By: Matthew Denhart, Robert Villwock, Jonathan Robe, and Daniel Bennett
In the previous blog we reported an entirely new university ranking system calculated using data from both ratemyprofessors.com and the 2008 edition of Who’s Who in America. Those results were telling, but it is interesting to also look at the results from only the ratemyprofessors.com data. These serve to indicate student (i.e. consumer) satisfaction with the product colleges and universities offer—faculty instruction.
These rankings are calculated by taking a weighted average of all faculty members at a university in the categories of: overall quality, average easiness (with ease treated as a negative quality), and average "hotness." While “hotness” may seem a bit irrelevant, we felt that it still is an indicator of consumer satisfaction. In the ranking "hotness" and easiness are weighted less than the figures for the overall rating of the professor's effectiveness.
The results show that on average students at liberal arts institutions are more satisfied with their professors than students at what US News and World Report terms “national universities.” In fact, of the top 25 of both school types combined, only 2 national universities (Boston College and Northwestern University) make the list. Furthermore, only 11 national universities make the top 50.
While this ranking is simply an indication of consumer satisfaction with professors, it is still interesting to also compare these with the USNWR rankings. Below are the CCAP top 15 national universities and top 15 liberal arts schools based on student satisfaction (per ratemyprofessors.com), with USNWR rankings in parentheses.
National Universities
1. Boston College (35)
2. Northwestern (14)
3. Harvard (2)
4. California Tech (5)
5. Princeton (1)
6. Samford (118)
7. U. of Chicago (9)
8. MIT (7)
9. Wake Forest (30)
10. Brigham Young University (BYU) (79)
11. Brown (14)
12. Yale (3)
13. U. of Pennsylvania (5)
14. Emory (17)
15. Stanford (4)
Liberal Arts Colleges
1. Wellesley (4)
2. U.S. Military Academy (22)
3. Wabash (52)
4. Whitman (37)
5. Bryn Mawr (24)
6. Carleton (5)
7. Swarthmore (3)
8. Barnard (30)
9. Earlham (69)
10. Harvey Mudd (15)
11. Middlebury (5)
12. Amherst (2)
13. Kalamazoo (67)
14. Lawrence U. (56)
15. Haverford (10)
Again the CCAP and USNWR rankings are fairly similar. Of the CCAP top 15 national universities, 10 of those are also in the top 15 of the USNWR rankings. Yet, some other schools—particularly Samford and BYU—rank much higher according to our student satisfaction rankings. The same is the case with liberal arts schools. A majority of the CCAP top 15 schools are also ranked in the top 15 by USNWR, but several others not as well ranked by USNWR appear on the CCAP list. These disparities show that what is traditionally believed to be important in determining a quality institution, is not always consistent with what satisfies students.
One of the oldest universities in the world, the University of Bologna chartered in 1158 by Frederick I Barbarossa, was designed to cater to student desires. Students collectively hired professors, set tuition rates, evaluated and even dismissed low-quality instructors. While we have moved away from that model (perhaps somewhat for the better) student instruction remains the primary function of a university. Faculty research and other things distract from this goal. Our findings that students at liberal arts colleges are more satisfied with their professors than those at national research institutions is not surprising. Perhaps it is time that our national research universities shifted priorities more toward satisfying high paying customers. Since students are the main consumers of the university product, any ranking of schools should include a student satisfaction variable.
Matthew Denhart, Robert Villwock and Jonathan Robe are undergraduate students and Daniel Bennett a graduate student at Ohio University, and all are research associates at CCAP.
Monday, March 31, 2008
Friday, March 28, 2008
A New Way to Evaluate College Performance
By Richard Vedder, Daniel Bennett, and Robert Villwock
We at CCAP have long complained that most rankings of colleges are largely based on inputs used in providing services, things like the faculty-student ratio or the average SAT score of entering students. Better would to evaluate schools on either consumer satisfaction (like we evaluate most other things) or on the post-graduate achievements of the products of the education --the alumni.
Accordingly, we have developed a new CCAP ranking system based one-half on student attitudes towards the faculty who teach them, based on ratings of professors on the popular ratemyprofessors.com Web site, and one-half on the proportion of graduates who achieve a high level of vocational distinction by being included in the 2008 edition of Who's Who in America.
A lot more work is needed to perfect the ratings, but we have a reasonably good measure already, and we want to show you that these rankings do often yield rather different results than the famed US News & World Report (USNWR) evaluations.
Below we list the top 15 national research universities and the top 15 liberal arts colleges on the CCAP ratings, and show by comparison, in parentheses, the USNWR rankings for those schools.
NATIONAL RESEARCH UNIVERSITIES
1. Harvard (2)
2. Yale (3)
3. Princeton (1)
4. Columbia (9)
5. Stanford (4)
6. Brown (14)
7. U. of Wisconsin (38)
8. Cal Tech (5)
9. Dartmouth (11)
10. Northwestern (14)
11. Boston College (35)
12. Cornell (12)
13. U. of Chicago (9)
14. U. of Pennsylvania (5)
15. Michigan State U. (71)
LIBERAL ARTS COLLEGES
1. Williams (1)
2. Hillsdale (97)
3. Amherst (2)
4. Haverford (10)
5. Washington and Lee (15)
6. Wellesley (4)
7. Swarthmore (3)
8. Reed (54)
9. Barnard (30)
10. Davidson (9)
11. Oberlin (20)
12. Smith (17)
13. Wabash (52)
14. Knox (80)
15. Bennington (106)
To be sure, there are a good deal of similarities in the lists. Of the top 15 CCAP universities, 12 are on the USNWR list of top 15, and of the top 15 CCAP liberal arts colleges, seven make the USNWR top 15. But there are some big disparities, especially among liberal arts colleges. In the top 15 CCAP liberal arts schools, five are not in the top 50 on the USNWR. Most dramatically, Hillsdale ranks #2 on the CCAP list, but a so-so 97 on USNWR. Also doing dramatically better on the CCAP rankings are Reed, Wabash, Knox and Bennington colleges. For years, I have thought those schools (Reed et al) were very good, and wondered how one could rank them well below other schools like Carleton, Bowdoin, Middlebury, and Grinnell --all schools that rank lower on the CCAP list. The disparities are less pronounced among the big universities, but Big Ten public schools like Wisconsin and Michigan State do dramatically better on the CCAP rankings than on USNWR, as does Boston College.
This is a work in progress, and down the road we will give a more elaborate discussion of both our results and a detailed discussion of the methodology used. However, we do believe it is conceptually superior to evaluate performance on the basis of consumer satisfaction or occupational success of graduates than such things as the percent of alumni contributing to the school, the quality of incoming students, or the like. Harvard, Yale and Princeton are good on any criteria ---but the Hillsdales and Wisconsins of the world may be absolutely top flight gems that are downplayed by the rather elitist and input-based criteria used by USNWR. (The senior author has been on both the Wisconsin and Hillsdale campuses, and was as impressed as he was at some Ivy League schools, consistent with the CCAP rankings).
Richard Vedder is Director of the Center for College Affordability and Productivity, Visiting Scholar at the American Enterprise Institute, and Distinguished Professor of Economics at Ohio University. Mr. Bennett and Villwock are, respectively, a graduate student and undergraduate student at Ohio University, and research associates of CCAP.
We at CCAP have long complained that most rankings of colleges are largely based on inputs used in providing services, things like the faculty-student ratio or the average SAT score of entering students. Better would to evaluate schools on either consumer satisfaction (like we evaluate most other things) or on the post-graduate achievements of the products of the education --the alumni.
Accordingly, we have developed a new CCAP ranking system based one-half on student attitudes towards the faculty who teach them, based on ratings of professors on the popular ratemyprofessors.com Web site, and one-half on the proportion of graduates who achieve a high level of vocational distinction by being included in the 2008 edition of Who's Who in America.
A lot more work is needed to perfect the ratings, but we have a reasonably good measure already, and we want to show you that these rankings do often yield rather different results than the famed US News & World Report (USNWR) evaluations.
Below we list the top 15 national research universities and the top 15 liberal arts colleges on the CCAP ratings, and show by comparison, in parentheses, the USNWR rankings for those schools.
NATIONAL RESEARCH UNIVERSITIES
1. Harvard (2)
2. Yale (3)
3. Princeton (1)
4. Columbia (9)
5. Stanford (4)
6. Brown (14)
7. U. of Wisconsin (38)
8. Cal Tech (5)
9. Dartmouth (11)
10. Northwestern (14)
11. Boston College (35)
12. Cornell (12)
13. U. of Chicago (9)
14. U. of Pennsylvania (5)
15. Michigan State U. (71)
LIBERAL ARTS COLLEGES
1. Williams (1)
2. Hillsdale (97)
3. Amherst (2)
4. Haverford (10)
5. Washington and Lee (15)
6. Wellesley (4)
7. Swarthmore (3)
8. Reed (54)
9. Barnard (30)
10. Davidson (9)
11. Oberlin (20)
12. Smith (17)
13. Wabash (52)
14. Knox (80)
15. Bennington (106)
To be sure, there are a good deal of similarities in the lists. Of the top 15 CCAP universities, 12 are on the USNWR list of top 15, and of the top 15 CCAP liberal arts colleges, seven make the USNWR top 15. But there are some big disparities, especially among liberal arts colleges. In the top 15 CCAP liberal arts schools, five are not in the top 50 on the USNWR. Most dramatically, Hillsdale ranks #2 on the CCAP list, but a so-so 97 on USNWR. Also doing dramatically better on the CCAP rankings are Reed, Wabash, Knox and Bennington colleges. For years, I have thought those schools (Reed et al) were very good, and wondered how one could rank them well below other schools like Carleton, Bowdoin, Middlebury, and Grinnell --all schools that rank lower on the CCAP list. The disparities are less pronounced among the big universities, but Big Ten public schools like Wisconsin and Michigan State do dramatically better on the CCAP rankings than on USNWR, as does Boston College.
This is a work in progress, and down the road we will give a more elaborate discussion of both our results and a detailed discussion of the methodology used. However, we do believe it is conceptually superior to evaluate performance on the basis of consumer satisfaction or occupational success of graduates than such things as the percent of alumni contributing to the school, the quality of incoming students, or the like. Harvard, Yale and Princeton are good on any criteria ---but the Hillsdales and Wisconsins of the world may be absolutely top flight gems that are downplayed by the rather elitist and input-based criteria used by USNWR. (The senior author has been on both the Wisconsin and Hillsdale campuses, and was as impressed as he was at some Ivy League schools, consistent with the CCAP rankings).
Richard Vedder is Director of the Center for College Affordability and Productivity, Visiting Scholar at the American Enterprise Institute, and Distinguished Professor of Economics at Ohio University. Mr. Bennett and Villwock are, respectively, a graduate student and undergraduate student at Ohio University, and research associates of CCAP.
Paying to Play
By Richard Vedder
I read in INSIDE HIGHER ED that Florida State charges professors $10 for each grade turned in late. It has worked marvelously in reducing a serious campus problem.
I think the principle should be greatly expanded, with carrots as well as sticks involved. Indeed, a revolving fund could be established, with funds raised from fining bad faculty behavior used to fund bonuses given for positive steps taken by the faculty or staff that need to be rewarded.
In particular, faculty should be fined for violating university rules on the times that final examinations are to be given, for failure to meet with student advisees, for failure to attend important ceremonial events (e.g., graduation), for missing classes, etc. The fines should be leveled against the departments in which the faculty member is in, with the chair being given the option of passing the fine along to the individual (this means Prof X's bad behavior reduces the travel budget for Prof Y, increasing peer pressure to play the game by the rules).
Fine money should be available as bonuses for employees who discover a new way to save money or who do extraordinary service (e.g., covering the classes of sick colleagues). In some sense, this is not too different from what pro sports teams do. A football player who is late to training camp is fined, as is one who embarrasses the team with antics on or off the field. But bonuses are often given for exemplary performance --winning the Super Bowl, for example.
We need to sharpen the consequences for bad behavior as well as the rewards for good behavior in the academy. The Florida State system is one way of doing this. Harvard penalizes humanities departments that keep Ph.D. students around forever by reducing the number of new students they can take. The result: Harvard Ph.D. candidates get their degrees faster than before. Incentives and disincentives work. Let's use them.
I read in INSIDE HIGHER ED that Florida State charges professors $10 for each grade turned in late. It has worked marvelously in reducing a serious campus problem.
I think the principle should be greatly expanded, with carrots as well as sticks involved. Indeed, a revolving fund could be established, with funds raised from fining bad faculty behavior used to fund bonuses given for positive steps taken by the faculty or staff that need to be rewarded.
In particular, faculty should be fined for violating university rules on the times that final examinations are to be given, for failure to meet with student advisees, for failure to attend important ceremonial events (e.g., graduation), for missing classes, etc. The fines should be leveled against the departments in which the faculty member is in, with the chair being given the option of passing the fine along to the individual (this means Prof X's bad behavior reduces the travel budget for Prof Y, increasing peer pressure to play the game by the rules).
Fine money should be available as bonuses for employees who discover a new way to save money or who do extraordinary service (e.g., covering the classes of sick colleagues). In some sense, this is not too different from what pro sports teams do. A football player who is late to training camp is fined, as is one who embarrasses the team with antics on or off the field. But bonuses are often given for exemplary performance --winning the Super Bowl, for example.
We need to sharpen the consequences for bad behavior as well as the rewards for good behavior in the academy. The Florida State system is one way of doing this. Harvard penalizes humanities departments that keep Ph.D. students around forever by reducing the number of new students they can take. The result: Harvard Ph.D. candidates get their degrees faster than before. Incentives and disincentives work. Let's use them.
Thursday, March 27, 2008
What Should We Do About Student Loans?
By Richard Vedder
People of importance have asked me to offer my perspectives on the current student loan segment of the current fragility in financial and credit markets. I plan to do so with them privately, and am spending some time thinking about it. Let me share my first blush opinion about the whole topic.
Politicians and others are asking the Bush Administration to "do something" to guarantee that all students can borrow whatever they want within the limits of the law. Failure to do so might lead some students to forego a college education this fall, it is argued. Students shouldn't become victims to a financial crisis that was predicated on greed and imprudent policies of others, or so some argue.
My views may differ fundamentally from this view, and may seem harsh, and certainly are unfashionable. First of all, too many people are borrowing too much subsidized money to go to college, and while the current "crisis" may not be the optimal way of revising that trend, it is a step in the right direction. At the margin, too many Americans of dubious academic backgrounds go to school. Some who drop out do so rationally (because the return on their investment is low), and subsidies of loans induces some of them to do something that is probably not socially optimal, to attend school despite their correct instincts that there are better personal alternatives. In some work for Charles Miller and me, Whiz Kid Gordy Ruchti is finding that the earnings advantage of college usually advertised overstates reality by a factor of three. As Charles has said repeatedly to me, many seemingly irrational "dropouts" are doing the right thing given the dubious economic advantages of going to college.
Second, the students who will have trouble borrowing this fall are, I suspect on average, less promising than the average college student. The best and brightest are worth lending on, and can even acquire conventional private loans. The marginal students who may drop out for academic reasons and are greater lending risks are the ones who may get crowded out in the battle for funds this fall. By denying them funds very often we are doing them a favor.
Third, the government has distorted financial markets enough. The Fed started the whole fiasco by artificially lowering the cost of funds after 2001 below what human behavior dictates that cost to be. This led to excessive lending and a housing bubble. The same thing has happened to some extent with student loans, as my colleague Andy Gillen has said in this space and even more brilliantly in a soon to be released CCAP study on the "tuition bubble." Lending money to persons who are not credit worthy would merely worsen an already bad system brought about by trying to out guess market forces.
Fourth, we should use this crisis NOT to put a bandage on a sick system, but to reform the system. The ultimate reform must be for the government to get out of the lending business and end its distortion of the allocation of resources that accompanies its subsidies and contortions to ration credit. If the way to make that happen is to move to an expanded Pell Grant system, preferably refashioned as a federal opportunity voucher for lower income applicants, so be it.
My views were reinforced today when a student who I like a great deal came to see me and said: "Dr. Vedder, I am graduating in three months, have no idea what I want to do, have not been able to get a job, and have $50,000 in student loans." One option he is considering is to go to graduate school, borrow still more, and put off entering the Real World. He will be lucky if he gets a job paying $45,000 a year now --with $6,000 or $7,000 in annual debt service on a disposable income of perhaps $35,000 a year --if he is lucky. Trying to induce him to do more school by offering him more loans is a bit like offering more dope to the drug addict.
People of importance have asked me to offer my perspectives on the current student loan segment of the current fragility in financial and credit markets. I plan to do so with them privately, and am spending some time thinking about it. Let me share my first blush opinion about the whole topic.
Politicians and others are asking the Bush Administration to "do something" to guarantee that all students can borrow whatever they want within the limits of the law. Failure to do so might lead some students to forego a college education this fall, it is argued. Students shouldn't become victims to a financial crisis that was predicated on greed and imprudent policies of others, or so some argue.
My views may differ fundamentally from this view, and may seem harsh, and certainly are unfashionable. First of all, too many people are borrowing too much subsidized money to go to college, and while the current "crisis" may not be the optimal way of revising that trend, it is a step in the right direction. At the margin, too many Americans of dubious academic backgrounds go to school. Some who drop out do so rationally (because the return on their investment is low), and subsidies of loans induces some of them to do something that is probably not socially optimal, to attend school despite their correct instincts that there are better personal alternatives. In some work for Charles Miller and me, Whiz Kid Gordy Ruchti is finding that the earnings advantage of college usually advertised overstates reality by a factor of three. As Charles has said repeatedly to me, many seemingly irrational "dropouts" are doing the right thing given the dubious economic advantages of going to college.
Second, the students who will have trouble borrowing this fall are, I suspect on average, less promising than the average college student. The best and brightest are worth lending on, and can even acquire conventional private loans. The marginal students who may drop out for academic reasons and are greater lending risks are the ones who may get crowded out in the battle for funds this fall. By denying them funds very often we are doing them a favor.
Third, the government has distorted financial markets enough. The Fed started the whole fiasco by artificially lowering the cost of funds after 2001 below what human behavior dictates that cost to be. This led to excessive lending and a housing bubble. The same thing has happened to some extent with student loans, as my colleague Andy Gillen has said in this space and even more brilliantly in a soon to be released CCAP study on the "tuition bubble." Lending money to persons who are not credit worthy would merely worsen an already bad system brought about by trying to out guess market forces.
Fourth, we should use this crisis NOT to put a bandage on a sick system, but to reform the system. The ultimate reform must be for the government to get out of the lending business and end its distortion of the allocation of resources that accompanies its subsidies and contortions to ration credit. If the way to make that happen is to move to an expanded Pell Grant system, preferably refashioned as a federal opportunity voucher for lower income applicants, so be it.
My views were reinforced today when a student who I like a great deal came to see me and said: "Dr. Vedder, I am graduating in three months, have no idea what I want to do, have not been able to get a job, and have $50,000 in student loans." One option he is considering is to go to graduate school, borrow still more, and put off entering the Real World. He will be lucky if he gets a job paying $45,000 a year now --with $6,000 or $7,000 in annual debt service on a disposable income of perhaps $35,000 a year --if he is lucky. Trying to induce him to do more school by offering him more loans is a bit like offering more dope to the drug addict.
Cultural and Atlhletic Wars plus Study Abroad
By Richard Vedder
Three short issues from today's INSIDE HIGHER ED:
CULTURAL WARS
A new study in the journal PS shows that, yes, professors tend to be overwhelmingly liberal, but it really doesn't make too much difference, since students are not that easily brainwashed (and, perhaps, professors do not try to brainwash them).
In principle, I suspect that is roughly right --I do not see a radical shift in student attitudes over the college years at my overwhelmingly liberal school.
Yet I think the degree of student attitudinal shift is much greater than the authors of the study let on. The proportion of college seniors that are "far left" is stated to be over DOUBLE the proportion of freshman; the proportion of those who are left rises by a relatively impressive 5.8 percentage points, from 23.3 to 29.1 percent. Meanwhile, the proportion on the right falls. Whether all of this is due to college (as opposed to a natural shift associated with maturing) is debatable. But there is almost certainly some substance, if these numbers are correct, to the notion that --consciously or unconsciously --the collegiate experience involves occasionally successful efforts to move people to the left of the political spectrum. To some extent, this verifies Marx's axiom that capitalists will sell the rope that hangs them. Conservative philanthropists give money to their alma mater, who in turn hires professors who bash market based competitive free enterprise capitalism.
THREE CHEERS FOR DAVIDSON COLLEGE
Prestigious wealthy southern liberal arts colleges are not supposed to make it into the NCAA basketball's Sweet Sixteen, but Davidson College has (as well as Stanford), which is kind of neat. It is nice, once in a while, to find a school that really excels academically also succeed athletically, despite competing in a true amateur way all year in a world of increasingly semi-pro jock wannabes that make up Division I sports. Will sports success impact positively on Davidson's fall freshman class? That would be interesting to know. That is an argument that the big sports advocates use to justify ever more corrupting practices to expand their ball throwing empire.
STUDY ABROAD
I am a great advocate and participant in study abroad programs, even taking 41 students to Italy with my new wife and I on our honeymoon four decades ago (seriously). Yet I have become a little cynical about colleges pushing these programs when I see some of the financial machinations that are occurring, where colleges insist that students pay the domestic top dollar tuition when they are studying with relatively less expensive professors in some foreign country. Today's INSIDE HIGHER ED says study abroad costs are soaring because of the fate of the dollar in the era of Ben Bernanke. Put an academic in charge of the Fed, foreigners reason, and you will get a less valuable dollar over time given the tendency for academics to believe they are smarter than markets or other mere mortals. Thus the dollar has tanked in value, raising the cost in local currencies of study abroad. In one sense, universities are being hoisted onto their own petard (whatever that means)--they promote fancy economic theories that are then less than successfully tested in the Real World, sending the dollar down and jeopardizing the study abroad programs that have become a cash cow to some schools.
Three short issues from today's INSIDE HIGHER ED:
CULTURAL WARS
A new study in the journal PS shows that, yes, professors tend to be overwhelmingly liberal, but it really doesn't make too much difference, since students are not that easily brainwashed (and, perhaps, professors do not try to brainwash them).
In principle, I suspect that is roughly right --I do not see a radical shift in student attitudes over the college years at my overwhelmingly liberal school.
Yet I think the degree of student attitudinal shift is much greater than the authors of the study let on. The proportion of college seniors that are "far left" is stated to be over DOUBLE the proportion of freshman; the proportion of those who are left rises by a relatively impressive 5.8 percentage points, from 23.3 to 29.1 percent. Meanwhile, the proportion on the right falls. Whether all of this is due to college (as opposed to a natural shift associated with maturing) is debatable. But there is almost certainly some substance, if these numbers are correct, to the notion that --consciously or unconsciously --the collegiate experience involves occasionally successful efforts to move people to the left of the political spectrum. To some extent, this verifies Marx's axiom that capitalists will sell the rope that hangs them. Conservative philanthropists give money to their alma mater, who in turn hires professors who bash market based competitive free enterprise capitalism.
THREE CHEERS FOR DAVIDSON COLLEGE
Prestigious wealthy southern liberal arts colleges are not supposed to make it into the NCAA basketball's Sweet Sixteen, but Davidson College has (as well as Stanford), which is kind of neat. It is nice, once in a while, to find a school that really excels academically also succeed athletically, despite competing in a true amateur way all year in a world of increasingly semi-pro jock wannabes that make up Division I sports. Will sports success impact positively on Davidson's fall freshman class? That would be interesting to know. That is an argument that the big sports advocates use to justify ever more corrupting practices to expand their ball throwing empire.
STUDY ABROAD
I am a great advocate and participant in study abroad programs, even taking 41 students to Italy with my new wife and I on our honeymoon four decades ago (seriously). Yet I have become a little cynical about colleges pushing these programs when I see some of the financial machinations that are occurring, where colleges insist that students pay the domestic top dollar tuition when they are studying with relatively less expensive professors in some foreign country. Today's INSIDE HIGHER ED says study abroad costs are soaring because of the fate of the dollar in the era of Ben Bernanke. Put an academic in charge of the Fed, foreigners reason, and you will get a less valuable dollar over time given the tendency for academics to believe they are smarter than markets or other mere mortals. Thus the dollar has tanked in value, raising the cost in local currencies of study abroad. In one sense, universities are being hoisted onto their own petard (whatever that means)--they promote fancy economic theories that are then less than successfully tested in the Real World, sending the dollar down and jeopardizing the study abroad programs that have become a cash cow to some schools.
Tuesday, March 25, 2008
CCAP at 500 --and, the Good, the Bad and the Ugly
By Richard Vedder and Daniel L. Bennett
This is the 500th blog of the Center for College Affordability and Productivity. We have come a long way in less than two years, and are proud of our growing presence in the higher education community. What began as an idea a couple of years ago has expanded into a center with growing research activities, increased media recognition, and growing respect from those who are deeply concerned about higher education in America.
***********************
THE GOOD
We (specifically, Daniel Bennett, our newest "Whiz Kid") are producing estimates of "Educational Gini Coefficients," measures of the inequality in the attainment of education. The results are tentative, and we are even refining the measurement of inequality, dealing with moderate differences in reporting procedures over time, etc. With these qualifications in mind, we can say:
1. Over time, the average level of educational attainment of adult Americans has risen.
2. The inequality in attaining an education has fallen --the gap in formal education between the haves (those with advanced degrees) and the have-nots (those with little or no schooling) has narrowed. The unweighted average Gini coefficient for 1980 is .306, for 1990 is .257, and for 2000 is .236. A Gini of 0 means everyone has the same education; a Gini of 1 means one person has all the education and everyone else has nothing.
3. Variations in inequality between the states have likewise fallen dramatically over time, especially in the 1980s. Big geographic differences in the extent of educational equality are declining.
All of this is consistent with the American Dream --we have a nation of increasingly educated persons who are more and more similar in terms of educational attainment.
THE BAD
Yet going to school is merely an INPUT --time spent doing something. What is truly important are outcomes or output. What are people learning? Here the evidence is distinctly less favorable. Learning at the K-12 level is at best relatively stagnant over time if standardized tests are to be believed, and the U.S. students do at best a mediocre job relative to other nations on international tests. There is some evidence (e.g., the Intercollegiate Studies Institute Civic Literacy test) that college kids today are pretty ignorant of some basic core knowledge relating to our civic identity, and that learning during college is miniscule on average with respect to this factor. Is this a more general problem? We are not sure, but data from the National Survey of Student Engagement showing that students spent remarkably little time in class or studying are cause for concern. Are our colleges becoming non-rigorous country clubs for a mostly affluent population of persons transitioning between childhood and adulthood? Adding to the problem is the enormously high attrition rate --students who drop out of college.
THE UGLY
Other data show that, for all the ostensible progress, that inequality of educational opportunity is still related to income and associated socioeconomic considerations. Some data show that educational participation among some groups (e.g., Hispanics) is not growing much over time. Rising college costs mean that, even if learning is increasing, on cost-benefit grounds the social rate of return of education may be stagnant or even falling.
As CCAP begins the next 500 in blogs, stay tuned for more on these and other topics relating to our universities.
Richard Vedder is Director of the Center for College Affordability and Productivity, Visiting Scholar at the American Enterprise Institute, and Distinguished Professor of Economics at Ohio University. Daniel L. Bennett is a Research Associate at CCAP and is finishing a masters degree in economics at Ohio University.
This is the 500th blog of the Center for College Affordability and Productivity. We have come a long way in less than two years, and are proud of our growing presence in the higher education community. What began as an idea a couple of years ago has expanded into a center with growing research activities, increased media recognition, and growing respect from those who are deeply concerned about higher education in America.
***********************
THE GOOD
We (specifically, Daniel Bennett, our newest "Whiz Kid") are producing estimates of "Educational Gini Coefficients," measures of the inequality in the attainment of education. The results are tentative, and we are even refining the measurement of inequality, dealing with moderate differences in reporting procedures over time, etc. With these qualifications in mind, we can say:
1. Over time, the average level of educational attainment of adult Americans has risen.
2. The inequality in attaining an education has fallen --the gap in formal education between the haves (those with advanced degrees) and the have-nots (those with little or no schooling) has narrowed. The unweighted average Gini coefficient for 1980 is .306, for 1990 is .257, and for 2000 is .236. A Gini of 0 means everyone has the same education; a Gini of 1 means one person has all the education and everyone else has nothing.
3. Variations in inequality between the states have likewise fallen dramatically over time, especially in the 1980s. Big geographic differences in the extent of educational equality are declining.
All of this is consistent with the American Dream --we have a nation of increasingly educated persons who are more and more similar in terms of educational attainment.
THE BAD
Yet going to school is merely an INPUT --time spent doing something. What is truly important are outcomes or output. What are people learning? Here the evidence is distinctly less favorable. Learning at the K-12 level is at best relatively stagnant over time if standardized tests are to be believed, and the U.S. students do at best a mediocre job relative to other nations on international tests. There is some evidence (e.g., the Intercollegiate Studies Institute Civic Literacy test) that college kids today are pretty ignorant of some basic core knowledge relating to our civic identity, and that learning during college is miniscule on average with respect to this factor. Is this a more general problem? We are not sure, but data from the National Survey of Student Engagement showing that students spent remarkably little time in class or studying are cause for concern. Are our colleges becoming non-rigorous country clubs for a mostly affluent population of persons transitioning between childhood and adulthood? Adding to the problem is the enormously high attrition rate --students who drop out of college.
THE UGLY
Other data show that, for all the ostensible progress, that inequality of educational opportunity is still related to income and associated socioeconomic considerations. Some data show that educational participation among some groups (e.g., Hispanics) is not growing much over time. Rising college costs mean that, even if learning is increasing, on cost-benefit grounds the social rate of return of education may be stagnant or even falling.
As CCAP begins the next 500 in blogs, stay tuned for more on these and other topics relating to our universities.
Richard Vedder is Director of the Center for College Affordability and Productivity, Visiting Scholar at the American Enterprise Institute, and Distinguished Professor of Economics at Ohio University. Daniel L. Bennett is a Research Associate at CCAP and is finishing a masters degree in economics at Ohio University.
Monday, March 24, 2008
Will A Recession Hurt Higher Education?
By Richard Vedder
Conventional wisdom is that higher education is relatively less battered by economic downturns than the rest of the economy. Indeed, a colleague of mine, Rajindar Koshal, found in his statistical analyses decades ago that enrollment demand for public universities in Ohio was actually anti-cyclical --recessions meant some people lost jobs so they went to school to improve their education --the opportunity cost of college (in terms of income foregone) fell sharply during recessionary periods. Nothing like a good recession to increase enrollment at Last Resort U., if not Harvard.
There are a lot of reasons, however, why the current downturn, if it becomes moderately severe, will have a large adverse impact on the financial condition of colleges and universities. It will not lead to massive layoffs, I suspect, but hiring will be down, retired people will be replaced less, etc.
1. As income growth stagnates, tax revenues fall and welfare spending rises, squeezing public funding for higher education, which is often viewed as a nice but non-essential form of spending that gets the residual after core needs (K-12 education, public assistance, corrections, public safety) are met. Empirical evidence is clear that real state appropriations fall in periods of economic downturn.
2. Shaky financial markets mean large endowments gains for the wealthy schools almost certainly will not be achieved this year. Indeed, given the high risk strategy of some schools, some may take a real pasting.
3. On top of this, we have reached the peak in the size of the college age pool of Americans, meaning the natural increase in demand for college associated with population growth has ended (in some low growth areas such as the industrial Midwest, the population pool is already falling).
4. The policy actions causing the bubble in housing were initiated by excessive Fed monetary policy after 2001 accompanied by highly expansionary fiscal policy of the Feds as well. The people who got us into this mess are trying to get us out, dropping money out of airplanes over investment banks, muting the powerful warning signals of markets, and, above all, threatening inflation. $1000 gold and a dollar that is declining in value by the minute are signs that inflationary expectations are rising. Inflation hurts universities big time in the short run, because their funding mechanism cannot quickly respond. Tuition fees are raised only once a year, for example.
5. The demand for higher education has been propped up by student loans. Private funding of student loans is declining sharply as lenders become more aware and wary of credit risks and the Congress radically reduces incentives for private players to participate in the student loan business.
6. The demand for college will decline somewhat as the perceived gains in terms of greater income fall (fewer good jobs available) relative to the still rising costs.
The upshot of all of this may be a bit of belt-tightening. This is good, of course, since the amount of waste and bloat in higher education is legendary. Unfortunately, however, the temporary nature of business cycle downturns means that colleges will soon return to their free spending old ways, unless more far reaching reforms come.
Conventional wisdom is that higher education is relatively less battered by economic downturns than the rest of the economy. Indeed, a colleague of mine, Rajindar Koshal, found in his statistical analyses decades ago that enrollment demand for public universities in Ohio was actually anti-cyclical --recessions meant some people lost jobs so they went to school to improve their education --the opportunity cost of college (in terms of income foregone) fell sharply during recessionary periods. Nothing like a good recession to increase enrollment at Last Resort U., if not Harvard.
There are a lot of reasons, however, why the current downturn, if it becomes moderately severe, will have a large adverse impact on the financial condition of colleges and universities. It will not lead to massive layoffs, I suspect, but hiring will be down, retired people will be replaced less, etc.
1. As income growth stagnates, tax revenues fall and welfare spending rises, squeezing public funding for higher education, which is often viewed as a nice but non-essential form of spending that gets the residual after core needs (K-12 education, public assistance, corrections, public safety) are met. Empirical evidence is clear that real state appropriations fall in periods of economic downturn.
2. Shaky financial markets mean large endowments gains for the wealthy schools almost certainly will not be achieved this year. Indeed, given the high risk strategy of some schools, some may take a real pasting.
3. On top of this, we have reached the peak in the size of the college age pool of Americans, meaning the natural increase in demand for college associated with population growth has ended (in some low growth areas such as the industrial Midwest, the population pool is already falling).
4. The policy actions causing the bubble in housing were initiated by excessive Fed monetary policy after 2001 accompanied by highly expansionary fiscal policy of the Feds as well. The people who got us into this mess are trying to get us out, dropping money out of airplanes over investment banks, muting the powerful warning signals of markets, and, above all, threatening inflation. $1000 gold and a dollar that is declining in value by the minute are signs that inflationary expectations are rising. Inflation hurts universities big time in the short run, because their funding mechanism cannot quickly respond. Tuition fees are raised only once a year, for example.
5. The demand for higher education has been propped up by student loans. Private funding of student loans is declining sharply as lenders become more aware and wary of credit risks and the Congress radically reduces incentives for private players to participate in the student loan business.
6. The demand for college will decline somewhat as the perceived gains in terms of greater income fall (fewer good jobs available) relative to the still rising costs.
The upshot of all of this may be a bit of belt-tightening. This is good, of course, since the amount of waste and bloat in higher education is legendary. Unfortunately, however, the temporary nature of business cycle downturns means that colleges will soon return to their free spending old ways, unless more far reaching reforms come.
Sunday, March 23, 2008
Is Mark Yudof Crazy
By Richard Vedder
If Gordon Gee (available for rent at Hertz Rent a Prez) is the most flamboyant major university adminstrator in American higher education, Mark Yudof is perhaps the most solid. He has run both the University of Minnesota and the University of Texas system with distinction over a long career. Now he is going to become Chancellor of the University of California, probably the most prestigious public university in the United States as well as the largest. He reportedly will make at least the $750,000 annually he made at Texas and three-quarters of what Mr. Gee gets at Ohio State.
Why would Yudof give up a nice job at UT (where he taught and worked as an administrator for three decades)to take on the UC system. UC has a Board of Regents that gets involved all the time in campus affairs. That is annoying, to put it mildly, for a university prez. The system had a big salary scandal a couple of years ago. It is in continuous battles over affirmative action. And it is California, not the sanest of American states politically.
But what is worse, the system is top heavy with administrators. They reportedly have 2,000 employees in the central office. This resembles a Soviet style central planning operation. Why not lop off 1,900 of those employees and let each campus operate mostly autonomously, with some policies and budget allocations set centrally? Aside from saving at least $100 million annually, this would allow for a more innovative and entrepreneurial system. The ancient regime that is leaving is ordering a 20 percent cut in that administrative blog, but it strikes me as insufficient.
All of this shows there are few economies of scale in higher education --bigger is not necessarily better, and certainly not cheaper. Campuses of 50,000 students (UT and Ohio State being the best examples) are often rather inhumane places with massive campus congestion and a sense of community that depends more on the football team than a shared sense of academic purpose. String a bunch of these campuses together and you have more of a mess, a managerial challenge of the first order. Should the University of California move to something akin to the Articles of Confederation in our earlier national history -- a looser confederation of largely independent universities? I suspect so. Mark Yudof certainly has a challenge.
If Gordon Gee (available for rent at Hertz Rent a Prez) is the most flamboyant major university adminstrator in American higher education, Mark Yudof is perhaps the most solid. He has run both the University of Minnesota and the University of Texas system with distinction over a long career. Now he is going to become Chancellor of the University of California, probably the most prestigious public university in the United States as well as the largest. He reportedly will make at least the $750,000 annually he made at Texas and three-quarters of what Mr. Gee gets at Ohio State.
Why would Yudof give up a nice job at UT (where he taught and worked as an administrator for three decades)to take on the UC system. UC has a Board of Regents that gets involved all the time in campus affairs. That is annoying, to put it mildly, for a university prez. The system had a big salary scandal a couple of years ago. It is in continuous battles over affirmative action. And it is California, not the sanest of American states politically.
But what is worse, the system is top heavy with administrators. They reportedly have 2,000 employees in the central office. This resembles a Soviet style central planning operation. Why not lop off 1,900 of those employees and let each campus operate mostly autonomously, with some policies and budget allocations set centrally? Aside from saving at least $100 million annually, this would allow for a more innovative and entrepreneurial system. The ancient regime that is leaving is ordering a 20 percent cut in that administrative blog, but it strikes me as insufficient.
All of this shows there are few economies of scale in higher education --bigger is not necessarily better, and certainly not cheaper. Campuses of 50,000 students (UT and Ohio State being the best examples) are often rather inhumane places with massive campus congestion and a sense of community that depends more on the football team than a shared sense of academic purpose. String a bunch of these campuses together and you have more of a mess, a managerial challenge of the first order. Should the University of California move to something akin to the Articles of Confederation in our earlier national history -- a looser confederation of largely independent universities? I suspect so. Mark Yudof certainly has a challenge.
Thursday, March 20, 2008
March Madness Begins
By Bryan O'Keefe
Like many people, I have just finished one of my favorite rites of spring -- filling out multiple NCAA tournament brackets, all in the futile hope of maybe picking the right winner. As most people know, I am a fairly ardent sports fan and especially like college sports. I am a season ticket holder for college basketball at my alma mater the George Washington University and I am a huge Penn State football fan (in fact, one of the bright spots of going to GWU was that, since they didn't have a football team, I could continue to root for Penn State and not feel the least bit guilty). And just like everyone else, I will be intently following the next couple of weeks of college basketball and hoping that a few of my bracket upsets come to bear fruit. (Note to Georgia -- You can do it! Keep on that roll from the SEC tournament! I have you in the Sweet 16!)
Never the less, even though I love college sports, I felt it was important to link to a piece in the Wall Street Journal from yesterday on renewed efforts to make "student atheletes" students once again. This has historically been a bright spot for the Penn State football program (less so for GWU baskteball). But in any event, in our sports crazed culture, of which I am a very guilty participant, it's important to keep some sort of perspective, especially at the college level. As the Journal story correctly points out, the vast majority of big time athletes in college will not make it in the pros. Since more and more of these students also leave college early and do not graduate with a degree, they can easily find themselves in a less than desirable situation if the pros don't pan out. I don't exactly fault the athletes for leaving -- if somebody would have dangled the possibility of a multi-million dollar contract in front of my eyes when I was a junior in undergrad, I probably would have bid school farewell too.
But that doesn't mean that colleges can't do more to ensure that students actually receieve some sort of reasonable education while they are there. For far too many schools, the academics part of the equation is a mere afterthought. They have very few academic standards, low graduation rates, etc. etc. The good news, at least according to this Journal dispatch, is that the tide might be turning in favor of giving academic standards some real teeth. I think we can all agree that would be a welcomed development.
So, have fun while watching the NCAA's today -- I know I will. But let's not lose sight of why we even have the very enjoyable games in the first place.
Like many people, I have just finished one of my favorite rites of spring -- filling out multiple NCAA tournament brackets, all in the futile hope of maybe picking the right winner. As most people know, I am a fairly ardent sports fan and especially like college sports. I am a season ticket holder for college basketball at my alma mater the George Washington University and I am a huge Penn State football fan (in fact, one of the bright spots of going to GWU was that, since they didn't have a football team, I could continue to root for Penn State and not feel the least bit guilty). And just like everyone else, I will be intently following the next couple of weeks of college basketball and hoping that a few of my bracket upsets come to bear fruit. (Note to Georgia -- You can do it! Keep on that roll from the SEC tournament! I have you in the Sweet 16!)
Never the less, even though I love college sports, I felt it was important to link to a piece in the Wall Street Journal from yesterday on renewed efforts to make "student atheletes" students once again. This has historically been a bright spot for the Penn State football program (less so for GWU baskteball). But in any event, in our sports crazed culture, of which I am a very guilty participant, it's important to keep some sort of perspective, especially at the college level. As the Journal story correctly points out, the vast majority of big time athletes in college will not make it in the pros. Since more and more of these students also leave college early and do not graduate with a degree, they can easily find themselves in a less than desirable situation if the pros don't pan out. I don't exactly fault the athletes for leaving -- if somebody would have dangled the possibility of a multi-million dollar contract in front of my eyes when I was a junior in undergrad, I probably would have bid school farewell too.
But that doesn't mean that colleges can't do more to ensure that students actually receieve some sort of reasonable education while they are there. For far too many schools, the academics part of the equation is a mere afterthought. They have very few academic standards, low graduation rates, etc. etc. The good news, at least according to this Journal dispatch, is that the tide might be turning in favor of giving academic standards some real teeth. I think we can all agree that would be a welcomed development.
So, have fun while watching the NCAA's today -- I know I will. But let's not lose sight of why we even have the very enjoyable games in the first place.
Pig Out Time for Lobbyists
By Richard Vedder
The economy may be shaky (although I think the threat may be less than meets the eye), markets may be down, and people may be distressed. But there is one group that is booming this year --higher education lobbyists, who continue to buy their Porsche Boxers and Gucci shoes in record numbers as their billable hours climb nearly exponentially.
To be sure, the Higher Education Act reauthorization, which is forever being delayed, is up for renewal (latest deadline date --April 30). And, as a Congressional Quarterly analysis on cqpolitics.com yesterday pointed out, the lobbyists are using the Easter recess to work their targets harder than ever. Let me comment a bit on three issues.
MAINTENANCE OF EFFORTS
The House wants state appropriations for higher ed to be maintained at current levels or above. The Senate is not wild about that idea. What will the conference do? Votes in both houses were quite bipartisan (the Senate vote was 95-0) on the bills currently being reconciled in conference. Against the "maintenance of effort" provision are the state and local government establishments led by the National Council of State Legislators (NCSL) and the National Governors Association (NGA). 44 of the governors have signed on to the NCSL/NGA effort. That is amazing, because you probably could not get 44 of them to endorse the view that George Washington was Father of our country. Against them is US PIRG --Public Interest Research Group, a group that purports to represent student interests. This maintenance of effort idea is one of the five most lunatic ideas emerging in a Congress that is rich in proposing stupid things. States are the best judges as to how their resources should be allocated. I believe the legislation, if adopted, is absolutely unconstitutional in addition to be stupid.
TEXTBOOK PRICES
Congress wants to get into the regulation of textbook prices business. Bad idea. Textbook prices are out of control, and some practices of publishers (bundling useless CDs with the book in one price) are obnoxious. The solution, of course, is to find alternatives to expensive textbooks, for individual colleges to set rules applicable on their own campuses, for new efforts (university's buying textbook rights on-line for distribution to students) to be made. Professors should be encouraged to use books longer, to allow students to use multiple editions of the book, etc. A bit of a hassle, but doable. But why should Congress get involved? The American Council of Education is in a tizzy over this one, opposing provisions that would require professors to be informed as to text prices, and for that information to be available to students before registering. It isn't a bad idea, and I am trying to use used textbooks myself to keep text costs down to students. But, again, Congress should not legislate and I agree with ACE's Terry Hartle 100 percent on this one.
FOR PROFIT HIGHER ED
For some reason, for profit schools can get no more than 90 percent of their money via student loans. The schools want a liberalized definition of what is included in the 10 percent non-governmental money, for example funds from tax exempt 529 savings plans. That money is privately provided, albeit with tax assistance, and logically should not be considered as "government funds." So I am with the for profits on this issue. US PIRG opposes it,but the for profits are likely to win on this one. As I have indicated previously, I wish the governent would get out of the student loan business (which the for profits would not like), but that also we would not discourage for profits with all sorts of barriers to entry (see an earlier blog today on that one). On the whole, I favor public policies that work to increase the market share of for profits. For profits are taxed, not for profits are subsidized. We should move to a more level playing field.
The economy may be shaky (although I think the threat may be less than meets the eye), markets may be down, and people may be distressed. But there is one group that is booming this year --higher education lobbyists, who continue to buy their Porsche Boxers and Gucci shoes in record numbers as their billable hours climb nearly exponentially.
To be sure, the Higher Education Act reauthorization, which is forever being delayed, is up for renewal (latest deadline date --April 30). And, as a Congressional Quarterly analysis on cqpolitics.com yesterday pointed out, the lobbyists are using the Easter recess to work their targets harder than ever. Let me comment a bit on three issues.
MAINTENANCE OF EFFORTS
The House wants state appropriations for higher ed to be maintained at current levels or above. The Senate is not wild about that idea. What will the conference do? Votes in both houses were quite bipartisan (the Senate vote was 95-0) on the bills currently being reconciled in conference. Against the "maintenance of effort" provision are the state and local government establishments led by the National Council of State Legislators (NCSL) and the National Governors Association (NGA). 44 of the governors have signed on to the NCSL/NGA effort. That is amazing, because you probably could not get 44 of them to endorse the view that George Washington was Father of our country. Against them is US PIRG --Public Interest Research Group, a group that purports to represent student interests. This maintenance of effort idea is one of the five most lunatic ideas emerging in a Congress that is rich in proposing stupid things. States are the best judges as to how their resources should be allocated. I believe the legislation, if adopted, is absolutely unconstitutional in addition to be stupid.
TEXTBOOK PRICES
Congress wants to get into the regulation of textbook prices business. Bad idea. Textbook prices are out of control, and some practices of publishers (bundling useless CDs with the book in one price) are obnoxious. The solution, of course, is to find alternatives to expensive textbooks, for individual colleges to set rules applicable on their own campuses, for new efforts (university's buying textbook rights on-line for distribution to students) to be made. Professors should be encouraged to use books longer, to allow students to use multiple editions of the book, etc. A bit of a hassle, but doable. But why should Congress get involved? The American Council of Education is in a tizzy over this one, opposing provisions that would require professors to be informed as to text prices, and for that information to be available to students before registering. It isn't a bad idea, and I am trying to use used textbooks myself to keep text costs down to students. But, again, Congress should not legislate and I agree with ACE's Terry Hartle 100 percent on this one.
FOR PROFIT HIGHER ED
For some reason, for profit schools can get no more than 90 percent of their money via student loans. The schools want a liberalized definition of what is included in the 10 percent non-governmental money, for example funds from tax exempt 529 savings plans. That money is privately provided, albeit with tax assistance, and logically should not be considered as "government funds." So I am with the for profits on this issue. US PIRG opposes it,but the for profits are likely to win on this one. As I have indicated previously, I wish the governent would get out of the student loan business (which the for profits would not like), but that also we would not discourage for profits with all sorts of barriers to entry (see an earlier blog today on that one). On the whole, I favor public policies that work to increase the market share of for profits. For profits are taxed, not for profits are subsidized. We should move to a more level playing field.
The Student Loan Crisis Is Not Over
By Richard Vedder
I have long said that students will be able to borrow money for college next fall, but the environment for borrowing may be less hospitable. Several new developments confirm that.
1. Several universities are pushing their students into the federal direct lending program. The federal government, which cannot begin to balance its own budget and is a model for fiscal irresponsibility rivaled only by a few Latin American Banana Repubics, should not be in the credit business --period. This is the wrong approach. Nonetheless, it is understandable that it is happening --it is the easy way out.
2. More lenders are "just saying no" to being mixed up in the federal student loan program. The feds have made such business at best marginally profitable (as a consequence of Congress trying to squeeze dollars to expand Pell Grants without cutting any government spending), so they are exiting. Today's Wall Street Journal reports that some big banks, such as HSBC Holdings, are exiting the business. While not huge participants, three in the top 50 lenders have exited recently, with more likely to follow.
3. Unsubsidized private loans will become more costly because of lender risks are higher than previously thought, and cautious lenders will demand, appropriately, higher risk premiums. Mediocre job prospects for students, a rising ratio of debt to future expected income, etc., all increase risks, and loans will be accordingly priced.
4. The Usual Suspects are clamoring for a federal bailout of student loan problems, beginning with Teddy Kennedy, whose answer for personal financial problems in his youth was to call Daddy, and more recently, no doubt to raid trust funds. Senator Kennedy never understood the meaning of scarcity, and never will. Putting him in charge of our youth's education (as chair of the Senate Education Committee) is only marginally saner than making Lorena Bobbitt the Surgeon General.
I have long said that students will be able to borrow money for college next fall, but the environment for borrowing may be less hospitable. Several new developments confirm that.
1. Several universities are pushing their students into the federal direct lending program. The federal government, which cannot begin to balance its own budget and is a model for fiscal irresponsibility rivaled only by a few Latin American Banana Repubics, should not be in the credit business --period. This is the wrong approach. Nonetheless, it is understandable that it is happening --it is the easy way out.
2. More lenders are "just saying no" to being mixed up in the federal student loan program. The feds have made such business at best marginally profitable (as a consequence of Congress trying to squeeze dollars to expand Pell Grants without cutting any government spending), so they are exiting. Today's Wall Street Journal reports that some big banks, such as HSBC Holdings, are exiting the business. While not huge participants, three in the top 50 lenders have exited recently, with more likely to follow.
3. Unsubsidized private loans will become more costly because of lender risks are higher than previously thought, and cautious lenders will demand, appropriately, higher risk premiums. Mediocre job prospects for students, a rising ratio of debt to future expected income, etc., all increase risks, and loans will be accordingly priced.
4. The Usual Suspects are clamoring for a federal bailout of student loan problems, beginning with Teddy Kennedy, whose answer for personal financial problems in his youth was to call Daddy, and more recently, no doubt to raid trust funds. Senator Kennedy never understood the meaning of scarcity, and never will. Putting him in charge of our youth's education (as chair of the Senate Education Committee) is only marginally saner than making Lorena Bobbitt the Surgeon General.
America Lags in Private Higher Education
By Richard Vedder
I learn from INSIDE HIGHER ED (by way of Whiz Kid Jim Coleman) that a majority of the college students in Japan are enrolled in private institutions, and private enrollments are soaring in Latin America, Asia, and even pars of Africa. While many of the students attend "traditional" not-for-profit schools, the for profit sector is booming. Every time I talk to people in Randy Best's higher education shop, it seems that at least one of the principals is in South America working on some deal.
I am reminded of a friend of mine who started a for-profit university in Peru, and named it Saint Ignatius of Loyola University, got huge enrollments, and made lots of money. Carlos (my friend) was sued by the Catholic Church for misuse of the name, but it was determined that the church had no trademark on the name, and besides, the good saint has been dead for zillions of years. But his name made some money for Carlos (former Finance Minister of Peru).
The irony of it is that barriers to entry into this form of education are probably greater in the U.S. than in nominally Communist China, and certainly greater than in several Latin American countries. We are a nation known as the bastion of free enterprise, the leading nation in the world for demonstrating the powers that a rule of law, private property rights, and free markets can have in providing material success. Despite many rules and regulations, private for profit higher education is doing well in the U.S. But as governments strain to meet the obligations of a aging population and the national security imperatives in a world of wacko terrorists, perhaps it is time to unleash the powers of capitalism in higher education to a greater extent, with the for profits picking up more of the business of educating our youth beyond the secondary level.
Operationally, this means state governments gradually retreat from the business of subsidizing universities, and those universities convert to private status on a not-for-profit or, better yet, for profit basis. The faculty will scream, the employee unions will yell, the students will initially complain. But state governments could term financial liabilities into assets by selling schools. The teaching and research functions could be separated into two entities. Students would go to a for profit University of Michigan, and faculty could work part time at a subsidized University of Michigan Research Institute that would be separate. The taxpayers of Michigan could receive probably $3 billion for the University of Michigan name, which could be added to the existing endowment and used exclusively for scholarships for Michigan students, providing perhaps an average $8,000 in assistance for 50,000 students attending the U of M in Ann Arbor and beyond. Low income kids could attend for nearly nothing. Crazy? Most great innovations are viewed as "off the wall" at first. They could even privatize the sports programs, making them transparently the semi-pro operations that they are now in all but name.
I learn from INSIDE HIGHER ED (by way of Whiz Kid Jim Coleman) that a majority of the college students in Japan are enrolled in private institutions, and private enrollments are soaring in Latin America, Asia, and even pars of Africa. While many of the students attend "traditional" not-for-profit schools, the for profit sector is booming. Every time I talk to people in Randy Best's higher education shop, it seems that at least one of the principals is in South America working on some deal.
I am reminded of a friend of mine who started a for-profit university in Peru, and named it Saint Ignatius of Loyola University, got huge enrollments, and made lots of money. Carlos (my friend) was sued by the Catholic Church for misuse of the name, but it was determined that the church had no trademark on the name, and besides, the good saint has been dead for zillions of years. But his name made some money for Carlos (former Finance Minister of Peru).
The irony of it is that barriers to entry into this form of education are probably greater in the U.S. than in nominally Communist China, and certainly greater than in several Latin American countries. We are a nation known as the bastion of free enterprise, the leading nation in the world for demonstrating the powers that a rule of law, private property rights, and free markets can have in providing material success. Despite many rules and regulations, private for profit higher education is doing well in the U.S. But as governments strain to meet the obligations of a aging population and the national security imperatives in a world of wacko terrorists, perhaps it is time to unleash the powers of capitalism in higher education to a greater extent, with the for profits picking up more of the business of educating our youth beyond the secondary level.
Operationally, this means state governments gradually retreat from the business of subsidizing universities, and those universities convert to private status on a not-for-profit or, better yet, for profit basis. The faculty will scream, the employee unions will yell, the students will initially complain. But state governments could term financial liabilities into assets by selling schools. The teaching and research functions could be separated into two entities. Students would go to a for profit University of Michigan, and faculty could work part time at a subsidized University of Michigan Research Institute that would be separate. The taxpayers of Michigan could receive probably $3 billion for the University of Michigan name, which could be added to the existing endowment and used exclusively for scholarships for Michigan students, providing perhaps an average $8,000 in assistance for 50,000 students attending the U of M in Ann Arbor and beyond. Low income kids could attend for nearly nothing. Crazy? Most great innovations are viewed as "off the wall" at first. They could even privatize the sports programs, making them transparently the semi-pro operations that they are now in all but name.
Friday, March 14, 2008
Hope and Despair
By Richard Vedder
HOPE
The unsustainable rise in the relative cost of higher education opens the doors for new approaches introduced by for-profit entrepreneurs. The for-profits have flourished outside the core 18-24 year old market, but now they are taking hold there, as well.
I spent an hour talking last night with Andrew Clark, the young, smart and energetic CEO of Bridgepoint Education, one of the more successful new private equity financed for-profit companies. All told, Bridgepoint serves 18,000 or so students, up exponentially in recent years. But most intriguing, they run a 500 student traditional liberal arts college (Ashford University) in Northeastern Iowa, charge $8,000 tuition and, they tell me, are breaking even or making a profit. Three cheers for them. This is sort of an empirical verification of what our friend Vance Fried of Oklahoma State University is telling us --you can offer a good quality education for a very affordable price (we are going to be publishing a study by Vance outlining his ideas in detail very shortly).
As entrepreneurs like Andrew Clark, Randy Best, and the established entrepreneurs at places like the University of Phoenix continue to gain market share, they will force the traditional highly subsidized legacy schools to consider changing their ways. To be sure, some of those traditional schools compete in another segment of the market --the high-end market led by the Harvards, Yales, Princetons and Wilherst's (Wllliams + Amherst = Wilherst) of the world. Maybe soon one of the for-profits will open a yuppie university, part country club, part first class liberal arts institution, to compete with the legacy schools. We will have the Ashfords of the world being the Targets or Best Buy of higher education --offering good service at low prices, but we may have other for-profit privates being the academic equivalent of Neiman Marcus, Nordstrom or Bergdorf Goodman.
DESPAIR
Yesterday, a prominent individual speaking of higher education said the following in a speech:
"Financing has become chaotic, compromised and unsustainable, based on ever higher fees burden and a dangerous over-reliance on cross subsidization.... A bewildering array of student financing arrangements has been put in place; each change adds another layer on top of past mistakes..."
Who said this? Charles Miller (Spellings Commission chair)? Margaret Spellings (U.S. Secretary of Education)? Myself? No --but anyone of us could have done it. Rather, it was Julia Gillan, Minister of Education for Australia. I hope other countries are not blindly emulating the American model --with all its flaws.
HOPE
The unsustainable rise in the relative cost of higher education opens the doors for new approaches introduced by for-profit entrepreneurs. The for-profits have flourished outside the core 18-24 year old market, but now they are taking hold there, as well.
I spent an hour talking last night with Andrew Clark, the young, smart and energetic CEO of Bridgepoint Education, one of the more successful new private equity financed for-profit companies. All told, Bridgepoint serves 18,000 or so students, up exponentially in recent years. But most intriguing, they run a 500 student traditional liberal arts college (Ashford University) in Northeastern Iowa, charge $8,000 tuition and, they tell me, are breaking even or making a profit. Three cheers for them. This is sort of an empirical verification of what our friend Vance Fried of Oklahoma State University is telling us --you can offer a good quality education for a very affordable price (we are going to be publishing a study by Vance outlining his ideas in detail very shortly).
As entrepreneurs like Andrew Clark, Randy Best, and the established entrepreneurs at places like the University of Phoenix continue to gain market share, they will force the traditional highly subsidized legacy schools to consider changing their ways. To be sure, some of those traditional schools compete in another segment of the market --the high-end market led by the Harvards, Yales, Princetons and Wilherst's (Wllliams + Amherst = Wilherst) of the world. Maybe soon one of the for-profits will open a yuppie university, part country club, part first class liberal arts institution, to compete with the legacy schools. We will have the Ashfords of the world being the Targets or Best Buy of higher education --offering good service at low prices, but we may have other for-profit privates being the academic equivalent of Neiman Marcus, Nordstrom or Bergdorf Goodman.
DESPAIR
Yesterday, a prominent individual speaking of higher education said the following in a speech:
"Financing has become chaotic, compromised and unsustainable, based on ever higher fees burden and a dangerous over-reliance on cross subsidization.... A bewildering array of student financing arrangements has been put in place; each change adds another layer on top of past mistakes..."
Who said this? Charles Miller (Spellings Commission chair)? Margaret Spellings (U.S. Secretary of Education)? Myself? No --but anyone of us could have done it. Rather, it was Julia Gillan, Minister of Education for Australia. I hope other countries are not blindly emulating the American model --with all its flaws.
Wednesday, March 12, 2008
An Administrator for Every Faculty Member
By Richard Vedder
I read in INSIDE HIGHER ED this morning a story by Doug Lederman that shows that the number of full time university employees who are non-instructional professionals now exceeds the number who are involved in instruction. Roughly speaking, these non-teaching professionals can be called "administrators", although some of them are lab technicans, computer specialists, librarians, etc. Many, however, carry out many tasks like promoting the university to outside constituencies, serving on the Affirmative Action/Diversity/Multicultural Police, writing grant proposals, serving as recycling coordinator, etc.
In a pure learning environment, a student goes to a professor and says, "I want to study under you." The student hires the professor, and learning occurs. 100 percent of the employees involved in the venture are teachers. In a pure think tank environment, there are no teachers, and 0 percent of the employees are teachers --while many profess to be doing research. Universities are becoming more like research institutes than schools which teach.
The data clearly support something I have long claimed --that teaching is becoming a shrinking activity in the modern academy --absorbing a smaller and declining proportion of the institution's human resources. What do all of these non-teaching people do? If I were a legislator funding higher education, a donor thinking of contributing, or a trustee of a private institution, I would want to know.
I read in INSIDE HIGHER ED this morning a story by Doug Lederman that shows that the number of full time university employees who are non-instructional professionals now exceeds the number who are involved in instruction. Roughly speaking, these non-teaching professionals can be called "administrators", although some of them are lab technicans, computer specialists, librarians, etc. Many, however, carry out many tasks like promoting the university to outside constituencies, serving on the Affirmative Action/Diversity/Multicultural Police, writing grant proposals, serving as recycling coordinator, etc.
In a pure learning environment, a student goes to a professor and says, "I want to study under you." The student hires the professor, and learning occurs. 100 percent of the employees involved in the venture are teachers. In a pure think tank environment, there are no teachers, and 0 percent of the employees are teachers --while many profess to be doing research. Universities are becoming more like research institutes than schools which teach.
The data clearly support something I have long claimed --that teaching is becoming a shrinking activity in the modern academy --absorbing a smaller and declining proportion of the institution's human resources. What do all of these non-teaching people do? If I were a legislator funding higher education, a donor thinking of contributing, or a trustee of a private institution, I would want to know.
Tuition vs. Gas Prices
By Andrew Gillen
The price of crude oil is hitting new highs almost daily ($108 per barrel yesterday). This is leading to higher gas prices, about which the news is constantly reporting. Reporters have no problem finding people who are forced to alter their consumption patterns due to the increased cost of filling up the tank. While I don't like higher prices more than anyone else, behavioral changes are a predictable result of increasing prices. Which got me thinking, what else has gone up in price over the years?
The graph below shows the inflation adjusted price of a gallon of unleaded regular gas, and average tuition at 4-year public degree granting institutions from 1976 to the present, indexed to their 1976 price.
Sources: Digest of Education Statistics, College Board, Bureau of Labor Statistics, CCAP Calculations.
As you can see, while the price of gas has gone up and down over the years, the price of college has consistently gone up. Moreover, tuition is more than two and a half times more expensive now than in 1976, while gas is not even one and half times as expensive (and has just recently surpassed its previous high in the early 1980s).
It is also interesting to note that both tuition and gas prices have been increasing at similar rates since 2002. Why the disproportionate news on gas price increases, but not tuition increases?
Perhaps it has something to do with the boiled frog analogy. People also buy gas much more frequently than they pay tuition. Or maybe it's because tuition is expected to increase every year. Whatever the reason, CCAP will be striving to ensure that the situation changes.
The price of crude oil is hitting new highs almost daily ($108 per barrel yesterday). This is leading to higher gas prices, about which the news is constantly reporting. Reporters have no problem finding people who are forced to alter their consumption patterns due to the increased cost of filling up the tank. While I don't like higher prices more than anyone else, behavioral changes are a predictable result of increasing prices. Which got me thinking, what else has gone up in price over the years?
The graph below shows the inflation adjusted price of a gallon of unleaded regular gas, and average tuition at 4-year public degree granting institutions from 1976 to the present, indexed to their 1976 price.
Sources: Digest of Education Statistics, College Board, Bureau of Labor Statistics, CCAP Calculations.
As you can see, while the price of gas has gone up and down over the years, the price of college has consistently gone up. Moreover, tuition is more than two and a half times more expensive now than in 1976, while gas is not even one and half times as expensive (and has just recently surpassed its previous high in the early 1980s).
It is also interesting to note that both tuition and gas prices have been increasing at similar rates since 2002. Why the disproportionate news on gas price increases, but not tuition increases?
Perhaps it has something to do with the boiled frog analogy. People also buy gas much more frequently than they pay tuition. Or maybe it's because tuition is expected to increase every year. Whatever the reason, CCAP will be striving to ensure that the situation changes.
Tuesday, March 11, 2008
Research Grants Yes, Teaching No!!!!
By Richard Vedder
"It is unfortunate that the ability to teach students may not be as highly valued as the ability to procure research funds." Or so said an appeals court in Ohio in deciding not to grant tenure to a professor who had sued claiming age discrimination (the lawsuit was at my university, Ohio University, but I am drawing from Doug Lederman's excellent account in today's INSIDE HIGHER EDUCATION).
Even at medium quality research universities such as my own, more and more people are evaluated on how much money they can bring in. Money provides inputs into the production process, but what society is interested in is output --teaching and research performed. One problem is we focus on the inputs, not the outcomes. Universities do this to maximize their wealth and ability to command resources. But that, per se, is not the goal of universities, at least as viewed by the broader society that funds them.
The bigger problem, of course, is the relegation of teaching to a secondary role. At most universities there are good incentives to do research, great incentives to win research grants to fund the research, but weak incentives to do a good job of teaching --and zero incentives to do something equally important --sit and talk with students (advise them, if you prefer), helping them navigate the exciting but dangerous transition from childhood to adulthood, or from being merely literate to being truly learned and wise.
Research results are externally visible: papers published, grants won, patents earned. The world knows and other schools want to get those who are good at it. Teaching results are only locally visible: reputation for being good in the classroom, liked by the kids, etc. The payoff often comes years later --a student goes on to get an advanced degree stimulated by what they learned as an undergraduate; a grateful student turned alum gives his or her alma mater $90 million (that just happened to us at Ohio University). The results of teaching are no less important --arguably MORE important -- than those of research, but less visible, less measurable, and thus less rewarded.
The situation is aggravated by the fact that this perverse incentive system leads to a large amount of relatively trivial research that occurs mainly to foster promotion and tenure, not a true increase in the frontiers of our knowledge. I go to meetings in exotic watering holes or gambling dens (e.g., Las Vegas), for which attendance at sessions where scholarly papers are being given rarely exceeds 15, and sometimes is in the single digits. The university pays for the travel, the professor has fun seeing his old buddies and drinking a lot --and society gets nothing in return. Papers for academic journals are laboriously edited and resubmitted to reach a pristine state --and then read by 25 or 50 persons in some cases, more in the case of truly top journals in the field. To be sure, some important work is being done, discoveries are being made, lives are being made longer, the quality of life is being extended --but at enormous cost.
The generalization above, of course, does not apply to community college nor so much at liberal arts colleges or obscure lower tiered state universities. The ability of colleges to push more of the costs of research on students is becoming imperiled, and rightly so. Costs are getting out of hand, and the phenomenon of tenured professors making over $100,000 a year but teaching only three classes a year to a total of 60 students may become increasingly rare. And it should.
"It is unfortunate that the ability to teach students may not be as highly valued as the ability to procure research funds." Or so said an appeals court in Ohio in deciding not to grant tenure to a professor who had sued claiming age discrimination (the lawsuit was at my university, Ohio University, but I am drawing from Doug Lederman's excellent account in today's INSIDE HIGHER EDUCATION).
Even at medium quality research universities such as my own, more and more people are evaluated on how much money they can bring in. Money provides inputs into the production process, but what society is interested in is output --teaching and research performed. One problem is we focus on the inputs, not the outcomes. Universities do this to maximize their wealth and ability to command resources. But that, per se, is not the goal of universities, at least as viewed by the broader society that funds them.
The bigger problem, of course, is the relegation of teaching to a secondary role. At most universities there are good incentives to do research, great incentives to win research grants to fund the research, but weak incentives to do a good job of teaching --and zero incentives to do something equally important --sit and talk with students (advise them, if you prefer), helping them navigate the exciting but dangerous transition from childhood to adulthood, or from being merely literate to being truly learned and wise.
Research results are externally visible: papers published, grants won, patents earned. The world knows and other schools want to get those who are good at it. Teaching results are only locally visible: reputation for being good in the classroom, liked by the kids, etc. The payoff often comes years later --a student goes on to get an advanced degree stimulated by what they learned as an undergraduate; a grateful student turned alum gives his or her alma mater $90 million (that just happened to us at Ohio University). The results of teaching are no less important --arguably MORE important -- than those of research, but less visible, less measurable, and thus less rewarded.
The situation is aggravated by the fact that this perverse incentive system leads to a large amount of relatively trivial research that occurs mainly to foster promotion and tenure, not a true increase in the frontiers of our knowledge. I go to meetings in exotic watering holes or gambling dens (e.g., Las Vegas), for which attendance at sessions where scholarly papers are being given rarely exceeds 15, and sometimes is in the single digits. The university pays for the travel, the professor has fun seeing his old buddies and drinking a lot --and society gets nothing in return. Papers for academic journals are laboriously edited and resubmitted to reach a pristine state --and then read by 25 or 50 persons in some cases, more in the case of truly top journals in the field. To be sure, some important work is being done, discoveries are being made, lives are being made longer, the quality of life is being extended --but at enormous cost.
The generalization above, of course, does not apply to community college nor so much at liberal arts colleges or obscure lower tiered state universities. The ability of colleges to push more of the costs of research on students is becoming imperiled, and rightly so. Costs are getting out of hand, and the phenomenon of tenured professors making over $100,000 a year but teaching only three classes a year to a total of 60 students may become increasingly rare. And it should.
Monday, March 10, 2008
Reforming Federal Student Aid
By Richard Vedder
This is my bi-monthly pitch to reform federal student financial aid. I start with a confession: deep down, I believe the Feds should get out of the student financial aid business altogether. I think higher education is mainly a private good, and most aid is in the form of subsidies to individuals to enhance their future earnings --akin to financing an investment. I believe the fed should stay out of the business of trying to influence investment decisions, be it human or physical capital creating ones.
But I know my views are considered kooky and are politically unattainable. And, I appreciate that there is a very strong egalitarian tradition in our nation that provides some intellectual basis for federal student aid for some students. It is considered unjust for lower income students to be denied the opportunity for college because of steep financial constraints. Therefore, I can support some sort of federal assistance program.
The current system, however, is dysfunctional and crazy. Many persons are turned off by the incredibly complex FAFSA form, so that they simply opt out of applying for aid --and that includes many low income persons. We have a bewildering array of options --Stafford loans, both subsidized and unsubsidized, Pell Grants, federal work study, Perkins, SMART, SEOG grants or loans, federal tax credits, etc.
Research has shown that the complexity of the system has added enormously to compliance costs but done little to target money in desired fashions. So here is my proposal:
1) Eliminate all federal programs.
2) Replace the Pell Grants with a new Educational Opportunity Scholarship. It would be awarded to about 7 million Americans at an average award of $3,500 and a range on awards from $1,500 to $6,000. In short, it would be considerably more generous than the current Pell Grant program and would cost nearly $25 billion a year, about $10 billion more than we are probably spending this fiscal year on Pell awards. The cancelling of other programs would save more than that amount, however --a net savings to the taxpayer. If need be, the savings could be spent in other ways on higher education --more federal research support, for example (I am not advocating this, however).
3) The Pell Grant amounts would increase annually by the Consumer Price Index --period. The notion that colleges can raise tuition by huge amounts and Fed loans then increase roughly proportionally would end.
4) Upper income Americans (say with family incomes of $90,000 or more) would not be eligible for the Educational Opportunity Scholarships. Below that, award size would vary with income mainly. However, aid would be restricted to four years for those in a bachelor's degree program --with the exception that part time students could receive pro rated Pell Grants over a longer time horizon.
5) Aid would be given to students, not to financial aid offices. Indeed, the federal disbursers of the scholarships would be prohibited in sharing information on them with universities, other than to report aggregate statistics on the number of recipients attending each school, etc.
6) Aid would NOT vary with the price of the institution attended. The aid would be designed to provide an opportunity for low income students to attend a community college and most four year public institutions at a relatively low personal cost, and would offer a modicum of relief to middle income students as well.
7) Students who graduate early would receive a bonus. For example, if a student graduates in 3 years (perhaps by taking college courses in high school, going to summer school), she would receive a bonus check equal to at least one-half year federal scholarship. Students lingering around college, changing majors repeatedly, etc., would be out of luck. Society cannot afford to subsidize able bodied young persons indefinitely.
Such a system would be efficient, simple, easy to administer, give students more say over the dollars spent. It should promote more timely graduation of students. It could be set up to reward excellence and punish mediocrity by introducing a performance dimension to it, although that adds to complexity and the egalitarian nature of the award. In the long run, it would increase pressure on colleges to cut tuition increases as the elasticity of demand for college would increase somewhat --people would become more price-sensitive.
Students could still borrow as they like from private lenders if necessary, as at present. Such loans would be made by banks and other institutions only when the rewards to them were perceived to exceed the risks --making students borrow the same way the rest of us have to do, an important lesson that young persons should learn. States wanting to have their own assistance programs could continue to do so.
This blog is reaching the length of a mini study, so I will stop even though there is more to say. Shortly, my colleague Andy Gillen will weigh in on the student loan issue in a thoughtful study that I commend to you.
This is my bi-monthly pitch to reform federal student financial aid. I start with a confession: deep down, I believe the Feds should get out of the student financial aid business altogether. I think higher education is mainly a private good, and most aid is in the form of subsidies to individuals to enhance their future earnings --akin to financing an investment. I believe the fed should stay out of the business of trying to influence investment decisions, be it human or physical capital creating ones.
But I know my views are considered kooky and are politically unattainable. And, I appreciate that there is a very strong egalitarian tradition in our nation that provides some intellectual basis for federal student aid for some students. It is considered unjust for lower income students to be denied the opportunity for college because of steep financial constraints. Therefore, I can support some sort of federal assistance program.
The current system, however, is dysfunctional and crazy. Many persons are turned off by the incredibly complex FAFSA form, so that they simply opt out of applying for aid --and that includes many low income persons. We have a bewildering array of options --Stafford loans, both subsidized and unsubsidized, Pell Grants, federal work study, Perkins, SMART, SEOG grants or loans, federal tax credits, etc.
Research has shown that the complexity of the system has added enormously to compliance costs but done little to target money in desired fashions. So here is my proposal:
1) Eliminate all federal programs.
2) Replace the Pell Grants with a new Educational Opportunity Scholarship. It would be awarded to about 7 million Americans at an average award of $3,500 and a range on awards from $1,500 to $6,000. In short, it would be considerably more generous than the current Pell Grant program and would cost nearly $25 billion a year, about $10 billion more than we are probably spending this fiscal year on Pell awards. The cancelling of other programs would save more than that amount, however --a net savings to the taxpayer. If need be, the savings could be spent in other ways on higher education --more federal research support, for example (I am not advocating this, however).
3) The Pell Grant amounts would increase annually by the Consumer Price Index --period. The notion that colleges can raise tuition by huge amounts and Fed loans then increase roughly proportionally would end.
4) Upper income Americans (say with family incomes of $90,000 or more) would not be eligible for the Educational Opportunity Scholarships. Below that, award size would vary with income mainly. However, aid would be restricted to four years for those in a bachelor's degree program --with the exception that part time students could receive pro rated Pell Grants over a longer time horizon.
5) Aid would be given to students, not to financial aid offices. Indeed, the federal disbursers of the scholarships would be prohibited in sharing information on them with universities, other than to report aggregate statistics on the number of recipients attending each school, etc.
6) Aid would NOT vary with the price of the institution attended. The aid would be designed to provide an opportunity for low income students to attend a community college and most four year public institutions at a relatively low personal cost, and would offer a modicum of relief to middle income students as well.
7) Students who graduate early would receive a bonus. For example, if a student graduates in 3 years (perhaps by taking college courses in high school, going to summer school), she would receive a bonus check equal to at least one-half year federal scholarship. Students lingering around college, changing majors repeatedly, etc., would be out of luck. Society cannot afford to subsidize able bodied young persons indefinitely.
Such a system would be efficient, simple, easy to administer, give students more say over the dollars spent. It should promote more timely graduation of students. It could be set up to reward excellence and punish mediocrity by introducing a performance dimension to it, although that adds to complexity and the egalitarian nature of the award. In the long run, it would increase pressure on colleges to cut tuition increases as the elasticity of demand for college would increase somewhat --people would become more price-sensitive.
Students could still borrow as they like from private lenders if necessary, as at present. Such loans would be made by banks and other institutions only when the rewards to them were perceived to exceed the risks --making students borrow the same way the rest of us have to do, an important lesson that young persons should learn. States wanting to have their own assistance programs could continue to do so.
This blog is reaching the length of a mini study, so I will stop even though there is more to say. Shortly, my colleague Andy Gillen will weigh in on the student loan issue in a thoughtful study that I commend to you.
Saturday, March 08, 2008
A Tale of Two Universities
By Richard Vedder
Perhaps the most frustrating thing to me about higher education is the penchant for secrets. People who are dedicated to expanding knowledge, to learning more about the world, and to telling people how humans and planets behave are mostly against putting out any information about themselves unless they tightly control it. The typical school runs an agitprop operation similar to that found in the old Soviet Union. Schools dedicated to learning are militantly anti-learning when it comes to themselves.
Some schools, however, are breaking out of the mold. My favorite university today is Oregon State. As a midwesterner, when I think of Oregon I think of left-leaning, Granola guzzling vegetarians who recycle faithfully each week and are currently suffering angst over whether to support Hilliary or Obama. But Oregon State has done something wonderful --and at almost no cost --it has put on the Web every single financial transaction that has occurred since 1996. How much did the Psych department spend on a pizza party for its majors? One exception: salary data are not available (which is very bad). Also the information is not accessible from off campus computers, which is doubly bad (transparency must be kept within the family, I guess). But the move is a bold one to make visible how campus resources are spent. I am doing a lot of thinking on this, and should have an article out in a major publication within a month or so. I am advocating that schools follow the Oregon State model.
Contrast that to Penn State. A commenter on the INSIDE HIGHER ED story on the Oregon State move noted that the prez of Penn State fought hard and successfully to exempt his university from transparency provisions earlier this year --arguing it could hurt it somehow in competiton with its intellectual rivals Penn and Cornell (wishful thinking --Penn State and Penn resemble one another in name only). It took major external judicial intervention before Penn State would say how much Joe Paterno is getting paid (answer: a lot, but not more than people imagined).
Universities show a parochialism, a lack of vision, no, a stupidity, in wanting to hide things (my university has been harassing student newspaper reporters for revealing embarassing things this year). When things are hidden, rumors spread that lead people to believe even worse things than are true. The anti-transparency mentality of universities leads the public to believe "they are hidding something bad." Overwhelm people with information about your operations, and they will praise you for openness and then their eyes will glaze over after a few minutes of looking at the informationm (except, of course, my Whiz Kids at CCAP who will have a ball finding out about administrators who take their secretaries out to three martini lunches at University expense).
Besides, the public has a RIGHT to know what is going on. Excepting a few schools like Hillsdale College (which can and should do what they darn well please), everyone is on the government dole --including the rich private Ivy League schools that take big research grants from the Feds and urge their students to apply for federal student assistance. I believe transparency in operations should be a prerequisite for the granting of tax exempt status to universities, not to mention subsidies. But try getting that one through Congress!! I can hear Terry Hartle, David Warren and other DuPont Circle Mandarins now complaining load and bitterly about this historic infringement on their autonomy, their academic freedom, and indeed, their Way of Life.
Perhaps the most frustrating thing to me about higher education is the penchant for secrets. People who are dedicated to expanding knowledge, to learning more about the world, and to telling people how humans and planets behave are mostly against putting out any information about themselves unless they tightly control it. The typical school runs an agitprop operation similar to that found in the old Soviet Union. Schools dedicated to learning are militantly anti-learning when it comes to themselves.
Some schools, however, are breaking out of the mold. My favorite university today is Oregon State. As a midwesterner, when I think of Oregon I think of left-leaning, Granola guzzling vegetarians who recycle faithfully each week and are currently suffering angst over whether to support Hilliary or Obama. But Oregon State has done something wonderful --and at almost no cost --it has put on the Web every single financial transaction that has occurred since 1996. How much did the Psych department spend on a pizza party for its majors? One exception: salary data are not available (which is very bad). Also the information is not accessible from off campus computers, which is doubly bad (transparency must be kept within the family, I guess). But the move is a bold one to make visible how campus resources are spent. I am doing a lot of thinking on this, and should have an article out in a major publication within a month or so. I am advocating that schools follow the Oregon State model.
Contrast that to Penn State. A commenter on the INSIDE HIGHER ED story on the Oregon State move noted that the prez of Penn State fought hard and successfully to exempt his university from transparency provisions earlier this year --arguing it could hurt it somehow in competiton with its intellectual rivals Penn and Cornell (wishful thinking --Penn State and Penn resemble one another in name only). It took major external judicial intervention before Penn State would say how much Joe Paterno is getting paid (answer: a lot, but not more than people imagined).
Universities show a parochialism, a lack of vision, no, a stupidity, in wanting to hide things (my university has been harassing student newspaper reporters for revealing embarassing things this year). When things are hidden, rumors spread that lead people to believe even worse things than are true. The anti-transparency mentality of universities leads the public to believe "they are hidding something bad." Overwhelm people with information about your operations, and they will praise you for openness and then their eyes will glaze over after a few minutes of looking at the informationm (except, of course, my Whiz Kids at CCAP who will have a ball finding out about administrators who take their secretaries out to three martini lunches at University expense).
Besides, the public has a RIGHT to know what is going on. Excepting a few schools like Hillsdale College (which can and should do what they darn well please), everyone is on the government dole --including the rich private Ivy League schools that take big research grants from the Feds and urge their students to apply for federal student assistance. I believe transparency in operations should be a prerequisite for the granting of tax exempt status to universities, not to mention subsidies. But try getting that one through Congress!! I can hear Terry Hartle, David Warren and other DuPont Circle Mandarins now complaining load and bitterly about this historic infringement on their autonomy, their academic freedom, and indeed, their Way of Life.
Friday, March 07, 2008
Endowment Spending: Senate Finance Committee Evidence
By Richard Vedder
I read in Inside Higher Ed that schools are generally complying with the Senate Finance Committee's "request" for information on their endowments, although a few schools (including my alma mater Northwestern and former employer Washington University in St. Louis) are refusing to have the information released --that reduces the size of MY next contribution to Northwestern given its apparent aversion to transparency).
Data on 17 of the most well endowed schools is revealing. Looking at the 1998-2007 average payout rate, the median rate was about 4.41 percent, below the 5 percent mandatory payout rate widely discussed, but not dramatically so. No school spent less than 4 percent, while a few (Johns Hopkins, Cornell, University of Southern California and Rice) actually did spend over 5 percent.
The data generally support the idea that using an endowment payout rule to solve the cost explosion issue in higher education is an exercise in futility. A majority of even top endowment schools have less than $500,000 in endowment per student, with the number much lower for high enrollment public schools like Texas, Texas A & M, Michigan, or California, and even for some prestigious private schools ( e.g., Columbia or Northwestern). If 4.41 percent is a representative payout rate, increasing the rate to 5 percent would increase per student spending by less than $3,000 a year at a school with $500,000 endowment per student -- and much less for the less well endowed public institutions. Since the cost of higher education to the typical student at good private universities is probably at least $30,000 a year after discounts, and over $15,000 a year at good public schools, the 5 percent rule is not going to dramatically impact costs --even if every cent of incremental spending went for student financial aid --which it would not. To be sure, at Princeton, with about two million dollars per student in endowment and a 4 percent payout rate, the 5 percent rule would have a potentially huge impact if devoted exclusively to financial aid --cutting the average student payment surely more than 50 percent. But for every student going to Princeton, there are 10 going to schools like the Universities of Texas or Michigan. And remember, restrictions on endowment spending by donors further constrains the legal ability of colleges to use their endowment in the way that payout rule advocates want.
Moreover, the vast majority of American college students do NOT attend a high endowment university; for these students endowment payout rules are almost completely irrelevant. Spending a lot of time hassling over payout rules detracts from doing something more fundamental --slowing or stopping the extraordinary real growth in college costs, not only to students and their parents, but to society as a whole. Endowment payout rules do nothing about this.
Having said that, however, with the benefit of hindsight we can say that universities were too conservative in their payout rates in the last decade, because the rate of return on investments was so high that a large portion of endowment income actually went into increasing real endowment principal rather than funding current operations. A 6 or 7 percent payout rate would have been fiscally sound. Yet universities did not know that these super high returns would exist before the fact, and they remember periods (e.g., the 1970s) when real endowments actually fell for many schools. I would not be surprised if that were to happen for many schools in this fiscal year if equity prices remain stagnant (not to mention the losses is highly speculative investments that have been in favor recently at some high endowment schools).
The Finance Committee exercise should teach the universities a positive lesson. Revealing a little light on university operations leads to more, not less sympathy, for the position of higher education institutions. Transparency, rather than damaging universities, might actually help them in their political travails. I will probably be writing shortly about this more in the Chronicle of Higher Education, so stay tuned.
I read in Inside Higher Ed that schools are generally complying with the Senate Finance Committee's "request" for information on their endowments, although a few schools (including my alma mater Northwestern and former employer Washington University in St. Louis) are refusing to have the information released --that reduces the size of MY next contribution to Northwestern given its apparent aversion to transparency).
Data on 17 of the most well endowed schools is revealing. Looking at the 1998-2007 average payout rate, the median rate was about 4.41 percent, below the 5 percent mandatory payout rate widely discussed, but not dramatically so. No school spent less than 4 percent, while a few (Johns Hopkins, Cornell, University of Southern California and Rice) actually did spend over 5 percent.
The data generally support the idea that using an endowment payout rule to solve the cost explosion issue in higher education is an exercise in futility. A majority of even top endowment schools have less than $500,000 in endowment per student, with the number much lower for high enrollment public schools like Texas, Texas A & M, Michigan, or California, and even for some prestigious private schools ( e.g., Columbia or Northwestern). If 4.41 percent is a representative payout rate, increasing the rate to 5 percent would increase per student spending by less than $3,000 a year at a school with $500,000 endowment per student -- and much less for the less well endowed public institutions. Since the cost of higher education to the typical student at good private universities is probably at least $30,000 a year after discounts, and over $15,000 a year at good public schools, the 5 percent rule is not going to dramatically impact costs --even if every cent of incremental spending went for student financial aid --which it would not. To be sure, at Princeton, with about two million dollars per student in endowment and a 4 percent payout rate, the 5 percent rule would have a potentially huge impact if devoted exclusively to financial aid --cutting the average student payment surely more than 50 percent. But for every student going to Princeton, there are 10 going to schools like the Universities of Texas or Michigan. And remember, restrictions on endowment spending by donors further constrains the legal ability of colleges to use their endowment in the way that payout rule advocates want.
Moreover, the vast majority of American college students do NOT attend a high endowment university; for these students endowment payout rules are almost completely irrelevant. Spending a lot of time hassling over payout rules detracts from doing something more fundamental --slowing or stopping the extraordinary real growth in college costs, not only to students and their parents, but to society as a whole. Endowment payout rules do nothing about this.
Having said that, however, with the benefit of hindsight we can say that universities were too conservative in their payout rates in the last decade, because the rate of return on investments was so high that a large portion of endowment income actually went into increasing real endowment principal rather than funding current operations. A 6 or 7 percent payout rate would have been fiscally sound. Yet universities did not know that these super high returns would exist before the fact, and they remember periods (e.g., the 1970s) when real endowments actually fell for many schools. I would not be surprised if that were to happen for many schools in this fiscal year if equity prices remain stagnant (not to mention the losses is highly speculative investments that have been in favor recently at some high endowment schools).
The Finance Committee exercise should teach the universities a positive lesson. Revealing a little light on university operations leads to more, not less sympathy, for the position of higher education institutions. Transparency, rather than damaging universities, might actually help them in their political travails. I will probably be writing shortly about this more in the Chronicle of Higher Education, so stay tuned.
Thursday, March 06, 2008
Bribing Students To Stay In State
By Richard Vedder
Virtually every state university in the nation charges students residing within the state lower tuition than residents of other states or countries. The argument is that the state government subsidizes the university for the benefit of resident students, and that those subsidies should not be used to pay for freeloaders from outside the state. The economic and moral justification for a two tier tuition structure is reasonably sound, although I suspect in reality this practice tends to reduce somewhat interstate academic mobility, which is not a good thing.
As Michael LaFaive of the Mackinac Center in Midland, Michigan, pointed out to me in a recent email, however, now some states are thinking more about what happens to the students after they graduate --and whether there should be incentives for students to reside in-state (or, arguably, disincentives for students who move out of state). The carrot approach might be to have the state pay off some student loans for students agreeing to stay in-state after graduation, or perhaps give them a special income tax credit that effectively lowers their taxes. The stick approach would be to make all students sign a contract upon entering college that states that there will be deferred tuition charges (an amount that is less than or equal to the present value of the differential between in and out of state tuition rates) that students are liable to pay over X number of years after graduation.
As with the traditional geographic-based tuition differentials already existing, there are arguments both for and against these proposals. It can be argued that state subsides are human capital investments in college students, and if the investment vanishes (moves away), the state cannot earn a return on its investment. A migration "tax" or "subsidy" thus is a way of mitigating that phenomenon.
The arguments against such policies are also strong --and arguably even more compelling. Such schemes frustrate and distort the geogrpahic migration of people that is vital to the nation's dynamic economic change over time. It violates the spirit, if not the letter, of the interstate commerce clause of the U.S. Constitution. Moreover, it raises troubling issues relating to horizontal equity --treating people of similar circumstances differently for tax (or subsidy) purposes.
The problems of states like Michigan and my own Ohio are far more fundamental. Young people want to leave Michigan because of limited economic opportunities there. Globalization, unionization, perhaps high or perverse taxes, etc., all may contribute to the unwillingness of businesses to invest in the industrial Midwest, which, in turn, promotes migration of labor resources. The appropriate public policies to deal with these issues are probably not to distort the price and reward mechanism determined by markets that reflect human economic behavior.
At the same time, taxpayers do not like being ripped off. In Ohio, graduate students from, say, China, are subsidized the same amount as those from Ohio --even though few stay in the state after graduation. Many are outraged by the expensive form of "foreign aid." The state (and perhaps others as well) has already had some modest programs that force Ohio physicians to pay back medical school tuition fees if they practice in another state. It might be worth while to study the impact of these type programs on migration and employment opportunities before expanding the concept to huge numbers of undergraduates.
Virtually every state university in the nation charges students residing within the state lower tuition than residents of other states or countries. The argument is that the state government subsidizes the university for the benefit of resident students, and that those subsidies should not be used to pay for freeloaders from outside the state. The economic and moral justification for a two tier tuition structure is reasonably sound, although I suspect in reality this practice tends to reduce somewhat interstate academic mobility, which is not a good thing.
As Michael LaFaive of the Mackinac Center in Midland, Michigan, pointed out to me in a recent email, however, now some states are thinking more about what happens to the students after they graduate --and whether there should be incentives for students to reside in-state (or, arguably, disincentives for students who move out of state). The carrot approach might be to have the state pay off some student loans for students agreeing to stay in-state after graduation, or perhaps give them a special income tax credit that effectively lowers their taxes. The stick approach would be to make all students sign a contract upon entering college that states that there will be deferred tuition charges (an amount that is less than or equal to the present value of the differential between in and out of state tuition rates) that students are liable to pay over X number of years after graduation.
As with the traditional geographic-based tuition differentials already existing, there are arguments both for and against these proposals. It can be argued that state subsides are human capital investments in college students, and if the investment vanishes (moves away), the state cannot earn a return on its investment. A migration "tax" or "subsidy" thus is a way of mitigating that phenomenon.
The arguments against such policies are also strong --and arguably even more compelling. Such schemes frustrate and distort the geogrpahic migration of people that is vital to the nation's dynamic economic change over time. It violates the spirit, if not the letter, of the interstate commerce clause of the U.S. Constitution. Moreover, it raises troubling issues relating to horizontal equity --treating people of similar circumstances differently for tax (or subsidy) purposes.
The problems of states like Michigan and my own Ohio are far more fundamental. Young people want to leave Michigan because of limited economic opportunities there. Globalization, unionization, perhaps high or perverse taxes, etc., all may contribute to the unwillingness of businesses to invest in the industrial Midwest, which, in turn, promotes migration of labor resources. The appropriate public policies to deal with these issues are probably not to distort the price and reward mechanism determined by markets that reflect human economic behavior.
At the same time, taxpayers do not like being ripped off. In Ohio, graduate students from, say, China, are subsidized the same amount as those from Ohio --even though few stay in the state after graduation. Many are outraged by the expensive form of "foreign aid." The state (and perhaps others as well) has already had some modest programs that force Ohio physicians to pay back medical school tuition fees if they practice in another state. It might be worth while to study the impact of these type programs on migration and employment opportunities before expanding the concept to huge numbers of undergraduates.
Wednesday, March 05, 2008
"Maintenance of Effort"
By Richard Vedder
I am in Washington, D.C., and as I saw Charlie Reed (head of the California State University system) in the House Dining Room and roaming the halls of the Capitol, I was reminded of why he was no doubt there --the Higher Education Act reauthorization. Calls from the Christian Science Monitor and the National Council of State Legislatures today further reminded me even more of one of the proposed provisions of the law: "maintenance of effort."
This provision is simply God-awful. It penalizes states that reduce university appropriations below levels in the recent past. It is an absolutely brazen interference by the federal government into the actions of state legislatures. It implies that a one-size-fits-all federal rule is desirable in every state. It may force some states to reduce other forms of more desirable spending because of the financial costs of maintaining higher ed --which may be a lower priority in some states.
Not only that, there is abundant evidence that the association between state appropriations on higher education and economic growth is not positive --and is likely somewhat negative. In other words, this inane provision would push states into following a growth-reducing fiscal policy. In short, it is just plain dumb.
There are some good congressmen and congresswomen. I ate breakfast with a dozen or so of them this morning. They asked good questions, made astute observations. Yet the whole is less than the sum of its parts --as an institution Congress on average makes bad decisions, in part subverted by the perverse effects of special interest lobbying and political funding.
Let us not pervert our federal system of government in order to implement hare-brained schemes of funding higher education.
I am in Washington, D.C., and as I saw Charlie Reed (head of the California State University system) in the House Dining Room and roaming the halls of the Capitol, I was reminded of why he was no doubt there --the Higher Education Act reauthorization. Calls from the Christian Science Monitor and the National Council of State Legislatures today further reminded me even more of one of the proposed provisions of the law: "maintenance of effort."
This provision is simply God-awful. It penalizes states that reduce university appropriations below levels in the recent past. It is an absolutely brazen interference by the federal government into the actions of state legislatures. It implies that a one-size-fits-all federal rule is desirable in every state. It may force some states to reduce other forms of more desirable spending because of the financial costs of maintaining higher ed --which may be a lower priority in some states.
Not only that, there is abundant evidence that the association between state appropriations on higher education and economic growth is not positive --and is likely somewhat negative. In other words, this inane provision would push states into following a growth-reducing fiscal policy. In short, it is just plain dumb.
There are some good congressmen and congresswomen. I ate breakfast with a dozen or so of them this morning. They asked good questions, made astute observations. Yet the whole is less than the sum of its parts --as an institution Congress on average makes bad decisions, in part subverted by the perverse effects of special interest lobbying and political funding.
Let us not pervert our federal system of government in order to implement hare-brained schemes of funding higher education.
Monday, March 03, 2008
Fight Fiercely Harvard!!
By Richard Vedder
I read this morning that Harvard is lowering standards for persons with a peculiar talent --an ability to put a ball through a hoop. They may be even violating NCAA recruiting rules in doing it. Why? They want to win the Ivy League basketball championship. Big whoop --or maybe I should say big hoop.
The desire to win is a basic human instinct. So few places in higher education is there a true "bottom line." Basketball is one of them. Basketball coaches are hired and fired with great regularity, unlike university presidents who can screw up for years, even decades, without the slightest adverse consequences. Yet universities are not about playing with balls, and when great universities like Harvard dilute their academic standards to win, it is rather sad. The Ivy League ideal --no athletic scholarships, treating athletes like students instead of semi-professional pseudo-employees--is one I long have admired.
Does Harvard have the right to do what they are doing? I believe the answer is yes. I think the NCAA is a dubious cartel with excessive powers that needs to be brought down to size. Certainly I don't want Congress interfering. So if Harvard wants to dilute the standards of America's oldest and most prestigious university, they can do so. Let us hope that the accounts our not true and, if they are, that Yale and Princeton maintain standards of academic integrity -- even if it means they are beaten by Harvard in the fun but silly little games that are played with that little ball.
I read this morning that Harvard is lowering standards for persons with a peculiar talent --an ability to put a ball through a hoop. They may be even violating NCAA recruiting rules in doing it. Why? They want to win the Ivy League basketball championship. Big whoop --or maybe I should say big hoop.
The desire to win is a basic human instinct. So few places in higher education is there a true "bottom line." Basketball is one of them. Basketball coaches are hired and fired with great regularity, unlike university presidents who can screw up for years, even decades, without the slightest adverse consequences. Yet universities are not about playing with balls, and when great universities like Harvard dilute their academic standards to win, it is rather sad. The Ivy League ideal --no athletic scholarships, treating athletes like students instead of semi-professional pseudo-employees--is one I long have admired.
Does Harvard have the right to do what they are doing? I believe the answer is yes. I think the NCAA is a dubious cartel with excessive powers that needs to be brought down to size. Certainly I don't want Congress interfering. So if Harvard wants to dilute the standards of America's oldest and most prestigious university, they can do so. Let us hope that the accounts our not true and, if they are, that Yale and Princeton maintain standards of academic integrity -- even if it means they are beaten by Harvard in the fun but silly little games that are played with that little ball.
The Cal Governance Crisis
By Richard Vedder
By all accounts, the University of California system has had severe issues of university governance, and Doug Lederman's excellent INSIDE HIGHER ED story today details many of the problems. A couple of years ago, a salary scandal broke out that required some outside intervention (my friend Jim Duderstadt, former University of Michigan prez, played a lead role). The problems continue.
The Chair of the Regents is an activist, attending weekly meetings of top staff and issuing mission statements without even full Regent approval. I would agree that is going too far --interfering too much in the day to day operations of a great university. Yet too often I see the opposite --the governing board is sort of a cheerleading society for the President, expected to help raise money and, in state universities, occasionally help politically when the governor or legislature interferes. Too often these trustees get all their information from one source --the President and his top aides, and are not truly performing their fiduciary responsibilities of oversight. This type of wishy-washy pseudo-governance is what my friend Anne Neal's organization, the American Council of Trustees and Alumni, is all about. I have seen it at work at my own university, Ohio University, and I am sickened by the consequences of irresponsible inaction.
A few observations.
First, the root cause of all this is that the ownership of the university is ambiguous in most cases --property rights are ill defined. The faculty believe they should run the university, or, at the minimum, make all academic decisions. The President believes she was hired to run the place and the Trustees should be seen and not heard. The alums believe they are the heart and soul of the place, and often important financial backers, so they should have a key role to play. Students say, "The place is being run for us --we are the consumers and pay a lot of the bills." So they want a role in decision-making. In state universities, Governors and state legislatures on occasion claim ownership. The Trustees are the legal owners and supreme legal authority of the institution, so sometimes they really want to make decisions --lots of them, some initiated by them and not the campus community. The non-profit, no bottom line nature of higher education complicates things. These problems do not exist at the University of Phoenix. Everyone knows who is in charge.
Second, in the specific case of the University of California and some other mega-campus systems, I suspect that decision-making as a whole is far too concentrated in the center --a Soviet style approach of "one size fits all" that is not appropriate. UC Berkeley and UC Santa Cruz may be only 50 miles or so apart geographically, but they are miles apart in other ways. The Cal State system, ably run by the great Charlie Reed, is doubly complex. I am meeting later this year with the Regents at the University of Texas, which I suspect has some of the same problems, as does the SUNY system in New York and perhaps a few others.
Third, if we had a true bottom line --or even two or three measurable goals, many of these problems would disappear. University presidents could be told "deliver on meeting our goals, and we will largely leave you alone." It is the vagueness of measuring our success that allows room for arguments --Prez X is doing a good job one will say, while a second person will disagree. These problems are less prevalent in private enterprise.
Fourth, having said that, however, boards do have to be decisive at times --passive corporate boards are sued for not carrying out their obligations to stockholders. Hence the rate of consequential negative actions taken against CEOs of private corporations is greater, I suspect, then is the case with universities. They do their number one duty --hire and fire CEOs --more vigorously. I am thinking of all the financial tycoons running big New York financial institutions who have bit the dust in the last year or two. By the way, it would be a fascinating study to empirically verify (or refute) this assertion.
By all accounts, the University of California system has had severe issues of university governance, and Doug Lederman's excellent INSIDE HIGHER ED story today details many of the problems. A couple of years ago, a salary scandal broke out that required some outside intervention (my friend Jim Duderstadt, former University of Michigan prez, played a lead role). The problems continue.
The Chair of the Regents is an activist, attending weekly meetings of top staff and issuing mission statements without even full Regent approval. I would agree that is going too far --interfering too much in the day to day operations of a great university. Yet too often I see the opposite --the governing board is sort of a cheerleading society for the President, expected to help raise money and, in state universities, occasionally help politically when the governor or legislature interferes. Too often these trustees get all their information from one source --the President and his top aides, and are not truly performing their fiduciary responsibilities of oversight. This type of wishy-washy pseudo-governance is what my friend Anne Neal's organization, the American Council of Trustees and Alumni, is all about. I have seen it at work at my own university, Ohio University, and I am sickened by the consequences of irresponsible inaction.
A few observations.
First, the root cause of all this is that the ownership of the university is ambiguous in most cases --property rights are ill defined. The faculty believe they should run the university, or, at the minimum, make all academic decisions. The President believes she was hired to run the place and the Trustees should be seen and not heard. The alums believe they are the heart and soul of the place, and often important financial backers, so they should have a key role to play. Students say, "The place is being run for us --we are the consumers and pay a lot of the bills." So they want a role in decision-making. In state universities, Governors and state legislatures on occasion claim ownership. The Trustees are the legal owners and supreme legal authority of the institution, so sometimes they really want to make decisions --lots of them, some initiated by them and not the campus community. The non-profit, no bottom line nature of higher education complicates things. These problems do not exist at the University of Phoenix. Everyone knows who is in charge.
Second, in the specific case of the University of California and some other mega-campus systems, I suspect that decision-making as a whole is far too concentrated in the center --a Soviet style approach of "one size fits all" that is not appropriate. UC Berkeley and UC Santa Cruz may be only 50 miles or so apart geographically, but they are miles apart in other ways. The Cal State system, ably run by the great Charlie Reed, is doubly complex. I am meeting later this year with the Regents at the University of Texas, which I suspect has some of the same problems, as does the SUNY system in New York and perhaps a few others.
Third, if we had a true bottom line --or even two or three measurable goals, many of these problems would disappear. University presidents could be told "deliver on meeting our goals, and we will largely leave you alone." It is the vagueness of measuring our success that allows room for arguments --Prez X is doing a good job one will say, while a second person will disagree. These problems are less prevalent in private enterprise.
Fourth, having said that, however, boards do have to be decisive at times --passive corporate boards are sued for not carrying out their obligations to stockholders. Hence the rate of consequential negative actions taken against CEOs of private corporations is greater, I suspect, then is the case with universities. They do their number one duty --hire and fire CEOs --more vigorously. I am thinking of all the financial tycoons running big New York financial institutions who have bit the dust in the last year or two. By the way, it would be a fascinating study to empirically verify (or refute) this assertion.
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