Wednesday, April 01, 2009

Whose Head Is Going to Roll at UCSD?

By Richard Vedder

It is rare for a goof at an individual college to make the first half hour of the Today Show on NBC, but the University of California at San Diego succeeded in doing that this morning. In one of the more stupendous mistakes perpetrated in modern times, UCSD managed to send 30,000 emails to students announcing they had been admitted and inviting them to a new student orientation event. In fact, the emails went out to rejected applicants, many of whom had previously received letters of rejection. That is right up there with my own university's goof in not creating firewalls in its information systems, allowing hackers to get 200,000 or so social security numbers.

Human error. If everyone were perfect and all-knowing, life would be more orderly and predictable, but also more banal and boring. Imperfections are at the heart of the human condition, and religions evolve to deal with the implications of those imperfections on our psyche and souls.

Nonetheless, when someone does something bad, they usually are punished, and when they do something good, they are rewarded. Both the rewards and punishments tend to be very muted in the not-for-profit university sector relative to what happens in private business (including, I suspect, higher education business). What will happen to those responsible for the UCSD mess? At the very most, they will lose their jobs, probably with some severance pay. They might well merely be given a mild tongue lashing. Contrast that to the private sector, where such a goof might lead to stock prices falling 10 percent, the Attorney General of some state announcing an investigation, etc. Chances are the punishments will be quicker and harsher.

The same applies in reverse. If a professor wins the Pulitzer Prize or Nobel Prize, enhancing an institution's reputation, he or she is given some praise, maybe a slightly larger raise than usual --that's it. If an entrepreneur comes up with a new idea that sells millions of widgets, she or he likely gets a bonus measured in the hundreds of thousands of dollars, perhaps a big promotion, etc.

The muting of payments and punishments for good and bad behavior is aggravated by the fact that we cannot measure performance well in traditional higher education; by contrast, I can say to the nearest one-hundredth of one percent how the market capitalization of the University of Phoenix (Apollo Corporation) changed yesterday. Incentives to succeed are small and success is hard to measure; in traditional market capitalism incentives are huge and outcomes relatively crystal clear.

It occurs to me that President Obama wants to make actors in the American capitalistic drama less accountable for their actions, much as the case in universities. Buyers of huge homes purchased with small down payments who cannot make their mortgage payments used to go into foreclosure and bankruptcy; Obama would delay that. Companies like AIG that would usually go bankrupt are allowed to hang on. Question: Should the economy be moving towards the university model, or should the university model be moving towards the competitive market capitalism model? I think our national prosperity is better attained by the latter approach (universities becoming more competitively market oriented). Stay tuned.

6 comments:

Melissa said...

Hey Gentleman! How about a shot of "Battery Acid" Tequila and a long neck? Yes it's me. But I already knew that you knew that I knew that you knew it is me.

capeman said...

The Doc says it all with

"What will happen to those responsible for the UCSD mess? At the very most, they will lose their jobs, probably with some severance pay."

Lose their jobs with "some severance pay". I'll bet they won't be going out with any golden parachute worth millions or tens or hundreds of millions of dollars. Or a fat $20 million pension fund like Rick Wagoner got.

This is how the Doc's vaunted "market" works. And yes, the market gives really precise valuations with its day-by-day stock prices. I can really see how great those valuations are if I compare the prices of the stocks in my portfolio from a year ago with the prices of those stocks today. Or ask the stockholders in Citigroup or Bank of America how great the valuation system has been for them.

Anthony said...

I recently came across your blog and have been reading along. Nice blog. I will keep visiting this blog very often. I want to share news aboutcollege which is offers beyond-the- classroom experience to students in the rapidly-expanding industries of Health Care, Criminal Justice, Business, and Computers. Don't miss out on great career opportunities.

Anthony said...

I recently came across your blog and have been reading along. Nice blog. I will keep visiting this blog very often. I want to share news about best insurance Agency which Provides exceptional service with personal and business insurance throughout North and Central New Jersey, since 1988. As an active member of the Independent Insurance Agents & Brokers of America, we match our customers to the company that is best for our clients.

Anthony said...

I found free career information on New York Colleges New York Schools, Best Careers in New York (NY) for various Programs like Medical Assisting Degree in New York (NY), College for Criminal Justice Career, Pharmacy Technician Degree NY, Business & Accounting Careers, Network Administration College Degree. So you can also visit.

Anthony said...

I recently came across your blog and have been reading along. Nice blog. I will keep visiting this blog very often. I want to share news aboutcollege which is offers beyond-the- classroom experience to students in the rapidly-expanding industries of Health Care, Criminal Justice, Business, and Computers. Don't miss out on great career opportunities.