Wednesday, December 12, 2007

American Universities in 2027: Christian Bateson's View

By Richard Vedder

I got a great email today from Christian Bateson, a Dartmouth College graduate of the class of 1999 who works as a financial analyst in New York for Bear Stearns and who seems to me to have a remarkably perceptive view of American higher education now and in the future (translation: he agrees with me). Let me, with his permission, quote extensively from his email:

"If cost increases keep up at the rates of recent years, and if my (as yet unborn) children want to go to private institutions, it will cost me millions of dollars....If costs continue to increase at 7-8% per annum, and if people in my economic situation choose to pay full tuition, it will essentially represent a large (and ever increasing) wealth transfer from the most productive (and probably more politically conservative...) element of society, to a part of society whose productivity is, at the least, very hard to measure (and politcally very left leaning...) It would be one thing if that was leading to smaller class sizes and better education, but instead it's going to hire more 'diversity deans' and 'sustainability specialists.'...As for me, I have faith in the markets...My prediction is that for-profit educational institutions will grow in number and acceptance, and will ultimately lose much of the stigma they have now. If parents in 2027 want to pay $700,000 to send their son to Vassar, they can do so, but for a mere $100,000 they will also be able to send him to Time Warner Media School or GE School of Electrical Engingeering. ...'traditional' private schools will lose their advantage."

Amen. I said pretty much the same thing in Going Broke By Degree. His comments on the income distributional effects of current policies with respect to political ideology, however, are pretty original and I think exactly on target. Maybe Lenin was thinking of university giving when he said the capitalists will hang themselves with the rope they manufacture and sell (or something like that). The battle of alums to have great control over affairs at Bateson's alma mater may have had its roots in the fact that left wing academics want to hustle resources from nostalgic right wing alums, but don't want those nasty plutocrats to interfere or constrain their own highly dubious professorial behavior.

Will the Vassars (or Dartmouths or Harvards) disappear? Of course not. Some people want the prestige that likely will continue to be associated with Ivy League education. Others want the country club like amenities that Princeton will provide but the GE School may not --college is a consumption good as much as investment good for many. Life in the new $250,000 a room Whitman College at Princeton will be pretty nice, I suspect. Students will love looking out of their triple glazed leaded glass windows on a bucolic campus scene.

Still, the theory of relative prices explains an awful lot in life, and I think higher education is not immune to the pressures imposed by the existence of scarcity and resource limitations on our planet. And the less prestigious private schools that emulate Harvard might have a rude awakening some day when few if any freshmen show up the first day in the fall. We at CCAP are trying merely to push for more aggressive use of the market mechanism now, to let prices reflect true values, and to increase awareness of alternatives to the status quo.

Three cheers for Christian Bateson!!!!


sciencedoc said...

Hah! A financial analyst in New York who considers himself one of society's most productive members! Maybe like that guy Stan O'Neal who walked away with a $160 million booby prize from Merrill-Lynch for losing $8 billion for the company. The guy sounds like a crybaby who got his Dartmouth degree and then started moaning about how victimized he is.

By all means, buddy, make your millions a year in New York, send your kid to the (non-existent?) GE school of engineering, if you don't think Dartmouth is worth it. There are plenty of people standing in line to take your place. Most of those who get in don't make millions a year, and they get a pretty good deal at Dartmouth and the other Ivies. Better, in fact, than if they go to Brand X state university.

Cowboy said...

There was a boat docked in a tiny Mexican village. An American tourist complimented the Mexican fisherman on the quality of his fish and asked how long it took him to catch them.

"Not very long," answered the Mexican.

"But then, why didn't you stay out longer and catch more?" asked the American.

The Mexican explained that his small catch was sufficient to meet his needs and those of his family.

The American asked, "But what do you do with the rest of your time?"

"I sleep late, fish a little, play with my children, and take a siesta with my wife. In the evenings, I go into the village to see my friends, have a nice meal, play the guitar, and sing a few songs... I have a full life."

The American interrupted, "I'm a Financial Analyst and I can help you!"

You should start by fishing longer every day. You can then sell the extra fish you catch. With the extra revenue, you can buy a bigger boat."

"And after that?" asked the Mexican.

"With the extra money the larger boat will bring, you can buy a second one and a third one and so on until you have an entire fleet of trawlers. Instead of selling your fish to a middle man, you can then negotiate directly with the processing plants and maybe even open your own plant."

"You can then leave this little village and move to Mexico City, Los Angeles, or even New York City! From there you can direct your huge new enterprise."

"How long would that take?" asked the Mexican.

"Twenty, perhaps twenty-five years," replied the American.

"And after that?"

"Afterwards? Well my Friend, That's when it gets really interesting," answered the American, laughing.

"When your business gets really big, you can start selling stocks and make millions!"

"Millions? Really? And after that?" said the Mexican.

"After that you'll be able to retire, live in a tiny village near the coast, sleep late, fish a little, play with your children, and take a siesta with your wife. In the evenings, you can go into the village to see your friends, have a nice meal, play the guitar, and sing a few songs... you can have a full life."

Chris said...

"they will also be able to send him to Time Warner Media School or GE School of Electrical Engingeering"

Very laughable. Didn't GM have their own engineering university at one time? Did it ever compete on a national level or even on an even level with UM and MSU?

Besides, if he paid any attention to the current modes of thinking in corporate America, he'd realize that our companies would be far more likely to open those universities in China or India than in their home country.

maxheadroom said...

i interpret the first comment contextualised as this guy christian bateson is an ungrateful little bastard. to an extent i agree. the second comment i'm not sure if it is a joke or if it has some moral to the story or message.

now here we have a kid that went to dartmouth and is critical of the system that put him in a position that will provide him and his family with financial security - not like all the customers of bear stearns who were prevented from drawing their investment dollars from bear stearns hedge fund(s). or the 650 piss-ants that bear stearns is going to lay off (merry christmas you poor dumb bastards). so in my opinion he is being a tinge hypocritical. in addition, his critique of the status quo that is dartmouth is especially unprincipled since he is on the 2007 dartmouth college fund honor roll. this is either ego or philanthropy or both. words are one thing - actions are quite another indeed.

i don't think that many people hold the likes of wall street financial analysts and their quants, or financial planners, wherever they are, in very high esteem. some people think that wall street, nay, lower manhattan are so confounded greedy they will use the mathematics phd’s to write the mathematical models that are supposed to not only predict market behaviour, but to also come up with every way possible to chase every penny. derivatives, cdo’s, cdo’s for cdo’s, cdo’s for cdo’s for cdo’s and so forth. well, even mathematical models fail because they cannot predict the stupidity of lenders and borrowers. It is incredible what effort is put into determining whether people like christian bateson will recommend buy, sell, or hold in the meeting with the portfolio manager.

so whilst ordinary americans that only have enough money for a 401k and ira have to bend over and take it up the wazoo by companies like bear stearns and their fleecing of america by way of fees, the heads of these banks and financial companies are pocketing millions in bonuses, even if they lose massive quantities of money for their customers. I guess this is why we are beginning to see foreigners being hired to head the financial companies and banks. wall street is not london, and it shall never be.

so anything an analyst has to say in criticising the future of higher education whilst at the same time giving them money and being part of the status quo, in my opinion goes over like passing gas in an elevator.

sciencedoc said...

Max, eloquently spoken! I know some of those Ph.D.'s who go off to Wall St., I've even trained one or two. They are probably making more than this Dartmouth crybaby, probably make ten times more than their (more talented) confreres who stick it out in academia. But they don't piss on the system that was good enough to provide them with this bounty.

Chris, GM had the General Motors Institute. I don't know if it still exists, you could probably google it up. As I recall, it was a good deal for people who wanted their education paid for, but it had pretty narrow horizons.

Are the American engineering colleges going to go out of business? Not judging by the foreigners (who by and large are not rich, huh, how do they afford this extortion?) that keep flocking here because they -- the schools and the students are the best schools in the world. (Of course, our government may be knuckleheaded enough to keep them from getting into the country).

Maybe Mr. Fratboy thinks that his Dartmouth pals -- who are too soft to compete? -- will have special engineering schools run by American corporations? I doubt it, the outsourcing to Asia sounds a lot more like it to me.

Chris said...

One more comment, then I'll let this drop. One of my major irritations in life is with those constantly harping that our universities "should be run more like business." Really! Anyone taken a lingering glance at the state of American business lately?

Our higher education system does have significant problems of which many are very thoughtfully analyzed in this blog. That being said, the American higher education system is still the world's gold standard as evidenced by the continuing stream of "best and brightest" from around the world that fill its classrooms each year.

When's the last time the same could be said for American business? This Dartmouth frat boy should be more concerned with issues closer to his home such as why is New York being eclipsed by London as the world's financial capital?

Mad Dog said...

I'll bet Bateson is real happy he gave permission to be quoted on a blog. But what the hell, live and learn.

Max - You say you agree (to an extent) that Bateson is ungrateful and then go on to say he is on the donors honor list. Just an observation, but I believe that indicates he is grateful. Plus he gets a tax deduction.

However, with that said, Bateson does indeed criticise the system that put him in a good position. I guess that's kind of like burning the American flag, huh?

You all are giving this "poor bumb bastard" a hell of a verbal beating. And unfortunately the authors use of a person's name and title completely overshadowed the message.

I just wanted to run an opposing view up the flag pole and see if it got shot at or saluted. I have the distinct feeling there will be quite a few holes in it.

Mad Dog said...

Just one other thing. "If everyone is thinking alike, someone isn't thinking." GS Patton, Jr.

That goes for the blog author too. If you surround yourself with people who always agree with your ideas, or have no better ideas of their own, then you really don't need them. Do you? (See: "Law of Diminishing Returns".)

(my apologies, that was two things)

sciencedoc said...

Mad Dog -- you bring up a good point, intentional or not, I'm unsure.

This stuff does kind of remind me of flag-burning, though of course there are a lot of differences. Bateson and people like Vedder strike me as very destructive people who don't much like the country that has produced the higher education system that they so despise. Yet both have benefited enormously from it -- Vedder had a chair-type position at Ohio University before he retired, Bateson is probably raking in the dough on Wall St. (enough to be worried about having to pay full freight at Dartmouth for his kids).

This strikes me as sort of a perverse mirror image of the hatred for the country that is displayed by the radical left.

I've hated it for a long time when it was coming from the left. I'm beginning to see the same thing from the right, and soom will be hating just as much.

Mad Dog said...

sciencedoc - You are very astute! My position was intentional. If Bateson is reading this, I wonder how many more times this blog's author will receive an email from him?!!

I whole-heatedly agree with eveything else you said. The hatred, anger, and divisiveness in our country is perverse. I could write all day about what I think of it.

jotini said...

I think I should make it clear that this is not me defending my brother; in fact it is quite the opposite. I spent this past weekend with my brother and overheard him talking aboout this blog. I decided to google it and couldnt believe the stupid comments posted by sciencedoc and Max - both stupid names by the way.

Wow! Sound like sciencedoc and Max have a lot of spare time. Chris was merely commenting on the current/future situation of college instititions in America, and I would think he has a good perspective being that he went to one of the best schools in the nation.

Before you eloquently writing f#@ks start attacking me, let me give you a little background on the "Dartmouth crybaby". Chris grew up in southern New Mexico. He came from a family of eight and had to work for, and has earned, everything he has. Chris knows what it means to set goals and meet, no exceed them.

I think you are missing the point that my brother is trying to get across. He is not playing the victim, as a matter of fact he loves the institute that provided him with probably the best four years of his life. Not only did he complete a very rigorous curriculum, he found time to be an active member of one of the best fraternities of all time.

Now let me guess, sciencedoc and Max by your names, I am thinking you might have been virgins when you graduated college?!! Let's be honest, I think you are just mad that you wasted four or five years being douche bags. If you have nothing better to do than attack my brother - a person that you know nothing about - than you have serious problems. If you think you are doing society some great favor by participating in this blog you are wrong. GET A LIFE!

By the way, I attended a "Brand X" state university, and I am quite happy wih my education and frat boy experience. Next time you make a comment on this blog, stop and think about what a loser you are, and then start talking sh#t.