, when there is not a scintilla of evidence that those rates mean anything with respect to whether universities prepare our youth for better citizenship, make them economically more productive, make them more knowledgeable about the world in which we live, or even make them happier consumers while in school.

By the way, Dan Golden has a long career ahead, as there are many other scams he has not touched. One big scam he has missed is the tendency for universities to grossly overstate the amount donated in their major capital campaigns. For example, I recall that my university's last campaign bragged about raising $221 million, when the actual cash received, I am told by inside sources, was somewhat less than 20 percent of that amount. I suspect, to varying degrees that too is "industry standards," counting as a gift every vaguely promised penny pledged by alums, and then using some of the phantom money to hustle real dollar matching gifts.

Should we throw the liars in jail? Probably not. Governmental policing of university morality is a cure worse than the disease. However, should we remove special tax status and government subsidies for universities engaging in such deceptive practices? That is an idea whose time may have come.

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