End the Arms Race

By Richard Vedder

Precisely one century ago, Germany was trying to catch up with Britain's navy, and started building "dreadnoughts", great battleships. Britain, of course, retaliated by building more of its own. Hence began a naval arms race that culminated in the most senseless war in human history (arguably), World War I.

A similar arms race has been going on in higher education. In the eyes of many university presidents, their schools achieve victory if they move up in the US News and World Report rankings. By increasing "faculty resources" or by getting a lot of alums to donate, the school improves. By taking students with high SAT scores, the school improves. By impressing fellow college presidents and admissions officers, the college can move up in the rankings. The rankings are largely resource and reputation based.

The new Forbes/CCAP rankings, released late Wednesday, are largely based on outcomes --are the students satisfied with their instruction? Are there any signs of significant occupational success amongst the graduates? Do students graduate in four years --and how does the school do on that score given the quality of incoming applicants and their resource base? Do a significant number of students and faculty reach academic distinction as recognized externally? This is not inherently a resource based ranking system. Indeed, schools are hurt in our rankings if they try to achieve distinction by spending a lot and financing it by having high fees that force students into a significant amount of debt.

Accordingly, we have statistically analyzed the determinants of high Forbes/CCAP rankings. While a number of demographic and selectivity variables are included in the analysis and are worth talking about (e.g., schools with more women rank significantly higher, other things equal), the important thing to me is that there is no statistically significant relationship between per student expenditures by the institution and the school's ranking. In other words, our rankings are spending-neutral.

That should be slightly qualified. It does make some difference HOW you spend your money. It would appear that schools that lavish high salaries on "superstar" professors actually do poorer in our rankings, but ones that keep the student-faculty ratio relatively low fare better. In other words, having many competent but not research-dazzling professors teach small classes is better than having fewer high paid (and presumably more research oriented) faculty teach bigger classes, no doubt with the help of graduate students. This latter conclusion is somewhat provisional, and much more research needs to be done.

Having college presidents, trustees and other leaders move towards evaluating success based on an expenditure-neutral rankings system would reduce the incentives for the academic arms race --victory comes not by building more academic battleships, but by making the student the center of attention, not the cash cow, and by being more efficient. To be sure, a big endowment helps, even in our rankings --but a big endowment can be used to lower the cost burden on students --a plus in our way of thinking and evaluating schools.