by Daniel Bennett
We keep hearing that the "stimulus plan" is going to repair the problems that face colleges by dropping money out of airplanes over the campuses (to borrow a phrase from Dr. Vedder). Aside from budget issues, colleges have a whole slew of other long-term problems that are essential to the stability of our future society and its economy. Some of the major problems include affordability, high attrition rates, increasing time-to-degree, and poor career transition support. The colleges themselves have not been able to accomplish much to address these issues, as their solutions generally involve glorified panhandling for additional funding from the government and alumnus, often with little improvement in these areas. Luckily, capitalism provides an incentive for innovation and entrepreneurship, and the private sector is hard at work in crafting solutions to these problems, unlike the tired and ineffective public solutions that are equivalent to flushing money down the toilet.
Affordability is a huge issue and I will not attempt to describe all of the reasons that have contributed to it being reduced; however, I will mention that high attrition rates and augmented time-to-degree trends have made a college education increasingly less affordable to both students and the public. Part of the problem is that many students are unaware of what kind of career that they want and where their interests and skills would yield the most success (in terms of financial and job satisfaction), resulting in students leaving school or changing majors several times.
Recently, I've become aware of an Academic Coach program that Profiles International has developed that offers some hope to alleviate the problem of attrition and lengthening degree completion time. Academic Coach is a capabilities and desires assessment tool available to students in which their thinking style, behavioral traits and occupational interests are evaluated and the results indicate which career fields and/or types of jobs are best suited for the student. In speaking with George Hamilton of Profiles, he explained that the program is beneficial to students, schools and the public. For students who take the assessment early in their academic career, they are able to better focus their studies and be confident that they will be successful. For colleges, greater student success (and satisfaction with their college career) will lead to increased retention and graduation rates, and hopefully greater enrollment demand and alumni giving. For the public, more students complete college and it costs less if they graduate in a timely manner. According to Mr. Hamilton, the program has been implemented at approximately 100 colleges in the US, with the state of Louisiana adopting the program statewide. He also reports that Sam Houston State University has had tremendous success with the program, having increased its retention rate by a substantial amount since implementing the program.
Another major issue is career transition. Colleges do not provide details on post-graduate success (or failure) and we often hear students complain about poor career services support on campus. An article in the WSJ yesterday was quite alarming in that it described a trend growing in popularity in which students pay several thousands of dollars in order to get an internship. As if college isn't already expensive enough, students now have to worry about an added expense to gain work experience. How bad are career services if a student has to pay for access to an internship? I recently became aware of one initiative to improve this situation. Matthew Zinman tells me that the Internship Institute has developed a LEAP program in which it partners with industry to develop internship training programs that are then marketed to colleges. The program is innovative in that that partner colleges (many have an internship graduation requirement) can pay to participate in the program with half of the 3 credit hour fees that are normally assessed for an internship credit. This ensures that students have a valuable internship experience and obtain something in return for the tuition spent for internship credit.
Thursday, January 29, 2009
Wednesday, January 28, 2009
Chart of the Week: 01/28/09
This chart shows the change in primary revenues per FTE for public universities over time.
Source: SHEEO, figure derived from 2007 SHEF report
Interesting Idea
by Andrew Gillen
One way for the cost of higher education to be reduced is to cut back on the number of students attending for 5 or 6 years. David Albo, a member of the Virginia House of Delegates, has a suggestion:
One way for the cost of higher education to be reduced is to cut back on the number of students attending for 5 or 6 years. David Albo, a member of the Virginia House of Delegates, has a suggestion:
Virginia’s in-state college students should be required to pay the more expensive out-of-state tuition rates once they exceed the 120 credit hours necessary to graduate, a member of the House of Delegates proposed Tuesday.Cool idea. HT: Eduwonk
Tuesday, January 27, 2009
Academic Tenure Revisited
by Daniel Bennett
Inside Higher Ed ran an essay defending academic tenure this morning and it prompted some thoughts on the matter.
The debate for tenure is usually focused on academic freedom, or the right to free speech, without it negatively affecting one's career or employment. However, tenure has been abused by some, certainly not all, as a means of slacking off after the conditional period of employment has passed. When this happens, colleges are stuck with highly paid, unproductive employees for the next 25 to 30 years that exert little effort in the classroom and less time trying to enhance the life prospects of their students. A similar problem exists in civil service and with unionized labor in terms of job security. Once an employee joins the club, then there is little incentive to continue working hard or to be innovative for the benefit of the organization.
Does this mean that employees should not have a voice or job protection? Absolutely not, but job security is a job benefit (similar to health insurance and a retirement plan) and there needs to be a tradeoff between wages and other compensation benefits. Offering tenure is not without cost to employers. There is a huge opportunity cost to provide long-term job security to employees in that it greatly reduces the ability of colleges and other organizations to shift resources to keep up with an ever-changing global environment. So, what to do? Richard Vedder likes the idea that DC public school superintendent Michelle Rhee proposed. Rhee's plan would impose two tracks for teachers in which there is a choice of benefits--job security and salary are a trade-off.
This is a great idea that would serve the needs of all employees. Those who are risk averse, would choose the job security and lower salary. Those who are willing to risk job security in the name of a higher salary, would choose that route. My guess is that those who are willing to risk job security are also confident of their capability and value to an organization, in which case they have little to worry about even during a downturn, as efficiently-managed and innovative organizations will extend a great deal of effort to retain their key employees. Job security should be an option with some restrictions as opposed to being an entitlement.
Inside Higher Ed ran an essay defending academic tenure this morning and it prompted some thoughts on the matter.
The debate for tenure is usually focused on academic freedom, or the right to free speech, without it negatively affecting one's career or employment. However, tenure has been abused by some, certainly not all, as a means of slacking off after the conditional period of employment has passed. When this happens, colleges are stuck with highly paid, unproductive employees for the next 25 to 30 years that exert little effort in the classroom and less time trying to enhance the life prospects of their students. A similar problem exists in civil service and with unionized labor in terms of job security. Once an employee joins the club, then there is little incentive to continue working hard or to be innovative for the benefit of the organization.
Does this mean that employees should not have a voice or job protection? Absolutely not, but job security is a job benefit (similar to health insurance and a retirement plan) and there needs to be a tradeoff between wages and other compensation benefits. Offering tenure is not without cost to employers. There is a huge opportunity cost to provide long-term job security to employees in that it greatly reduces the ability of colleges and other organizations to shift resources to keep up with an ever-changing global environment. So, what to do? Richard Vedder likes the idea that DC public school superintendent Michelle Rhee proposed. Rhee's plan would impose two tracks for teachers in which there is a choice of benefits--job security and salary are a trade-off.
This is a great idea that would serve the needs of all employees. Those who are risk averse, would choose the job security and lower salary. Those who are willing to risk job security in the name of a higher salary, would choose that route. My guess is that those who are willing to risk job security are also confident of their capability and value to an organization, in which case they have little to worry about even during a downturn, as efficiently-managed and innovative organizations will extend a great deal of effort to retain their key employees. Job security should be an option with some restrictions as opposed to being an entitlement.
Are Profits in Higher Ed Distasteful?
by Andrew Gillen
Over at the Quick and the Ed, Chad Adelman becomes deeply distressed that people can profit from providing an education (or claiming to provide one).
Adelman:
I normally find Adelman insightful and correct, so I was slightly taken aback to see him make such a statement.
My immediate instinct was to reference the famous Butcher quote from Adam Smith, which is important, but I want be very clear here.
Chad’s problem is that something as essential as “knowledge and learning” should not be left to a market where people might profit. But what about things that are even more essential? Using Maslow’s hierarchy of needs as our default, things like food and shelter are more essential than “knowledge and learning” (I’d put them in one of the top two categories). It seems odd to me to argue that it’s OK to profit from providing food and shelter to others, but that educational services are too essential to allow someone to profit by providing.
So why do we allow profit making by providers of food, shelter, and shoes, and by extension, why should we allow profit by providers of education?
We like things that have positive net value (benefits in excess of costs) and dislike things with negative net value, so it would be just super if there was a way to distinguish between the two. Well, profits and losses can serve precisely that purpose. Moreover, they provide incentives to expand profitable activities, and shut down unprofitable ones, helping to ensure that resources are reallocated into more productive uses.
When there are profits to be made, there is a constant search for ways to create net value. Without profits, most traditional schools didn't realize that there was an unmet need for night and weekend classes, and classes tailored more towards workplace skills, until the for-profits discovered a niche in them. This competition as a discovery process is one of the most important functions served by profits.
Students are well served by such competition, but unfortunately, this competition is currently limited largely to scheduling and "add-ons" (recreation, entertainment, etc.) since, as as Kevin points out:
Moreover, the for-profits don’t seem to be the most profitable institutions of higher education – the publics and non-profits just don’t call it profit. Just compare the values in figure 4 of the new Delta Cost Project report to the values for education and related spending in figure 7. The difference between giving “profits” to shareholders, or spending it on auxiliary enterprises and massive presidential and coaching salaries seems a little... shall we say, blurred.
Is the system perfect? Heavens no, as recent events have helpfully reminded us. The profits of finance types, in retrospect, were not signaling that finance had such high positive net value, but that financial innovations got very good at making negative net value things look like positive ones. But to make some slight modifications to another great quote, capitalism is the worst form of societal organization except all the others that have been tried. Socialism sounds good to many, but the old joke that everything is free… but you get what you pay for, is just too true.
Are profits distasteful? I don’t know. But even supposing they are, they are much too useful to give up for that reason alone.
[Update]
Through email Chad says:
The topic of the public having an interest because of public financing is worth commenting on, but will have to wait for another time.
In retrospect, I certainly should have mentioned somewhere that fraudulent profits from misleading students, such as the story that spurred Chad's post are bad/distasteful.
Over at the Quick and the Ed, Chad Adelman becomes deeply distressed that people can profit from providing an education (or claiming to provide one).
Adelman:
knowledge and learning should be freely acquired rights for all people. It strikes me as utterly distasteful that a profit can be made off these things like other on commodities. They're not shoes, and they shouldn't be treated as such.
I normally find Adelman insightful and correct, so I was slightly taken aback to see him make such a statement.
My immediate instinct was to reference the famous Butcher quote from Adam Smith, which is important, but I want be very clear here.
Chad’s problem is that something as essential as “knowledge and learning” should not be left to a market where people might profit. But what about things that are even more essential? Using Maslow’s hierarchy of needs as our default, things like food and shelter are more essential than “knowledge and learning” (I’d put them in one of the top two categories). It seems odd to me to argue that it’s OK to profit from providing food and shelter to others, but that educational services are too essential to allow someone to profit by providing.
So why do we allow profit making by providers of food, shelter, and shoes, and by extension, why should we allow profit by providers of education?
We like things that have positive net value (benefits in excess of costs) and dislike things with negative net value, so it would be just super if there was a way to distinguish between the two. Well, profits and losses can serve precisely that purpose. Moreover, they provide incentives to expand profitable activities, and shut down unprofitable ones, helping to ensure that resources are reallocated into more productive uses.
When there are profits to be made, there is a constant search for ways to create net value. Without profits, most traditional schools didn't realize that there was an unmet need for night and weekend classes, and classes tailored more towards workplace skills, until the for-profits discovered a niche in them. This competition as a discovery process is one of the most important functions served by profits.
Students are well served by such competition, but unfortunately, this competition is currently limited largely to scheduling and "add-ons" (recreation, entertainment, etc.) since, as as Kevin points out:
since few colleges provide any kind of objective, comparable, reliable information about how much students learn while they're in college, what's left is a huge mass of largely undifferentiated degrees from non-selective institutions.When you’ve got degrees that are undifferentiated, you cannot fully exploit the informational, coordinating, and incentivizing functions of profits (and losses). But that is an argument in favor of providing “objective, comparable, reliable information about how much students learn while they're in college”, not getting rid of profits. The more important the item, the more crucial it is to make maximum use of the information, coordination, and incentives that are embodied in profit making. It is precisely because knowledge and learning are so important that we need to make use of the profit system to creatively destruct our way towards better ways of providing them.
Moreover, the for-profits don’t seem to be the most profitable institutions of higher education – the publics and non-profits just don’t call it profit. Just compare the values in figure 4 of the new Delta Cost Project report to the values for education and related spending in figure 7. The difference between giving “profits” to shareholders, or spending it on auxiliary enterprises and massive presidential and coaching salaries seems a little... shall we say, blurred.
Is the system perfect? Heavens no, as recent events have helpfully reminded us. The profits of finance types, in retrospect, were not signaling that finance had such high positive net value, but that financial innovations got very good at making negative net value things look like positive ones. But to make some slight modifications to another great quote, capitalism is the worst form of societal organization except all the others that have been tried. Socialism sounds good to many, but the old joke that everything is free… but you get what you pay for, is just too true.
Are profits distasteful? I don’t know. But even supposing they are, they are much too useful to give up for that reason alone.
[Update]
Through email Chad says:
here's how I see it: companies make profits off higher-order needs like food and shelter by marketing their products and convincing someone to pay for the good. The individual transactions are small. Companies making profits off higher education (what I consider a need but lesser than food, clothing, or shelter) market their products just as craftily and often more aggressively. The costs they demand are much higher, and much of their revenue comes directly from taxpayers. It isn't just a matter of individuals parting with their own money, because they're really spending a fair amount of John Q. Taxpayer's in the process. So, when I found out they're (accused of) manipulating students to keep this business model intact, it does strike me as distasteful.
I used the example of shoes deliberately. Some shoes are marketed at populations that have no reasonable justification for purchasing them, but yet my reaction isn't to try to stop the shoe sale. I may shake my head at their financial decisions, but I feel it's entirely a personal matter, and I leave it at that. But education is fundamentally different because of cost and the public interest at stake.
The topic of the public having an interest because of public financing is worth commenting on, but will have to wait for another time.
In retrospect, I certainly should have mentioned somewhere that fraudulent profits from misleading students, such as the story that spurred Chad's post are bad/distasteful.
Monday, January 26, 2009
Another Review of The Race Between Education and Technology
by Andrew Gillen
Arnold Kling and John Merrifield review The Race Between Education and Technology in the latest edition of Econ Journal Watch, and come to pretty much the same conclusion as Rich did in his review. Basically, that it is a good book that makes great contributions, but is flawed in some respects.
Arnold Kling and John Merrifield review The Race Between Education and Technology in the latest edition of Econ Journal Watch, and come to pretty much the same conclusion as Rich did in his review. Basically, that it is a good book that makes great contributions, but is flawed in some respects.
the basic framework—captured in the statement that technology is skill-biased—is a great contribution… however, in several respects they over-reach their data in an attempt to support interventionist policy recommendations…
the narrative, in a nutshell, holds that America… did a great job of educating the workforce so as to keep up with technology, and hence achieve a broad-based sharing of the fruits of economic and technological development. But after 1970 or so, education began to “lose the race” with technology, such that skill advancement no longer occurred in the same broad-based way. Thus, the last thirty years saw increasing inequality. The book ends with advice that would seem to follow from the book’s theoretical structure: rejuvenate education so that it again keeps up with technology. in particular, GK make a pitch for more college for more people…
the book’s basic theoretical structure makes sense. Some of the trends in inequality over the past several decades might well be the result of skills not keeping up with technology. one of the book’s greatest contributions, in our view, may be to elevate this explanation above other explanations [such as immigration, globalization, unionization, and minimum wages]…
But ideological motivation seems, in this case, to have led to distortions in the historical narrative, misunderstanding of the recent decades, dubious policy suggestions, and misplaced hope of “keeping up” with technology…
Additional questions about GK’s data interpretation arise when we divide the 1980-2005 period into two sub-periods. From 1980-1990, productivity growth was 1.78 percent, a substantial slowdown that might be consistent with the slowdown in human capital formation. However, from 1990-2005, productivity growth averaged 2.42 percent, which represents a substantial rise. Given that educational attainment did not accelerate from the first period to the second, the relationship between educational attainment and overall productivity is not nearly as stable as GK report on the basis of aggregating 1980-2005 into a single time period. The relationship between schooling and economic performance is not as simple and straight-forward as GK portray it to be…
To show a slowdown in college graduation, one could use the percentage change in the college-graduate rate as a measure of the increase in supply (rather than the growth in percentage points)…
The period from 1939 to 1970 represents a great transformation from the local community-based public school to the great bureaucratic system… Goldin and Katz make no mention… Thus, GK’s historical overview is suspect. Besides neglecting the institutional transformations, it does not include an assessment of education performance…
In our view, the evidence cited by GK to suggest that more current high school graduates could benefit from college is rather flimsy, and even more so in light of other evidence. For example, James Heckman (2008)…
In a book devoted to analyzing price signals and incentives, GK fail to note the K-12 system’s almost total lack of price signals, and that misaligned incentives and sharply sagging productivity exist system-wide (Hoxby, 2004)…
there is no real engagement of the “critics,”…
A reader of GK could easily walk away with the impression that much of our economic growth over the past hundred years was due to government intervention in education, and that further intervention could yield great results…
The sweeping nature of GK’s exhortations for new initiatives stands in sharp contrast to the dearth of quantitative evidence that their list of recommended policies would achieve much…
PA Moving in the Right Direction
by Jim Coleman
The Philadelphia Inquirer reported Thursday that the Pennsylvania State board of Education approved a proposal to explore the possibility of founding a new type of 4-year state university, which would focus on offering a “low-cost, no frills” bachelor’s degree. This “no-frills” university would forgo the extras, which have become common at other schools. No sports, no luxury student center, and even no climbing wall. The reduction in both capital and staff would, in theory, allow the university to run a much leaner operation and pass the savings on to the students.
At CCAP this is music to our ears. There has been a growing trend among universities to compete for students by becoming centers of recreation and entertainment. Additionally, costs have also been driven up by the ballooning number of administrators in higher education. It’s refreshing to see a state begin to address these problems head on as opposed to just throwing more money at the problem.
PA could potentially lead the nation in cutting college costs and serve as paradigm for other states. Let’s hope PA policy makers have the good sense to actually follow through on their proposal.
The Philadelphia Inquirer reported Thursday that the Pennsylvania State board of Education approved a proposal to explore the possibility of founding a new type of 4-year state university, which would focus on offering a “low-cost, no frills” bachelor’s degree. This “no-frills” university would forgo the extras, which have become common at other schools. No sports, no luxury student center, and even no climbing wall. The reduction in both capital and staff would, in theory, allow the university to run a much leaner operation and pass the savings on to the students.
At CCAP this is music to our ears. There has been a growing trend among universities to compete for students by becoming centers of recreation and entertainment. Additionally, costs have also been driven up by the ballooning number of administrators in higher education. It’s refreshing to see a state begin to address these problems head on as opposed to just throwing more money at the problem.
PA could potentially lead the nation in cutting college costs and serve as paradigm for other states. Let’s hope PA policy makers have the good sense to actually follow through on their proposal.
The Stimulus Package Revisited
By Richard Vedder
Readers may be bored with my rants about the stimulus package, but it is, by far, the most important thing going on in public policy today --and much of it is higher ed related. As the Senate bill has become known, the contours of the Dems proposal is becoming pretty clear. Whether Senate Republicans have enough fortitude and principles to force some moderation into the package is debatable, but I am pessimistic, John Boehner's sensible comments notwithstanding.
Billions of money is supposed to flow to schools. Most of it, I think, is a payback to the teachers unions and the academic community for their heavy support for President Obama. It has very little to do with stimulus. Giving money to increase the National Endowment for Humanities or increase NSF grants, for example, would not be considered effective short-term stimulus by most economists, I suspect. The same probably is true of increasing Pell Grants, giving tax credits to allow colleges to raise tuition rates more, etc. This is, of course, in addition to the fact that the empirical evidence is overwhelming that stimulus packages seldom work.
Liberals --and make no mistake about it, Barack Obama may be the most liberal president in American history-- love to capitalize on crises to expand government. We are entering the fourth big crisis in American history. The first one was World War I, an era that gave us the income tax. The Second was the Great Depression/World War II that gave us Social Security and massive government regulation of business. The third was a wholly manufactured crisis, the so-called poverty crisis of the 1960s, that gave us the Great Society, Medicare/Medicaid, EPA, etc. Today's crisis is the fourth, and is designed to give us womb to tomb government medical care, all sorts of growth destroying items to protect us from global warming (it is below zero outdoors where I am writing this, by the way), etc., etc. I predict this effort may be politically successful but will seriously damage the country economically, and put us in roughly the shape that western Europe is in --little growth, much angst and malaise. My economic modeling and political predicting leads me to expect bear markets for years to come --much like the bear markets of the 1960s and 1970s.
And, I repeat, colleges will be allowed to avoid taking big steps towards restructuring and rationalizing to make themselves lean, efficient, and accountable. Don't pack your bags to move to New Zealand yet --but it might be a good idea to be sure your passport is up to date.
Readers may be bored with my rants about the stimulus package, but it is, by far, the most important thing going on in public policy today --and much of it is higher ed related. As the Senate bill has become known, the contours of the Dems proposal is becoming pretty clear. Whether Senate Republicans have enough fortitude and principles to force some moderation into the package is debatable, but I am pessimistic, John Boehner's sensible comments notwithstanding.
Billions of money is supposed to flow to schools. Most of it, I think, is a payback to the teachers unions and the academic community for their heavy support for President Obama. It has very little to do with stimulus. Giving money to increase the National Endowment for Humanities or increase NSF grants, for example, would not be considered effective short-term stimulus by most economists, I suspect. The same probably is true of increasing Pell Grants, giving tax credits to allow colleges to raise tuition rates more, etc. This is, of course, in addition to the fact that the empirical evidence is overwhelming that stimulus packages seldom work.
Liberals --and make no mistake about it, Barack Obama may be the most liberal president in American history-- love to capitalize on crises to expand government. We are entering the fourth big crisis in American history. The first one was World War I, an era that gave us the income tax. The Second was the Great Depression/World War II that gave us Social Security and massive government regulation of business. The third was a wholly manufactured crisis, the so-called poverty crisis of the 1960s, that gave us the Great Society, Medicare/Medicaid, EPA, etc. Today's crisis is the fourth, and is designed to give us womb to tomb government medical care, all sorts of growth destroying items to protect us from global warming (it is below zero outdoors where I am writing this, by the way), etc., etc. I predict this effort may be politically successful but will seriously damage the country economically, and put us in roughly the shape that western Europe is in --little growth, much angst and malaise. My economic modeling and political predicting leads me to expect bear markets for years to come --much like the bear markets of the 1960s and 1970s.
And, I repeat, colleges will be allowed to avoid taking big steps towards restructuring and rationalizing to make themselves lean, efficient, and accountable. Don't pack your bags to move to New Zealand yet --but it might be a good idea to be sure your passport is up to date.
Fundamental Flaw in the New GI Bill
by Daniel Bennett
The new GI Bill will go into effect this August, providing veterans with expanded benefits, such as tuition coverage up to the most expensive public school in a veteran's particular state, as well as a living allowance that is based on where the veteran lives (I imagine this is similar to locality pay that the Federal Government uses for employees). The bill has been lauded for its potential to increase access to the best educational opportunities for our nation's veterans. I am all for rewarding those who have risked their lives to serve our country by affording veterans the opportunity to expand their knowledge and increase their skills set, which in some respect, may already be higher than the traditional college student due to experience and training in the military.
However, there is one troubling aspect of the new bill-- as pointed out by Inside Higher Ed--veterans are only eligible for the living allowance if they are attending a bricks & mortar institutions more than half time and thus, excluding online institutions, which are very popular with veterans due to their flexibility. Flexibility is most likely a strong consideration for veterans due to the fact that many have families to provide for and/or have jobs. The decision to exclude online students from the housing allowance is fundamentally flawed.
First of all, this policy assumes that veterans not attending a bricks & mortar school do not have living expenses. Whether a student enrolls at a B&M or an online college, s/he still needs a place to live and a has a mouth to feed. Was the logic that veterans enrolled in online schools would move back home with "mom and pops", rent-free and the benefit of a home-cooked meal? Or perhaps it was assumed that all veterans partaking in online education have a full-time job and don't need the living allowance. I believe that policy makers missed the mark big time on this one, ignoring the fact that veterans often have a family and punishing those who need a flexible class schedule to attend to their family's needs.
Next, the policy is (perhaps inadvertently, but perhaps influenced by lobbying) discriminatory and potentially malicious towards predominately online schools, which garner a significant portion of their students from the veteran ranks. From a consumer (veteran) standpoint, a rational decision maker is going to weigh the costs versus the benefits when choosing a school and, assuming that financial considerations are a priority, enroll at the institution that will have the most favorable impact on his/her economic condition. With the added benefit of a housing allowance, coupled with increased tuition coverage, that student is more often than not going to choose the brick & mortar school, as there is a financial incentive to do so. Once veterans figure out how the system works, then it is possible that there will be a shift in veteran's enrollment preferences from online to traditional colleges and thus, sending a below-the-belt shot to the institutions who have attempted to innovate the education experience by increasing the productivity and hence, lowering the costs to both consumers and the public.
My final point is that policy makers are naive if they believe that because the majority of veterans currently attend low cost community and online colleges, that they will continue to do so and it will save the government money by not having to pay out huge sums for housing allowances. If veteran enrollments at traditional schools swells, then the original estimated costs of the bill will surely need revision. In addition, colleges may increase their tuition, in part because they know that a third party is footing the bill, particularly at community colleges that serve the educational needs of many veterans. This would have a negative affect for the rest of society, as community colleges are one of the most affordable postsecondary educational outlets, especially for working and low-income Americans.
The new GI Bill will go into effect this August, providing veterans with expanded benefits, such as tuition coverage up to the most expensive public school in a veteran's particular state, as well as a living allowance that is based on where the veteran lives (I imagine this is similar to locality pay that the Federal Government uses for employees). The bill has been lauded for its potential to increase access to the best educational opportunities for our nation's veterans. I am all for rewarding those who have risked their lives to serve our country by affording veterans the opportunity to expand their knowledge and increase their skills set, which in some respect, may already be higher than the traditional college student due to experience and training in the military.
However, there is one troubling aspect of the new bill-- as pointed out by Inside Higher Ed--veterans are only eligible for the living allowance if they are attending a bricks & mortar institutions more than half time and thus, excluding online institutions, which are very popular with veterans due to their flexibility. Flexibility is most likely a strong consideration for veterans due to the fact that many have families to provide for and/or have jobs. The decision to exclude online students from the housing allowance is fundamentally flawed.
First of all, this policy assumes that veterans not attending a bricks & mortar school do not have living expenses. Whether a student enrolls at a B&M or an online college, s/he still needs a place to live and a has a mouth to feed. Was the logic that veterans enrolled in online schools would move back home with "mom and pops", rent-free and the benefit of a home-cooked meal? Or perhaps it was assumed that all veterans partaking in online education have a full-time job and don't need the living allowance. I believe that policy makers missed the mark big time on this one, ignoring the fact that veterans often have a family and punishing those who need a flexible class schedule to attend to their family's needs.
Next, the policy is (perhaps inadvertently, but perhaps influenced by lobbying) discriminatory and potentially malicious towards predominately online schools, which garner a significant portion of their students from the veteran ranks. From a consumer (veteran) standpoint, a rational decision maker is going to weigh the costs versus the benefits when choosing a school and, assuming that financial considerations are a priority, enroll at the institution that will have the most favorable impact on his/her economic condition. With the added benefit of a housing allowance, coupled with increased tuition coverage, that student is more often than not going to choose the brick & mortar school, as there is a financial incentive to do so. Once veterans figure out how the system works, then it is possible that there will be a shift in veteran's enrollment preferences from online to traditional colleges and thus, sending a below-the-belt shot to the institutions who have attempted to innovate the education experience by increasing the productivity and hence, lowering the costs to both consumers and the public.
My final point is that policy makers are naive if they believe that because the majority of veterans currently attend low cost community and online colleges, that they will continue to do so and it will save the government money by not having to pay out huge sums for housing allowances. If veteran enrollments at traditional schools swells, then the original estimated costs of the bill will surely need revision. In addition, colleges may increase their tuition, in part because they know that a third party is footing the bill, particularly at community colleges that serve the educational needs of many veterans. This would have a negative affect for the rest of society, as community colleges are one of the most affordable postsecondary educational outlets, especially for working and low-income Americans.
Friday, January 23, 2009
Best Wishes for Myles Brand
By: Matthew Denhart and Robert Villwock
It was with sadness that we learned of Myles Brand’s recent diagnosis of pancreatic cancer. This is a horrible disease and Brand himself says the long-term prognosis is not good. Since he became President of the NCAA in 2003, Brand has been a positive force pushing for much needed reform of intercollegiate athletics. He has been especially concerned with the academic status of student-athletes and ensuring that the fundamental educational mission of the academy is not undermined by athletics and poor academic performance.
One of his first orders of reform was to create an equation to better assess the graduation rates of student-athletes. The belief was that athletes tend to transfer between schools at a higher rate than the general student body. Whether this is empirically true is somewhat uncertain, however, the creation of the Graduation Success Rate (GSR) is an attempt to better account for transfers. With the GSR, a school’s graduation rate is not affected by an athlete who transfers from the school as long as they are in good academic standing (i.e. eligible for competition in the next academic term). While this approach creates some problems—-it does not follow students all the way to graduation or consider those leaving school early to pursue a professional athletic career—-it is a bold step. Indeed, better graduation statistics that account for inter-institutional transfers are needed for universities in general. The NCAA, under Brand’s leadership, has at least opened the discussion for ways to address this problem.
Brand has also pushed for higher academic standards among athletes through something known as the Academic Progress Rate (APR). This requires that athletes maintain a certain level of progress toward the completion of their degrees, and punishes schools who exhibit poor academic performance. Such sanctions include losses of scholarships, practice time, postseason participation and even restricted membership in the NCAA. The implementation of this program appears to have helped improve graduation rates among athletes in recent years. Yet, a number of possible unintended consequences, such as evidence of athletes “clustering” in the same majors, are beginning to surface. Continuing reform is warranted.
Before taking over as President of the NCAA in 2003, Brand was the President of Indiana University. While at IU, he became famous after he fired then head basketball coach Bobby Knight for violating a zero tolerance policy placed on him by Brand.
CCAP is in the late stages of preparing a lengthy study on intercollegiate athletics. Issues with the academic performances of athletes, such as those raised above, are addressed in greater detail. Furthermore, the study will offer a close examination of the revenues and expenses of FBS (formerly referred to as Division 1-A) athletic departments. It is our hope that this work will be of benefit to those pushing for reform of college athletics. Myles Brand has been a positive force for such reform and it is a shame that his health is failing. We wish him a healthy recovery.
It was with sadness that we learned of Myles Brand’s recent diagnosis of pancreatic cancer. This is a horrible disease and Brand himself says the long-term prognosis is not good. Since he became President of the NCAA in 2003, Brand has been a positive force pushing for much needed reform of intercollegiate athletics. He has been especially concerned with the academic status of student-athletes and ensuring that the fundamental educational mission of the academy is not undermined by athletics and poor academic performance.
One of his first orders of reform was to create an equation to better assess the graduation rates of student-athletes. The belief was that athletes tend to transfer between schools at a higher rate than the general student body. Whether this is empirically true is somewhat uncertain, however, the creation of the Graduation Success Rate (GSR) is an attempt to better account for transfers. With the GSR, a school’s graduation rate is not affected by an athlete who transfers from the school as long as they are in good academic standing (i.e. eligible for competition in the next academic term). While this approach creates some problems—-it does not follow students all the way to graduation or consider those leaving school early to pursue a professional athletic career—-it is a bold step. Indeed, better graduation statistics that account for inter-institutional transfers are needed for universities in general. The NCAA, under Brand’s leadership, has at least opened the discussion for ways to address this problem.
Brand has also pushed for higher academic standards among athletes through something known as the Academic Progress Rate (APR). This requires that athletes maintain a certain level of progress toward the completion of their degrees, and punishes schools who exhibit poor academic performance. Such sanctions include losses of scholarships, practice time, postseason participation and even restricted membership in the NCAA. The implementation of this program appears to have helped improve graduation rates among athletes in recent years. Yet, a number of possible unintended consequences, such as evidence of athletes “clustering” in the same majors, are beginning to surface. Continuing reform is warranted.
Before taking over as President of the NCAA in 2003, Brand was the President of Indiana University. While at IU, he became famous after he fired then head basketball coach Bobby Knight for violating a zero tolerance policy placed on him by Brand.
CCAP is in the late stages of preparing a lengthy study on intercollegiate athletics. Issues with the academic performances of athletes, such as those raised above, are addressed in greater detail. Furthermore, the study will offer a close examination of the revenues and expenses of FBS (formerly referred to as Division 1-A) athletic departments. It is our hope that this work will be of benefit to those pushing for reform of college athletics. Myles Brand has been a positive force for such reform and it is a shame that his health is failing. We wish him a healthy recovery.
Thursday, January 22, 2009
Support for Real Education & A Call for Outcomes
by Daniel Bennett
In his highly provocative book, Real Education, Charles Murray makes a strong case that only a small percentage of high school graduates (between 10-20%) have the intellectual capability to handle a true liberal arts college education (before colleges become purveyors of customer satisfaction) and that America needs to de-stigmatize vocational/technical training. It is true, many Americans associate completion of a bachelor's degree with success. Murray also suggests that the expected payoff to a college education is grossly over exaggerated and that the earnings differential is attributable to innate differences in intellectual capabilities.
Murray argues that it is wrong to direct all students on to four year colleges and that each student should evaluate his/her own abilities, as well as interests, in deciding the best route for him/herself. That is to say, that many young people ought to consider what they have a comparative advantage in when evaluating postsecondary education options, including technical/vocational schools (as well as the costs and benefits of each option). A person who has relatively strong linguistic and mathematical-logical intelligence should probably shoot for a four-year college, while someone with relatively strong spatial and naturalistic intelligence may be better for suited for a technical/vocational field.
A recent study prepared by the Hudson Institute and CNA, offers some evidence in support of Real Education, as well as provide support for colleges to track student outcomes, such as job placement and earnings. Researchers Louis Jacobson and Christine Mokher made use of a large longitudinal dataset that tracked the postsecondary education choices and earnings of a cohort of nealry 145,000 Florida public high school students. The data were used to estimate the effect of education on earnings, postsecondary outcomes, and the differences in earnings and postsecondary outcomes by family income. Among the key findings:
As for a call for outcomes, as stated earlier, this study was possible due to the State of Florida's unique data system that links its citizens education and employment records. If this type of system was available on a national level, then policy makers would be better equipped to make decisions on how to allocate taxpayer money to education. This makes logical sense, but there appears to be resistance from college leaders--who state a need to protect the privacy of their students, which is blasphemy, considering the increasing number of security breaches happening at US colleges, which allow hackers access to personal information of thousands of students, as well as the fact, which Kevin Carey points out, that colleges are already electronically submitting personal information on a monthly or quarterly basis to the National Student Clearinghouse--used to track the location of students for loan purposes. Some colleges may simply be afraid that the truth may be found out-- that their institutions offer little value added, other than a credential.
In his highly provocative book, Real Education, Charles Murray makes a strong case that only a small percentage of high school graduates (between 10-20%) have the intellectual capability to handle a true liberal arts college education (before colleges become purveyors of customer satisfaction) and that America needs to de-stigmatize vocational/technical training. It is true, many Americans associate completion of a bachelor's degree with success. Murray also suggests that the expected payoff to a college education is grossly over exaggerated and that the earnings differential is attributable to innate differences in intellectual capabilities.
Murray argues that it is wrong to direct all students on to four year colleges and that each student should evaluate his/her own abilities, as well as interests, in deciding the best route for him/herself. That is to say, that many young people ought to consider what they have a comparative advantage in when evaluating postsecondary education options, including technical/vocational schools (as well as the costs and benefits of each option). A person who has relatively strong linguistic and mathematical-logical intelligence should probably shoot for a four-year college, while someone with relatively strong spatial and naturalistic intelligence may be better for suited for a technical/vocational field.
A recent study prepared by the Hudson Institute and CNA, offers some evidence in support of Real Education, as well as provide support for colleges to track student outcomes, such as job placement and earnings. Researchers Louis Jacobson and Christine Mokher made use of a large longitudinal dataset that tracked the postsecondary education choices and earnings of a cohort of nealry 145,000 Florida public high school students. The data were used to estimate the effect of education on earnings, postsecondary outcomes, and the differences in earnings and postsecondary outcomes by family income. Among the key findings:
"...that there are postsecondary pathways available to raise the earnings of students who did not perform especially well academically in high school."The moral of the story is that high school students who are not prepared for college are often saddled with remedial courses when they begin college--course material which they were unable to grasp in high school and have a high probability of failing to grasp in college. This sets these students up for failure in addition to being a drain on taxpayer dollars and the individual student's personal economic situation. Instead, it would be much better policy to guide students who possess a comparative advantage in spatial or technical knowledge into a vocational or technical field, where their chances of completion are increased and earnings potential greater.
"Student preparation and performance are important predictors of persistence and the attainment of a credential."
"Students with weak performance in high school have high probabilities of attaining a credential in career-oriented high-return fields"
"For students receiving degrees, close to half of the difference (in earnings) is associated with better high school preparation and performance, better performance in college,... This result implies that the earnings of students attaining degrees would be substantially above average even if they did not attain degrees or attend college (emphasis added). This result suggests that attainment of a certificate, especially in career-oriented fields, offers a pathway to substantially increase earnings that is open to lower performing high school students."
"when all factors are taken into account, students with certificates show substantial earnings gains relative to students with similar characteristics who leave college without credentials"
As for a call for outcomes, as stated earlier, this study was possible due to the State of Florida's unique data system that links its citizens education and employment records. If this type of system was available on a national level, then policy makers would be better equipped to make decisions on how to allocate taxpayer money to education. This makes logical sense, but there appears to be resistance from college leaders--who state a need to protect the privacy of their students, which is blasphemy, considering the increasing number of security breaches happening at US colleges, which allow hackers access to personal information of thousands of students, as well as the fact, which Kevin Carey points out, that colleges are already electronically submitting personal information on a monthly or quarterly basis to the National Student Clearinghouse--used to track the location of students for loan purposes. Some colleges may simply be afraid that the truth may be found out-- that their institutions offer little value added, other than a credential.
Outsourcing in Michigan
This week CCAP is featured in the Mackinac Center’s “Michigan Privatization Report.” CCAP researcher, Jim Coleman, discusses the potential savings of outsourcing remedial and introductory level instruction to private 3rd parties.
NINJA Student Loans
by Andrew Gillen
In a piece in Forbes titled The Great College Hoax, Kathy Kristof highlights the practice of “nontraditional” lending. This, in the words of Albert Lord, chief executive of Sallie Mae is “basically kids and parents with poor credit who are at the wrong schools."
Let me get this straight. Sallie Mae saw a group of people with poor credit wanting to attend overly pricey schools with poor job prospects and said, I think we should lend them lots of money which they probably won’t be able to pay back. What could possibly go wrong?
How is this different from the many fraudulent no income no job no assets (NINJA) mortgages that got the country in so much trouble? At least those mortgages can be laid to rest with bankruptcy, unlike most student loans, which stick with you “to the grave.”
And it’s not like they were being altruistic in making these loans to people who otherwise couldn’t get them – they were charging 18% interest! That’s the rate I’d expect at “Bob’s Pawn Shop and Student Loan Center” not Sallie Mae.*
Krisof says more and more students are
But just as banks that made stupid loans are in serious trouble, lenders who made these loans are being forced to write down their value.
This leads Megan McArdle to ask, Who benefited from this?
*If anyone from Sallie Mae is reading this, I take it all back. Please don’t jack up the rate on my loans and crush me under an even bigger mountain of debt like you did to the poor people in this story.
In a piece in Forbes titled The Great College Hoax, Kathy Kristof highlights the practice of “nontraditional” lending. This, in the words of Albert Lord, chief executive of Sallie Mae is “basically kids and parents with poor credit who are at the wrong schools."
Let me get this straight. Sallie Mae saw a group of people with poor credit wanting to attend overly pricey schools with poor job prospects and said, I think we should lend them lots of money which they probably won’t be able to pay back. What could possibly go wrong?
How is this different from the many fraudulent no income no job no assets (NINJA) mortgages that got the country in so much trouble? At least those mortgages can be laid to rest with bankruptcy, unlike most student loans, which stick with you “to the grave.”
And it’s not like they were being altruistic in making these loans to people who otherwise couldn’t get them – they were charging 18% interest! That’s the rate I’d expect at “Bob’s Pawn Shop and Student Loan Center” not Sallie Mae.*
Krisof says more and more students are
victims of an unfolding education hoax on the middle class that's just as insidious, and nearly as sweeping, as the housing debacle. The ingredients are strikingly similar, too: Misguided easy-money policies that are encouraging the masses to go into debt; a self-serving establishment trading in half-truths that exaggerate the value of its product; plus a Wall Street money machine dabbling in outright fraud as it foists unaffordable debt on the most vulnerable marks.
But just as banks that made stupid loans are in serious trouble, lenders who made these loans are being forced to write down their value.
This leads Megan McArdle to ask, Who benefited from this?
Not [the students], obviously, but not the "greedy" loan company, either [who were forced to write down much of the value of these loans]. No, the beneficiaries are the schools that take peoples' money in exchange for worthless degrees.
*If anyone from Sallie Mae is reading this, I take it all back. Please don’t jack up the rate on my loans and crush me under an even bigger mountain of debt like you did to the poor people in this story.
Student Protests Go Digital!
by Andrew Gillen
Edububble finds Students Against Financial Mismanagement at RPI and Lay off Shirley Ann, two facebook groups devoted to the ouster of one of the highest paid university presidents in the country.
Edububble finds Students Against Financial Mismanagement at RPI and Lay off Shirley Ann, two facebook groups devoted to the ouster of one of the highest paid university presidents in the country.
Wednesday, January 21, 2009
Neutering of a Board of Trustees
by Luke Myers
Tomorrow, the Ohio University Board of Trustees will begin discussion on a “Statement of Expectations” (“Statement”) for members of the board. Its current language, in draft form, violates every principle of good governance for public institutions.
First, sections of the “Statement” seek to seriously limit the ability of individual Trustees to publicly dissent against the decisions of the Board. These sections call for the Board to speak with a “single voice” and prohibit Trustees from publicly criticizing the President, the Board or any other university official. Finally, they require that Trustees “publicly support [a] decision even if they held a contrary view during board deliberations.”
Such unnerving provisions are a serious obstacle to transparency. If individual Board Members are not allowed to publicly break with the official line of the majority decision, students, faculty and the taxpaying public are deprived of information vital to evaluating that decision. Individual Trustees are allowed to oppose a measure during the Board Meetings, a section of which are public, but few constituents of the Board have the time to attend these meetings or to read the resulting minutes.
Squashing public opposition will also seriously harm the quality of the decision-making process to begin with. If dissenting Trustees are unable to raise their concerns to the university community or the general public, the creative process of public deliberation is never initiated. The result is a stagnation of opinion and policies; bad decisions will never be fully challenged and revisited, preventing their future improvement.
Finally, another provision of the “Statement” seeks to consolidate the power of the Board of Trustees in its Chair and the President of the university. It provides that individual Trustees’ requests for information should be conveyed to the Chair who will then receive the information from the President. Individual Trustees are admonished from gaining this information directly from the administrators responsible for the data, as is currently allowed.
The constituents to whom the Board is responsible, including the taxpaying public, should be seriously distraught by the likely outcome of decisions made under such draconian rules. The provisions limiting dissent and restricting the flow of information eviscerate the main benefit of having a multi-member Board: diversity of thought. Trustees who are forced to speak alike and receive information alike will have difficulty in not also thinking alike. Furthermore, the elimination of opposition from their own members about the Board’s decisions shows a willful disregard for the need to publicly justify their actions. When a governing body no longer feels a compelling need to defend its decisions against public challenge, it has little incentive left to ensure good decisions are being made.
Although clearly defined roles and expectations of behavior for the Trustees is important to the “best interests of the university,” the protection of which the “Statement” lists as the first duty of individual Trustees, the provisions limiting transparency, dissent and flow of information serve only the interests of whoever has power on the Board. These provisions are more reminiscent of the Stalinist Soviet Union than the principles of academic freedom of thought so cherished by institutions of higher education. They are directly contrary to principles of good governance for public institutions and have no place in the rules of the governing board of an institute of higher education.
Luke Myers is a senior political science major at Ohio University and research assistant for the Center for College Affordability and Productivity.
Tomorrow, the Ohio University Board of Trustees will begin discussion on a “Statement of Expectations” (“Statement”) for members of the board. Its current language, in draft form, violates every principle of good governance for public institutions.
First, sections of the “Statement” seek to seriously limit the ability of individual Trustees to publicly dissent against the decisions of the Board. These sections call for the Board to speak with a “single voice” and prohibit Trustees from publicly criticizing the President, the Board or any other university official. Finally, they require that Trustees “publicly support [a] decision even if they held a contrary view during board deliberations.”
Such unnerving provisions are a serious obstacle to transparency. If individual Board Members are not allowed to publicly break with the official line of the majority decision, students, faculty and the taxpaying public are deprived of information vital to evaluating that decision. Individual Trustees are allowed to oppose a measure during the Board Meetings, a section of which are public, but few constituents of the Board have the time to attend these meetings or to read the resulting minutes.
Squashing public opposition will also seriously harm the quality of the decision-making process to begin with. If dissenting Trustees are unable to raise their concerns to the university community or the general public, the creative process of public deliberation is never initiated. The result is a stagnation of opinion and policies; bad decisions will never be fully challenged and revisited, preventing their future improvement.
Finally, another provision of the “Statement” seeks to consolidate the power of the Board of Trustees in its Chair and the President of the university. It provides that individual Trustees’ requests for information should be conveyed to the Chair who will then receive the information from the President. Individual Trustees are admonished from gaining this information directly from the administrators responsible for the data, as is currently allowed.
The constituents to whom the Board is responsible, including the taxpaying public, should be seriously distraught by the likely outcome of decisions made under such draconian rules. The provisions limiting dissent and restricting the flow of information eviscerate the main benefit of having a multi-member Board: diversity of thought. Trustees who are forced to speak alike and receive information alike will have difficulty in not also thinking alike. Furthermore, the elimination of opposition from their own members about the Board’s decisions shows a willful disregard for the need to publicly justify their actions. When a governing body no longer feels a compelling need to defend its decisions against public challenge, it has little incentive left to ensure good decisions are being made.
Although clearly defined roles and expectations of behavior for the Trustees is important to the “best interests of the university,” the protection of which the “Statement” lists as the first duty of individual Trustees, the provisions limiting transparency, dissent and flow of information serve only the interests of whoever has power on the Board. These provisions are more reminiscent of the Stalinist Soviet Union than the principles of academic freedom of thought so cherished by institutions of higher education. They are directly contrary to principles of good governance for public institutions and have no place in the rules of the governing board of an institute of higher education.
Luke Myers is a senior political science major at Ohio University and research assistant for the Center for College Affordability and Productivity.
Tuesday, January 20, 2009
Obama's Nation or an Obamination?
By Richard Vedder
The media have proclaimed we are having a coronation, not an inauguration. The nation is in love with Barack Obama. This is truly, Obama's Nation.
But is it? Or are we entering, pardon the pun, an "Obamination?" Are we about ready to unleash public policies that will damage America for many years to come? It is interesting that the inauguration was accompanied by about a $400 billion decline in the national wealth, as measured by stock indices. Obama plans on using the excuse of a "crisis" to dramatically expand the size of government, enact huge increases in welfare spending, and reward friends on a massive scale --all in the name of stimulus, using money borrowed from God knows where--I fear it may be the Federal Reserve )which would have the effect of dramatically increasing an already bloated supply of money).
Robert Higgs in Crisis and Leviathan outlined how the massive expansions of government proceeded from alleged crises --World War I, the Great Depression, World War II. And when there is not really a new national crisis --invent one, as LBJ did with his War on Poverty in the mid-1960s.
Part of all of this dropping of money out of airplanes on public institutions is directed to education. A lot will go, if Obama gets his way, to K-12 education, which is arguably even more inefficient and deficient than higher education, since much of it is a government monopoly largely controlled by giant teacher unions. So in the name of stimulus, Obama will pay off the NEA, AFT and other groups that cynically use children to redistribute income for themselves.
But, as previously indicated, higher education is designed to share in the largess. Billions for school buildings --when most existing structures are inefficiently used, often empty months of the year. Billions for student financial aid when the evidence is that the explosion of such aid has been accompanied by an INCREASE in the burden of higher education on students.
This is on top of the fact that stimulus programs do not work. They did not in the 1930s --the WPA once employed 3.3 million workers (nearly 10 million today) -- but unemployment rates were still over 17 percent. They did not in Japan during the 1990s, where economic stimulus was associated with an abrupt drop in the growth rate in the Japanese economy. All of this is wrong, will be costly, etc.
Sorry, I am not in a festive mood, thinking, like Wall Street, that this populist mania in Obama's Nation will lead to obaminally poor economic conditions in the years ahead --and colleges, like others, will lose. After all, if stagflation returns, a distinct possibility, colleges and universities will be big losers, if the experience of the 1970s is any guide.
The media have proclaimed we are having a coronation, not an inauguration. The nation is in love with Barack Obama. This is truly, Obama's Nation.
But is it? Or are we entering, pardon the pun, an "Obamination?" Are we about ready to unleash public policies that will damage America for many years to come? It is interesting that the inauguration was accompanied by about a $400 billion decline in the national wealth, as measured by stock indices. Obama plans on using the excuse of a "crisis" to dramatically expand the size of government, enact huge increases in welfare spending, and reward friends on a massive scale --all in the name of stimulus, using money borrowed from God knows where--I fear it may be the Federal Reserve )which would have the effect of dramatically increasing an already bloated supply of money).
Robert Higgs in Crisis and Leviathan outlined how the massive expansions of government proceeded from alleged crises --World War I, the Great Depression, World War II. And when there is not really a new national crisis --invent one, as LBJ did with his War on Poverty in the mid-1960s.
Part of all of this dropping of money out of airplanes on public institutions is directed to education. A lot will go, if Obama gets his way, to K-12 education, which is arguably even more inefficient and deficient than higher education, since much of it is a government monopoly largely controlled by giant teacher unions. So in the name of stimulus, Obama will pay off the NEA, AFT and other groups that cynically use children to redistribute income for themselves.
But, as previously indicated, higher education is designed to share in the largess. Billions for school buildings --when most existing structures are inefficiently used, often empty months of the year. Billions for student financial aid when the evidence is that the explosion of such aid has been accompanied by an INCREASE in the burden of higher education on students.
This is on top of the fact that stimulus programs do not work. They did not in the 1930s --the WPA once employed 3.3 million workers (nearly 10 million today) -- but unemployment rates were still over 17 percent. They did not in Japan during the 1990s, where economic stimulus was associated with an abrupt drop in the growth rate in the Japanese economy. All of this is wrong, will be costly, etc.
Sorry, I am not in a festive mood, thinking, like Wall Street, that this populist mania in Obama's Nation will lead to obaminally poor economic conditions in the years ahead --and colleges, like others, will lose. After all, if stagflation returns, a distinct possibility, colleges and universities will be big losers, if the experience of the 1970s is any guide.
Monday, January 19, 2009
Supreme Court to Hear Racial Discrimination Case
by Daniel Bennett
The Chronicle of Higher Education reports that the Supreme Court will hear the Ricci v. DeStefano case. White and Hispanic firefighters from New Haven, CT filed a suit against the city government for ruling to throw out the results from a civil service exam that was required in order to be eligible for a promotion. The reason for throwing out the exams was that there were no blacks and very few Hispanics that passed with a qualified score.
The Chronicle article lists some of the key questions for the Supreme Court to address, including:
The Chronicle of Higher Education reports that the Supreme Court will hear the Ricci v. DeStefano case. White and Hispanic firefighters from New Haven, CT filed a suit against the city government for ruling to throw out the results from a civil service exam that was required in order to be eligible for a promotion. The reason for throwing out the exams was that there were no blacks and very few Hispanics that passed with a qualified score.
The Chronicle article lists some of the key questions for the Supreme Court to address, including:
1. Whether city governments can throw out the results of a valid test that yields racially disproportionate results,Several Advocacy groups, including The Center for Equal Opportunity, The American Civil Rights Institute and The Center for Individual Rights, have filed an amicus brief, suggesting that the
2. Whether Supreme Court precedents that bar employers from altering tests to produce desired racial outcomes also bar them from throwing out test results for reasons of race and
3. Whether federal courts can relieve municipalities from complying with state civil-service laws requiring race-blind, merit-based hiring
"City of New Haven threw out the results of a firefighters exam because it didn't like its racial results: not enough "diversity.""The outcome of the case may have implications for colleges, including an affect on the hiring and admissions processes. The advocacy groups decry that if the City of New Haven's decision is upheld, that it
"would let colleges adopt “irrelevant” admissions criteria expected to favor minority applicants."
Friday, January 16, 2009
The Stimulus Package and Higher Education
By Richard Vedder
Most in the higher ed establishment are no doubt doing cartwheels, if they are physically able, over the Democrats proposed $825 billion stimulus package. They think it will help higher ed, even if it does not help the economy. Count me as one dissenter: I think the proposal is an unmitigated disaster.
First of all, what the Dems are really trying to do is use the rhetoric of "stimulus" and the reality of a recession to implement cherished left-wing programs that have little to do with the economy. Second, stimulus packages don't work --period. They did not work in the 1930s (unemployment at the peak of the Works Progress Administration was over 17 percent), did not work in the U.S. in the 1970s (indeed, causing stagflation), did not work in Japan in the 1990s, and did not work in our nation early last year, as unemployment rates have risen and equity values fallen in the wake of a $100 billion plus stimulus package. We are in uncharted territory running budget deficits that will be well over 10 percent of GDP in relative peacetime, and, if history is any guide, the results will not be pretty.
But what about colleges? The proposed aid does nothing to force colleges to reform, and, indeed, delays reforms that are needed. The colleges not only will gain some funds directly, but get the ability to raise tuition charges more. The proposed bill will give the states billions for educational aid, which will end reductions in state college appropriations. It will pour tens of billions into student aid through larger Pell Grants and increased student loan availability, allowing the colleges to raise tuition charges even more.
There is nothing, of course, that forces the colleges to do anything different. To be sure, this is not an education bill, but a so-called stimulus package. But it is bad fiscal policy, bad education policy, and, in general-- just stinks. To be sure, the bill is far from a done deal, and Congress will wrangle. But usually, Congressional wrangling works to worsen, not improve things. The market is low for a reason --the prospects for the private economy in the coming years is abysmal. It is not yet noon where I am writing this, but I need a drink.
Most in the higher ed establishment are no doubt doing cartwheels, if they are physically able, over the Democrats proposed $825 billion stimulus package. They think it will help higher ed, even if it does not help the economy. Count me as one dissenter: I think the proposal is an unmitigated disaster.
First of all, what the Dems are really trying to do is use the rhetoric of "stimulus" and the reality of a recession to implement cherished left-wing programs that have little to do with the economy. Second, stimulus packages don't work --period. They did not work in the 1930s (unemployment at the peak of the Works Progress Administration was over 17 percent), did not work in the U.S. in the 1970s (indeed, causing stagflation), did not work in Japan in the 1990s, and did not work in our nation early last year, as unemployment rates have risen and equity values fallen in the wake of a $100 billion plus stimulus package. We are in uncharted territory running budget deficits that will be well over 10 percent of GDP in relative peacetime, and, if history is any guide, the results will not be pretty.
But what about colleges? The proposed aid does nothing to force colleges to reform, and, indeed, delays reforms that are needed. The colleges not only will gain some funds directly, but get the ability to raise tuition charges more. The proposed bill will give the states billions for educational aid, which will end reductions in state college appropriations. It will pour tens of billions into student aid through larger Pell Grants and increased student loan availability, allowing the colleges to raise tuition charges even more.
There is nothing, of course, that forces the colleges to do anything different. To be sure, this is not an education bill, but a so-called stimulus package. But it is bad fiscal policy, bad education policy, and, in general-- just stinks. To be sure, the bill is far from a done deal, and Congress will wrangle. But usually, Congressional wrangling works to worsen, not improve things. The market is low for a reason --the prospects for the private economy in the coming years is abysmal. It is not yet noon where I am writing this, but I need a drink.
Thursday, January 15, 2009
Universities as Starbucks
by Andrew Gillen
My recent post, which highlighted the fact that actual spending is out of all proportion to reasonable costs of instruction, has not been well received by some in the higher ed establishment. As far as I can tell, the thrust of the critics is that universities have to spend all that money on various things, and that there is just no way around it. This is kind of like observing the price of a cup of coffee at Starbucks, and concluding that it’s not possible to provide a cup of coffee for less than $5.
But just as the $5 price tag at Starbucks includes amore than just coffee, the per student spending figures at all levels of education contain a lot of other spending, such as ritzy dorms, unnecessary staff, $13,000 Sushi robots, funds to upgrade closing schools, and (ironically for this post) unused cappuccino/espresso machines.
To say that I’m naïve about the financial needs of modern higher education may be true in many respects. But it is just as naïve to treat a process that results in such wasteful spending as sacrosanct. Moreover, it misses my point completely. The amount of money spent per student is out of all proportion to the actual cost of providing an education. And this matters because college has become a huge financial burden for many students and families.
Lucky for me, Rich has already expanded on my point for me:
By all means, continue coming up with dubious rationalizations (like the example here) for maintaining the status quo. Just don’t be surprised when students that are not getting a good deal stop showing up.
This has already happened to Starbucks and many expensive private schools are getting a taste of this right now:
Even less expensive schools that are so far unfazed would be well advised to think long and hard about if their spending patterns are wise. In the age of Google, Wikipedia, and video lectures from top practioners, it may not be long before they too come out on the wrong side of potential students’ cost benefit calculations.
My recent post, which highlighted the fact that actual spending is out of all proportion to reasonable costs of instruction, has not been well received by some in the higher ed establishment. As far as I can tell, the thrust of the critics is that universities have to spend all that money on various things, and that there is just no way around it. This is kind of like observing the price of a cup of coffee at Starbucks, and concluding that it’s not possible to provide a cup of coffee for less than $5.
But just as the $5 price tag at Starbucks includes amore than just coffee, the per student spending figures at all levels of education contain a lot of other spending, such as ritzy dorms, unnecessary staff, $13,000 Sushi robots, funds to upgrade closing schools, and (ironically for this post) unused cappuccino/espresso machines.
To say that I’m naïve about the financial needs of modern higher education may be true in many respects. But it is just as naïve to treat a process that results in such wasteful spending as sacrosanct. Moreover, it misses my point completely. The amount of money spent per student is out of all proportion to the actual cost of providing an education. And this matters because college has become a huge financial burden for many students and families.
Lucky for me, Rich has already expanded on my point for me:
Too many of today's colleges and universities have lost focus -- they try to do too many things --run entertainment enterprises, have conference centers competing for the convention trade, run food and lodging operations, TRY to spur economic development (almost always unsuccessfully), engage in commercial technology transfer, etc., etc.
By all means, continue coming up with dubious rationalizations (like the example here) for maintaining the status quo. Just don’t be surprised when students that are not getting a good deal stop showing up.
This has already happened to Starbucks and many expensive private schools are getting a taste of this right now:
The question about how much one should stretch to pay for college — and a new clear-eyed realization that loans must be repaid — are making officials at some private schools nervous.
Even less expensive schools that are so far unfazed would be well advised to think long and hard about if their spending patterns are wise. In the age of Google, Wikipedia, and video lectures from top practioners, it may not be long before they too come out on the wrong side of potential students’ cost benefit calculations.
Interesting Links 1/16/09
by Andrew Gillen
The New York Times agrees with CCAP! At least that's how I read this headline: Students Paying More and Getting Less, Study Says
Higher Ed in the Stimulus: "$15.6 billion to increase the Pell grant by $500" Good. "$6 billion for higher education modernization." Not so good. This reminds me of the technology fees I kept paying to universities in years past. The rest of the world uses technology to increase efficiency, but apparently, not higher ed, where for some reason technology and modernization always seem to add to costs rather than subtracting from them.
“Chegg is the Netflix of college textbooks” HT: Al Roth
Madoff Victims: Looks like Bard College lost 3 million, and Yeshiva University lost 14.5 million
The New York Times agrees with CCAP! At least that's how I read this headline: Students Paying More and Getting Less, Study Says
Higher Ed in the Stimulus: "$15.6 billion to increase the Pell grant by $500" Good. "$6 billion for higher education modernization." Not so good. This reminds me of the technology fees I kept paying to universities in years past. The rest of the world uses technology to increase efficiency, but apparently, not higher ed, where for some reason technology and modernization always seem to add to costs rather than subtracting from them.
“Chegg is the Netflix of college textbooks” HT: Al Roth
Madoff Victims: Looks like Bard College lost 3 million, and Yeshiva University lost 14.5 million
The Delta Cost Project Report
By Richard Vedder
The Delta Cost Project, largely funded by the Lumina Foundation, has released a report. On the whole, it is excellent, detailing trends noted in this space for some time. Colleges are getting more costly to students, while the share of budgets allocated to instruction falls. The proportion of the cost of attending college paid for by students is rising, and in some cases, fairly dramatically. If one used appropriate pricing --measuring costs at the margin ---in some cases I suspect a growing number of students at private and some elite public schools are actually paying well over 100 percent of the incremental cost of college.
Of course, as I noted in the INSIDE HIGHER ED story running today, truly measuring college financial performance, efficiency, and productivity, takes more than tracing revenues and expenditures. We need to know what the students are getting for their education other than a piece of paper that has considerable credentialing value. Are they learning anything? More knowledge? Better critical learning skills? Values that will make them better citizens? Who knows? We measure inputs, not outputs. I don't fault Jane Wellman and colleges for not addressing this issue much, because of the inherent problems of measurement and because of university resistance to measuring the "value added" of the higher education experience.
Liberals will interpret the report as demonstrating that the public purpose of higher education is being eroded. Conservatives will show that universities increasingly ignore students and, despite falling state appropriations in real (and in some cases, absolute) terms, are still spending as much per student as ever. Real cost containment has not evolved, despite a growing public agitation of the rising real cost of higher education.
From 1960 to the present, the share of our national output going for higher education has nearly tripled. In the coming generation, we will face a growing proportion of output needed to sustain an elderly population that is no longer economically productive. We face intense international competition that makes tax increases economically very costly in terms of reduced competitiveness. The higher ed share of the national output cannot grow without huge costs and pain to society. For that reason, I think the time is coming when colleges will have to do what almost every other sector of society has done --get more productive. Too bad we cannot even measure productivity change. That said, the Delta Project is doing useful work, and their calls for greater financial transparency echo those of CCAP and other reformers.
The Delta Cost Project, largely funded by the Lumina Foundation, has released a report. On the whole, it is excellent, detailing trends noted in this space for some time. Colleges are getting more costly to students, while the share of budgets allocated to instruction falls. The proportion of the cost of attending college paid for by students is rising, and in some cases, fairly dramatically. If one used appropriate pricing --measuring costs at the margin ---in some cases I suspect a growing number of students at private and some elite public schools are actually paying well over 100 percent of the incremental cost of college.
Of course, as I noted in the INSIDE HIGHER ED story running today, truly measuring college financial performance, efficiency, and productivity, takes more than tracing revenues and expenditures. We need to know what the students are getting for their education other than a piece of paper that has considerable credentialing value. Are they learning anything? More knowledge? Better critical learning skills? Values that will make them better citizens? Who knows? We measure inputs, not outputs. I don't fault Jane Wellman and colleges for not addressing this issue much, because of the inherent problems of measurement and because of university resistance to measuring the "value added" of the higher education experience.
Liberals will interpret the report as demonstrating that the public purpose of higher education is being eroded. Conservatives will show that universities increasingly ignore students and, despite falling state appropriations in real (and in some cases, absolute) terms, are still spending as much per student as ever. Real cost containment has not evolved, despite a growing public agitation of the rising real cost of higher education.
From 1960 to the present, the share of our national output going for higher education has nearly tripled. In the coming generation, we will face a growing proportion of output needed to sustain an elderly population that is no longer economically productive. We face intense international competition that makes tax increases economically very costly in terms of reduced competitiveness. The higher ed share of the national output cannot grow without huge costs and pain to society. For that reason, I think the time is coming when colleges will have to do what almost every other sector of society has done --get more productive. Too bad we cannot even measure productivity change. That said, the Delta Project is doing useful work, and their calls for greater financial transparency echo those of CCAP and other reformers.
Wednesday, January 14, 2009
The Odd Couple
By Richard Vedder
I am sorry I missed the National Association of Scholars meeting in Washington last weekend (my sidekick Andy Gillen gave the presentation I was going to make because a family emergency kept me away). I would have given a fair amount of money to see the limited lovefest between Anne Neal of the American Council of Trustees and Alumni (ACTA) and Cary Nelson of the AAUP. Those two cannot agree on where the sun is going to come up tomorrow morning --East or West?
But they do agree on something. Speech codes are bad ---real bad. Attempts to stifle the free expression of faculty, students, administrators, and the like are doubly repulsive. They are bad because the violate the American Constitution and a tradition of free expression that has made America both great and exceptional. But, secondarily, they are doubly repulsive because they emanate from what are supposed to be the purest citadels of free flow of ideas, the academy.
I think it is time to get more aggressive, and not merely be defensive to these repulsive restrictions by trying to get them ruled unconstitutional, or by embarrassing administrations to drop charges against alleged offenders. I think we should seek legislative action banning the codes, and impose huge fines on institutions and jail sentences of those individuals guilty of persecuting offenders.
If ACTA and AAUP can act together on this, perhaps something can be done. Cary Nelson is a liberal trade unionist, Anne a conservative activist. Together they can make sweet music, and I, for one, am all for it.
I am sorry I missed the National Association of Scholars meeting in Washington last weekend (my sidekick Andy Gillen gave the presentation I was going to make because a family emergency kept me away). I would have given a fair amount of money to see the limited lovefest between Anne Neal of the American Council of Trustees and Alumni (ACTA) and Cary Nelson of the AAUP. Those two cannot agree on where the sun is going to come up tomorrow morning --East or West?
But they do agree on something. Speech codes are bad ---real bad. Attempts to stifle the free expression of faculty, students, administrators, and the like are doubly repulsive. They are bad because the violate the American Constitution and a tradition of free expression that has made America both great and exceptional. But, secondarily, they are doubly repulsive because they emanate from what are supposed to be the purest citadels of free flow of ideas, the academy.
I think it is time to get more aggressive, and not merely be defensive to these repulsive restrictions by trying to get them ruled unconstitutional, or by embarrassing administrations to drop charges against alleged offenders. I think we should seek legislative action banning the codes, and impose huge fines on institutions and jail sentences of those individuals guilty of persecuting offenders.
If ACTA and AAUP can act together on this, perhaps something can be done. Cary Nelson is a liberal trade unionist, Anne a conservative activist. Together they can make sweet music, and I, for one, am all for it.
College Health Risk Indicators
by Daniel Bennett
Colleges increasingly face calls for additional accountability, transparency and productivity measures. Establishing metrics is a convoluted process, considering the complexity of college organizational structures and the range of college sizes. A one-size fits all solution is problematic; however, an excerpt from the upcoming release: "Turnaround: Leading Stressed Colleges and Universities to Excellence," edited by James Martin and James E. Samels, offers a list of:
Colleges increasingly face calls for additional accountability, transparency and productivity measures. Establishing metrics is a convoluted process, considering the complexity of college organizational structures and the range of college sizes. A one-size fits all solution is problematic; however, an excerpt from the upcoming release: "Turnaround: Leading Stressed Colleges and Universities to Excellence," edited by James Martin and James E. Samels, offers a list of:
20 INDICATORS THAT YOUR INSTITUTION IS AT RISK
A fragile college may not demonstrate all 20, nor does the presence of three or four guarantee vulnerability. But a preponderance of them means that an institution has slipped from its founding vision and strength, and that some form of surgery will most likely be required to return it to health:
1. Tuition discounting is more than 35 percent.
2. Tuition dependency is more than 85 percent.
3. Student default rate is more than 5 percent.
4. Debt service is more than 10 percent of annual operating budget.
5. The ratio between endowment and operating budget is less than 1-to-3.
6. Average annual tuition increase has been greater than 8 percent for five years.
7. Deferred maintenance is at least 40 percent unfinanced.
8. Short-term bridge financing is regularly required in the final quarter of each fiscal year.
9. Less than 10 percent of operating budget is dedicated to technology.
10. Average alumni gift is less than $75, and less than 20 percent of alumni give annually.
11. Enrollment is 1,000 students or fewer.
12. The conversion yield — the percentage of students who attend the college after applying — is 20 percent lower than that of primary competitors.
13. Student retention is 10 percent behind that of primary competitors.
14. The institution is on probation with a regional accreditor.
15. The majority of faculty members do not hold terminal degrees.
16. Average age of full-time faculty is 58 or higher.
17. The leadership team averages more than 12 years, or fewer than three years, of service.
18. No complete online program has been developed.
19. No new degree or certificate program has been developed for at least two years.
20. It takes more than a year to approve a new degree program.
Tuesday, January 13, 2009
How Effective Will An Education Stimulus Be?
by Andrew Gillen
Not very, if several recent stories are any indication. When it comes to education, money is often spent in strange ways.
Of course, listening to any economist right now is probably unwise, if these tongue lashings of the profession are any indication.
From Barry Ritholtz
From Paul Wilmott:
From Robert Skidelsky
From Arnold Kling:
From Felix Salmon
This entire story
Many of the jokes here. My favorite
And this paper from Daron Acemoglu
Much of the criticism centers on the lack of real world applications provided by the profession. Moreover, this seems to be deliberate on the part of economists. As Raghuram Rajan says
Not very, if several recent stories are any indication. When it comes to education, money is often spent in strange ways.
Of course, listening to any economist right now is probably unwise, if these tongue lashings of the profession are any indication.
From Barry Ritholtz
there were systemic failures in economics as a discipline, at least as it is employed in the real world
From Paul Wilmott:
The jargonizing of complex ideas based upon irrelevant assumptions into an easily used and abused building block on which to build the edifice of nonsense that is modern economics.
From Robert Skidelsky
Economics, especially in its mathematicized form, purveys a peculiar vision of society.
From Arnold Kling:
[rather than doing useful things] the economics profession for the past thirty years instead focused on producing stochastic calculus porn to satisfy young men's urge for mathematical masturbation.
From Felix Salmon
Why should we trust the economists now
This entire story
Many of the jokes here. My favorite
You might be an economist if... you can translate plain English into incomprehensible gibberish.
And this paper from Daron Acemoglu
Much of the criticism centers on the lack of real world applications provided by the profession. Moreover, this seems to be deliberate on the part of economists. As Raghuram Rajan says
Most academics are really reluctant to take part in the public dialog, because the public dialog requires you to have an opinion about things you can’t really be sure about… They fear talking about things where everything is not neatly nailed in a model.
Increased Enrollment Does Not Mean Bigger Losses
by Andrew Gillen
People keep making a silly mistake when they jump from the accurate observation that because tuition does not cover the total cost of college, that colleges lose money on each student (see here, here, here, here, here, here, and here for examples) to the conclusion that if a college enrolls more students, they will lose even more (see here and here for examples).
This often flawed conclusion stems from confusion about total vs. marginal costs.
An example will illustrate my point.
Suppose that a school has fixed costs (FC) of 50, variable costs (VC) of 2 per student, charges tuition (T) of 5, has an enrollment (E) of 10 students, and a state appropriation (SA) of 20. This implies that they have total costs (TC) of 70 (TC = FC+VC*E = 50 + 2*10). They have 50 in tuition revenue (T*E = 5*10), and the 20 state appropriation for Total Revenue of 70.
Now along comes a recession, and the state government, which is facing budget deficits decides to cut the appropriation to 17 (SA’). What should the school do?
If you believe that public postsecondary education “is one of the few businesses where every new customer means bigger losses,” then you’ll also think that cutting customers will lower your losses. You’ll note that the tuition of 5 does not cover the average cost per student of 7 (ATC = TC/E = 70/10). You view this as a loss of 2 per student, and may conclude that you need to cut enrollment by 1.5 to make up for the cut in appropriations of 3. So, you cut enrollment to 8.5 (E’), and are surprised to discover that now your revenue doesn’t cover your costs (T*E’+SA’ = 5*8.5+17 = 59.5 < FC+VC*E’ = 50 + 2*8.5 = 67). The reason, of course, is that while cutting enrollment by 1.5 cut your costs by 3, it also cut your revenue by 7.5.
Alternatively, you could recall from your principles of economics class years ago, that the crucial thing to keep in mind is marginal costs and revenues. Noting that your tuition revenue of 5 is greater than your variable costs of 2, you increase enrollment to 11 (assume that the school is capacity constrained at 11). With enrollment of 11 (E’’), you have revenue of 72 (T*E’’+SA’ = 5*11+17) and costs of 72 (FC+VC*E’’ = 50+2*11).
Which scenario is better? Lower enrollment with deficits, or higher enrollment with a balanced budget?
The view that “every new customer means bigger losses” for higher ed is not true when the marginal cost of a student is less than the marginal revenue of that student (variable cost and tuition respectively in the example above).
The key question then is: What is the marginal cost of one more student?
Typically, a few more student will not require that you hire a new professor, create a financial aid department or registrar, build a new dorm or classroom - the school will already have these things. Thus, I have a very hard time believing that the marginal cost of a student is very high except when a school is at capacity along multiple dimensions.
While it no doubt varies by school, I would argue that the average tuition revenue per student of around $4,500 at public four year schools (first figure on page six of this report) is typically more than enough to cover marginal cost.
People keep making a silly mistake when they jump from the accurate observation that because tuition does not cover the total cost of college, that colleges lose money on each student (see here, here, here, here, here, here, and here for examples) to the conclusion that if a college enrolls more students, they will lose even more (see here and here for examples).
This often flawed conclusion stems from confusion about total vs. marginal costs.
An example will illustrate my point.
Suppose that a school has fixed costs (FC) of 50, variable costs (VC) of 2 per student, charges tuition (T) of 5, has an enrollment (E) of 10 students, and a state appropriation (SA) of 20. This implies that they have total costs (TC) of 70 (TC = FC+VC*E = 50 + 2*10). They have 50 in tuition revenue (T*E = 5*10), and the 20 state appropriation for Total Revenue of 70.
Now along comes a recession, and the state government, which is facing budget deficits decides to cut the appropriation to 17 (SA’). What should the school do?
If you believe that public postsecondary education “is one of the few businesses where every new customer means bigger losses,” then you’ll also think that cutting customers will lower your losses. You’ll note that the tuition of 5 does not cover the average cost per student of 7 (ATC = TC/E = 70/10). You view this as a loss of 2 per student, and may conclude that you need to cut enrollment by 1.5 to make up for the cut in appropriations of 3. So, you cut enrollment to 8.5 (E’), and are surprised to discover that now your revenue doesn’t cover your costs (T*E’+SA’ = 5*8.5+17 = 59.5 < FC+VC*E’ = 50 + 2*8.5 = 67). The reason, of course, is that while cutting enrollment by 1.5 cut your costs by 3, it also cut your revenue by 7.5.
Alternatively, you could recall from your principles of economics class years ago, that the crucial thing to keep in mind is marginal costs and revenues. Noting that your tuition revenue of 5 is greater than your variable costs of 2, you increase enrollment to 11 (assume that the school is capacity constrained at 11). With enrollment of 11 (E’’), you have revenue of 72 (T*E’’+SA’ = 5*11+17) and costs of 72 (FC+VC*E’’ = 50+2*11).
Which scenario is better? Lower enrollment with deficits, or higher enrollment with a balanced budget?
The view that “every new customer means bigger losses” for higher ed is not true when the marginal cost of a student is less than the marginal revenue of that student (variable cost and tuition respectively in the example above).
The key question then is: What is the marginal cost of one more student?
Typically, a few more student will not require that you hire a new professor, create a financial aid department or registrar, build a new dorm or classroom - the school will already have these things. Thus, I have a very hard time believing that the marginal cost of a student is very high except when a school is at capacity along multiple dimensions.
While it no doubt varies by school, I would argue that the average tuition revenue per student of around $4,500 at public four year schools (first figure on page six of this report) is typically more than enough to cover marginal cost.
The Price of University Hubris
By Richard Vedder
I am currently in Illinois and read in the local paper that Southern Illinois University (SIU) wants to admit out-of-state students from neighboring states and charge them in-state tuition rates, in order to battle falling enrollment. This story is rich in irony and lessons for ambitious universities below the top tier.
For decades, SIU has had an inferiority complex that it has tried to overcome by aggressive expansion. A former president (Morris) tried to follow the Michigan State model of John Hannah from the 1950s and 1960s, by attempting to turn a sleepy secondary college into a major university. Illinois already has two schools in the top 10 of the forbes.com (and CCAP) rankings of national universities, Northwestern and Chicago, and one of the great state universities in the top 25 in the US NEWS public university rankings, the University of Illinois.
In recent years, SIU has jacked its tuition up enormously under ambitious presidents trying to take the school to "the next highest level." A reporter for the student paper called me a couple of years ago and related how the school had an ambitious plan to ascend to the ranks of the great research universities, and high tuition fees were needed to help fund the effort.
A funny thing happened along the way (aside from some top administrators of the university leaving, apparently under some duress): enrollments started falling. SIU has fewer students than it did in 1990. Demand for tier three (US News rankings) schools is somewhat price-elastic --if SIU gets too costly, kids will go to Eastern Illinois, Western Illinois, Illinois State University or a variety of other schools, both private and public. Meanwhile, SIU has not ascended to the top ranks, as the number of top-notch scholars wanting to move to Carbondale, Illinois is, shall we say, highly finite.
Now with the pool of 18 to 22 year olds starting to fall, SIU is facing a big problem --not enough students. Located in a low income area with relatively high tuition fees, the school has gone from seeking to rival the U. of Illinois in the national rankings, to trying to maintain an adequate enrollment base so that it can maintain the pretense that it is a serious comprehensive university.
The SIU experience, with variations, is being repeated all over the country. Everyone wants to reach the next highest level --by spending more money. There can only be 50 schools in the top 50. SIU will never, at least not before 2040, catch up with Chicago, Northwestern, or Illinois. My university, Ohio University, will not catch Ohio State. North Texas State will not catch the University of Texas or Texas A&M. And so it goes. Nor will football success achieve what cannot be reached academically.
To be sure, I wish there was MORE movement up and down in university rankings and the success and failure of schools. But until we measure outcomes better, that will not happen. Meanwhile, the SIU tale of how institutional hubris can have unintended consequences is one that many university presidents should heed.
I am currently in Illinois and read in the local paper that Southern Illinois University (SIU) wants to admit out-of-state students from neighboring states and charge them in-state tuition rates, in order to battle falling enrollment. This story is rich in irony and lessons for ambitious universities below the top tier.
For decades, SIU has had an inferiority complex that it has tried to overcome by aggressive expansion. A former president (Morris) tried to follow the Michigan State model of John Hannah from the 1950s and 1960s, by attempting to turn a sleepy secondary college into a major university. Illinois already has two schools in the top 10 of the forbes.com (and CCAP) rankings of national universities, Northwestern and Chicago, and one of the great state universities in the top 25 in the US NEWS public university rankings, the University of Illinois.
In recent years, SIU has jacked its tuition up enormously under ambitious presidents trying to take the school to "the next highest level." A reporter for the student paper called me a couple of years ago and related how the school had an ambitious plan to ascend to the ranks of the great research universities, and high tuition fees were needed to help fund the effort.
A funny thing happened along the way (aside from some top administrators of the university leaving, apparently under some duress): enrollments started falling. SIU has fewer students than it did in 1990. Demand for tier three (US News rankings) schools is somewhat price-elastic --if SIU gets too costly, kids will go to Eastern Illinois, Western Illinois, Illinois State University or a variety of other schools, both private and public. Meanwhile, SIU has not ascended to the top ranks, as the number of top-notch scholars wanting to move to Carbondale, Illinois is, shall we say, highly finite.
Now with the pool of 18 to 22 year olds starting to fall, SIU is facing a big problem --not enough students. Located in a low income area with relatively high tuition fees, the school has gone from seeking to rival the U. of Illinois in the national rankings, to trying to maintain an adequate enrollment base so that it can maintain the pretense that it is a serious comprehensive university.
The SIU experience, with variations, is being repeated all over the country. Everyone wants to reach the next highest level --by spending more money. There can only be 50 schools in the top 50. SIU will never, at least not before 2040, catch up with Chicago, Northwestern, or Illinois. My university, Ohio University, will not catch Ohio State. North Texas State will not catch the University of Texas or Texas A&M. And so it goes. Nor will football success achieve what cannot be reached academically.
To be sure, I wish there was MORE movement up and down in university rankings and the success and failure of schools. But until we measure outcomes better, that will not happen. Meanwhile, the SIU tale of how institutional hubris can have unintended consequences is one that many university presidents should heed.
Monday, January 12, 2009
Chart of the week: 01/12/09
This graph displays the ratio of the median number of students (FTE) enrolled per executive/administrator/manager, by school type, since 2004. Only schools with enrollments of 500 or more were considered in the calculation. The downward trend exhibited in the graph is indicative of:
a) lower enrollments
b) a greater number of senior administrators, or
c) a combination of the two.
For public 4-year schools, the median enrollment increased by average of 1.6% between 2004 and 2007, while the median number of senior administrators grew by an average of 1.8% annually over the same time period. For private not-for-profit schools, the median enrollment shrank by an average of 6% per year, while the median number of senior administrators grew by 3.4% annually over the time period. For the private for-profit schools, the median enrollment decreased by an average of 2.6% per year, while the number of senior administrators increased by 7% annually, since 2004.
Source of data: IPEDS
View past charts of the week here.
a) lower enrollments
b) a greater number of senior administrators, or
c) a combination of the two.
For public 4-year schools, the median enrollment increased by average of 1.6% between 2004 and 2007, while the median number of senior administrators grew by an average of 1.8% annually over the same time period. For private not-for-profit schools, the median enrollment shrank by an average of 6% per year, while the median number of senior administrators grew by 3.4% annually over the time period. For the private for-profit schools, the median enrollment decreased by an average of 2.6% per year, while the number of senior administrators increased by 7% annually, since 2004.
Source of data: IPEDS
View past charts of the week here.
Saturday, January 10, 2009
Why We Cannot Afford the Status Quo
By Richard Vedder
In recently talking to a private company that advises college business officers (as well as other university administrators) on best practices, I got thinking about the economics of current instructional practices in research universities. I did a Vance Fried-sort of accounting analysis in my mind, getting down to the micro level.
Let us look at the senior faculty at a major flagship university, say the University of Michigan. Take a senior full professor of, say, political science or history. He or she probably makes a low six digit salary which, with fringe benefits, may total $150,000 a year. Suppose this person teaches three classes over the course of an entire academic year. One is to advanced undergraduates in a small lecture hall environment, with 50 students. One is a standard graduate course with 25 students, and one is an advanced Ph.D. seminar with 10 students. The first class meets three times a week for an hour (academic hour, which is 50 minutes) the second twice a week for an hour an a half, and the third class meets in a 3 hour session once weekly.
Let us say the professor is writing a book that will take five years to complete (implying six or seven books over his/her career, a rather sizable output), and writes one fairly significant journal article each year as well. He/she also does some thesis supervision, advises a few students, and is on a couple of committees. This would be the typical life of a successful and relatively productive professor at a typical major university.
Now, let us cost it out. Starting with the professor's salary and benefits, let us allocate 40 percent for class instruction, 40 percent for research, and 20 percent for other-- "service" and other quasi-instructional duties. In other words, the core instructional and research duties each cost $60,000 a year. In the case of instruction, that is $20,000 per course. For the Ph.D. seminar meeting 16 times, that is $1,250 a session or $125 per student per class. Even for the undergraduate class meeting 45-48 times, the instructor's compensation cost is well over $400 a session or more than $8 per student for 50 minutes. Not cheap.
But that is not the biggest burden. If we assume the professor devotes his/her time equally to writing the journal article and the book, the journal article costs $20,000. Suppose, very optimistically, 500 people read it --that is $40 per person --not for a book, but for what is perhaps a 20-30 page paper. If, more realistically, 200 persons read it, the cost per reader is $100. The book will ($20,000 X 5)cost $100,000 in professorial time to prepare. Suppose 1,500 read it (a pretty good readership for an academic book). The cost per reader is $667.
And this does not consider all the overhead costs, academic support, etc. If we assume, as do federal granting agencies, that these costs are at least 50 percent of the direct salary costs, all the numbers above should be multiplied by at least 1.5. Thus the book will cost about $1,000 per reader. Moreover, suppose the professor is a historian writing the 20th account about some aspect of Andrew Jackson's life. Is it really worth it to society to spend $150,000 (plus book publication costs) to offer that 20th perspective? NO ONE DOES A COST BENEFIT ANALYSIS OF THE RESEARCH. The professor decides what to research and how to allocate his time, which is an expensive resource.
With assistant professors at mid-quality universities, divide the numbers above by two or three to get per student teaching costs. Research efforts are less in quantity and typically quality, and also far less in readership. Suppose an associate professor at Slippery Rock costs, with fringes, $100,000 a year, and she devotes 30 percent of her time to research, and writes one paper a year for an obscure academic journal and gives one paper at an equally obscure academic gathering-- a rather typical occurrence. The journal article still costs at least $15,000, maybe $22,500 after indirect costs. Suppose, more realistically, that 50 people read the article in the Journal of Last Resort or its equivalent. The cost per reader is $450 for a paper that does not move the academic world, much less western civilization, one bit. If 25 people attend the session at the academic meeting that the paper is presented, that would be considered pretty good. If the article costs $15,000 in salary and $22,500 in total to produce, the cost per listener at the meeting is $900. Outrageous. Yet no one does anything about it.
That is why administrators are substituting cheaper help to do a lot of the teaching. They may stop hiring tenured faculty altogether, except ones with sterling research records who can pay their own way with external research grants. In addition, administrators may be starting to evaluate the effectiveness of institutionally funded (via low teaching loads) research. And, if they don't, perhaps some of the third party payers (e.g., state legislatures) will. Expect the fall in teaching loads that has been a central figure of modern academic life to stop --and for good reason.
I am not anti-research. God knows. I have done a lot of it, and love to do it. I am writing what is anywhere from my 8th to 10th book, depending on how you count, and have literally hundreds of published papers floating around, a few of them even occasionally read. But is society better off for it? Perhaps, but at what price?
To be sure, there is a lot of scientific research that is done that has real payoffs for society and I would hate to see universities become solely teaching institutions. Research can have modest but real positive spillover effects with respect to teaching, although it can also hurt instruction when professors treat the teaching function indifferently. But the important thing is we do not analyze the cost or benefit of the way we perform EITHER function, and as resources become scarcer, policymakers may demand that universities start doing it.
In recently talking to a private company that advises college business officers (as well as other university administrators) on best practices, I got thinking about the economics of current instructional practices in research universities. I did a Vance Fried-sort of accounting analysis in my mind, getting down to the micro level.
Let us look at the senior faculty at a major flagship university, say the University of Michigan. Take a senior full professor of, say, political science or history. He or she probably makes a low six digit salary which, with fringe benefits, may total $150,000 a year. Suppose this person teaches three classes over the course of an entire academic year. One is to advanced undergraduates in a small lecture hall environment, with 50 students. One is a standard graduate course with 25 students, and one is an advanced Ph.D. seminar with 10 students. The first class meets three times a week for an hour (academic hour, which is 50 minutes) the second twice a week for an hour an a half, and the third class meets in a 3 hour session once weekly.
Let us say the professor is writing a book that will take five years to complete (implying six or seven books over his/her career, a rather sizable output), and writes one fairly significant journal article each year as well. He/she also does some thesis supervision, advises a few students, and is on a couple of committees. This would be the typical life of a successful and relatively productive professor at a typical major university.
Now, let us cost it out. Starting with the professor's salary and benefits, let us allocate 40 percent for class instruction, 40 percent for research, and 20 percent for other-- "service" and other quasi-instructional duties. In other words, the core instructional and research duties each cost $60,000 a year. In the case of instruction, that is $20,000 per course. For the Ph.D. seminar meeting 16 times, that is $1,250 a session or $125 per student per class. Even for the undergraduate class meeting 45-48 times, the instructor's compensation cost is well over $400 a session or more than $8 per student for 50 minutes. Not cheap.
But that is not the biggest burden. If we assume the professor devotes his/her time equally to writing the journal article and the book, the journal article costs $20,000. Suppose, very optimistically, 500 people read it --that is $40 per person --not for a book, but for what is perhaps a 20-30 page paper. If, more realistically, 200 persons read it, the cost per reader is $100. The book will ($20,000 X 5)cost $100,000 in professorial time to prepare. Suppose 1,500 read it (a pretty good readership for an academic book). The cost per reader is $667.
And this does not consider all the overhead costs, academic support, etc. If we assume, as do federal granting agencies, that these costs are at least 50 percent of the direct salary costs, all the numbers above should be multiplied by at least 1.5. Thus the book will cost about $1,000 per reader. Moreover, suppose the professor is a historian writing the 20th account about some aspect of Andrew Jackson's life. Is it really worth it to society to spend $150,000 (plus book publication costs) to offer that 20th perspective? NO ONE DOES A COST BENEFIT ANALYSIS OF THE RESEARCH. The professor decides what to research and how to allocate his time, which is an expensive resource.
With assistant professors at mid-quality universities, divide the numbers above by two or three to get per student teaching costs. Research efforts are less in quantity and typically quality, and also far less in readership. Suppose an associate professor at Slippery Rock costs, with fringes, $100,000 a year, and she devotes 30 percent of her time to research, and writes one paper a year for an obscure academic journal and gives one paper at an equally obscure academic gathering-- a rather typical occurrence. The journal article still costs at least $15,000, maybe $22,500 after indirect costs. Suppose, more realistically, that 50 people read the article in the Journal of Last Resort or its equivalent. The cost per reader is $450 for a paper that does not move the academic world, much less western civilization, one bit. If 25 people attend the session at the academic meeting that the paper is presented, that would be considered pretty good. If the article costs $15,000 in salary and $22,500 in total to produce, the cost per listener at the meeting is $900. Outrageous. Yet no one does anything about it.
That is why administrators are substituting cheaper help to do a lot of the teaching. They may stop hiring tenured faculty altogether, except ones with sterling research records who can pay their own way with external research grants. In addition, administrators may be starting to evaluate the effectiveness of institutionally funded (via low teaching loads) research. And, if they don't, perhaps some of the third party payers (e.g., state legislatures) will. Expect the fall in teaching loads that has been a central figure of modern academic life to stop --and for good reason.
I am not anti-research. God knows. I have done a lot of it, and love to do it. I am writing what is anywhere from my 8th to 10th book, depending on how you count, and have literally hundreds of published papers floating around, a few of them even occasionally read. But is society better off for it? Perhaps, but at what price?
To be sure, there is a lot of scientific research that is done that has real payoffs for society and I would hate to see universities become solely teaching institutions. Research can have modest but real positive spillover effects with respect to teaching, although it can also hurt instruction when professors treat the teaching function indifferently. But the important thing is we do not analyze the cost or benefit of the way we perform EITHER function, and as resources become scarcer, policymakers may demand that universities start doing it.
The Latest College Rankings
by Daniel Bennett
Online Education Database, or OEDb, released the latest rankings of colleges recently. Unlike the other college rankings, such as the CCAP Forbes and USNWR ones, OEDb ranks only the online colleges. It uses metrics such as acceptance rate, financial aid, graduation rate, peer Web citations, retention rate, scholarly citations, student-faculty ratio, and years accredited.
The top 10 online colleges, according to the OEDb rankings, are:
Online Education Database, or OEDb, released the latest rankings of colleges recently. Unlike the other college rankings, such as the CCAP Forbes and USNWR ones, OEDb ranks only the online colleges. It uses metrics such as acceptance rate, financial aid, graduation rate, peer Web citations, retention rate, scholarly citations, student-faculty ratio, and years accredited.
The top 10 online colleges, according to the OEDb rankings, are:
1 Nova Southeastern University
2 Regent University
3 Champlain College
4 Upper Iowa University
5 LeTourneau University
6 Liberty University
7 Grand Canyon University
8 Dickinson State University
9 Salem International University
10 Keiser University
Friday, January 09, 2009
Trade-Off: Budget Deficit vs. Basic Education
by Daniel Bennett
Yesterday, I wrote a blog that summarized AASCU's new report, which outlines the top ten issues likely to affect public higher education across the states. Issue #7 states: Improve college-readiness among all high school students.
California Governor Arnold Schwarzenegger apparently has yet to receive the memo on this. Faced with a huge budget deficit, he has proposed a number of drastic changes to close the $42 billion gap. One such measure is to reduce the compulsory school year by five days. This would give California one of the shortest school years in the country, which already lags behind the international average number of school days. According to the Trends in International Mathematics and Science Study (TIMSS) in 2003, the US average was 180 days, as compared to the international average of 193 days. Countries with the most days included Korea (225), Japan (223), China (221), Australia (196) and Russian (195).
Is there any wonder why the US trails the developed world in math and science scores, or why American college students increasingly must take remedial courses to make up for what they failed to learn in high school? There may be an intellectual gap, as Charles Murray would argue, but let's avoid giving ourselves an excuse for falling behind by having a short school year.
Yesterday, I wrote a blog that summarized AASCU's new report, which outlines the top ten issues likely to affect public higher education across the states. Issue #7 states: Improve college-readiness among all high school students.
California Governor Arnold Schwarzenegger apparently has yet to receive the memo on this. Faced with a huge budget deficit, he has proposed a number of drastic changes to close the $42 billion gap. One such measure is to reduce the compulsory school year by five days. This would give California one of the shortest school years in the country, which already lags behind the international average number of school days. According to the Trends in International Mathematics and Science Study (TIMSS) in 2003, the US average was 180 days, as compared to the international average of 193 days. Countries with the most days included Korea (225), Japan (223), China (221), Australia (196) and Russian (195).
Is there any wonder why the US trails the developed world in math and science scores, or why American college students increasingly must take remedial courses to make up for what they failed to learn in high school? There may be an intellectual gap, as Charles Murray would argue, but let's avoid giving ourselves an excuse for falling behind by having a short school year.
Appropriations Blues: An Opportunity
By Richard Vedder
Everyone prefers more to less. If you see a five dollar bill lying on the street, you pick it up and consider yourself lucky. Therefore, it is not surprising that the higher education community is crying the blues these days, as dollars are being taken away from them.
The new Grapevine study from Illinois State University provides the first comprehensive data on this year's appropriations decline. The numbers actually show a 0.9 percent INCREASE, but there most likely will be cuts in appropriations as the year goes along and my guess of a true figure is a reduction of, say 3-4 percent. Adjusted for inflation and enrollment increases, the reductions may approach 10 percent on average, which is not insignificant. The decade long (2000-09) average increase in appropriations was a tad over 4 percent, which is essentially zero or a tad less than zero after adjusting for inflation and enrollment change.
Moreover, some states are facing a worse situation. Inflation-adjusted cuts of over 10 percent have been enacted in Alabama, Florida, Rhode Island, South Carolina and Tennessee, for example (and perhaps others). A few states (e.g., Georgia, Missouri, and Wyoming) had planned big increases, but my guess is that those are being scaled back.
The time has come for major changes in the way colleges do business. The salary reduction approach (e.g., Clemson and Urbana University) is at best a short run solution. My associate Andrew Gillen is delivering remarks tomorrow that I prepared for the National Association of Scholars conference outlining 13 things I predict might emerge from the current crisis, and many of them involve cost cutting. And some long run institutional changes may be coming. More schools may abandon tenure, for example. Teaching loads may start growing, reversing a trend of at least 50 years standing. Administrative bureaucracies may be trimmed, and the special status that intercollegiate athletics seems to have may be at least partially questioned (e.g., their budgets may be folded into the general university budget). Above all, the use of technology to REDUCE COSTS, so far elusive, may begin in earnest.
Stay tuned. Out of adversity can come opportunity for reform.
Everyone prefers more to less. If you see a five dollar bill lying on the street, you pick it up and consider yourself lucky. Therefore, it is not surprising that the higher education community is crying the blues these days, as dollars are being taken away from them.
The new Grapevine study from Illinois State University provides the first comprehensive data on this year's appropriations decline. The numbers actually show a 0.9 percent INCREASE, but there most likely will be cuts in appropriations as the year goes along and my guess of a true figure is a reduction of, say 3-4 percent. Adjusted for inflation and enrollment increases, the reductions may approach 10 percent on average, which is not insignificant. The decade long (2000-09) average increase in appropriations was a tad over 4 percent, which is essentially zero or a tad less than zero after adjusting for inflation and enrollment change.
Moreover, some states are facing a worse situation. Inflation-adjusted cuts of over 10 percent have been enacted in Alabama, Florida, Rhode Island, South Carolina and Tennessee, for example (and perhaps others). A few states (e.g., Georgia, Missouri, and Wyoming) had planned big increases, but my guess is that those are being scaled back.
The time has come for major changes in the way colleges do business. The salary reduction approach (e.g., Clemson and Urbana University) is at best a short run solution. My associate Andrew Gillen is delivering remarks tomorrow that I prepared for the National Association of Scholars conference outlining 13 things I predict might emerge from the current crisis, and many of them involve cost cutting. And some long run institutional changes may be coming. More schools may abandon tenure, for example. Teaching loads may start growing, reversing a trend of at least 50 years standing. Administrative bureaucracies may be trimmed, and the special status that intercollegiate athletics seems to have may be at least partially questioned (e.g., their budgets may be folded into the general university budget). Above all, the use of technology to REDUCE COSTS, so far elusive, may begin in earnest.
Stay tuned. Out of adversity can come opportunity for reform.
Thursday, January 08, 2009
Top 10 State Policy Issues for Higher Ed in 2009
by Daniel Bennett
The American Association of State Colleges and University (AASCU) recently released a report that describes the top ten issues likely to affect public higher education across the 50 states in 2009, accompanied with some predictions. The brief review of the list includes:
The American Association of State Colleges and University (AASCU) recently released a report that describes the top ten issues likely to affect public higher education across the 50 states in 2009, accompanied with some predictions. The brief review of the list includes:
1. State's fiscal crises will result in reduced state appropriations for public postsecondary educationThe concluding remarks of the report state:
2. Increases in tuition at public schools and further support for policy legislation to control tuition
3. Changes in state student grant aig programs to tighten restrictions on eligibility
4. Increase in enrollment demand and capacity limitations
5. Implementation of the Higher Education Opportunity Act and the call for increased transparency and accountability
6. Possible Obama Policies - tax credit in exhange for community service, streamlined aid application, increased Pell Grant maximum, matching grant programs, and public higher ed stimulus
7. Improve college-readiness among all high school students
8. Implementation of the Post 9/11 GI Bill in August 2009
9. Federal legislation to clarify the rights of states to offer in-state tuition to undocumented students
10. Fed & State action to accelerate campus sustainability projects and fund campus-based research endeavors while generating so-called "green collar jobs"
Embedded in the fiscally tumultuous year ahead is a silver lining, however. Sheer economic necessity will drive greater innovation, through new policies and actions at all levels—state, system and institutional. The need to innovate, even while under financial will lead to improvements in cost efficiency, effectiveness and productivity.In a related story, CCAP's Richard Vedder discusses 10 possibilities for universities to cut costs during the current economic downturn in a recent Inside Higher Ed article.
Canadian Blacklisting
by Andrew Gillen
The Chronicle reports that the
Hmmm. How does history view the last time academic freedom was suppressed and people were blacklisted if they held "the wrong" views?
The Chronicle reports that the
Canadian Union of Public Employees in Ontario, the largest labor union representing staff members at the province’s universities, plans to introduce a resolution at its conference next month to ban Israeli academics from teaching, speaking, or doing research at Ontario universities if they do not first condemn Israeli actions in Gaza.
Hmmm. How does history view the last time academic freedom was suppressed and people were blacklisted if they held "the wrong" views?
Wednesday, January 07, 2009
Chart of the Week: 01/07/09
The above chart shows the distribution of spending per FTE by school type. Two-year schools spend about $9,200 on the median student, while four-year schools spend about $19,000 on the median student. (Source: IPEDS)
You can view past charts of the week here.
Monday, January 05, 2009
How Much Did Harvard Lose?
by Andrew Gillen
Lost among the holiday shuffle was a piece in the Huffington Post (HT: Felix Salmon) which claims that Harvard’s losses on it’s endowment are much larger than the reported $8 billion:
If I were involved, I’d certainly want to know the mark to market values, but I wouldn’t place too much emphasis on them given that, as Megan McArdle points out,
Lost among the holiday shuffle was a piece in the Huffington Post (HT: Felix Salmon) which claims that Harvard’s losses on it’s endowment are much larger than the reported $8 billion:
Harvard University's admission that it lost $8 billion from its $36 billion endowment fund, as staggering as it sounds, may grossly underestimate the true magnitude of the loss… According to a source close the Harvard Management Corporation (HMC), which runs the fund for Harvard, the loss is closer to $18 billion if the losses on the fund's illiquid investment are realistically appraised…Paul Kedrosky notes that this is mostly “a mark-to-market issue. Does Harvard have to mark its illiquid investments to market, or does it not?” He leans toward “marking as much of it to market as I could.”
…shifting the lion's share of Harvard's money from American stocks, bonds and cash to highly esoteric investment which were not only illiquid but whose imputed value often could not be easily determined by outside parties. So, by the time the bubble burst in the fall of 2008, less than a fifth of Harvard's endowment fund was invested in exchange-listed stocks and bonds.
Nearly 28% of Harvard Endowment fund was in what the fund manager's called "real assets," a category comprised of timber forest and arable land in remote areas, commercial real estate participators, and huge stockpiles of oil and other physical commodities. Such "real assets" plunged in value, if they could be sold, much more severely than the stock market averages.
If I were involved, I’d certainly want to know the mark to market values, but I wouldn’t place too much emphasis on them given that, as Megan McArdle points out,
the Harvard Endowment (unlike almost any other fund) can guarantee that it won't need to sell any of its illiquid assets any time soonShe also offers some thought on the news which seems to
indicate that Harvard was getting its high returns just like all the other financial firms were: by investing in risky, illiquid assets (including shares in hedge funds who did same). Their ability to massively diversify--again, much more than most funds who have shorter time horizons and narrower mandates--made that almost always a winning strategy.Jake at Econompic offers some analysis as well, and shows that:
Harvard's endowment has become increasingly reliant on capital gains vs. income over the past 20 years, with income returns accounting for less than 2% of total returns in 7 of the past 8 years. In an environment characterized by asset deflation and equity market collapse (i.e. the past 6 months), capital gains get crushed.Perhaps the take away point is that if Harvard was forced to sell, they would see very large losses, but that's not very informative or useful given that they won't be forced to sell.
Friday, January 02, 2009
News of the Day 1/2/09
by Daniel Bennett
Creator of the Federal Pell Grant and former Rhode Island Senator, Claiborne Pell, passed away at the age of 90.
In other news, Cecilia Rouse, Labor Economist and Director of the Education Research Section at Princeton University, is expected to be named to the economic team of President-elect Obama. According to the Wall Street Journal:
Creator of the Federal Pell Grant and former Rhode Island Senator, Claiborne Pell, passed away at the age of 90.
In other news, Cecilia Rouse, Labor Economist and Director of the Education Research Section at Princeton University, is expected to be named to the economic team of President-elect Obama. According to the Wall Street Journal:
Mr. Obama is expected to draw on Ms. Rouse's expertise in the economic benefits of education investments as he prepares a stimulus package to help jumpstart the ailing economy. Among other things, the package is expected to focus on preparing workers for jobs in a global economy. Ms. Rouse has written on the benefits of attending community college. She has also argued that the use of school vouchers -- a staple of the Bush administration's stance on education -- doesn't dramatically improve student achievement.
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