Thursday, February 12, 2009

Public College Subsidies-...Off With Their Heads

by Daniel Bennett

Inside Higher Ed ran a story this morning that discusses a trend in which public universities are increasingly recruiting out-of-state students. Some of the schools mentioned dished out a healthy dose of rhetoric by indicating that such strategies are intended to bolster geographic diversity of the student population. The idea that the goal is to increase revenue streams (due to the fact the out-of-state students pay up to 4x the tuition of an in-state student) to compensate for expected declines in state subsidies, was shrugged off as a secondary benefit. I say phony bologna.

The current recession is a perfect opportunity to make lasting change that will ultimately reduce the cost of college to students and taxpayers alike. Let's rid the public dime of the inefficient operation and excessive spending of state-sponsored public college. We need to cut state subsidies altogether and force colleges to compete on price and quality. The excessive spending will surely reign in, as colleges will trim back the non-education related services and bloated administrative salaries because they will be faced with the reality that students are going to vote with their wallets and those schools who offer a good value will survive and flourish. And those who don't will be faced with the decision to innovate, cut costs and improve quality, or to close up shop. The efficient markets theory can surely apply to higher education and in the medium to long term, reduce the costs of higher education substantially and at the same time, help to balance the state and national budgets. Maybe then, financial aid for low-income students can actually be effective at increasing access and making college more affordable.

11 comments:

capeman said...

Ah, the real agenda, end public subsidies for higher education. (And why stop there, why not end publicly subsidized K-12 education?)

capeman said...

And I should add:

"The efficient markets theory can surely apply to higher education and in the medium to long term"

Yes, the wonderful theory that has worked such wonders for the world financial system, the theory that has proved such an electoral boon to the conservatives and Republicans.

Lenny said...

Once again, one of Vedder's "whiz kids" exhibits precisely why he ended up at Ohio U. instead of a real econ department.

Simplistic, rigid ideology...using whatever means are at hand at any given time to always argue for the same end...radical goals disguised as thoughtful reform...blind fetishization of the private sector.

Ahhh yes, young man. Dr. Vedder has trained you quite well.

Tolky1 said...

Actually, I think Mr. Bennett is quite right. Prices go up when people can afford higher prices and there's inelastic demand (which our society has created by making the B.A. sine qua non, without making skills sine qua non).

Universities, because of government involvement, because there's so much money to be made from the government, have for a while cared more about tuition (partly raised by student loans) than about how they should be making money, which is donations from people, alumni or otherwise, who are impressed with the product and want to see themselves associated with the products or eventually pay for the amazing product. So the quality of higher education is destroyed by government loans.

Let the invisible hand of Adam Smith work, by having individual people decide who should go to college, not the government, because individual businesses and businessmen are going to choose more mature, harder working people, while the government simply says: "everybody come," which lowers the quality.

Charles Murray, whose 1984 book *Losing Ground* eventually led to 1990s welfare reform, has argued basically these same things, I think, in his book *Real Education* and hopes to have the same reforms with his book. Blessings.

capeman said...

Tolky -- If you really believe the preposterous claim that eliminating state subsidies will reduce the cost to students -- at public universities -- you will believe anything.

This is moonshine. It must take someone who has been trained by the Doc to come up with such absurdity.

Tolky1 said...

Okay, but please explain why?

capeman said...

It's simple. The state subsidy reduces the cost to students. Don't believe me? Compare private college tuition costs to public college tuition costs. Generally, they're much higher. You might say that the private colleges 'discount' their tuition. Often true, but this is largely because they have amassed big endowments, in the few cases where they actually offer lower tuition.

Where I work -- a public university -- we've sometimes talked about the response if we were cut free from the state -- no control, no subsidy. The answer is we would immediately raise tuition as high as we could -- the way we do with the out of state students. There's no way we could keep going at the level of in-state tuition that is currently charged. People would either pay the higher tuition, or not go here. We would undoubtedly lose students if we suddenly became 'private', but we would do the best to survive that we could.

It's kind of amusing to see beneficiaries of public education getting their subsidized degrees, then going off to bash the public education program, making absurd arguments about how it would have been cheaper if they had not gone to a public university.

Tolky1 said...

Dear Capeman:

Much thanks. But I believe Mr. Bennet (and I hope he will correct me if I am wrong) is considering not the nominal price of education but the real price, the quality versus price, which is a very different thing. Note his terms "inefficient operation" and "excessive public spending," and "non-education related services and bloated administrative salaries."

So, for instance, an American car might seem cheaper sticker price than a Japanese car (much like a public education seems cheaper than a private one), but it ends up costing much more, because it ends up breaking down more and lasts half of the life of a car like a Honda. There is a much greater difference in excellence between public and private.

For instance, I am the graduate of a public university, essentially a party school. I look back with some shame on the education I received there. There were many immense classes, incredibly easy classes, especially at the undergraduate level, and I learned from quite a few of my teachers but only through them fighting through the immense class sizes and very poor standards set for students by the administration.

Consequently, the administrators made a lot of money (probably for keeping the prices low by raising class sizes), but there were relatively few teachers, and many of those were TAs.

Not coincidentally, the campus had a major alcohol problem. Now, I know that students are going to get drunk some in the week regardless, but I argue that they were so bored, because the classes were so easy, that drinking too much was much more of a way of life for them than if they had been really challenged. But morally they were falling apart, because the institution was rotting on the inside, because it showed them that only money was important, not building character and discipline and skills.

So the cost of the party school in undisciplined lives, anonymous classes, students who can't think or express themselves or write, or who know very little, is much greater than the cost of an excellent private college where students are required to become great, although they may have to pay a little more to do so.

I'm in a rush, but consider also the Austrian economic concept of malinvestment, and let's write about this more later. Deep blessings upon you.

capeman said...

Tolky -- I could give a long answer, but the short answer is: if the public party school you went to was so horrible, why did you stay there? Why did you not "pay a little more", as you put it, to go to one of those places where you would have "become great"?

Tolky1 said...

Hi Capeman:

Well, I suppose the answer is threefold, and all three are my fault.
1. I applied to one particular school I was very interested in as a transfer (should have applied to many more) but was rejected because my academics were not good enough (my fault). 2. It wasn't completely clear to me as a sophomore how bad an education I was getting, which is the fault of the culture and me for not being perceptive enough. 3. As for graduate school, I had worked my butt off in the last three years of undergraduate, but with a 1360 GRE and graduating with honors, it wasn't good enough, at least partly because of the use of TAs and adjuncts at even the best schools (which, remember, are still influenced by government loans and not always the free market). I'm not the proudest of it. Hope that helps.

capeman said...

I don't know what you were majoring in, so a little hard to comment. If someone finds all of their classes to be too easy, my recommendation is find something else to study, e.g. try physics, engineering, economics, even finance -- admittedly, I know more about the first two than the last two -- and chances are you will find yourself challenged.

My experience as a student and faculty member at a variety of public and private universities is that they vary greatly in quality and efficiency. On the whole, my experience has been that the public colleges give much greater value for the buck. On the other hand, perhaps the peaks are to be found at the private colleges, depending on what you are looking for. Probably the public universities have fallen (further?) behind the privates over the past few decades.

I guarantee, you can find all levels of drunkenness, immorality, seriousness, hard work, quality of teaching at both kinds of schools. I believe you have a somewhat romanticized/ideologicized view of what private colleges are like.

I believe that what you get out of school depends first and foremost on what you put into it, especially undergraduate school.