By Richard Vedder
Ohio is boring. I have lived there for two-thirds of my life. People are friendly, mostly good, etc., but not on average terribly innovative, in part because a rapidly expanding state and local governmental sector has crowded out private entrepreneurship. In my lifetime, incomes have gone (on average) from well above the national average to well below.
Yet, to my surprise, a couple of promising moves have come out of the Buckeye State. First, the Ohio Board of Regents traditionally has funded universities on the basis of students enrolled. Now they are putting much more emphasis on academic success --things like retention and graduation rates. Eric Fingerhut, the Chancellor of the Board of Regents, is smart (although he has some loopy political views, in my judgment), and focused on making higher education more efficient and responsive. He is pushing for more transparency, and getting some results, although it is still too early to say much definitively.
Second, prodded by the Board of Trustees and perhaps the business office (specifically CFO Bill Decatur), my own university, Ohio University, is poised to do something innovative and exciting (a rarity for a school that usually follows the fads of academia rather than leading them). The involvement of the Trustees is particularly noteworthy because in general this is one the worst Board of Trustees I have experienced in a half century of watching American higher education. But it does have some experienced business persons of some competence.
Specifically OU is considering privatizing its housing operations. They may do so because they are facing large capital costs, and are grudgingly but courageously admitting the obvious: universities are better at doing academics than engaging in lodging operations. Specifically, the school has enormously expensive labor agreements with an union (workers probably earn on average 40-50 percent more than the going wage in the area for the types of work performed). Prevailing wage laws make renovations of buildings very costly. Private entrepreneurs can provide higher quality housing at the same prices as the university, and keep the school from adding to its already sizable debt load. I am proud of the school I have taught at for 43 plus years for considering this move.
To be sure, both the funding formula idea and the privatization of housing is going on elsewhere, but when it comes to mainstream Ohio, you know that the winds of change in higher education are picking up a bit.
Thursday, April 30, 2009
Buy the Weekly Standard: Save the SAT!!!!
By Richard Vedder
I don't usually read the Weekly Standard, but someone yesterday told me I had to get the latest issue and read the piece by Andrew Ferguson "The SAT Test and Its Enemies." I have read the story, and it is absolutely superb, saying in much greater detail what I have said on several occasions in recent weeks.
The SAT was put in to add objectivity to the admissions process, and to stop discrimination against able students of the "wrong" social background -- Jews, poor kids, racial minorities, graduates of big city public high schools, etc. It was promoted by "progressives" to increase the role of merit and downgrade the importance of family background, religion and other factors, and to reduce the clout that admissions officers had by making highly subjective decisions. To be sure, as Dan Golden is forever pointing out, up to 40 percent of admits are given preferential treatment: legacies, superb athletes, rich kids whose parents are actual or potential donors, children of celebrities or politicians, and, not to be forgotten, affirmative action admits based on race. Read Jerome Krabel's The Chosen --one of the best books I have ever read.
Now the SAT bashers are winning wars. Good schools are going SAT optional, noting that high SAT scores are disproportionately earned by whites (Asians are never mentioned) and higher income kids. Too many of the "wrong" people are getting in, and, besides, the tests are racist. All of this is crazy and wrong, as Ferguson nicely points out.
What will be the end result if the SAT loses importance? Here are a few things:
1) The intellectual quality of students will decline, accelerating a decline in academic standards that large numbers of senior faculty like myself believe has been going on for years, manifested in such things as a decline in student reading, more time spent partying and less studying, and grade inflation.
2) The subjective judgment of admission officers will grow, and currently "good" groups (blacks, athletes, poor kids, etc.) will be granted admission to students of lesser academic promise. Statistical analysis indicates that, along with high school grades, SAT performance is an excellent predictor of college success. Also, eliminating the SAT would no doubt increase legacy admissions at some schools.
3) Either college retention rates will fall or standards will be further watered down.
Ironically, in other countries, admissions is even more test-based than in the U.S., and kids going to Oxford (and a few American schools like Cal Tech) are admitted solely on their prospects to succeed academically --no legacies, athletic scholarships, etc. I think a better than decent argument can be made to move in that direction in the U.S. in keeping with the democratic ideals of American society.
But aren't we keeping some poor kids out by using SAT testing (not to mention blacks and Hispanics? Sure. But Ferguson has a great quote from two prominent liberal sociologists, Christopher Jencks and David Riesman, written in the 1960s, commenting on the "unfairness" of standardized tests to poor persons. "Life is unfair to the poor. Tests merely measure the results."
I don't usually read the Weekly Standard, but someone yesterday told me I had to get the latest issue and read the piece by Andrew Ferguson "The SAT Test and Its Enemies." I have read the story, and it is absolutely superb, saying in much greater detail what I have said on several occasions in recent weeks.
The SAT was put in to add objectivity to the admissions process, and to stop discrimination against able students of the "wrong" social background -- Jews, poor kids, racial minorities, graduates of big city public high schools, etc. It was promoted by "progressives" to increase the role of merit and downgrade the importance of family background, religion and other factors, and to reduce the clout that admissions officers had by making highly subjective decisions. To be sure, as Dan Golden is forever pointing out, up to 40 percent of admits are given preferential treatment: legacies, superb athletes, rich kids whose parents are actual or potential donors, children of celebrities or politicians, and, not to be forgotten, affirmative action admits based on race. Read Jerome Krabel's The Chosen --one of the best books I have ever read.
Now the SAT bashers are winning wars. Good schools are going SAT optional, noting that high SAT scores are disproportionately earned by whites (Asians are never mentioned) and higher income kids. Too many of the "wrong" people are getting in, and, besides, the tests are racist. All of this is crazy and wrong, as Ferguson nicely points out.
What will be the end result if the SAT loses importance? Here are a few things:
1) The intellectual quality of students will decline, accelerating a decline in academic standards that large numbers of senior faculty like myself believe has been going on for years, manifested in such things as a decline in student reading, more time spent partying and less studying, and grade inflation.
2) The subjective judgment of admission officers will grow, and currently "good" groups (blacks, athletes, poor kids, etc.) will be granted admission to students of lesser academic promise. Statistical analysis indicates that, along with high school grades, SAT performance is an excellent predictor of college success. Also, eliminating the SAT would no doubt increase legacy admissions at some schools.
3) Either college retention rates will fall or standards will be further watered down.
Ironically, in other countries, admissions is even more test-based than in the U.S., and kids going to Oxford (and a few American schools like Cal Tech) are admitted solely on their prospects to succeed academically --no legacies, athletic scholarships, etc. I think a better than decent argument can be made to move in that direction in the U.S. in keeping with the democratic ideals of American society.
But aren't we keeping some poor kids out by using SAT testing (not to mention blacks and Hispanics? Sure. But Ferguson has a great quote from two prominent liberal sociologists, Christopher Jencks and David Riesman, written in the 1960s, commenting on the "unfairness" of standardized tests to poor persons. "Life is unfair to the poor. Tests merely measure the results."
Wednesday, April 29, 2009
The Battle for Control Is the Key to Lowering Costs
By Richard Vedder
I vaguely recall that Julius Caesar started his Commentaries by noting that Gaul (roughly, modern day France) was divided into three parts (I wonder if some students today think Caesar leads a rock band or is a You Tube singing sensation). Is this true of universities?
The Public Agenda, with funding from the Lumina Foundation's massive Making Opportunity Affordable project (with which CCAP is also receiving generous funding), talked to three parts that are vital to all universities: presidents and senior academic administrators, budget and financial officers, and faculty, and asked them for their reactions to financial strains confronting higher education.
As I noted myself looking at the study (a preview of which I got at a meeting at Lumina a couple of weeks ago), and from Doug Lederman's excellent summary in INSIDE HIGHER ED, college presidents believe, roughly, "we already are efficient and cannot do much more to improve productivity." That is what I observe --college presidents think they are the most efficient, coolest people on the planet Earth and are doing everything right.
Chief budget officers take a view similar to ours (CCAP's): there are tons of ways to cut costs --make faculty teach more, use technology to save labor costs, use buildings more efficiently, make more use of dual (high school/college) enrollments, etc. etc. Secretly, they believe their bosses (presidents) are not aggressive enough in cutting costs. Using the lingo of corporate America, I find myself more in sync with CFOs of colleges than CEOs.
The faculty believe, if the Public Agenda has it right (and I think they do) that "efficiency gains" are a code word for reducing quality, which has already eroded over time as the impact of reduced demands on students, grade inflation, etc. have taken their toll. Also, most of them that I talk to say "get rid of administrators to cut costs and actually improve efficiency." The data on staffing growth suggest they have a point.
In terms of resistance to change, I would rank faculty first, presidents second, and budget officers last. In terms of power, though, the rankings are similar, at some schools presidents have more clout than faculty, at others the reverse. But the financial officers are relatively powerless as a general rule (there are exceptions).
This gets to the question of university governance. Who owns the university? Who makes decisions? I do believe universities are different than, say, steel manufacturers, and the persons on the factory floor are different from faculty members, just as physicians in hospitals are not the same as assembly line workers. Professionals expect some deference, and their skill level is such that treating them like hired hands will lead to rapid defections --they have occupational mobility. Moreover, faculty have a better appreciation for the outcomes of universities -- knowledge and how it is created-- than do others, simply because they are the ones doing it. But they also are incredibly insular, non-innovative, rent-seeking, and indifferent to inefficiency. Presidents usually are a bit more open to change, knowing the "big picture" with respect to the economics of higher education, but feel constrained by the fact that at the really good schools, the faculty have a lot of clout.
Yet markets are showing that the old governance model is breaking down somewhat. For-profit schools pay faculty reasonably well, but sharply circumscribe their authority. And these are the schools that are gaining market share rapidly. Moreover, even at the traditional universities, tenured faculty are doing less and less of the teaching --by choice, as they prefer to do research (much of it of inconsequential value) and let lowly graduate students and starving adjuncts do the heavy lifting. But more and more, schools are going to say: we can operate without the tenured faculty, at least in the short run,and much of the insularity of the faculty is prompted by the effects of lifetime employment contracts. I think tenure is undergoing a very slow but real death in America. But the process is slow, and the need for faster change will probably lead to greater governance tensions as financial constraints increase in coming years.
I vaguely recall that Julius Caesar started his Commentaries by noting that Gaul (roughly, modern day France) was divided into three parts (I wonder if some students today think Caesar leads a rock band or is a You Tube singing sensation). Is this true of universities?
The Public Agenda, with funding from the Lumina Foundation's massive Making Opportunity Affordable project (with which CCAP is also receiving generous funding), talked to three parts that are vital to all universities: presidents and senior academic administrators, budget and financial officers, and faculty, and asked them for their reactions to financial strains confronting higher education.
As I noted myself looking at the study (a preview of which I got at a meeting at Lumina a couple of weeks ago), and from Doug Lederman's excellent summary in INSIDE HIGHER ED, college presidents believe, roughly, "we already are efficient and cannot do much more to improve productivity." That is what I observe --college presidents think they are the most efficient, coolest people on the planet Earth and are doing everything right.
Chief budget officers take a view similar to ours (CCAP's): there are tons of ways to cut costs --make faculty teach more, use technology to save labor costs, use buildings more efficiently, make more use of dual (high school/college) enrollments, etc. etc. Secretly, they believe their bosses (presidents) are not aggressive enough in cutting costs. Using the lingo of corporate America, I find myself more in sync with CFOs of colleges than CEOs.
The faculty believe, if the Public Agenda has it right (and I think they do) that "efficiency gains" are a code word for reducing quality, which has already eroded over time as the impact of reduced demands on students, grade inflation, etc. have taken their toll. Also, most of them that I talk to say "get rid of administrators to cut costs and actually improve efficiency." The data on staffing growth suggest they have a point.
In terms of resistance to change, I would rank faculty first, presidents second, and budget officers last. In terms of power, though, the rankings are similar, at some schools presidents have more clout than faculty, at others the reverse. But the financial officers are relatively powerless as a general rule (there are exceptions).
This gets to the question of university governance. Who owns the university? Who makes decisions? I do believe universities are different than, say, steel manufacturers, and the persons on the factory floor are different from faculty members, just as physicians in hospitals are not the same as assembly line workers. Professionals expect some deference, and their skill level is such that treating them like hired hands will lead to rapid defections --they have occupational mobility. Moreover, faculty have a better appreciation for the outcomes of universities -- knowledge and how it is created-- than do others, simply because they are the ones doing it. But they also are incredibly insular, non-innovative, rent-seeking, and indifferent to inefficiency. Presidents usually are a bit more open to change, knowing the "big picture" with respect to the economics of higher education, but feel constrained by the fact that at the really good schools, the faculty have a lot of clout.
Yet markets are showing that the old governance model is breaking down somewhat. For-profit schools pay faculty reasonably well, but sharply circumscribe their authority. And these are the schools that are gaining market share rapidly. Moreover, even at the traditional universities, tenured faculty are doing less and less of the teaching --by choice, as they prefer to do research (much of it of inconsequential value) and let lowly graduate students and starving adjuncts do the heavy lifting. But more and more, schools are going to say: we can operate without the tenured faculty, at least in the short run,and much of the insularity of the faculty is prompted by the effects of lifetime employment contracts. I think tenure is undergoing a very slow but real death in America. But the process is slow, and the need for faster change will probably lead to greater governance tensions as financial constraints increase in coming years.
Tuesday, April 28, 2009
Rent-Seekers vs. Truth-Seekers
By Richard Vedder
Higher education is about the pursuit of truth and the creation of more truth. We teach a new generation the verities learned over time, and we explore new verities --new truths. But higher education, as it operates, is also about collecting rents --payments beyond those necessary to produce a good or service. Thus university presidents are earning huge salary increases, rivaling those of the kings of the university pyramid, the football coaches themselves.
Truth-seekers are also rent-seekers. And that is where problems arise. Too often, I have seen generally first rate researchers become, as Margaret Thatcher once put it, wobbly, over issues relating to higher education. Nobel laureates see positive spillover effects justifying massive public subsidies --the same scholars who generally are skeptical of externality arguments when it comes to other endeavors.
For example, I have heard very, very serious scholars claim that higher education has all sorts of positive externalities --college graduates smoke less, commit fewer crimes, engage more in volunteer activities, and burden the social welfare system less since they have higher incomes and are less often unemployed. All of these things are true. But are they true BECAUSE of college? Do kids say "Mom --I got accepted to Harvard --I am going to stop smoking?"
As I have said hundreds of times, college kids are brighter, more dependable, less crime prone, etc., than high school graduates -- and would be even if they did not go to college. Perhaps college contributes something to their having positive character traits, but certainly not everything. The average IQ of a college graduate is, I suspect, 15 or more points higher (a lot) than the typical high school graduate. Smarter people do fewer dumb things, on average.
A top aide to President Obama, Austin Goolsbee, a member of the Council of Economic Advisers, has found in his research that the positive externalities of university spending on research are over-stated, because some of the spending on research gets dissipated in economic rents (unnecessary payments) to researchers. Most researchers, including myself, would do a lot of the research that we get funded for even if the grant did not come through. Thus Goolsbee's findings strike me intuitively as a reasonable, and I suspect, highly accurate conclusion --but one that academics HATE to see published, because it discredits a favorite hustle --the quest for research grants. Andy Gillen (who told me about the Goolsbee research) also tells me that an esteemed colleague of Goolsbee at the University of Chicago is already trying to discredit Goolsbee's research. Is this the beginning of War Between the Rent-Seekers and Truth-Seekers?
Higher education is about the pursuit of truth and the creation of more truth. We teach a new generation the verities learned over time, and we explore new verities --new truths. But higher education, as it operates, is also about collecting rents --payments beyond those necessary to produce a good or service. Thus university presidents are earning huge salary increases, rivaling those of the kings of the university pyramid, the football coaches themselves.
Truth-seekers are also rent-seekers. And that is where problems arise. Too often, I have seen generally first rate researchers become, as Margaret Thatcher once put it, wobbly, over issues relating to higher education. Nobel laureates see positive spillover effects justifying massive public subsidies --the same scholars who generally are skeptical of externality arguments when it comes to other endeavors.
For example, I have heard very, very serious scholars claim that higher education has all sorts of positive externalities --college graduates smoke less, commit fewer crimes, engage more in volunteer activities, and burden the social welfare system less since they have higher incomes and are less often unemployed. All of these things are true. But are they true BECAUSE of college? Do kids say "Mom --I got accepted to Harvard --I am going to stop smoking?"
As I have said hundreds of times, college kids are brighter, more dependable, less crime prone, etc., than high school graduates -- and would be even if they did not go to college. Perhaps college contributes something to their having positive character traits, but certainly not everything. The average IQ of a college graduate is, I suspect, 15 or more points higher (a lot) than the typical high school graduate. Smarter people do fewer dumb things, on average.
A top aide to President Obama, Austin Goolsbee, a member of the Council of Economic Advisers, has found in his research that the positive externalities of university spending on research are over-stated, because some of the spending on research gets dissipated in economic rents (unnecessary payments) to researchers. Most researchers, including myself, would do a lot of the research that we get funded for even if the grant did not come through. Thus Goolsbee's findings strike me intuitively as a reasonable, and I suspect, highly accurate conclusion --but one that academics HATE to see published, because it discredits a favorite hustle --the quest for research grants. Andy Gillen (who told me about the Goolsbee research) also tells me that an esteemed colleague of Goolsbee at the University of Chicago is already trying to discredit Goolsbee's research. Is this the beginning of War Between the Rent-Seekers and Truth-Seekers?
Inequality in college spending
by Andrew Gillen and James Coleman
After reading Lane Kenworthy and The Education Optimists, we’ve got inequality on the brain, so we thought we’d share a couple of very informative charts we put together on the topic a while back for a project that’s on our backburner.
This first one shows the share of all income (red), and all college spending (blue) by percentile. For example, the bottom 80% of the population earns about 50% of all income. Similarly, 30% of FTE students attending schools with the lowest spending per student account for 10% of all school spending.
The most interesting thing is that in the bottom range (0-60%), college spending is more egalitarian than the income distribution. The bottom 20% accounts for 6% of all college spending, but only 3.5% of income. However, in the upper range (60-100%) the income distribution is more egalitarian than college spending. The 10% of students attending the highest spending schools account for 40% of all postsecondary spending compared to the richest 10% of Americans who bring in about 33% of all income. The country seems to have decided that our income distribution is too unequal – what does that imply about our higher education system, which is even more unequal?
For those of you interested in a little more detail, we’ve included the second chart showing the distribution of students by how much their school spends on each student.
After reading Lane Kenworthy and The Education Optimists, we’ve got inequality on the brain, so we thought we’d share a couple of very informative charts we put together on the topic a while back for a project that’s on our backburner.
This first one shows the share of all income (red), and all college spending (blue) by percentile. For example, the bottom 80% of the population earns about 50% of all income. Similarly, 30% of FTE students attending schools with the lowest spending per student account for 10% of all school spending.
The most interesting thing is that in the bottom range (0-60%), college spending is more egalitarian than the income distribution. The bottom 20% accounts for 6% of all college spending, but only 3.5% of income. However, in the upper range (60-100%) the income distribution is more egalitarian than college spending. The 10% of students attending the highest spending schools account for 40% of all postsecondary spending compared to the richest 10% of Americans who bring in about 33% of all income. The country seems to have decided that our income distribution is too unequal – what does that imply about our higher education system, which is even more unequal?
For those of you interested in a little more detail, we’ve included the second chart showing the distribution of students by how much their school spends on each student.
End the University!!
By Richard Vedder
You would not expect the chair of the Religion Department of Columbia to be someone who has a clear headed view of the problems ailing the modern university, but Mark Taylor, that chair, has written a superb op-ed in today's New York Times.
Taylor points out that much research and graduate education is wasteful, exploitative, and does little to advance knowledge. Jobs are not available for a large portion of newly minted Ph.D.s --at least not in the field in which they have studied for 6, 8, even 10 years. Dissertations are written on ever more obscure topics --the use of citations by the medieval theologian Duns Scotus, for example. University press publications of dissertations rarely sell 500 copies, and some of those are to libraries where they are seldom read.
We do graduate education the way we do to make life easier for the professors. We get cheap graduate help to teach those annoying undergraduates, we get individuals to do the citations work for our papers that we write that are almost never read, etc. etc. etc. All of it is wasteful, costly, and does little to advance knowledge. That is obviously not true of all research, but is relevant to much of the research that I see turned out these days.
Taylor thinks we should abolish departments and have more interdisciplinary learning. Fine, I suppose, but that does not solve the bigger problem --we are simply overinvested in some forms of higher education, especially in the social sciences and humanities. To be sure, the over specialization that Taylor speaks of is a problem, and professors have little to talk about amongst themselves given their narrow specialization. We should address that, but more importantly we need to rethink all of graduate education, and given the very high cost of educating PhDs, we should start to put doctoral programs on a diet.
You would not expect the chair of the Religion Department of Columbia to be someone who has a clear headed view of the problems ailing the modern university, but Mark Taylor, that chair, has written a superb op-ed in today's New York Times.
Taylor points out that much research and graduate education is wasteful, exploitative, and does little to advance knowledge. Jobs are not available for a large portion of newly minted Ph.D.s --at least not in the field in which they have studied for 6, 8, even 10 years. Dissertations are written on ever more obscure topics --the use of citations by the medieval theologian Duns Scotus, for example. University press publications of dissertations rarely sell 500 copies, and some of those are to libraries where they are seldom read.
We do graduate education the way we do to make life easier for the professors. We get cheap graduate help to teach those annoying undergraduates, we get individuals to do the citations work for our papers that we write that are almost never read, etc. etc. etc. All of it is wasteful, costly, and does little to advance knowledge. That is obviously not true of all research, but is relevant to much of the research that I see turned out these days.
Taylor thinks we should abolish departments and have more interdisciplinary learning. Fine, I suppose, but that does not solve the bigger problem --we are simply overinvested in some forms of higher education, especially in the social sciences and humanities. To be sure, the over specialization that Taylor speaks of is a problem, and professors have little to talk about amongst themselves given their narrow specialization. We should address that, but more importantly we need to rethink all of graduate education, and given the very high cost of educating PhDs, we should start to put doctoral programs on a diet.
Monday, April 27, 2009
Goldie Blumenstyk and Plato on Universities
By Richard Vedder
Goldie Blumenstyk has a great piece in the Chronicle of Higher Education, May 1 issue: "In a Time of Crisis, Colleges Ought to Be Making History."
Goldie's piece echos a theme of mine, and, for that matter, Plato's ("necessity is the mother of invention.") A time of adversity, economic downturn, is as much an opportunity as a challenge. Economic imperatives should stimulate college's rethinking their role. Some of the thinking could be moderately radical but still fairly conventional: offering three year bachelor's degrees, getting out of low enrollment graduate programs, moving to interactive, computer-based instruction that is both cost effective and educationally at least the equal of current methods, getting out of non-academic pursuits like lodging and sports entertainment. Some of the innovation could truly be radical --moving to a Wikipedia type open source university at very low cost, or moving to certifying competence by examination independent of courses studied.
Goldie's point is that not much is happening. Apparently there is some shake-up at Cornell, with a lot of rethinking of programs and a dictate to reduce costs significantly. Some schools, such as Carnegie Mellon are coming up with some interesting new instructional approaches (e.g., the Open Learning Model). And throughout the country, schools are doing some staffing reductions, putting brakes on explosive salary increases for senior administrators, etc. But much of it reflects a view "let's trim our sails a bit until this passes, and then we can resume our old ways."
America is facing huge financial strains. Our Social Security/Medicare system has an unfunded liability measured in the tens of trillions of dollars, equal to almost one-third the wealth of the U.S. --including the human capital component. The Obama Administration has embarked on a policy of reckless deficit spending that is going to imperil future generations. The notion that our extremely costly health and educational systems can continue indefinitely on their highly inefficient ways conflicts with these realities, and the thought we can simply grow our way out of any problem seems problematic, particularly given the anti-growth policies proposed in Washington.
Why are universities relatively immobile in the face of economic pressure? Because they have been isolated from mainstream America, protected and subsidized in an extraordinarily inefficient manner, with little inclination or incentive to change. The incentives are NOT there to be efficient, innovative, lean and mean. It is time to change that, so Goldie's lament can be appropriately dealt with.
Goldie Blumenstyk has a great piece in the Chronicle of Higher Education, May 1 issue: "In a Time of Crisis, Colleges Ought to Be Making History."
Goldie's piece echos a theme of mine, and, for that matter, Plato's ("necessity is the mother of invention.") A time of adversity, economic downturn, is as much an opportunity as a challenge. Economic imperatives should stimulate college's rethinking their role. Some of the thinking could be moderately radical but still fairly conventional: offering three year bachelor's degrees, getting out of low enrollment graduate programs, moving to interactive, computer-based instruction that is both cost effective and educationally at least the equal of current methods, getting out of non-academic pursuits like lodging and sports entertainment. Some of the innovation could truly be radical --moving to a Wikipedia type open source university at very low cost, or moving to certifying competence by examination independent of courses studied.
Goldie's point is that not much is happening. Apparently there is some shake-up at Cornell, with a lot of rethinking of programs and a dictate to reduce costs significantly. Some schools, such as Carnegie Mellon are coming up with some interesting new instructional approaches (e.g., the Open Learning Model). And throughout the country, schools are doing some staffing reductions, putting brakes on explosive salary increases for senior administrators, etc. But much of it reflects a view "let's trim our sails a bit until this passes, and then we can resume our old ways."
America is facing huge financial strains. Our Social Security/Medicare system has an unfunded liability measured in the tens of trillions of dollars, equal to almost one-third the wealth of the U.S. --including the human capital component. The Obama Administration has embarked on a policy of reckless deficit spending that is going to imperil future generations. The notion that our extremely costly health and educational systems can continue indefinitely on their highly inefficient ways conflicts with these realities, and the thought we can simply grow our way out of any problem seems problematic, particularly given the anti-growth policies proposed in Washington.
Why are universities relatively immobile in the face of economic pressure? Because they have been isolated from mainstream America, protected and subsidized in an extraordinarily inefficient manner, with little inclination or incentive to change. The incentives are NOT there to be efficient, innovative, lean and mean. It is time to change that, so Goldie's lament can be appropriately dealt with.
College and income inequality
by Andrew Gillen
In The Race between Education and Technology, Claudia Goldin and Lawrence Katz argue that the rise in inequality in recent years can largely be attributed to the slowdown in educational attainment.
But Lane Kenworthy is not quite convinced. He says that “comparative evidence doesn’t seem especially supportive of the Goldin-Katz hypothesis,” showing a graph of changes in schooling and inequality by country, and there is not a clear link absent the US.
He also notes that “the key features of the rise in U.S. income inequality are soaring incomes among the top 1% of households (especially the top 0.1%) and slow income growth in the bottom half of the distribution. A slowdown in the supply of college graduates is unlikely to be the key to either of these two developments.”
In The Race between Education and Technology, Claudia Goldin and Lawrence Katz argue that the rise in inequality in recent years can largely be attributed to the slowdown in educational attainment.
But Lane Kenworthy is not quite convinced. He says that “comparative evidence doesn’t seem especially supportive of the Goldin-Katz hypothesis,” showing a graph of changes in schooling and inequality by country, and there is not a clear link absent the US.
He also notes that “the key features of the rise in U.S. income inequality are soaring incomes among the top 1% of households (especially the top 0.1%) and slow income growth in the bottom half of the distribution. A slowdown in the supply of college graduates is unlikely to be the key to either of these two developments.”
More Obaminations
By Richard Vedder
I got so mad reading the online version of USA Today yesterday that I forced myself to sit 24 hours before blogging about it, thinking I might say something intemperate or unreasonable if I did not give myself a cooling off period. I don't think the wait did much good, so here are my thoughts.
The headline that set me off was about another speech from President Obama that, first, repeated his embarrassing and economically and academically untenable suggestion that the U.S. should lead the nation in college graduates by 2020. And then, to add icing on the cake, he implied the key to doing this was socializing student financial aid, getting those wicked banks and selfish private capitalists out of the student lending business, and allowing the more efficient, more moral, and more just federal government (B.H. Obama, proprietor) to do the job.
Everything he said was wrong. As Andy Gillen has pointed out so beautifully and rigorously, student financial aid as it currently exists often does little, if anything, to improve college accessibility, worsens college affordability, and is a prime example of the law of unintended consequences. Concentrating on making it more attractive for students to go into debt is bad on many grounds, and only aggravates the conditions that have made college so expensive in the first place (there are some exceptions to this generalization, as Andy points out in his study).
Beyond that, the notion that financial resources should be primarily allocated by the federal government is a huge move towards a bankrupt socialism that time after time was shown to be deficient in the 20th century. The Feds now, effectively, control Fannie Mae, Freddie Mac, AIG, and are the leading stockholder in Citigroup. Political decisions about allocating resources are almost ALWAYS worse than market decisions in terms of advancing economic and, I would argue, social welfare.
And, let us return to the goal of becoming number one in the proportion of adults who are college graduates. First of all, is that necessarily a good objective? I know many many college graduates taking jobs for which a high school diploma is perfectly adequate, or perhaps a high school diploma plus some specialized post-secondary vocational training. But even if the President's goal is somehow a good one, we would have to have a revolution in education at the K-12 level as well, one that the president would never support because it would offend his union allies. When 30 percent or so of kids do not make it out of high school, it is hard to be number one in college graduates. When over 40 percent of those who do go on don't make it out of college, it becomes impossible. The president is concentrating on the one-third or so of high school graduates that do not go on to college, ignoring the larger other problems that keep 4 of 5 high school freshman from getting a bachelor's degree within a decade of entering high school.
I got so mad reading the online version of USA Today yesterday that I forced myself to sit 24 hours before blogging about it, thinking I might say something intemperate or unreasonable if I did not give myself a cooling off period. I don't think the wait did much good, so here are my thoughts.
The headline that set me off was about another speech from President Obama that, first, repeated his embarrassing and economically and academically untenable suggestion that the U.S. should lead the nation in college graduates by 2020. And then, to add icing on the cake, he implied the key to doing this was socializing student financial aid, getting those wicked banks and selfish private capitalists out of the student lending business, and allowing the more efficient, more moral, and more just federal government (B.H. Obama, proprietor) to do the job.
Everything he said was wrong. As Andy Gillen has pointed out so beautifully and rigorously, student financial aid as it currently exists often does little, if anything, to improve college accessibility, worsens college affordability, and is a prime example of the law of unintended consequences. Concentrating on making it more attractive for students to go into debt is bad on many grounds, and only aggravates the conditions that have made college so expensive in the first place (there are some exceptions to this generalization, as Andy points out in his study).
Beyond that, the notion that financial resources should be primarily allocated by the federal government is a huge move towards a bankrupt socialism that time after time was shown to be deficient in the 20th century. The Feds now, effectively, control Fannie Mae, Freddie Mac, AIG, and are the leading stockholder in Citigroup. Political decisions about allocating resources are almost ALWAYS worse than market decisions in terms of advancing economic and, I would argue, social welfare.
And, let us return to the goal of becoming number one in the proportion of adults who are college graduates. First of all, is that necessarily a good objective? I know many many college graduates taking jobs for which a high school diploma is perfectly adequate, or perhaps a high school diploma plus some specialized post-secondary vocational training. But even if the President's goal is somehow a good one, we would have to have a revolution in education at the K-12 level as well, one that the president would never support because it would offend his union allies. When 30 percent or so of kids do not make it out of high school, it is hard to be number one in college graduates. When over 40 percent of those who do go on don't make it out of college, it becomes impossible. The president is concentrating on the one-third or so of high school graduates that do not go on to college, ignoring the larger other problems that keep 4 of 5 high school freshman from getting a bachelor's degree within a decade of entering high school.
Friday, April 24, 2009
Links 4/24/09
by Andrew Gillen
1) Over at the Quick and the Ed, Chad Aldeman offers the best commentary I’ve seen yet on making the Pell an entitlement and how to index it if so.
3) An interesting statement from Daniel Kahneman:
4) The Project on Student Debt reports the latest numbers on private student loans.
1) Over at the Quick and the Ed, Chad Aldeman offers the best commentary I’ve seen yet on making the Pell an entitlement and how to index it if so.
Congress doesn't like it because it takes away their annual authorizing power… Tax hawks don't like it because it makes another program an entitlement, even if it's one we approve every single year anyway.and
Had the Pell been indexed to inflation, it would indeed be higher than it is today. But it would not have been nearly enough to cover college tuition costs, because those have outpaced inflation by enormous amounts… that's not the fault of the Pell, or federal legislators. It's the fault of colleges and universities that have been unable and unwilling to control costs.2) Robots Teaching! (sort of)
3) An interesting statement from Daniel Kahneman:
I conclude from the fact that only five people predicted the current crisis that it was impossible to predict it.It’s not a typo, and he was a co-winner of the 2002 Nobel in economics, so you probably need to read the piece to realize that it actually makes a lot of sense in context. HT: Thoma
4) The Project on Student Debt reports the latest numbers on private student loans.
The percentage of undergraduates borrowing private loans increased dramatically, from
5% in 2003-04 to 14% in 2007-08.
A real critique
by Andrew Gillen
Reuben Ternes has read my financial aid study, and provided a real critique, which I appreciate. He brings up a number of points that I thought I’d respond to.
BTW, since Rich was a semi-retired professor when he wrote the book (and still is), shouldn’t his motivation have been pro higher ed establishment? To the motivation obsessed, shouldn’t that give us even more credibility? I don’t put a lot of weight behind that line of reasoning, but those who try to discredit our work by pointing to nefarious motivations sort of have to if they want to be at all logically consistent, don't they?
I understand conceptually why people are so focused on motivations, but I don’t share that particular focus – I’d rather just judge ideas on their merits rather than on who made them.
This is why social sciences have a heavy dose of art - the weighing of multiple competing theories, none of which perfectly matches the data. This is what I attempted to do in the second half of the paper, by showing numerous areas where my theory matched the data better than the old theory.
Reuben Ternes has read my financial aid study, and provided a real critique, which I appreciate. He brings up a number of points that I thought I’d respond to.
[CCAP] “seems to have already decided that education costs too much.”This is largely true, but I really don't see the problem. CCAP was started after Rich wrote Going Broke by Degree: Why College Costs Too Much, which among other things concluded, as the subtitle suggests, that, well, college costs too much. The organization was started to try and do something about that. The book came out in 2004, and CCAP started in 2006, which means that the organization and our mission is an outgrowth of a disinterested analysis. Perhaps I’m missing something here, but I really don’t see how that undermines our ethos. Should we rewrite the book every time we put out a paper?
BTW, since Rich was a semi-retired professor when he wrote the book (and still is), shouldn’t his motivation have been pro higher ed establishment? To the motivation obsessed, shouldn’t that give us even more credibility? I don’t put a lot of weight behind that line of reasoning, but those who try to discredit our work by pointing to nefarious motivations sort of have to if they want to be at all logically consistent, don't they?
I understand conceptually why people are so focused on motivations, but I don’t share that particular focus – I’d rather just judge ideas on their merits rather than on who made them.
“I still can't get over the fact that the author seems to think all you need to provide causation is a correlation and a good theory”The blog post he is referring to was in response to other people claiming that I was confusing correlation with causation, which was not the case. I basically pointed out that the claim of causation came not from the correlations, but from the theory that predicted/explained the correlations. I don’t think I need to emphasize that that is not the same as saying all you need is any old theory and a high R^2, but perhaps an example will illustrate. Justin Fox recently had a post where he mentioned an old David Leinweber paper showing that “butter production in Bangladesh, U.S. cheese production, and sheep population in Bangladesh and the U.S. together ‘explained’ (in a statistical sense) 99% of the annual movements of the S&P 500 between 1983 and 1993.” That’s an amazing correlation, but even if there was an accompanying theory nobody would take it very seriously. The fact that there are better theories/explanations, even though their R^2 isn’t as high, keeps us from walking around with the notion that sheep, butter, and cheese determine the level of the S&P (or vice versa).
This is why social sciences have a heavy dose of art - the weighing of multiple competing theories, none of which perfectly matches the data. This is what I attempted to do in the second half of the paper, by showing numerous areas where my theory matched the data better than the old theory.
“my biggest complaint about the article is its scope”Any analysis that tries to generalize about higher education is open to this criticism. There are over 4k degree granting institutions in the US, with varied goals, circumstances, and opportunities. The fact that no one model will be applicable to all of them does not seem to me a valid reason for not looking for generalizations or rules of thumb. I would think someone whose blog is titled “A Patterned World” would see the value in that. Having said that, I shouldn't dismiss his point, since it doesn't hurt to remind us policy types that care is needed when drawing generalizations.
NCAA: Making the Problem the Solution
By Richard Vedder
My friend, associate and sometime student Matt Denhart hit things on the head with his recent blog. But the question arises: why do colleges allow their academic integrity to be besmirched, athletes be so heavily exploited, etc.? The Athletic Cartel is the NCAA, so it is a big part of the problem. And even as gifted a leader as Myles Brand can only modestly get the NCAA to change its ways. Why?
The answer is simple, as suggested in a story in today's INSIDE HIGHER ED --the NCAA is controlled by athletic directors. The Faculty Representatives role in NCAA governance is at best modest. Each school gets one vote on the key decision making bodies --and that one rep is typically the athletic director.
What could help save college athletics from its own excesses? A good first step would be to have a single governing body that must be at least 51 percent faculty representatives. To be sure, this is no panacea, because some schools would pick a sports junkie faculty member who wants to be buddies with the AD, coaches and players. An alternative approach would be to have two bodies, like the House and Senate, with the House consisting primarily of faculty (say a minimum of 51 percent, perhaps 100 percent), and the Senate being consisted of university presidents. The Athletic Directors could have a purely advisory third group that would make recommendations to the two legislative bodies. The NCAA prez would be picked by the Senate.
This will not solve all the problems in the world. Some university presidents I have known are sports fanatics who would eliminate the English Department if the fund savings could buy the school's way into a top bowl game or Final Four in men's basketball. On average, however, faculty and university presidents understand and appreciate the core mission of universities better than the coaches and athletic directors who derive enormous wealth, prestige and fun from the current system.
Indeed, an intelligent Congress (an oxymoron if there ever was one) would pass legislation making the tax exempt status of gifts to athletic departments and on the profits from sporting activities contingent on turning control over sports to the people who make the university work --the faculty and top administration. Or how about this: no federal student loan money will go to any school whose representatives on NCAA governing bodies are not legitimate members of the faculty or the university president or provost.
My friend, associate and sometime student Matt Denhart hit things on the head with his recent blog. But the question arises: why do colleges allow their academic integrity to be besmirched, athletes be so heavily exploited, etc.? The Athletic Cartel is the NCAA, so it is a big part of the problem. And even as gifted a leader as Myles Brand can only modestly get the NCAA to change its ways. Why?
The answer is simple, as suggested in a story in today's INSIDE HIGHER ED --the NCAA is controlled by athletic directors. The Faculty Representatives role in NCAA governance is at best modest. Each school gets one vote on the key decision making bodies --and that one rep is typically the athletic director.
What could help save college athletics from its own excesses? A good first step would be to have a single governing body that must be at least 51 percent faculty representatives. To be sure, this is no panacea, because some schools would pick a sports junkie faculty member who wants to be buddies with the AD, coaches and players. An alternative approach would be to have two bodies, like the House and Senate, with the House consisting primarily of faculty (say a minimum of 51 percent, perhaps 100 percent), and the Senate being consisted of university presidents. The Athletic Directors could have a purely advisory third group that would make recommendations to the two legislative bodies. The NCAA prez would be picked by the Senate.
This will not solve all the problems in the world. Some university presidents I have known are sports fanatics who would eliminate the English Department if the fund savings could buy the school's way into a top bowl game or Final Four in men's basketball. On average, however, faculty and university presidents understand and appreciate the core mission of universities better than the coaches and athletic directors who derive enormous wealth, prestige and fun from the current system.
Indeed, an intelligent Congress (an oxymoron if there ever was one) would pass legislation making the tax exempt status of gifts to athletic departments and on the profits from sporting activities contingent on turning control over sports to the people who make the university work --the faculty and top administration. Or how about this: no federal student loan money will go to any school whose representatives on NCAA governing bodies are not legitimate members of the faculty or the university president or provost.
A Call for Reform: Universities and Intercollegiate Athletics
By: Matthew Denhart
Last week I had the pleasure of attending the 2009 Scholarly Conference on College Sport hosted by the College Sport Research Institute at UNC-Chapel Hill. The conference addressed many of the issues facing intercollegiate athletics discussed by CCAP in our recent study and Wall Street Journal article. One of the most interesting sessions was the keynote luncheon given by Bernie Mullin who, among many things, was the Athletic Director at the University of Denver and was formerly the President and part-owner of the NBA’s Atlanta Hawks.
Mr. Mullin discussed the many differences between the games of college and professional basketball and argued that the NBA and its players want to see college-aged athletes delay their entrance into the pros as long as possible. Players don’t want to babysit on road-trips while coaches and executives don’t want to have to spend as much time teaching young players basic basketball fundamentals (which he noted are far inferior to our overseas counterparts despite American players being wildly more gifted in athletic ability). For these reasons, in 2005 the NBA instituted an age-limit rule forcing athletes to wait a year after high school to enter the draft. A similar three year rule applies in the NFL.
Dave Ridpath, our friend and former Director of the Drake Group, asked Mr. Mullin what I'm sure he knew to be a naïve question: “If the NBA has a vested interest in delaying the age at which kids enter the league, why don’t they establish some type of development league?” Mr. Mullins opined that the NBA has created the National Basketball Development League (NBDL), although he acknowledged that it has failed to really attract much interest. Next, he bluntly stated that there is no real incentive for the NBA to bother because their current arrangement of free-riding off the NCAA has worked pretty well.
The NCAA hasn’t made out too poorly from this arrangement either. Star athletes attract millions of loyal fans, huge contracts, and millions of dollars in revenue. CBS pays around $545 million annually to carry March Madness and last November ESPN signed a $500 million deal with the NCAA for rights to broadcast four of the five BCS football games. Certainly, some of this money trickles down to individual schools, too. So it’s a win-win, right?
Hardly. This interpretation ignores the fact that such a system encourages schools to accept athletes who may not even be qualified for college. The Atlanta Journal Constitution reports that at schools with big-time athletics programs, football and basketball players have SAT scores on average 220 points lower than the institution’s general student body. They strive to increase revenues by winning games which often contributes to the perversion of the core academic mission of a university. What’s more, this revenue is derived off the exploited labor of student athletes who receive very modest compensation in the form of athletic scholarships. Meanwhile, coaches and athletic administrators earn huge salaries off what economist Andrew Zimbalist refers to as a "stilted market." One wonders how long this system can last?
Intercollegiate athletics are in desperate need of reform. On a panel --that Dr. Ridpath graciously invited me to participate on --I discussed another unsustainable trend involving the growing reliance of athletic departments on allocated funds from the wider university. As our study details, only 19 athletic departments in the country realized a net profit in 2006 (and many argue that is a generous figure due to unorthodox accounting standards). Furthermore, between 2004 and 2006 real athletic expenses grew by around 15.6% while generated revenues grew by only 8.3%. Athletic departments are growing increasingly reliant on allocated funds from the wider university. In hard economic times universities are going to be forced to make tough fiscal decisions and growing deficits from athletics are likely to be more highly scrutinized.
Now may now be the time for long-needed reform to come to one of America’s most beloved institutions: college sports.
Last week I had the pleasure of attending the 2009 Scholarly Conference on College Sport hosted by the College Sport Research Institute at UNC-Chapel Hill. The conference addressed many of the issues facing intercollegiate athletics discussed by CCAP in our recent study and Wall Street Journal article. One of the most interesting sessions was the keynote luncheon given by Bernie Mullin who, among many things, was the Athletic Director at the University of Denver and was formerly the President and part-owner of the NBA’s Atlanta Hawks.
Mr. Mullin discussed the many differences between the games of college and professional basketball and argued that the NBA and its players want to see college-aged athletes delay their entrance into the pros as long as possible. Players don’t want to babysit on road-trips while coaches and executives don’t want to have to spend as much time teaching young players basic basketball fundamentals (which he noted are far inferior to our overseas counterparts despite American players being wildly more gifted in athletic ability). For these reasons, in 2005 the NBA instituted an age-limit rule forcing athletes to wait a year after high school to enter the draft. A similar three year rule applies in the NFL.
Dave Ridpath, our friend and former Director of the Drake Group, asked Mr. Mullin what I'm sure he knew to be a naïve question: “If the NBA has a vested interest in delaying the age at which kids enter the league, why don’t they establish some type of development league?” Mr. Mullins opined that the NBA has created the National Basketball Development League (NBDL), although he acknowledged that it has failed to really attract much interest. Next, he bluntly stated that there is no real incentive for the NBA to bother because their current arrangement of free-riding off the NCAA has worked pretty well.
The NCAA hasn’t made out too poorly from this arrangement either. Star athletes attract millions of loyal fans, huge contracts, and millions of dollars in revenue. CBS pays around $545 million annually to carry March Madness and last November ESPN signed a $500 million deal with the NCAA for rights to broadcast four of the five BCS football games. Certainly, some of this money trickles down to individual schools, too. So it’s a win-win, right?
Hardly. This interpretation ignores the fact that such a system encourages schools to accept athletes who may not even be qualified for college. The Atlanta Journal Constitution reports that at schools with big-time athletics programs, football and basketball players have SAT scores on average 220 points lower than the institution’s general student body. They strive to increase revenues by winning games which often contributes to the perversion of the core academic mission of a university. What’s more, this revenue is derived off the exploited labor of student athletes who receive very modest compensation in the form of athletic scholarships. Meanwhile, coaches and athletic administrators earn huge salaries off what economist Andrew Zimbalist refers to as a "stilted market." One wonders how long this system can last?
Intercollegiate athletics are in desperate need of reform. On a panel --that Dr. Ridpath graciously invited me to participate on --I discussed another unsustainable trend involving the growing reliance of athletic departments on allocated funds from the wider university. As our study details, only 19 athletic departments in the country realized a net profit in 2006 (and many argue that is a generous figure due to unorthodox accounting standards). Furthermore, between 2004 and 2006 real athletic expenses grew by around 15.6% while generated revenues grew by only 8.3%. Athletic departments are growing increasingly reliant on allocated funds from the wider university. In hard economic times universities are going to be forced to make tough fiscal decisions and growing deficits from athletics are likely to be more highly scrutinized.
Now may now be the time for long-needed reform to come to one of America’s most beloved institutions: college sports.
Thursday, April 23, 2009
This Week's Hero: Gerald Gunderson
By Richard Vedder
Gerald Gunderson is my age and, like me, an economic historian. We both wrote economic history textbooks four score and seven years ago (give or take 45 years). We have always liked each other and respected each other. I only see Jerry once in a great while, but always enjoy the contact. He holds the Davis Chair in Free Enterprise (or somesuch name) at Trinity College in Connecticut, a fine liberal arts school.
Gerry made the front page of the Wall Street Journal today, and became my hero du jour or even hero de semaine. Trinity has a huge endowment for Gerry's chair --far more than needed to pay his salary. He has proposed over the years creating additional faculty positions consistent with the donor's intent --promoting free enterprise, market capitalism,etc. The college said that violates donor intent. But the school has tried now to spend the money on scholarships for international students, clearly not the intent of Shelby Cullom Davis. Allegedly some family members said it was okay to use the monies in an alternative way, although some of them now say they were not fully informed of either Prof. Gunderson's concerns or of Mr. Davis's clear intent (Trinity deceived them).
Gerry went to the Connecticut Attorney General, or at least that is what John Hechinger of the Journal reports, and told them of the alleged misappropriation. Hell has been raised, President Jones of Trinity has allegedly threatened Gerry (a dumb, dumb thing to do), etc. I suspect (and hope) that other alums, trustees, and donors will put President Jones's feet to the fire.
Universities do this sort of thing all the time. The Weidenbaum Center at Washington University in St. Louis was funded by many donors, the largest of which was the Olin Foundation. The donors clearly intended for the money to be used for promoting free market economics, the perils of regulation, etc. After Murray Weidenbaum retired, Wash U named his research center after him, but took the center off in an altogether new direction. Then there was the Robertson grant to Princeton, where the school returned big bucks to the family to settle what had obviously been a perversion of donor intent. The stories go on and on.
I think there should be criminal penalties against university officials who steal, in effect, donor money, and I think that court approval should be needed, perhaps after consultation with other heirs, before any modification of gifts can be made.
To be sure, times change, and often the resource allocations arising from restricted gifts may not be optimal in almost anyone's eyes. But unless the donor's intent is honored, universities are engaging in the moral equivalent of theft, which is morally wrong. The Ten Commandments may not count for much on college campuses these days, but flouting one of those commandments should have consequences, financial if not otherwise.
Gerald Gunderson is my age and, like me, an economic historian. We both wrote economic history textbooks four score and seven years ago (give or take 45 years). We have always liked each other and respected each other. I only see Jerry once in a great while, but always enjoy the contact. He holds the Davis Chair in Free Enterprise (or somesuch name) at Trinity College in Connecticut, a fine liberal arts school.
Gerry made the front page of the Wall Street Journal today, and became my hero du jour or even hero de semaine. Trinity has a huge endowment for Gerry's chair --far more than needed to pay his salary. He has proposed over the years creating additional faculty positions consistent with the donor's intent --promoting free enterprise, market capitalism,etc. The college said that violates donor intent. But the school has tried now to spend the money on scholarships for international students, clearly not the intent of Shelby Cullom Davis. Allegedly some family members said it was okay to use the monies in an alternative way, although some of them now say they were not fully informed of either Prof. Gunderson's concerns or of Mr. Davis's clear intent (Trinity deceived them).
Gerry went to the Connecticut Attorney General, or at least that is what John Hechinger of the Journal reports, and told them of the alleged misappropriation. Hell has been raised, President Jones of Trinity has allegedly threatened Gerry (a dumb, dumb thing to do), etc. I suspect (and hope) that other alums, trustees, and donors will put President Jones's feet to the fire.
Universities do this sort of thing all the time. The Weidenbaum Center at Washington University in St. Louis was funded by many donors, the largest of which was the Olin Foundation. The donors clearly intended for the money to be used for promoting free market economics, the perils of regulation, etc. After Murray Weidenbaum retired, Wash U named his research center after him, but took the center off in an altogether new direction. Then there was the Robertson grant to Princeton, where the school returned big bucks to the family to settle what had obviously been a perversion of donor intent. The stories go on and on.
I think there should be criminal penalties against university officials who steal, in effect, donor money, and I think that court approval should be needed, perhaps after consultation with other heirs, before any modification of gifts can be made.
To be sure, times change, and often the resource allocations arising from restricted gifts may not be optimal in almost anyone's eyes. But unless the donor's intent is honored, universities are engaging in the moral equivalent of theft, which is morally wrong. The Ten Commandments may not count for much on college campuses these days, but flouting one of those commandments should have consequences, financial if not otherwise.
More on Financial Aid
by Andrew Gillen
The lead story in today’s Inside Higher Education reports that the National Association of Student Financial Aid Administrators (NASFAA) has released a new proposal for reforming financial aid. I haven’t had a chance to read through the 72 pages yet, so unlike some others, I’ll hold off on commenting on the report itself until I have read it.
However, at the bottom of the Inside Higher Education story is a fantastic table showing the proposals of the NASFAA along with the recent proposals of a College Board panel, and I can’t resist highlighting some specific ideas that I have recently written on.
The first concerns campus work programs. Both the CB and NASFAA appear to want to simplify and consolidate these (so far so good), but the CB wants to replace them with block grants to schools. Unless this is structured so that the money is given to individual students, like the Pell, I think this is a mistake. Block grants to institutions are not a good way to increase affordability (see figure 17 here).
The second issue concerns loans limits. The NASFAA wants to limit loans to the amount of the maximum Pell, up to the cost of attendance. The second part worries me. If they get their way, the Pell would increase to about 9k, making the student eligible for another 9k in loans. Something tells me that if this were the case, we wouldn’t see too many schools charging less than 18k for long. One of the most important things I tried to show in this report is that tying aid to cost at an institutional level is a bad idea, since aid can help determine cost. As I argued in the report, a better idea is to determine what a student can pay, determine what an education should cost in general, and provide aid to fill in any gap.
The lead story in today’s Inside Higher Education reports that the National Association of Student Financial Aid Administrators (NASFAA) has released a new proposal for reforming financial aid. I haven’t had a chance to read through the 72 pages yet, so unlike some others, I’ll hold off on commenting on the report itself until I have read it.
However, at the bottom of the Inside Higher Education story is a fantastic table showing the proposals of the NASFAA along with the recent proposals of a College Board panel, and I can’t resist highlighting some specific ideas that I have recently written on.
The first concerns campus work programs. Both the CB and NASFAA appear to want to simplify and consolidate these (so far so good), but the CB wants to replace them with block grants to schools. Unless this is structured so that the money is given to individual students, like the Pell, I think this is a mistake. Block grants to institutions are not a good way to increase affordability (see figure 17 here).
The second issue concerns loans limits. The NASFAA wants to limit loans to the amount of the maximum Pell, up to the cost of attendance. The second part worries me. If they get their way, the Pell would increase to about 9k, making the student eligible for another 9k in loans. Something tells me that if this were the case, we wouldn’t see too many schools charging less than 18k for long. One of the most important things I tried to show in this report is that tying aid to cost at an institutional level is a bad idea, since aid can help determine cost. As I argued in the report, a better idea is to determine what a student can pay, determine what an education should cost in general, and provide aid to fill in any gap.
$700 Million Dollar Misunderstanding
By Richard Vedder
On Tuesday morning, the value of Apollo Corporation stock, as measured by the opening price on the New York Stock Exchange, was $700 million less than it closed on the Big Board less than 18 hours earlier. What happened over night? A horrible earnings report? A huge general fall in stock prices because of some national economic calamity? Indictments against key Apollo officials? No --Robert Shireman was named by President Obama as the new Deputy Secretary for Higher Education.
Credit Suisse lowered Apollo's rating. Investors were nervous. Why? Shireman ran the Project on Student Debt and constantly has harangued against the private provision of student loans, on one occasion referring to them as "dangerous." Apollo, and all for profit higher ed institutions, for that matter, are very dependent on student loans for their students. Already the Obama administration wants to end private guarantee loans as part of its apparent effort to nationalize financial services (e.g.,the government controls AIG, Citi Group, and is trying to keep banks from paying back TARP monies that potentially give them a stock interest). Shireman appears to be a socialist, and as such, is probably against people profiting from higher education services.
This is a shame. I don't know whether the fears against Mr. Shireman are justified, but I do know that for profits are a huge part of the solution, not the problem, with respect to American higher education. They educate far larger proportions of minorities and low income students than the flagship state universities, and at a vastly lower cost per student. Their rapidly rising market share suggests that their clientele is largely happy with their services. They are the home for roughly 30 percent of the increase in higher ed enrollments in the U.S., relieving public funding for expansion of public schools. They are efficient, cost effective, and, on average, good guys. Let us hope that the socialist ideological orientation of many of the OBamaistas does not lead to an unfortunate attack on this valuable resource.
On Tuesday morning, the value of Apollo Corporation stock, as measured by the opening price on the New York Stock Exchange, was $700 million less than it closed on the Big Board less than 18 hours earlier. What happened over night? A horrible earnings report? A huge general fall in stock prices because of some national economic calamity? Indictments against key Apollo officials? No --Robert Shireman was named by President Obama as the new Deputy Secretary for Higher Education.
Credit Suisse lowered Apollo's rating. Investors were nervous. Why? Shireman ran the Project on Student Debt and constantly has harangued against the private provision of student loans, on one occasion referring to them as "dangerous." Apollo, and all for profit higher ed institutions, for that matter, are very dependent on student loans for their students. Already the Obama administration wants to end private guarantee loans as part of its apparent effort to nationalize financial services (e.g.,the government controls AIG, Citi Group, and is trying to keep banks from paying back TARP monies that potentially give them a stock interest). Shireman appears to be a socialist, and as such, is probably against people profiting from higher education services.
This is a shame. I don't know whether the fears against Mr. Shireman are justified, but I do know that for profits are a huge part of the solution, not the problem, with respect to American higher education. They educate far larger proportions of minorities and low income students than the flagship state universities, and at a vastly lower cost per student. Their rapidly rising market share suggests that their clientele is largely happy with their services. They are the home for roughly 30 percent of the increase in higher ed enrollments in the U.S., relieving public funding for expansion of public schools. They are efficient, cost effective, and, on average, good guys. Let us hope that the socialist ideological orientation of many of the OBamaistas does not lead to an unfortunate attack on this valuable resource.
The College Bailout of 2009
by Daniel Bennett
A new report by Cristin Toutsi and Richard Novak, reveals the results of a survey of how public college are or will be affected by the current recession, according to their governing boards. Of the 90 respondents, 62% perceived a "substantial" impact, while 25% perceived a "modest" and 3% perceived little or no impact. With a decline in state tax revenues, state budget appropriations are a big concern, with 42% of respondents reporting that their state budget was reduced for the current year (an average of 6.4%) and 66% responded that they experienced a mid year cut.
When asked how they plan to respond to this crises, 17% responded that they will not make any changes to their current operating budget, while 49% planned a budget reduction of less than 5% and 30% planned to reduce theiry budget by more than 5% (3%actually planned an increase).
There were no surprises when asked what steps were being taken to cut costs, with the most common themes being hiring and travel freezes, maintenance deferrals, capital spending delays and across the board cuts. These are common short-term answers to long-term problems that have exasperated the rise in tuition in the last decade. Speaking of which, the report indicates that many boards are already planning to increase tuition by an average of 6.7% in the coming academic year, further decreasing the ability of students to afford college at a time when many parents are expected to remain unemployed and whose college savings have been eroded by the crises.
What should be a critical moment in history in which colleges re-evaluate their purpose of providing an education and make serious fundamental changes in how they operate in order to increase affordability, access and the public benefits of having a better educated citizenry, is more likely to be a temporary bump in the road that slows the spending engine down. Uncle Sam has continued to enable the fiscal irresponsibility of colleges with the equivalent of the higher education bailout that is wrapped up in the "stimulus" bill that allows colleges to continue to avoid making difficult decisions that most organizations face.
This is not the last that we will hear of declining state higher ed budgets and the need to raise tuition. In the near future, when states realize that they now have to cough up significant funds to comply with the newly created unemployment entitlements associated with the stimulus bill, they will again have to disappoint the public colleges with a education budget reduction. Not to mention the continual rise of healthcare costs of an ageing population. This cycle will continue to gauge the pockets of students and the taxpayers until we get serious about reforming higher ed.
A new report by Cristin Toutsi and Richard Novak, reveals the results of a survey of how public college are or will be affected by the current recession, according to their governing boards. Of the 90 respondents, 62% perceived a "substantial" impact, while 25% perceived a "modest" and 3% perceived little or no impact. With a decline in state tax revenues, state budget appropriations are a big concern, with 42% of respondents reporting that their state budget was reduced for the current year (an average of 6.4%) and 66% responded that they experienced a mid year cut.
When asked how they plan to respond to this crises, 17% responded that they will not make any changes to their current operating budget, while 49% planned a budget reduction of less than 5% and 30% planned to reduce theiry budget by more than 5% (3%actually planned an increase).
There were no surprises when asked what steps were being taken to cut costs, with the most common themes being hiring and travel freezes, maintenance deferrals, capital spending delays and across the board cuts. These are common short-term answers to long-term problems that have exasperated the rise in tuition in the last decade. Speaking of which, the report indicates that many boards are already planning to increase tuition by an average of 6.7% in the coming academic year, further decreasing the ability of students to afford college at a time when many parents are expected to remain unemployed and whose college savings have been eroded by the crises.
What should be a critical moment in history in which colleges re-evaluate their purpose of providing an education and make serious fundamental changes in how they operate in order to increase affordability, access and the public benefits of having a better educated citizenry, is more likely to be a temporary bump in the road that slows the spending engine down. Uncle Sam has continued to enable the fiscal irresponsibility of colleges with the equivalent of the higher education bailout that is wrapped up in the "stimulus" bill that allows colleges to continue to avoid making difficult decisions that most organizations face.
This is not the last that we will hear of declining state higher ed budgets and the need to raise tuition. In the near future, when states realize that they now have to cough up significant funds to comply with the newly created unemployment entitlements associated with the stimulus bill, they will again have to disappoint the public colleges with a education budget reduction. Not to mention the continual rise of healthcare costs of an ageing population. This cycle will continue to gauge the pockets of students and the taxpayers until we get serious about reforming higher ed.
Wednesday, April 22, 2009
The Human Capital Stock Growth Slowdown
By Richard Vedder and Jordan Templeton
Last month, we suggested that the human capital stock of the United States has grown slightly more than two percent a year since 1980. Our explorations on this issue continue, and as we uncover new estimates, we learn new insights.
Somewhere in the past decade or so, there has been a rather significant slowdown in the growth in the human capital stock, at least in the way we measure it. We have divided the period 1974 to 2007 into three 11 year periods. We estimate the the growth in the human capital stock was 2.70 percent a year from 1974 to 1985, and nearly as much, 2.57 percent a year, from 1985 to 1996. But we estimate the growth rate fell almost by one-half after 1996, to a 1.34 percent rate annually for the 1996to 2007 period. We are the first to admit that one can quibble about the way we measure human capital, and we have ignored the possibility that the discount rate used in valuing the human capital stock may vary over time. Nonetheless, the slowdown is startling, and perhaps consistent with the arguments of Harvard's Claudia Goldin and Lawrence Katz, who have written a book claiming the slowdown in educational attainment growth is imperiling America's future.
Why might there have been a human capital growth slowdown? Many factors are at work. Some human capital growth, for example, comes from immigration, and we have not analyzed at all how changing immigrant patterns might have impacted growth rates. But a slowdown in college completion rates is probably NOT the major culprit for the slowdown as Goldin and Katz would no doubt suggest. From 1985 to 1996, a period of high human capital growth, the proportion of the human capital stock possessed by individuals with a college degree rose from 39 to 44 percent --5 percent points. In the 1996 to 2007 slower growth period, the percent of the human capital stock possessed by college graduates rose by 7 percent points (from 44 to 51).
We are also finding that, over time, a growing part of the lifetime income differentials between high school and college graduates is explained by post-college productivity gains --learning by doing. A very large and generally growing portion of the lifetime earnings differential favoring college graduates comes AFTER college is over. Perhaps college develops critical learning skills that allow for more post-graduate learning, but that is just a conjecture. We are pretty certain that much of what we might attribute to the impact of college training actually reflects work and learning experiences acquired informally later in life.
Human capital per worker in an inflation adjusted sense rose dramatically less than the overall capital stock growth, reflecting increasing numbers of employed Americans. The overall average human capital per worker in 2007 dollars rose from $535,663 in 1974 to $653,041 in 2007. Again, the increase was concentrated in the period before 1996, with virtually no growth since.
This project is potentially the most important research being carried out at CCAP, and we are planning on expanding it in a variety of ways in the months ahead.
Last month, we suggested that the human capital stock of the United States has grown slightly more than two percent a year since 1980. Our explorations on this issue continue, and as we uncover new estimates, we learn new insights.
Somewhere in the past decade or so, there has been a rather significant slowdown in the growth in the human capital stock, at least in the way we measure it. We have divided the period 1974 to 2007 into three 11 year periods. We estimate the the growth in the human capital stock was 2.70 percent a year from 1974 to 1985, and nearly as much, 2.57 percent a year, from 1985 to 1996. But we estimate the growth rate fell almost by one-half after 1996, to a 1.34 percent rate annually for the 1996to 2007 period. We are the first to admit that one can quibble about the way we measure human capital, and we have ignored the possibility that the discount rate used in valuing the human capital stock may vary over time. Nonetheless, the slowdown is startling, and perhaps consistent with the arguments of Harvard's Claudia Goldin and Lawrence Katz, who have written a book claiming the slowdown in educational attainment growth is imperiling America's future.
Why might there have been a human capital growth slowdown? Many factors are at work. Some human capital growth, for example, comes from immigration, and we have not analyzed at all how changing immigrant patterns might have impacted growth rates. But a slowdown in college completion rates is probably NOT the major culprit for the slowdown as Goldin and Katz would no doubt suggest. From 1985 to 1996, a period of high human capital growth, the proportion of the human capital stock possessed by individuals with a college degree rose from 39 to 44 percent --5 percent points. In the 1996 to 2007 slower growth period, the percent of the human capital stock possessed by college graduates rose by 7 percent points (from 44 to 51).
We are also finding that, over time, a growing part of the lifetime income differentials between high school and college graduates is explained by post-college productivity gains --learning by doing. A very large and generally growing portion of the lifetime earnings differential favoring college graduates comes AFTER college is over. Perhaps college develops critical learning skills that allow for more post-graduate learning, but that is just a conjecture. We are pretty certain that much of what we might attribute to the impact of college training actually reflects work and learning experiences acquired informally later in life.
Human capital per worker in an inflation adjusted sense rose dramatically less than the overall capital stock growth, reflecting increasing numbers of employed Americans. The overall average human capital per worker in 2007 dollars rose from $535,663 in 1974 to $653,041 in 2007. Again, the increase was concentrated in the period before 1996, with virtually no growth since.
This project is potentially the most important research being carried out at CCAP, and we are planning on expanding it in a variety of ways in the months ahead.
Monday, April 20, 2009
CCAP Labor Productivity Report Released
by Daniel Bennett
CCAP's latest report, Trends in the Higher Education Labor Force: Identifying Changes in Worker Composition and Productivity, was released this week. The report provides an objective view of aggregated labor force data, as reported by the Department of Education, over the past twenty years. The main findings are that:
Critics will surely defend this increase with claims of a changing college missions that call for athletic dominance, environmental sustainability, diversity, and the like. Those are noble social goals, but the problem is that every college in the nation has been playing follow-the-leader, which has resulted in an explosion in labor costs, without consideration of the student's and public's ability to continue supporting these ambitions with tuition dollars and subsidies. This increase in the labor force to meet new (and discretionary) goals is at least partially responsible for the soaring tuition levels, which is leading to public discontent with the higher education establishment.
Perhaps colleges have been too ambitious in trying to keep up with their peers, contributing to speculative expansion, or what what my colleague, Andrew Gillen, has termed a tuition bubble. At some point, reality needs to set in that not every 4-year institution in the nation is going to be a premier research center, have a championship football team, or what have you. When this happens, many colleges can revert their missions back to providing students with the tools and knowledge that they will need to be successful in life, and reduce their staff to a more sustainable level. If this fails to happen, then I'm sure that proprietary colleges will gladly step up to the plate to provide affordable career training for students interested in gaining skills that will make them employable without mortgaging their future.
CCAP's latest report, Trends in the Higher Education Labor Force: Identifying Changes in Worker Composition and Productivity, was released this week. The report provides an objective view of aggregated labor force data, as reported by the Department of Education, over the past twenty years. The main findings are that:
(a) Colleges have responded to an increase in enrollment by increasing their labor force, largely with full-time support staff and management positions and part-time instructorsThe report recognizes that there have been regulatory changes during the past twenty years that require additional support staff, but questions whether such changes substantiate the level of growth that has actually occured. "Back Office" FTE staff has increased by 86.4 percent over the past twenty years, relative to an increase in FTE enrollment of 39.7 percent.
(b) The number of support and management positions has exploded
(c) The increase in staffing levels has been disproportionate to the change in enrollment and number of degrees awarded
(d) The work force at 2-year schools are more productive than their 4-year counterparts, and the for-profit sectors are more productive than the not-for-profit sectors
Critics will surely defend this increase with claims of a changing college missions that call for athletic dominance, environmental sustainability, diversity, and the like. Those are noble social goals, but the problem is that every college in the nation has been playing follow-the-leader, which has resulted in an explosion in labor costs, without consideration of the student's and public's ability to continue supporting these ambitions with tuition dollars and subsidies. This increase in the labor force to meet new (and discretionary) goals is at least partially responsible for the soaring tuition levels, which is leading to public discontent with the higher education establishment.
Perhaps colleges have been too ambitious in trying to keep up with their peers, contributing to speculative expansion, or what what my colleague, Andrew Gillen, has termed a tuition bubble. At some point, reality needs to set in that not every 4-year institution in the nation is going to be a premier research center, have a championship football team, or what have you. When this happens, many colleges can revert their missions back to providing students with the tools and knowledge that they will need to be successful in life, and reduce their staff to a more sustainable level. If this fails to happen, then I'm sure that proprietary colleges will gladly step up to the plate to provide affordable career training for students interested in gaining skills that will make them employable without mortgaging their future.
Sunday, April 19, 2009
End of Tenure --from the Author of the End of History
By Richard Vedder
My friend Al Eckes pointed me to a story in the Sunday Washington Post by scholar Francis Fukuyama, now at Johns Hopkins, who once created a sensation with his "End of History" hypothesis. Prof. Fukuyama calls for the elimination of tenure, and makes some good arguments.
As he points out, the 18-22 year old population will be shrinking, and the federal law against compulsory retirement age means colleges could well be populated by lots of old fossils like me teaching in a few years, a possibility enormously aggravated by tenure. To provide opportunities for young scholars, we need to encourage faculty to retire at a reasonable age --and force them if necessary, or so Fukuyama claims. He could also add that tenure leads to stifling of innovation in teaching, a failure to reallocate resources to new scholarly needs, etc.
In part, Prof. Fukuyama is slowly getting his wish. Tenured faculty are becoming a minority in the academy, in part because of costs associated with the institution. Colleges are substituting lower cost, more flexible labor for high priced inflexible human resources.
I mentioned this article to my friend Lowell Gallaway and he asked a great question: "Do you suppose you and I would have taken the stand against the increase in the Ohio income tax that we took in 1983 if we did not have tenure?" Our university faced pressure from prominent politicians and alumni to have us fired for taking a stand that was perceived to potentially reduce university subsidies.
Fukuyama points out that in Europe and Japan where tenure in the American form does not exist, there seems to be no problem with the freedom of speech. I am not sure about that (and some prominent scholars in European universities do have permanent appointments). And I am not sure that the degree of intellectual vitality is as great in Europe as the U.S. Thus the "academic freedom" argument for tenure does have some validity. The question to me is: are the gains from tenure from the standpoint of promoting intellectual diversity and debate greater than the costs? Are there intermediate positions, such as fairly long term contracts (say 5-10 years) that could largely protect academic freedom while increasing flexibility with respect to staff?
Speaking of tenure and university staffing, my colleague Daniel Bennett has provided some good data (using governmental data sources) showing that there has been an explosion in staffing levels outside the faculty in modern times. His study is available on the CCAP website, and is discussed prominently in the Monday Chronicle of Higher Education and also mentioned by Inside Higher Education .
My friend Al Eckes pointed me to a story in the Sunday Washington Post by scholar Francis Fukuyama, now at Johns Hopkins, who once created a sensation with his "End of History" hypothesis. Prof. Fukuyama calls for the elimination of tenure, and makes some good arguments.
As he points out, the 18-22 year old population will be shrinking, and the federal law against compulsory retirement age means colleges could well be populated by lots of old fossils like me teaching in a few years, a possibility enormously aggravated by tenure. To provide opportunities for young scholars, we need to encourage faculty to retire at a reasonable age --and force them if necessary, or so Fukuyama claims. He could also add that tenure leads to stifling of innovation in teaching, a failure to reallocate resources to new scholarly needs, etc.
In part, Prof. Fukuyama is slowly getting his wish. Tenured faculty are becoming a minority in the academy, in part because of costs associated with the institution. Colleges are substituting lower cost, more flexible labor for high priced inflexible human resources.
I mentioned this article to my friend Lowell Gallaway and he asked a great question: "Do you suppose you and I would have taken the stand against the increase in the Ohio income tax that we took in 1983 if we did not have tenure?" Our university faced pressure from prominent politicians and alumni to have us fired for taking a stand that was perceived to potentially reduce university subsidies.
Fukuyama points out that in Europe and Japan where tenure in the American form does not exist, there seems to be no problem with the freedom of speech. I am not sure about that (and some prominent scholars in European universities do have permanent appointments). And I am not sure that the degree of intellectual vitality is as great in Europe as the U.S. Thus the "academic freedom" argument for tenure does have some validity. The question to me is: are the gains from tenure from the standpoint of promoting intellectual diversity and debate greater than the costs? Are there intermediate positions, such as fairly long term contracts (say 5-10 years) that could largely protect academic freedom while increasing flexibility with respect to staff?
Speaking of tenure and university staffing, my colleague Daniel Bennett has provided some good data (using governmental data sources) showing that there has been an explosion in staffing levels outside the faculty in modern times. His study is available on the CCAP website, and is discussed prominently in the Monday Chronicle of Higher Education and also mentioned by Inside Higher Education .
Friday, April 17, 2009
Eliminating the SAT requirement
By Richard Vedder
I have just attended a marvelous two day conference on college admissions at Wake Forest University, an absolute gem of a school with one of the most beautiful campuses in the Solar System. It had provocative and diverse speakers, and an audience that included high school guidance counselors, professional admission consultants, college admissions directors, academics, students, journalists, and a few townspeople.
Yet, in spite of numerous presentations arguing that requiring the SAT test is bad policy, I came away more convinced than ever that dropping that test is a big mistake. The charming and passionate Martha Allman gave a strong speech on Wake Forest's decision to make that school SAT optional, pointing out that it led to a big increase in applications and probably will result in a more diverse class at least as academically strong as the ones proceeding it.
I remain unconvinced. Before standardized testing began, in the early decades of the last century, admission officers arbitrarily excluded "undesirables" --very often Jews, persons from public (as opposed to elite private) schools, and even nerdy brainy students who might push academic standards up too much. "Leadership" was emphasized --meaning persons who were white Anglo-Saxon Protestants. The SAT evolved to bring objectivity to admissions, increasing diversity (e.g., more Jews and poorer public school kids), etc.
Now, ostensibly in the interest of diversity, the SAT is being overturned. Why? Too many minorities, especially blacks, get low scores. A Wake student asked a good question: if on average kids with high test scores do better academically, why sacrifice that? Answer, after correcting for double talk, etc.: we are NOT trying to maximize the academic prowess of our students --race (and maybe other criteria, such as the ability to throw a ball) often trumps academic excellence.
My intuitive view on this got some support from Scott Highhouse, an industrial psychologist at Bowling Green State University, who argued that in industrial evaluations, "holistic assessment" (subjective judgments of evaluators) usually worsens the predictive value arising from assessments based on objective criteria such as tests. Personally, I trust the predictive value of the SAT over the typical judgment of admission personnel.
*********************
We also had a good session on rankings. Persons expecting a battle between Bob Morse of US News ranking fame and me (Forbes rankings) were mostly disappointed, I suspect, although Jeff Brenzel, Yale's admission director, had some pointed and generally responsible criticism of rankings, most of which I agreed with. By contrast, Lloyd Thacker who runs something called the Education Conservancy issued an ideological, hysterical, theatrical attack on rankings in general and US News in particular, a presentation that lowered the otherwise civil but spirited nature of discourse at the conference. He made all sorts of unsubstantiated and very likely inaccurate claims, such as claiming student attrition has risen because of rankings, and that rankings have led student work effort to decline (he could be right, but there is no evidence supporting his claim).
I have just attended a marvelous two day conference on college admissions at Wake Forest University, an absolute gem of a school with one of the most beautiful campuses in the Solar System. It had provocative and diverse speakers, and an audience that included high school guidance counselors, professional admission consultants, college admissions directors, academics, students, journalists, and a few townspeople.
Yet, in spite of numerous presentations arguing that requiring the SAT test is bad policy, I came away more convinced than ever that dropping that test is a big mistake. The charming and passionate Martha Allman gave a strong speech on Wake Forest's decision to make that school SAT optional, pointing out that it led to a big increase in applications and probably will result in a more diverse class at least as academically strong as the ones proceeding it.
I remain unconvinced. Before standardized testing began, in the early decades of the last century, admission officers arbitrarily excluded "undesirables" --very often Jews, persons from public (as opposed to elite private) schools, and even nerdy brainy students who might push academic standards up too much. "Leadership" was emphasized --meaning persons who were white Anglo-Saxon Protestants. The SAT evolved to bring objectivity to admissions, increasing diversity (e.g., more Jews and poorer public school kids), etc.
Now, ostensibly in the interest of diversity, the SAT is being overturned. Why? Too many minorities, especially blacks, get low scores. A Wake student asked a good question: if on average kids with high test scores do better academically, why sacrifice that? Answer, after correcting for double talk, etc.: we are NOT trying to maximize the academic prowess of our students --race (and maybe other criteria, such as the ability to throw a ball) often trumps academic excellence.
My intuitive view on this got some support from Scott Highhouse, an industrial psychologist at Bowling Green State University, who argued that in industrial evaluations, "holistic assessment" (subjective judgments of evaluators) usually worsens the predictive value arising from assessments based on objective criteria such as tests. Personally, I trust the predictive value of the SAT over the typical judgment of admission personnel.
*********************
We also had a good session on rankings. Persons expecting a battle between Bob Morse of US News ranking fame and me (Forbes rankings) were mostly disappointed, I suspect, although Jeff Brenzel, Yale's admission director, had some pointed and generally responsible criticism of rankings, most of which I agreed with. By contrast, Lloyd Thacker who runs something called the Education Conservancy issued an ideological, hysterical, theatrical attack on rankings in general and US News in particular, a presentation that lowered the otherwise civil but spirited nature of discourse at the conference. He made all sorts of unsubstantiated and very likely inaccurate claims, such as claiming student attrition has risen because of rankings, and that rankings have led student work effort to decline (he could be right, but there is no evidence supporting his claim).
Improving College Access Without Breaking the Bank
by Daniel Bennett and Michael J. Carter*
Inside Higher Ed published a story on Thursday that discussed how Virginia Community Colleges are using "career coaches" at the high school level to assist students with the college planning process. The coaching program reaches out to students deemed in need of the most help - namely college-qualified students who would be first generation college-bound, but are often neglected by their guidance counselors "in favor of their gifted or at-risk peers", according to the IHE article. Early indications are that the program has been successful, as "community college enrollments...grew 7 percentage points more last academic year out of high schools that have coaches than from those that do not."
Similarly, a national effort is underway by Strive for College Collaborative, a non-profit organization that offers a comprehensive approach to correcting the inequalities of college access by focusing on both the lack of information and motivation. (Full Disclosure: Michael Carter is the founder and president of Strive for College.) Strive is the ‘last mile’ – serving low-income high school students who have already proven themselves academically qualified to gain admission at a four-year college or university. Strive delivers a customized curriculum for these students and recruits undergraduates from local universities to serve as mentors, guiding them through the process of applying to, enrolling in and paying for four-year colleges and universities.
Beginning in the spring of a high school student’s junior year, the Strive program provides thorough college counseling, covering every aspect of the admissions process – from choosing the right school to personal essays to financial aid and paying for college. This engaging curriculum, customized and delivered through Strive’s online system, was developed by the nation’s top counselors, admissions experts and financial aid consultants. Strive’s online component allows any student in the country to benefit from the curriculum for free.
To compliment Strive’s curriculum, each Strive Chapter pairs undergraduate student mentors with high school students to act as a guide and role model through the college application process. The chapter system allows Strive to expand with nearly limitless potential across the country. Chapters develop local partnerships and tailor the Strive program to fit local students’ needs as each chapter becomes an integrated part of the community.
The Obama Administration has clearly stated that improving access to college is top priority, yet it has thus far not unveiled a clear strategy for achieving this goal. Perhaps the administration and the Department of Education should consider using a portion of their budgets to spur innovation through funding initiatives such as Strive and the Virginia coaching program. This would be a welcome change to the failed efforts to improve access by increasing financial aid and subsidization, as described in a new report by CCAP’s Andrew Gillen.
Gillen suggests that the current financial aid process has failed to achieve its objectives to increase access, increase affordability and promote equality of opportunity. The current financial aid model falsely assumes that dropping money out of airplanes over college campuses will in some way fix these problems, without addressing the root of the them. The lack of discernible information and a lack of quality assistance in college planning for first generation and low-income college-bound students may very well be much greater than the supposed insufficient funding (the US spends more per capita on education than any other country in the world).
Maybe it is time to consider some new approaches to achieve these goals. Perhaps instead of going on a spending spree and throwing money at the problem in hopes that it will go away, the Obama Administration can try funding innovative and cost-efficient solutions that organizations such as Strive and the career coaching program in Virginia provide. These programs appear to be very promising at providing quality mentoring to the neediest qualified students and thus, improving affordable access to college. It is time that we look past the flawed methods of the past and try something new. With any luck, we might kill two birds with one stone - improving affordability and improving access, without breaking the bank.
*Michael Carter is the Founder and President of Strive for College
Inside Higher Ed published a story on Thursday that discussed how Virginia Community Colleges are using "career coaches" at the high school level to assist students with the college planning process. The coaching program reaches out to students deemed in need of the most help - namely college-qualified students who would be first generation college-bound, but are often neglected by their guidance counselors "in favor of their gifted or at-risk peers", according to the IHE article. Early indications are that the program has been successful, as "community college enrollments...grew 7 percentage points more last academic year out of high schools that have coaches than from those that do not."
Similarly, a national effort is underway by Strive for College Collaborative, a non-profit organization that offers a comprehensive approach to correcting the inequalities of college access by focusing on both the lack of information and motivation. (Full Disclosure: Michael Carter is the founder and president of Strive for College.) Strive is the ‘last mile’ – serving low-income high school students who have already proven themselves academically qualified to gain admission at a four-year college or university. Strive delivers a customized curriculum for these students and recruits undergraduates from local universities to serve as mentors, guiding them through the process of applying to, enrolling in and paying for four-year colleges and universities.
Beginning in the spring of a high school student’s junior year, the Strive program provides thorough college counseling, covering every aspect of the admissions process – from choosing the right school to personal essays to financial aid and paying for college. This engaging curriculum, customized and delivered through Strive’s online system, was developed by the nation’s top counselors, admissions experts and financial aid consultants. Strive’s online component allows any student in the country to benefit from the curriculum for free.
To compliment Strive’s curriculum, each Strive Chapter pairs undergraduate student mentors with high school students to act as a guide and role model through the college application process. The chapter system allows Strive to expand with nearly limitless potential across the country. Chapters develop local partnerships and tailor the Strive program to fit local students’ needs as each chapter becomes an integrated part of the community.
The Obama Administration has clearly stated that improving access to college is top priority, yet it has thus far not unveiled a clear strategy for achieving this goal. Perhaps the administration and the Department of Education should consider using a portion of their budgets to spur innovation through funding initiatives such as Strive and the Virginia coaching program. This would be a welcome change to the failed efforts to improve access by increasing financial aid and subsidization, as described in a new report by CCAP’s Andrew Gillen.
Gillen suggests that the current financial aid process has failed to achieve its objectives to increase access, increase affordability and promote equality of opportunity. The current financial aid model falsely assumes that dropping money out of airplanes over college campuses will in some way fix these problems, without addressing the root of the them. The lack of discernible information and a lack of quality assistance in college planning for first generation and low-income college-bound students may very well be much greater than the supposed insufficient funding (the US spends more per capita on education than any other country in the world).
Maybe it is time to consider some new approaches to achieve these goals. Perhaps instead of going on a spending spree and throwing money at the problem in hopes that it will go away, the Obama Administration can try funding innovative and cost-efficient solutions that organizations such as Strive and the career coaching program in Virginia provide. These programs appear to be very promising at providing quality mentoring to the neediest qualified students and thus, improving affordable access to college. It is time that we look past the flawed methods of the past and try something new. With any luck, we might kill two birds with one stone - improving affordability and improving access, without breaking the bank.
*Michael Carter is the Founder and President of Strive for College
Wednesday, April 15, 2009
Links 4/15/09
by Andrew Gillen
Tufts ends need-blind admissions HT: Mankiw
The Education Optimists report that community college call centers focusing on recruitment and retention could be a really good use of money.
Sallie Mae finds that “Seniors graduated with an average credit card debt of more than $4,100, up from $2,900 almost four years ago.” HT: Inside Higher Ed.
Mike Petrilli over at the Flypaper is worked up that the DC voucher program, which works, is being murdered.
Lastly, check out this post by Andy Smarick. Be sure to read through to the end.
Tufts ends need-blind admissions HT: Mankiw
The Education Optimists report that community college call centers focusing on recruitment and retention could be a really good use of money.
Sallie Mae finds that “Seniors graduated with an average credit card debt of more than $4,100, up from $2,900 almost four years ago.” HT: Inside Higher Ed.
Mike Petrilli over at the Flypaper is worked up that the DC voucher program, which works, is being murdered.
Lastly, check out this post by Andy Smarick. Be sure to read through to the end.
Tuesday, April 14, 2009
"Not a Chance"
By Richard Vedder
Tom Mortensen no doubts loves President's Obama's message: "By 2020 America will once again have the highest proportion of college graduates in the world." I do not --I think it is a foolhardy and inappropriate public ambition. But I do agree with Tom on one thing: there is not a chance it will happen (when it does not, ex-President Obama can blame his successor).
There are three obstacles that a high school freshman has to overcome before getting a bachelor's degree. First, she must graduate from high school. Second, she must enter college. Third, she must complete college in a reasonably timely manner (say within six years). When you lose over one-third of the potential pool at each of the first two steps of the process (high school graduation and college entrance), you already have only about two out of every five students eligible for college graduation. And when you lose at least 45 percent of those for failure to complete a bachelor's degree, you are left with roughly one student in five who gets a degree.
By contrast, the success rate in most other industrial nations is substantially higher. Why? Is it the fault of a mediocre secondary school system combined with parents indifferent to academic success? Is it because the drop off rate from high school and college is relatively high? Or, is it because college completion rates are relatively low in the U.S.?
I suspect all three factors are at work, especially the first and third. Despite all the complaining about college access by Mortensen and others, that is probably the least important reason why we have such low rates of college attainment in our population. According to Mortensen (Postsecondary Education Opportunity, March 2009), the college completion rate in 2005 was above 75 percent in Japan, Britain, Russia, Germany, even neighboring Quebec -- but only 56 percent in the U.S. --lower than nearly all other advanced industrial countries.
Why do students graduate in the other countries far more than the U.S.? I don't know, but I don't believe the explanation of most liberals that it is mainly about inadequate financial support for poorer students. I suspect it has more to do with inadequate preparation for college, along with the college's placing obstacles to graduation ---more credit hours than international norms, more class close outs because professors consider research more important than teaching, etc.
Some data from Mortensen support the first assertion. Kids graduating in the top 10 percent of their high school class roughly have an 80 percent graduation rate; kids in the bottom half of their high school class have roughly a 40 percent graduation rate at public universities. Regarding the insensitivity of colleges to getting students through, private schools which are much more tuition driven on average have far higher graduation rates than public schools that rely less on student financial support (e.g., kids in the top one-fourth of their high school class have a 67 percent graduation rate at private schools, 52 percent at public ones).
All of this is consistent with several CCAP themes. Sending some kids to college is setting them up for failure. They should have different forms of post-secondary training and experiences. The lack of market incentives leads to poorer performance. High tuition fees are actually good in one respect: they force colleges to pay more attention to the students and less to the peculiar drive to publish papers in obscure journals of last resort. I once taught at a 100 percent tuition driven institution affiliated with the University of Colorado that offered first class instruction because if they did not the institution would die (it ultimately did).
Tom Mortensen no doubts loves President's Obama's message: "By 2020 America will once again have the highest proportion of college graduates in the world." I do not --I think it is a foolhardy and inappropriate public ambition. But I do agree with Tom on one thing: there is not a chance it will happen (when it does not, ex-President Obama can blame his successor).
There are three obstacles that a high school freshman has to overcome before getting a bachelor's degree. First, she must graduate from high school. Second, she must enter college. Third, she must complete college in a reasonably timely manner (say within six years). When you lose over one-third of the potential pool at each of the first two steps of the process (high school graduation and college entrance), you already have only about two out of every five students eligible for college graduation. And when you lose at least 45 percent of those for failure to complete a bachelor's degree, you are left with roughly one student in five who gets a degree.
By contrast, the success rate in most other industrial nations is substantially higher. Why? Is it the fault of a mediocre secondary school system combined with parents indifferent to academic success? Is it because the drop off rate from high school and college is relatively high? Or, is it because college completion rates are relatively low in the U.S.?
I suspect all three factors are at work, especially the first and third. Despite all the complaining about college access by Mortensen and others, that is probably the least important reason why we have such low rates of college attainment in our population. According to Mortensen (Postsecondary Education Opportunity, March 2009), the college completion rate in 2005 was above 75 percent in Japan, Britain, Russia, Germany, even neighboring Quebec -- but only 56 percent in the U.S. --lower than nearly all other advanced industrial countries.
Why do students graduate in the other countries far more than the U.S.? I don't know, but I don't believe the explanation of most liberals that it is mainly about inadequate financial support for poorer students. I suspect it has more to do with inadequate preparation for college, along with the college's placing obstacles to graduation ---more credit hours than international norms, more class close outs because professors consider research more important than teaching, etc.
Some data from Mortensen support the first assertion. Kids graduating in the top 10 percent of their high school class roughly have an 80 percent graduation rate; kids in the bottom half of their high school class have roughly a 40 percent graduation rate at public universities. Regarding the insensitivity of colleges to getting students through, private schools which are much more tuition driven on average have far higher graduation rates than public schools that rely less on student financial support (e.g., kids in the top one-fourth of their high school class have a 67 percent graduation rate at private schools, 52 percent at public ones).
All of this is consistent with several CCAP themes. Sending some kids to college is setting them up for failure. They should have different forms of post-secondary training and experiences. The lack of market incentives leads to poorer performance. High tuition fees are actually good in one respect: they force colleges to pay more attention to the students and less to the peculiar drive to publish papers in obscure journals of last resort. I once taught at a 100 percent tuition driven institution affiliated with the University of Colorado that offered first class instruction because if they did not the institution would die (it ultimately did).
Thoughts on the Stimulus
by Andrew Gillen
There is a debate raging in the eduworld over what impact the education portion of the stimulus will have for reform efforts. As I've followed along, I’ve realized that I am quite torn. As much as I would like to see serious reform of education, that is not the point of the stimulus. I'm also torn over the stimulus itself.
This picture, more than anything else, convinced me that fiscal stimulus is a good idea (It is slide 31 from a Richard Koo presentation which is available here).jpg)
But I am not confident that the American Recovery and Reinvestment Act (ARRA) will be stimulating. This is in spite of largely buying the administration’s argument put forth by Romer and Bernstein that direct government spending is better (has a bigger multiplier) than tax cuts as far as stimulus is concerned. Note, RB is not an established fact per se (see this critique, for instance) but I think it’s a good baseline, and I also think that it’s directionally correct – by which I mean that under current conditions, the multiplier for government spending is likely to be larger than the multiplier for tax cuts. But the reason for the difference between the two is one source of my concern.
While the debate terminology can be confusing (velocity of money, marginal propensity to (fill in the blank) etc.), the argument that having the government spend money directly is more effective than letting taxpayers keep it basically rests on the historical tendency in times of recession for government spending to bring more unemployed resources (both people and equipment) back into active production than tax cuts. I think that would largely hold today as well, since in situations like this, your typical taxpayer is cutting back on consumption and increasing savings. Normally, the reduction in consumption would be at least partially offset by increased lending by banks (thanks to the increase in savings), but banks are largely paralyzed at the moment (according to Richard Posner, excess reserves have jumped from $2 to $725 billion).
So basically, I buy into the argument that for right now, government spending is better, at least in theory, because historically it brought more unemployed resources back into production. But, given this reasoning, it seems to me that any stimulus should be focused like a laser on unemployed resources, or at least resources that have a high probability of becoming unemployed in the absence of the stimulus. Browsing through recovery.gov, stimuluswatch.org (for leading spending candidates), and newspaper accounts of stimulus spending, I have trouble convincing myself that this is the case. Rather, as Megan McArdle wrote,
My second concern with the stimulus is that even if it is properly targeted at unemployed resources, it will delay and possibly prevent needed structural realignment. For instance, bailing out the auto makers is a no brainer as far as stimulating the economy is concerned, since it is full of either currently unemployed, or soon to be unemployed resources. But there is a very good chance that the auto sector is in need of serious change that the bailout would postpone, perhaps indefinitely. As Luigi Zingales said,
Moreover, too much involvement in business affairs by Washington can reduce efficiency in strange and seemingly inexplicable ways. For example, check out this story, where it is explained that paper companies are adding unneeded diesel fuel in their production process to qualify for a tax break. (I for one am astonished to realize that using the tax code to run giant social engineering experiments can have unintended consequences. Who would have thought?)
Even more distressing is the heavy lobbying that has engulfed DC lately. With politicians not only open to, but actively encouraging folks to come up with ways to spend public money, the stimulus free for all is significantly enlarging the inefficient rent seeking/lobbying industry. A story in today’s Washington Post highlighting an instance of a 22,000% rate of return to lobbying effort has terrifying implications. HT: MR. Don’t let the small size ($3 billion) of the lobbying industry fool you, the example highlighted resulted in $100 billion in giveaways.
Between keeping inefficient firms alive, making efficient firms less so, and expanding the relative size and influence of the inefficient rent seeking sector, significant long term harm could be done. To the extent that the stimulus and bailouts lead to more inefficiency, our standard of living will be lower.
The worst case would be a stimulus that doesn’t focus on bringing unemployed resources back into production, while simultaneously leading to more inefficiency long term. I won’t pretend to be able to figure out if this is a valid description of our stimulus. But I am highly troubled by the fact that I can’t rule it out.
There is a debate raging in the eduworld over what impact the education portion of the stimulus will have for reform efforts. As I've followed along, I’ve realized that I am quite torn. As much as I would like to see serious reform of education, that is not the point of the stimulus. I'm also torn over the stimulus itself.
This picture, more than anything else, convinced me that fiscal stimulus is a good idea (It is slide 31 from a Richard Koo presentation which is available here)
.jpg)
But I am not confident that the American Recovery and Reinvestment Act (ARRA) will be stimulating. This is in spite of largely buying the administration’s argument put forth by Romer and Bernstein that direct government spending is better (has a bigger multiplier) than tax cuts as far as stimulus is concerned. Note, RB is not an established fact per se (see this critique, for instance) but I think it’s a good baseline, and I also think that it’s directionally correct – by which I mean that under current conditions, the multiplier for government spending is likely to be larger than the multiplier for tax cuts. But the reason for the difference between the two is one source of my concern. While the debate terminology can be confusing (velocity of money, marginal propensity to (fill in the blank) etc.), the argument that having the government spend money directly is more effective than letting taxpayers keep it basically rests on the historical tendency in times of recession for government spending to bring more unemployed resources (both people and equipment) back into active production than tax cuts. I think that would largely hold today as well, since in situations like this, your typical taxpayer is cutting back on consumption and increasing savings. Normally, the reduction in consumption would be at least partially offset by increased lending by banks (thanks to the increase in savings), but banks are largely paralyzed at the moment (according to Richard Posner, excess reserves have jumped from $2 to $725 billion).
So basically, I buy into the argument that for right now, government spending is better, at least in theory, because historically it brought more unemployed resources back into production. But, given this reasoning, it seems to me that any stimulus should be focused like a laser on unemployed resources, or at least resources that have a high probability of becoming unemployed in the absence of the stimulus. Browsing through recovery.gov, stimuluswatch.org (for leading spending candidates), and newspaper accounts of stimulus spending, I have trouble convincing myself that this is the case. Rather, as Megan McArdle wrote,
Mostly, Democrats took their wish lists, called them "stimulus", and look set to inflict them on the American people.I’m sure some of the spending will employ formerly unemployed resources, but it seems like that is more of a coincidental afterthought, rather than the primary motivation and goal of the spending.
My second concern with the stimulus is that even if it is properly targeted at unemployed resources, it will delay and possibly prevent needed structural realignment. For instance, bailing out the auto makers is a no brainer as far as stimulating the economy is concerned, since it is full of either currently unemployed, or soon to be unemployed resources. But there is a very good chance that the auto sector is in need of serious change that the bailout would postpone, perhaps indefinitely. As Luigi Zingales said,
Keynesianism has conquered the hearts and minds of politicians and ordinary people alike because it provides a theoretical justification for irresponsible behaviour. Medical science has established that one or two glasses of wine per day are good for your long-term health, but no doctor would recommend a recovering alcoholic to follow this prescription. Unfortunately, Keynesian economists do exactly this. They tell politicians, who are addicted to spending our money, that government expenditures are good…Once you give politicians a plausible excuse to go around spending even more money and rescuing firms, I have real doubts that you will ever be able to get them to stop. If you’re not convinced of this, go back and look at how Republican politicians have misused the Laffer curve, twisting it from the idea that lower taxes can lead to higher revenues, to the claim that all tax cuts will lead to higher revenues. I think many aspects of the education world are in a similar situation – hopelessly in need of reform, but with reform in good times being highly improbable.
Moreover, too much involvement in business affairs by Washington can reduce efficiency in strange and seemingly inexplicable ways. For example, check out this story, where it is explained that paper companies are adding unneeded diesel fuel in their production process to qualify for a tax break. (I for one am astonished to realize that using the tax code to run giant social engineering experiments can have unintended consequences. Who would have thought?)
Even more distressing is the heavy lobbying that has engulfed DC lately. With politicians not only open to, but actively encouraging folks to come up with ways to spend public money, the stimulus free for all is significantly enlarging the inefficient rent seeking/lobbying industry. A story in today’s Washington Post highlighting an instance of a 22,000% rate of return to lobbying effort has terrifying implications. HT: MR. Don’t let the small size ($3 billion) of the lobbying industry fool you, the example highlighted resulted in $100 billion in giveaways.
Between keeping inefficient firms alive, making efficient firms less so, and expanding the relative size and influence of the inefficient rent seeking sector, significant long term harm could be done. To the extent that the stimulus and bailouts lead to more inefficiency, our standard of living will be lower.
The worst case would be a stimulus that doesn’t focus on bringing unemployed resources back into production, while simultaneously leading to more inefficiency long term. I won’t pretend to be able to figure out if this is a valid description of our stimulus. But I am highly troubled by the fact that I can’t rule it out.
Monday, April 13, 2009
The Academic Arms Race: Ohio State as an Aggressor
By Richard Vedder
For decades, Ohio State University (OSU) was a national athletic powerhouse, but considered something of a lightweight school academically. Within the Big Ten conference, Michigan, Northwestern, Illinois, and Wisconsin were always considered better schools academically, and perhaps others (Minnesota especially). A couple of decades ago, a serious effort to reverse this began, an effort that has accelerated in the last decade. Ohio State has been a major aggressor, trying to buy an academic reputation.
The Columbus Dispatch had a marvelous extremely long (over two full pages) story yesterday detailing spending growth at OSU. From fiscal year 1998 to 2008, total enrollment (including a couple of smaller regional campuses) rose 10 percent, but the number employed rose 32.5 percent. The ratio of employees to students rose by about 20 percent. Labor costs per student rose nearly 30 percent, adjusting for inflation. So much for capital-labor substitution.
Not only have staff levels exploded, but salaries as well at the top. OSU's president in 1997-98, Brit Kirwan, made $275,000 a year. This year, Gordon Gee will make about $1.4 million with bonuses, etc. Allowing for inflation, the salary of the university prez has roughly quadrupled. The football coach in the earlier period, John Cooper made $675,000 a year --his successor, Jim Tressell, is making $2.5 million now, but $3.5 million next year. Some 21 employees at OSU make over $500,000 a year --still a very high salary for a university president.
To be sure, a huge part of the increase in positions and salaries reflects the fact that OSU has a huge and growing medical center --hospitals, clinics, etc. The total budget of the university has nearly doubled in inflation adjusted terms in a decade --increasing 7 percent a year as enrollments rose at best 1 percent (and most of that increase was at the relatively lower cost regional campuses).
Interestingly, only about 15 cents of each new dollar of inflation adjusted spending went for "instruction/academic support). A majority went to pay for the expanding hospitals, physicians, etc. The hospital's budget is now greater than that for the supposed heart of the university --instruction and research spending combined.
Gee says "we are not competing with the Montana School of Massage. We're fiercely competing with Harvard, Yale, Chicago, Stanford and the University of Michigan." Huge amounts of resources are being expended to be at the top of American colleges, even though we have no real way of measuring which colleges truly do a good job. Students are given subordinated status to research, medical center expansion, and, of course, athletics (no professor outside the medical school makes even one-fourth what the basketball coach is paid).
In the same period, UCLA added 32 percent to its inflation adjusted payroll, the University of Arizona 23 percent, and the University of Michigan 37 percent. No serious discussion of rising college costs can be made unless one addresses this explosion in payrolls.The Dispatch story reminds me once more how critical daily newspapers are in our lives, and how we should pray they survive the current downturn.
For decades, Ohio State University (OSU) was a national athletic powerhouse, but considered something of a lightweight school academically. Within the Big Ten conference, Michigan, Northwestern, Illinois, and Wisconsin were always considered better schools academically, and perhaps others (Minnesota especially). A couple of decades ago, a serious effort to reverse this began, an effort that has accelerated in the last decade. Ohio State has been a major aggressor, trying to buy an academic reputation.
The Columbus Dispatch had a marvelous extremely long (over two full pages) story yesterday detailing spending growth at OSU. From fiscal year 1998 to 2008, total enrollment (including a couple of smaller regional campuses) rose 10 percent, but the number employed rose 32.5 percent. The ratio of employees to students rose by about 20 percent. Labor costs per student rose nearly 30 percent, adjusting for inflation. So much for capital-labor substitution.
Not only have staff levels exploded, but salaries as well at the top. OSU's president in 1997-98, Brit Kirwan, made $275,000 a year. This year, Gordon Gee will make about $1.4 million with bonuses, etc. Allowing for inflation, the salary of the university prez has roughly quadrupled. The football coach in the earlier period, John Cooper made $675,000 a year --his successor, Jim Tressell, is making $2.5 million now, but $3.5 million next year. Some 21 employees at OSU make over $500,000 a year --still a very high salary for a university president.
To be sure, a huge part of the increase in positions and salaries reflects the fact that OSU has a huge and growing medical center --hospitals, clinics, etc. The total budget of the university has nearly doubled in inflation adjusted terms in a decade --increasing 7 percent a year as enrollments rose at best 1 percent (and most of that increase was at the relatively lower cost regional campuses).
Interestingly, only about 15 cents of each new dollar of inflation adjusted spending went for "instruction/academic support). A majority went to pay for the expanding hospitals, physicians, etc. The hospital's budget is now greater than that for the supposed heart of the university --instruction and research spending combined.
Gee says "we are not competing with the Montana School of Massage. We're fiercely competing with Harvard, Yale, Chicago, Stanford and the University of Michigan." Huge amounts of resources are being expended to be at the top of American colleges, even though we have no real way of measuring which colleges truly do a good job. Students are given subordinated status to research, medical center expansion, and, of course, athletics (no professor outside the medical school makes even one-fourth what the basketball coach is paid).
In the same period, UCLA added 32 percent to its inflation adjusted payroll, the University of Arizona 23 percent, and the University of Michigan 37 percent. No serious discussion of rising college costs can be made unless one addresses this explosion in payrolls.The Dispatch story reminds me once more how critical daily newspapers are in our lives, and how we should pray they survive the current downturn.
Illuminating Luminaries
By Richard Vedder
While my sidekick Andy Gillen was holding down the fort at CCAP and fighting the financial aid establishment that attacked his fine study on that topic with smear attacks rather than thoughtful and incisive criticism, I was in Indianapolis at a meeting of Lumina Foundation grantees, hearing the results of their research, much of which was quite impressive.
Lumina is a positive force in higher education, wanting to increase efficiency and affordability in higher education. At the same time, they want to do so in order to meet a goal of vastly more college graduates --60 percent. I have real doubts whether that is an important goal --who is to say what the optimal proportion of college graduates is, or where adding more college graduates adds more to costs than to benefits? But put that aside --Lumina has some researchers doing some neat research.
Let me cite just one example. Nate Johnson is a Florida researcher who is doing excellent work in measuring the "cost per degree." One dimension of that effort is estimating the cost of college attrition. College attrition rates are typically over 40 percent, but that does not mean 40 percent of resources are devoted to educating kids who drop out --since most drop out early, and are educated comparatively cheaply as freshman and sophomores (large classes, lower priced teachers, etc.) In fact, the true cost of attrition is probably less than 20 percent --still, however, a huge amount.
Then there is the issue of kids graduating with more hours than needed to meet major and graduation requirements. The "transcript cost" of getting a degree in Florida is 20 percent or so higher than the "catalog" cost --the cost of getting a degree if degree requirements were precisely and minimally met. The "full attribution" cost (taking account also of drop-outs as well as students taking more courses than mandated) is estimated to be about 50 percent above the catalog costs--put differently, in a world without any attrition and where students followed catalog requirements precisely, costs per student would be roughly one-third less --big dollars. It costs society a lot when students change majors or drop out of school --what can we do to incentivize students and faculty in a way that would reduce those costs. Useful research.
*******************
If you do want to vastly expand enrollments, and President Obama, Lumina, and many higher education gurus do, it is assumed that public education must expand significantly. But is that so? The market share of public universities is in decline. More and more, students are going to private institutions, especially the for-profits.
I showed that if you invested $100 in an index of publicly held for-profit universities at the beginning of this decade, those stocks would be worth nearly $800today, but if you instead bought a S&P Stock Index Fund, you would have about $60 today. Proprietary education is hot today on Wall Street, for good reason.
Enrollments are growing by double digit percentages annually, and companies like Apollo (University of Phoenix) have pre-tax profit margins equal to one-fourth to one-third of revenues. The University of Phoenix paid over $306 million in federal corporate income taxes last year, while, say, the University of Michigan received roughly the same amount as subsidy from the state government. Despite a decidedly unlevel playing field, the for-profit market share has gone from less than one percent of enrollments a decade ago to over seven percent today. My junior sidekick Matt Denhart estimates that 23 percent of increased enrollments from 1998 to 2005 were at for-profit institutions (compared with 2 percent from 1984 to 1990), and I would guess the current proportion is at or above 30 percent. To discuss the growth of higher education without a major discussion of for-profits is absolutely crazy.
Questions abound --why have the for-profits gained enormously in market share (it will probably pass 10 percent within a half dozen years), despite public policy favoring their competitors? Why do the for-profits see huge economies of scale in operations, while the traditional universities do not? Why do the not-for-profits build buildings but the for-profits rent buildings constructed by others? I hope to ask for-profit leaders these and other questions in coming months, thanks to Lumina.
While my sidekick Andy Gillen was holding down the fort at CCAP and fighting the financial aid establishment that attacked his fine study on that topic with smear attacks rather than thoughtful and incisive criticism, I was in Indianapolis at a meeting of Lumina Foundation grantees, hearing the results of their research, much of which was quite impressive.
Lumina is a positive force in higher education, wanting to increase efficiency and affordability in higher education. At the same time, they want to do so in order to meet a goal of vastly more college graduates --60 percent. I have real doubts whether that is an important goal --who is to say what the optimal proportion of college graduates is, or where adding more college graduates adds more to costs than to benefits? But put that aside --Lumina has some researchers doing some neat research.
Let me cite just one example. Nate Johnson is a Florida researcher who is doing excellent work in measuring the "cost per degree." One dimension of that effort is estimating the cost of college attrition. College attrition rates are typically over 40 percent, but that does not mean 40 percent of resources are devoted to educating kids who drop out --since most drop out early, and are educated comparatively cheaply as freshman and sophomores (large classes, lower priced teachers, etc.) In fact, the true cost of attrition is probably less than 20 percent --still, however, a huge amount.
Then there is the issue of kids graduating with more hours than needed to meet major and graduation requirements. The "transcript cost" of getting a degree in Florida is 20 percent or so higher than the "catalog" cost --the cost of getting a degree if degree requirements were precisely and minimally met. The "full attribution" cost (taking account also of drop-outs as well as students taking more courses than mandated) is estimated to be about 50 percent above the catalog costs--put differently, in a world without any attrition and where students followed catalog requirements precisely, costs per student would be roughly one-third less --big dollars. It costs society a lot when students change majors or drop out of school --what can we do to incentivize students and faculty in a way that would reduce those costs. Useful research.
*******************
If you do want to vastly expand enrollments, and President Obama, Lumina, and many higher education gurus do, it is assumed that public education must expand significantly. But is that so? The market share of public universities is in decline. More and more, students are going to private institutions, especially the for-profits.
I showed that if you invested $100 in an index of publicly held for-profit universities at the beginning of this decade, those stocks would be worth nearly $800today, but if you instead bought a S&P Stock Index Fund, you would have about $60 today. Proprietary education is hot today on Wall Street, for good reason.
Enrollments are growing by double digit percentages annually, and companies like Apollo (University of Phoenix) have pre-tax profit margins equal to one-fourth to one-third of revenues. The University of Phoenix paid over $306 million in federal corporate income taxes last year, while, say, the University of Michigan received roughly the same amount as subsidy from the state government. Despite a decidedly unlevel playing field, the for-profit market share has gone from less than one percent of enrollments a decade ago to over seven percent today. My junior sidekick Matt Denhart estimates that 23 percent of increased enrollments from 1998 to 2005 were at for-profit institutions (compared with 2 percent from 1984 to 1990), and I would guess the current proportion is at or above 30 percent. To discuss the growth of higher education without a major discussion of for-profits is absolutely crazy.
Questions abound --why have the for-profits gained enormously in market share (it will probably pass 10 percent within a half dozen years), despite public policy favoring their competitors? Why do the for-profits see huge economies of scale in operations, while the traditional universities do not? Why do the not-for-profits build buildings but the for-profits rent buildings constructed by others? I hope to ask for-profit leaders these and other questions in coming months, thanks to Lumina.
Friday, April 10, 2009
Shireman on Loans
by Andrew Gillen
I meant to get to this earlier, but Tim Ranzetta at Student Lending Analytics Blog tracked down the transcript of a talk by Bob Shireman, a senior adviser to the secretary of education. It's a bit long, but well worth it.
I meant to get to this earlier, but Tim Ranzetta at Student Lending Analytics Blog tracked down the transcript of a talk by Bob Shireman, a senior adviser to the secretary of education. It's a bit long, but well worth it.
Thursday, April 09, 2009
I'm No Cherry Picker (But I Do Have An Agenda)
by Andrew Gillen
The plot thickens on efforts to discredit my new study, and like the last attempt, this latest one miraculously attempts to do so without mentioning anything specific to the study.
The Badger Herald’s Taylor Cox interviewed me yesterday, and she also spoke with someone who doesn’t like the report - Haley Chitty from the National Association of Student Financial Aid Administrators. According to the article, the NASFAA “disagrees with [my] methodology,” accuses me of being “selective in the evidence [I use]”, and thinks that CCAP “had already concluded federal aid leads to increases in tuition, and then they found facts that were convenient.”
Their concerns would carry more weight, if anything was offered to substantiate the claims either in the article or on their website, but I’ve been unable to find specifics anywhere. I am willing to give the benefit of the doubt to the NASFAA, stipulating that they are in fact familiar with the study and that the evidence to back up their claims just didn’t make it into the Badger Herald article or the NASFAA website. However, when someone says “we’ve seen this kind of report before and it’s usually someone with an agenda and not necessarily a very insightful report”, it raises the possibility that they are just attacking research they don’t like by using the classic technique of questioning the motivation/agenda of the author, making accusations about cherry picking evidence, and claiming there are problems with the methodology. These coincidentally, are the precise charges leveled at me.
Perhaps I will soon develop a thicker skin and be able to ignore such unsubstantiated criticism, but I guess I’m still too young and naïve, holding out hope that my ideas will be judged on their merits instead of by where I work. My task of responding is a bit difficult because without any specifics, their stance can basically be boiled down to we think he’s wrong. Since the No I’m Not defense is fairly unsatisfying, I’ll address the three broad charges in turn, even though no substantiation was given for any of them.
To be honest, I’m a little confused about the charge of cherry picking evidence. I focused on state appropriations, student loans, and federal grants, which together constitute the vast majority of government-provided financial aid. If cutting down most of the orchard constitutes cherry picking, then I guess they have a point.
As to the claim that CCAP has an agenda, we are definitely guilty as charged, as I presume is the NASFAA (unless of course they’re claiming to be agenda-less). Anyway, we do have an agenda and that agenda is to make college more affordable and more productive. Anything that my research indicates is an obstacle to those goals is fair game, including financial aid. The concern that I set out to attack financial aid is certainly misplaced. Why on earth would I advocate for Pell grants and modified student loans if I’m anti-financial aid?
As for problems with my methodology, without them indicating what those problems are, I really don’t know what to say. Do they have a problem with any methodology that reaches conclusions that they don’t like? Without knowing what their objections are, as opposed to the fact that they have objections, it’s hard to say. As it stands, I have already thoroughly debunked the only methodology related criticism I’ve seen so far - that I confused correlation with causation (see this post or comment 25 here). Personally, I still think that if I am wrong it is because my theory is wrong, as opposed to because I used an inappropriate methodology, but I certainly welcome thoughts on this from NASFAA or anyone else. Just try to make it a little more substantial than we think you’re wrong.
Near the end of the article, I’m chastised for not “letting the research speak for itself.” I would love to let my research speak for itself, but so far, my critics are talking about everything but the research.
The plot thickens on efforts to discredit my new study, and like the last attempt, this latest one miraculously attempts to do so without mentioning anything specific to the study.
The Badger Herald’s Taylor Cox interviewed me yesterday, and she also spoke with someone who doesn’t like the report - Haley Chitty from the National Association of Student Financial Aid Administrators. According to the article, the NASFAA “disagrees with [my] methodology,” accuses me of being “selective in the evidence [I use]”, and thinks that CCAP “had already concluded federal aid leads to increases in tuition, and then they found facts that were convenient.”
Their concerns would carry more weight, if anything was offered to substantiate the claims either in the article or on their website, but I’ve been unable to find specifics anywhere. I am willing to give the benefit of the doubt to the NASFAA, stipulating that they are in fact familiar with the study and that the evidence to back up their claims just didn’t make it into the Badger Herald article or the NASFAA website. However, when someone says “we’ve seen this kind of report before and it’s usually someone with an agenda and not necessarily a very insightful report”, it raises the possibility that they are just attacking research they don’t like by using the classic technique of questioning the motivation/agenda of the author, making accusations about cherry picking evidence, and claiming there are problems with the methodology. These coincidentally, are the precise charges leveled at me.
Perhaps I will soon develop a thicker skin and be able to ignore such unsubstantiated criticism, but I guess I’m still too young and naïve, holding out hope that my ideas will be judged on their merits instead of by where I work. My task of responding is a bit difficult because without any specifics, their stance can basically be boiled down to we think he’s wrong. Since the No I’m Not defense is fairly unsatisfying, I’ll address the three broad charges in turn, even though no substantiation was given for any of them.
To be honest, I’m a little confused about the charge of cherry picking evidence. I focused on state appropriations, student loans, and federal grants, which together constitute the vast majority of government-provided financial aid. If cutting down most of the orchard constitutes cherry picking, then I guess they have a point.
As to the claim that CCAP has an agenda, we are definitely guilty as charged, as I presume is the NASFAA (unless of course they’re claiming to be agenda-less). Anyway, we do have an agenda and that agenda is to make college more affordable and more productive. Anything that my research indicates is an obstacle to those goals is fair game, including financial aid. The concern that I set out to attack financial aid is certainly misplaced. Why on earth would I advocate for Pell grants and modified student loans if I’m anti-financial aid?
As for problems with my methodology, without them indicating what those problems are, I really don’t know what to say. Do they have a problem with any methodology that reaches conclusions that they don’t like? Without knowing what their objections are, as opposed to the fact that they have objections, it’s hard to say. As it stands, I have already thoroughly debunked the only methodology related criticism I’ve seen so far - that I confused correlation with causation (see this post or comment 25 here). Personally, I still think that if I am wrong it is because my theory is wrong, as opposed to because I used an inappropriate methodology, but I certainly welcome thoughts on this from NASFAA or anyone else. Just try to make it a little more substantial than we think you’re wrong.
Near the end of the article, I’m chastised for not “letting the research speak for itself.” I would love to let my research speak for itself, but so far, my critics are talking about everything but the research.
Wednesday, April 08, 2009
Correlation v Causation
by Andrew Gillen
The Chronicle of Higher Education did a nice little write up of our new report, Financial Aid in Theory and Practice, which seems to have set off a bit of a firestorm of criticism in the comments.
One recurring claim is that I am confusing correlation with causation. I seem to remember hearing of that before… – oh yes, I’d cover it in the first week of class back when I taught.
The report uses basic econometrics to show a couple of things about the interaction between various financial aid programs and tuition. The thing is, econometrics can virtually never prove causality by itself. Even fancy econometrics with causality in the title (such as granger causality), is probably better thought of as hinting at causality as opposed to proving it. To claim causality, you basically need a theory that provides a reason to think that the one thing causes the other. To sum up, econometrics gives you the correlation, the theory gives you the causation.
Fortunately for me, I cleverly included a DOZEN PAGES OF THEORY, to explain the correlations and back up my claims of causality. If my conclusions are wrong, it is because my theory is wrong, not because I've confused correlation with causation. But to claim that my theory is wrong, you'd probably have to actually read the study to see what the theory is. I guess it's easier for those that don't like my conclusions to just claim I made some basic mistake.
I have no problem with people commenting on the ideas in the study before reading it. I do have a problem with people trying to discredit my work by accusing me of making a mistake that I did not make, presumably because a) they did not actually read the study, or b) they don’t know what they are talking about.
The Chronicle of Higher Education did a nice little write up of our new report, Financial Aid in Theory and Practice, which seems to have set off a bit of a firestorm of criticism in the comments.
One recurring claim is that I am confusing correlation with causation. I seem to remember hearing of that before… – oh yes, I’d cover it in the first week of class back when I taught.
The report uses basic econometrics to show a couple of things about the interaction between various financial aid programs and tuition. The thing is, econometrics can virtually never prove causality by itself. Even fancy econometrics with causality in the title (such as granger causality), is probably better thought of as hinting at causality as opposed to proving it. To claim causality, you basically need a theory that provides a reason to think that the one thing causes the other. To sum up, econometrics gives you the correlation, the theory gives you the causation.
Fortunately for me, I cleverly included a DOZEN PAGES OF THEORY, to explain the correlations and back up my claims of causality. If my conclusions are wrong, it is because my theory is wrong, not because I've confused correlation with causation. But to claim that my theory is wrong, you'd probably have to actually read the study to see what the theory is. I guess it's easier for those that don't like my conclusions to just claim I made some basic mistake.
I have no problem with people commenting on the ideas in the study before reading it. I do have a problem with people trying to discredit my work by accusing me of making a mistake that I did not make, presumably because a) they did not actually read the study, or b) they don’t know what they are talking about.
Tuesday, April 07, 2009
A good sentence...
by Andrew Gillen
from Rotherham. Buried in an uncharacteristically long post by Eduwonk is this gem:
from Rotherham. Buried in an uncharacteristically long post by Eduwonk is this gem:
there are not yet good cues to help parents or policymakers differentiate among good providers and lousy ones. That’s why in most states pretty much every provider that is not run by a felon or completely in financial disarray and has at least one employee who owns a suit can get approved to provide services. And it’s a chaotic space with [insufficient] information so it’s hard for parents to make good decisions.He is talking about supplemental educational services or tutoring, but that is a good description of higher ed too. Of course it's not that extreme in higher ed, but the insufficient information that makes it hard to make good decisions is an appropriate parallel.
Death of a Turnaround Artist
By Richard Vedder
Higher education occasionally produces interesting university presidents --persons like Gordon Gee with humor and vibrancy that instil support and confidence, sometimes scholarly leaders like William Bowen or John Silber who bring academic heft as well as managerial acumen to their jobs. In the for-profit sector, you get very successful agents of change, such as Randy Best and, arguably, Andrew Clark of Bridgepoint Education. But seldom do you find a turnaround artist like the business world has-- the person who takes over a moribund or declining enterprise and makes it work --he turns it around.
Constantine Papadakis, President of Drexel University, was such a man. He died suddenly Sunday, and the academic world has lost a great leader. I met him (his friends called him "Taki") only once, but I liked him instantly. He did novel, untried and audacious things, which, of course, annoyed his more cautious, conservative, and traditionalist faculty. For example, he wanted to expand Drexel's on-line presence to compete with growing for-profit providers, and he did so by creating a for-profit company that has proven successful. Many other schools (Illinois comes immediately to mind) have tried to move into this market aggressively and have failed. Most recently, Randy Best's win-win proposal at the University of Toledo was shot down by an angry faculty. But it did not happen at Drexel.
****************
The interesting lesson here is that Constantine Papadakis was a rarity, a nearly unique person in the higher education world. The culture of higher education favors leaders who are smooth, good talkers and fund raisers, hard workers --but cautious. There are so many powerful and relatively unaccountable interests presidents have to appease --the faculty, influential alumni and trustees, politicians, etc. Few persons are ready to buck or antagonize these groups. There is no universally agreed upon "bottom line" in higher education, making goal fulfillment a near impossible task --since there is no universal agreement on what the goals are, or how to measure achievement. The tendency is to "not rock the boat." The top 10 schools in America today (if you believe US News and World Report) are roughly the same ones as 50 years ago, partly because people THINK they are good and we have no good way to measure achievement, and partly because we have so few people like Constantine Papadakis who are willing to take risks and push the envelope in ways that effect positive change.
Higher education occasionally produces interesting university presidents --persons like Gordon Gee with humor and vibrancy that instil support and confidence, sometimes scholarly leaders like William Bowen or John Silber who bring academic heft as well as managerial acumen to their jobs. In the for-profit sector, you get very successful agents of change, such as Randy Best and, arguably, Andrew Clark of Bridgepoint Education. But seldom do you find a turnaround artist like the business world has-- the person who takes over a moribund or declining enterprise and makes it work --he turns it around.
Constantine Papadakis, President of Drexel University, was such a man. He died suddenly Sunday, and the academic world has lost a great leader. I met him (his friends called him "Taki") only once, but I liked him instantly. He did novel, untried and audacious things, which, of course, annoyed his more cautious, conservative, and traditionalist faculty. For example, he wanted to expand Drexel's on-line presence to compete with growing for-profit providers, and he did so by creating a for-profit company that has proven successful. Many other schools (Illinois comes immediately to mind) have tried to move into this market aggressively and have failed. Most recently, Randy Best's win-win proposal at the University of Toledo was shot down by an angry faculty. But it did not happen at Drexel.
****************
The interesting lesson here is that Constantine Papadakis was a rarity, a nearly unique person in the higher education world. The culture of higher education favors leaders who are smooth, good talkers and fund raisers, hard workers --but cautious. There are so many powerful and relatively unaccountable interests presidents have to appease --the faculty, influential alumni and trustees, politicians, etc. Few persons are ready to buck or antagonize these groups. There is no universally agreed upon "bottom line" in higher education, making goal fulfillment a near impossible task --since there is no universal agreement on what the goals are, or how to measure achievement. The tendency is to "not rock the boat." The top 10 schools in America today (if you believe US News and World Report) are roughly the same ones as 50 years ago, partly because people THINK they are good and we have no good way to measure achievement, and partly because we have so few people like Constantine Papadakis who are willing to take risks and push the envelope in ways that effect positive change.
Monday, April 06, 2009
Links 4/6/09
by Andrew Gillen
Eric Hanushek and Alfred Lindseth discuss their impression of the impact the stimulus package will have on education.
Penelope Trunk offers 8 reasons why going back to school is not a good way to dodge the recession:
Eric Hanushek and Alfred Lindseth discuss their impression of the impact the stimulus package will have on education.
our biggest concern – that the stimulus program simply locks in a set of bad policies.EconompicData offers a chart showing unemployment by education.
Penelope Trunk offers 8 reasons why going back to school is not a good way to dodge the recession:
1. Grad school pointlessly delays adulthood.
2. PhD programs are pyramid schemes
3. Business school is not going to help 90% of the people who go.
4. Law school is a factory for depressives.
5. The medical school model assumes that health care spending is not a mess.
6. Going to grad school is like going into the military.
7. Most jobs are better than they seem: You can learn from any job.
8. Graduate school forces you to overinvest: It’s too high risk.
Friday, April 03, 2009
Teach a College to Fish Rather than Give it a Fish
by Daniel Bennett
An interesting piece appeared in Inside Higher Ed this morning. The University of North Carolina accepted a (presumably substantial) anonymous gift with an unusual stipulation - that the university hire consulting firm Bain & Company to help trim up to 7% of its $1.9 billion operating budget.
There is concern among some UNC faculty (mostly those affiliated with the AAUP) about the stipulation. The two main concerns are:
Let's do a quick and dirty empirical investigation:
With a total enrollment (undergrad and grad) of slightly more than 28,000 at the UNC Chapel Hill campus, this amounts to a budget of nearly $68,000 per student. According to NCES, the listed tuition and fees for an in-state student is nearly $5,400, and nearly $23,000 for an out-of-state student. It has been suggested that out-of-state tuition is a good approximation of the actual average cost of providing an education. Assuming that this is the case, this leaves a discrepancy of $45,000 per student between the operating budget and the cost of providing an education. There is obviously some discretionary spending taking place in Chapel Hill, as well as countless other colleges. Hiring an outside consulting firm (that has no bias towards academe) to point out cost savings sounds like a pretty good idea, especially since it is already bought and paid for by the donor.
In this case, the donor is doing the university a huge favor by providing a gift to further the institution's mission. He/she obviously has some concerns that the money be spent effectively and so, justly, he/she provided a reasonable stipulation that UNC hire a management consulting firm to point out excesses. This reminds me of the old proverb "Give a man a fish, you have fed him for a day. Teach a man to fish and you have fed him for a lifetime." In this case, the donor is attempting to teach UNC how to fish (fiscal control) rather than just giving it a fish (enabling bad habits).
An interesting piece appeared in Inside Higher Ed this morning. The University of North Carolina accepted a (presumably substantial) anonymous gift with an unusual stipulation - that the university hire consulting firm Bain & Company to help trim up to 7% of its $1.9 billion operating budget.
There is concern among some UNC faculty (mostly those affiliated with the AAUP) about the stipulation. The two main concerns are:
1) A potential conflict of interest since the donor is anonymousUNC's chancellor alleviated the first concern by declaring that the donor was properly vetted to ensure that there was not a conflict of interest. The second concern, which admittedly has some validity, is mitigated by the fact that Bain has expertise in management consulting across a broad spectrum of industries. It has established a reputation, based on its success, for being able to help organizations trim the fat off their pork. While it has limited exposure to higher ed, it may actually be a great idea to get an outsider's perspective, as is a common practice in most other industries. Many corporations often hire executives from outside their own firm or industry because of their management expertise and the promise that such leaders will bring fresh ideas to the table. For too long, the higher ed establishment has been plagued with a resistance to change brought about by self regulation (via accreditation) and a lack of fiscal control that has resulted in spiraling tuition costs.
2) Bain has limited experience in academic consulting
Let's do a quick and dirty empirical investigation:
With a total enrollment (undergrad and grad) of slightly more than 28,000 at the UNC Chapel Hill campus, this amounts to a budget of nearly $68,000 per student. According to NCES, the listed tuition and fees for an in-state student is nearly $5,400, and nearly $23,000 for an out-of-state student. It has been suggested that out-of-state tuition is a good approximation of the actual average cost of providing an education. Assuming that this is the case, this leaves a discrepancy of $45,000 per student between the operating budget and the cost of providing an education. There is obviously some discretionary spending taking place in Chapel Hill, as well as countless other colleges. Hiring an outside consulting firm (that has no bias towards academe) to point out cost savings sounds like a pretty good idea, especially since it is already bought and paid for by the donor.
In this case, the donor is doing the university a huge favor by providing a gift to further the institution's mission. He/she obviously has some concerns that the money be spent effectively and so, justly, he/she provided a reasonable stipulation that UNC hire a management consulting firm to point out excesses. This reminds me of the old proverb "Give a man a fish, you have fed him for a day. Teach a man to fish and you have fed him for a lifetime." In this case, the donor is attempting to teach UNC how to fish (fiscal control) rather than just giving it a fish (enabling bad habits).
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