Education Does (Not) Pay?

by Matthew Denhart and Jonathan Robe

George Leef has come out with his scathing rebuttal to the latest installment of the College Board's "Education Pays" report. The low-down: he agrees with us.

Leef's killer paragraph:

Actually, the report contains data that refute the notion that college is financially beneficial for just about everyone. We read (p.15) that 20 percent of male and 16 percent of female college graduates earn less than the median earnings for high school graduates. What that means is that a substantial percentage of those who go to college spend years of their lives and a lot of money but end up with work that is less remunerative than the typical high school graduate has.

CCAP has also discussed this very issue in a recent YouTube video. Of course, we are not saying that college is not a good decision for some; rather, it is our position that the case for broad, societal subsidization of higher ed for everyone is misguided.

Links for 9/30/10

Andrew J. Coulson

it has long been argued that we should introduce this or that aspect of free markets into the public school system. And that’s the problem. The free enterprise system is a system. It is not a smorgasbord from which we can pick an isolated incentive here and a particular freedom there, and expect to get the same results we’ve come to expect from full-fledged markets…

Thomas H. Benton

I can't remember a time when professors, particularly in the humanities and social sciences—already the survivors of a 40-year depression in the academic job market—had a stronger feeling of being under siege…

"hate" is not too strong a word, I think, for how nonacademics feel about us…

If everyone's biased, including professors, why not just "go with your gut"? It's much easier, and it empowers you against the academics whose admonitions—as we have lost influence—have become increasingly condescending, sanctimonious, and shrill…

we are no longer able to articulate a coherent vision of why others should value what we teach. And with that, I think, we have lost any remaining justification for our autonomy…

MG Siegler

Thiel is starting a new initiative that will offer grants of up to $100,000 for kids to drop out of school. Yes, you read that right. Though that’s not how Thiel puts it. Instead, he calls it “stopping out of school.”

The basic gist is that he will fund up to 20 kids under the age of 20 who apply for this grant. His hope, obviously, isn’t to ruin their lives, but instead to find the best minds thinking about big things early in life. This is where true disruption comes from, Thiel believes.
And it also solves another problem that many young people face today: crippling debt…

Paul Krugman
[AG: This was written in 1996 under the premise that it was written in 2096, looking back on how the world changed.]

The devaluation of higher education. In the 1990s everyone believed that education was the key to economic success, for both individuals and nations…

over the course of this century many of the jobs that used to require a college degree have been eliminated, while many of the rest can, it turns out, be done quite well by an intelligent person whether or not she has studied world literature.

This trend should have been obvious even in 1996…

Or consider the panic over "downsizing" that gripped America in 1996. As economists quickly pointed out, the rate at which Americans were losing jobs in the 90s was not especially high by historical standards. Why, then, did downsizing suddenly become news? Because for the first time white-collar, college-educated workers were being fired in large numbers, even while skilled machinists and other blue-collar workers were in high demand. This should have been a clear signal that the days of ever-rising wage premia for people with higher education were over, but somehow nobody noticed.

Eventually, of course, the eroding payoff to higher education created a crisis in the education industry itself… Many institutions of higher education could not survive this harsher environment. The famous universities mostly did manage to cope, but only by changing their character and reverting to an older role. Today a place like Harvard is, as it was in the 19th century, more of a social institution than a scholarly one…

Chart of the Week: GPA by Athletic Conference

Average college grades vary widely by athletic conference affiliation. While the average GPA at Pac-10 schools (e.g., UCLA and the University of Washington) is a whopping 3.22, the average GPA at Conference-USA schools (e.g., the University of Houston and Southern Miss) is 2.85, as this chart demonstrates.


Notes: The sample includes GPAs only of public institutions. The sample for each conference average is at least 50% of all institutions affiliated with that conference.

National Research Council Finally Releases Its Ratings of Doctoral Programs

by Jonathan Robe

Yesterday, after years of delay, the newest (and long anticipated) installment of the National Research Council's ratings of Research-Doctorate Programs is finally out and generating some buzz in higher ed circles. Both the Chronicle and InsideHigherEd have great overviews of the new rankings, though from reading those stories, it almost seems that the NRC is embarrassed to use that "R-word" to describe what it developed and even declined to defend its work, despite the fact that it's been 15 years since the last NRC ratings and that the entire project cost over $4 million.

While these rankings tend to be on the excessively complicated side of things (I love the headline to Times Higher Education's story), in one sense I don't think this will wind up being too big of a problem, at least in terms of providing information to prospective students. Because these rankings focus only on doctoral programs, the students who would be most served probably have a sufficiently developed intellectual ability to sift through the obtuse systems (yes, the NRC saw fit to release not one, but two distinct rating systems) and interpret the data as they need, though there is no guarantee that anyone will ever fully comprehend the NRC's systems. What is puzzling to me is why the NRC went to all the trouble of constructing such complicated systems without producing a full-fledged "do-it-yourself" ranking tool (i.e., let each individual user pick the factors and weights as he wishes). Such an approach would strike the best balance between the competing goals of flexibility, precision, and usefulness in the rankings--and would also allow the ratings to be published in a more timely manner with more up-to-date data.

One positive feature, however, of the NRC ratings is the focus on comparisons across departments and disciplines rather than entire institutions. Of course the reason for this focus is that potential doctoral students are looking for the specific field of study they want to pursue rather than merely a particular institution at which to study. Although it would be more difficult to implement this departmental comparison in undergraduate rankings, it would be nice to see this feature extended in the future to these rankings as well.

The NRC has also made some progress on its methodology since its 1995 ratings. This time there are two different ratings methodologies: the "R" ratings, which rely partially and indirectly on program reputation, and the "S" ratings, which rely upon supposedly more objective measures. Reputational rankings are, in my view, one of the best ways to maintain the status quo in higher ed and prevent innovation or reform; therefore, the move away from reputation in the "S" ratings is certainly to be applauded.

Yet, the rankings still heavily rely upon inputs (publications per faculty, % new students with full support, % interdisciplinary faculty, etc.), and the output measures included (average completion %, % PhD's with academic degrees, etc.) are very scant. And some of the input variables have no discernible relationship to the quality of a doctorate education (e.g., % non-Asian minority faculty, % foreign students, etc.). This inordinate reliance upon inputs continues to be the fatal flaw with the NRC rankings. After all, given that undergraduate tuition and fees are used to subsidize graduate education at many schools, a fixation on the inputs at the graduate level not only encourages the "academic arms race" but does so in a way that increases the financial burden already on undergraduate students while keeping the rise in cost almost invisible to graduate students.

Another, albeit far less pressing, problem with the NRC rankings is the published rankings range. Each school is given a range of ranks, designed to reflect the 90% confidence. While the use of a range of rankings rather than a single, precise ordinal rank is arguably more appropriate for college rankings, the range must be meaningful--that is, not inappropriately broad--in order for the rankings system as a whole to convey a realistic picture of educational quality. The fact that, say, Case Western's doctoral nutrition program is rated at between the 38th percentile to the 69th percentile (and this is by no means the most extreme example) suggests that the "range" may in fact be too vague to be meaningful . Janet A. Weiss, graduate dean and vice provost at the University of Michigan, is entirely correct to question these ranges as she did in the InsideHigherEd story.

All in all, while the NRC has made some improvements to its ratings, and while the new ratings systems do, at some level, increase institutional transparency, I remain troubled by the shortcomings inherent in a system which is based on inputs and doubt that these rankings will, in the long run, be a truly valuable service to students and the public at large.

Links for 9/29/10

Martin Hutchinson

the effect of continued ratcheting up of college costs and the modest decline in the college earnings premium has made college dramatically less attractive on a return-on-investment basis. Instead of the healthy 25% and 18% post-tax returns that had been achieved in 1973, and the higher returns in the intervening years, the post-tax return from college investment has fallen to 21% for men and 18% for women…

Dean Dad

Much of the popular discussion of the economics of online education -- both in the press and in the academic blogs -- just gets it wrong. The institutional savings, if any, don’t come from larger class sizes. If you do online education right, it’s labor-intensive. Frankly, if reducing labor costs is your primary motive, you can’t do much better than the traditional overstuffed lecture taught by an adjunct. On a per-student basis, the labor costs of that are miniscule. The institutional savings from online education come mostly from infrastructure. Adding server space is dramatically (and increasingly) cheaper than adding classroom space. You don’t have to add parking, or heating costs, or seats in the library. When your physical campus is running full, this is no small consideration…

Bob Samuels

The University of California is about to decide on a path that will determine its future…

Due to the massive investment losses and the failure to continue contributions, the university now faces the strong possibility of having to contribute over 20% of its budget to the pension for the next twenty years… when the UC lost just 1% of its funding during the last two years, the administration imposed layoffs, furloughs, departmental reductions, and a major reduction of spending on instruction. Imagine what will happen when the UC has to put 20% of its budget into the pension program…

MIKI TANIKAWA

In a country with a shrinking population, the latest trend in Japan’s higher education is something of a mystery: the number of universities and academic programs is rising. The growth is sharpest for professional graduate schools, where the number has soared from practically zero in 2003, when accreditation began, to 130 now, in fields ranging from law and business to clinical counseling and education.

But there is one obvious problem: not enough students are signing up…

A Modest Proposal: Searching for an Academic Bottom Line

By Richard Vedder

Does much learning occur at the University of Michigan, Colorado College, or the University of Texas at San Antonio? Do students at Duke University fare better in the job market than their counterparts at Northwestern or Cornell? There are so many important questions like these regarding higher education for which we do not have answers, and colleges have generally resisted providing that information in a uniform matter that would allow comparisons of performance at colleges and universities by consumers, funders, and taxpayers generally.

I have a modest proposal of three ways that we could get immensely important information that would make for more informed customers and donors, stimulate healthy competition between schools, and promote greater concern for undergraduate education by the schools themselves, particularly the national research universities. Moreover, these proposals are not inordinately expensive, nor would proceeding with them impede in any major way institutional autonomy.

Proposal One:

Require all schools receiving federal funds to require newly entering students to take one of the following tests: ACT, SAT, Critical Learning Assessment, or the National Assessment of Educational Progress Test administered at age 17 in English and Mathematics. Require those schools to administer the same test to those student shortly before receiving the bachelor's degree. Provide information on the test results to the federal government or a private not-for-profit agency so that changes in test scores can be disseminated to the public. Did student performance on these academic measures improve during the college years? Finally, require graduating students to take the Graduate Record Examination in the major subject, if such an exam exists, and to report the tests scores to the federal government or the private agency. Average "value added" on the tests of basic skills/general education (as well as the raw data) would be reported to the public as well as student performance on subject exams.

Proposal Two:

Require each year that every college or university provide to the Internal Revenue Service the Social Security numbers of students receiving bachelor's degrees in the preceding 12 months. Require the IRS to publish, by school of graduation, average and median employment earnings data for graduates 1 year, 5 years, and 10 years after graduation, based on federal income tax returns. Since employability in good paying jobs is a major goal of many college students, this would be very useful information.

Proposal Three:

When I served on the Spellings Commission on the Future of Higher Education, Boeing executive Rick Stephens told us about a fascinating thing his company did: categorize employees by college attended and do some assessment of those schools based on the job performance of the workers. Rick knew that some schools rather consistently provided workers that met or exceeded expectations, while others did not. Why should we not expand the survey to hundreds of employers and make the results available to the public (on average performances, of course, not individual workers)? Why should not companies receiving more than $5 million in federal contracts annually and employing 1,000 or more workers be required to fill out a very simple standardized form on all employees assessing job performance, classified by colleges attended? And why should not the Department of Labor, Department of Education, Census Bureau or some agency provided summary data from this information on any school for which there are at least 25 employees? This would be a good way of gathering some good data on which schools seem to turn out young adults that are useful and productive.

There are all sorts of objections to these ideas, and some of them are quite legitimate. Obviously some laws would have to change to allow these proposals to be fully operative. Statistical methods exist to mesh together schools using, say, the ACT test with those using the CLA. Schools that argue, for example, that the SAT is not really a good instrument to measure learning or understanding in core disciplines can opt for another test, say the CLA that purportedly measures critical thinking. The gains of disseminating this information are potentially so great, that we should try to minimize the problems and move in the direction of doing at least one, if not all three, of the ideas above. This would allow us to rely less upon published magazine rankings (full disclosure: I direct the computation of the rankings used by Forbes), force schools to emphasize important outcomes rather than inputs (thereby reducing the academic arms race), perhaps increase price competition, etc.

Note to Self: Pay attention to bylines

by Andrew Gillen

My rss reader makes all blogs look pretty much the same, so when I read

This ad highlights a successful graduate of a for-profit college and includes the tag line, “My education. My job. My choice.” But it forgot one more, very important, statement…Your Money.

I just assumed it was by one of the "Cato-ites." It was actually by Erin Dillon over at Education Sector.

Hmm... on the issues where I disagree with ES, I generally agree with Cato, and on the issues I disagree with Cato, I generally agree with ES, so being able to turn ES into Cato will come in useful in the future. Now I just need to find a way to turn Cato into ES…

Links for 9/28/10

Matthew Ladner

there is a pattern here: in the limited number of instances when jurisdictions take control of policy away from the reactionaries, keep it away from them for a sustained period, and implement reforms that they hate, NAEP scores make substantial improvement…

the only reasonable conclusion to reach is that unions hate policies that succeed in substantially improving the education of children…

Bill Gleason

Land-grant universities should get back to the business of doing what they do best­—in particular, teaching at a level sufficient to prepare people in their states to be competitive in the job market—and worry less about becoming world-class public research institutions…

Megan McArdle

In the past, college degrees conferred higher incomes on those who earned them. But almost all of that surplus went to the student rather than the college, because aside from a small number of extremely affluent families, the students were young and did not have that much cash. If colleges wanted to expand their market, college tuition was constrained to what an average student, or their family, could pay.

Introducing subsidized loans into the picture allowed students to monetize that future income now. It's hardly surprising that colleges began to claim more and more of the surplus created by their college degree…

Not, mind you, that I think that colleges think of this in quite such mercenary terms. Rather, they keep pushing the boundaries (and keep telling themselves how valuable a college degree is), and students keep telling themselves how valuable a college degree is, and paying up. But I think this is the underlying dynamic.

So why not just switch to subsidies…

we'd simply relieve the burden on students by shifting it to taxpayers. Meanwhile, we'd free students of the need to think about the cost, and value of their education--which sounds nice if you think about future nuclear physicists skipping gaily towards the registrar, and less nice if you think about Perpetual Students who never quite finish that degree in Old Church Slavonic.

Charlotte Allen

Here is a new trend: college for people who can't read or write…

Links for 9/27/10

Richard D. Kahlenberg

10 Myths About Legacy Preferences in College Admissions

1. Legacy preferences are just a "tie breaker" in close calls…
2. Legacy preferences have an honorable history of fostering loyalty at America's great institutions of higher learning…
3. Legacy preferences are a necessary evil to support the financial vitality of colleges and universities—including the ability to provide scholarships for low-income and working-class students…
4. After a generation of affirmative action, legacy preferences are finally beginning to help families of color. Pulling the rug out now would hurt minority students.
5. An attack on legacy preferences could indirectly hurt affirmative-action policies by suggesting that "merit" is the only permissible basis for admissions…
6. Legacy preferences may be unfair, but they are not illegal. Unlike discrimination based on race, which is forbidden under the 14th Amendment, it is perfectly legal to discriminate based on legacy status, as the courts have held…
7. Legacy preferences—like affirmative action, geographic preferences, and athletics preferences—are protected by academic freedom, especially at private universities and colleges…
8. Legacy preferences have been around a long time and are unlikely to ever go away, because powerful political forces support them…
9. Legacy preferences don't keep nonlegacy applicants out of college entirely. They just reduce the chances of going to a particular selective college, so the stakes are low…
10. Everyone does it. Legacies are just an inherent reality in higher education throughout the world…

Tom Kane on the Merit Pay study

It's a well-done study of a not-very-interesting question. Merit pay for teachers could impact student achievement via three distinct routes: by encouraging teachers to work harder, by encouraging talented and skilled teachers to remain in teaching, by enticing talented and skilled people to enter teaching. The study was designed to answer a narrow question: can you make the average teacher work harder with monetary incentives?...

I've never believed that lack of teacher effort--as opposed to talent and skills--was the primary issue underlying poor student achievement gains. Rather, the primary hope for merit pay is that it will encourage talented teachers to remain in the classroom or to enter teaching. Although the jury is admittedly still out on it, this study provides no reason to question that hope…

Michael J. Petrilli and Chester E. Finn, Jr.

it’s fairly obvious that the GOP doesn’t know what it stands for on education anymore…

Where you can detect at least a pulse on education, you can spot Republican instincts on reform colliding with deeply held principles of federalism… it looks like “local control” and “states’ rights” arguments may rule the day should the GOP take over one or both houses of Congress…

state legislatures are where the traditional public-school establishment wields the most power and is best able—often working behind the scenes—to keep anything much from changing…

In urban America and many suburbs, local control means union dominance…

Neal McCluskey responds

They implored them not to ”reflexively revert to weary old themes that emphasize states’ rights, local control, and parental choice—and tell Uncle Sam to basically butt out.” In other words, they strongly advise ignoring (1) the Constitution, (2) decades of failed federal education efforts, and (3) the inherent hopelessness of government monopolies…

it seems the problem isn’t district or state government, but government itself! That’s right: A government schooling monopoly tends to be controlled by the people employed by it – the people who have the greatest incentive to be involved in education politics and the easiest ability to organize — and what they naturally want is more money and little or no accountability…

Quote of the Day

Greg Mankiw

Also, being a university professor is quite a good deal. Top pay with maximum flexibility regarding teaching etc. As I understand it, you do pretty much whatever you want.

CCAP on YouTube: "Education Pays" Study Overstates Benefits of a College Degree

In the latest You Tube video, Richard Vedder, Jonathan Robe and Matthew Denhart discuss the recently released College Board study that triumphs the benefits of a college degree.




To subscribe to CCAP's YouTube channel, follow this link.

Repeating Failure

by Daniel L. Bennett

Lindsey Burke at the Heritage Foundation wrote yesterday about yet another Obamination of a policy proposal. It seems that the White House is intent on repeating failed history, as it has proposed

expanding the power of states to authorize higher education institutions

This smells to me a lot like the now defunct State Postsecondary Review Entities (SPRE) which were created in the 1992 Higher Education Act. Never really getting off their feet, they were officially disbanded in the 1998 HEA. It also seems to me that the Department of Education knows that it cannot successfully evaluate and monitor all of the colleges which are the recipients of billions of federal aid dollars and that it can't rely on the accreditors either.

So what is ED's solution? It wants to pass the torch to the states, which have little incentive to take on the role, in hopes that it can pick up the slack. If I were a governor or member of a state legislature, I would resist the federal government's efforts to bully my state into new regulatory imperatives.

When will these folks in Washington realize that it is not the lack of regulation that has lead to widespread academic malfeasance, but rather the fact that exorbitant government subsidies have created a perverse incentive for economic rent-seeking in higher ed? It seems to be the Washington way to create a ticking time bomb and then find someone to point the finger at when it blows up (Wall Street for the housing bubble; For-profit colleges for the college debt bubble). Our system of higher ed certainly is in need of much more accountability, but our political system has a more dire need for accountability.

Gainful Employment on Hold

by Daniel L. Bennett

If you are one of our loyal readers who has an interest in for-profit education, then you probably already heard rumors that the highly controversial gainful employment rule being levied by the Department of Education is being pushed back. According to the Chronicle:

The U.S. Department of Education will announce on Friday a new "timetable" for the release of rules aimed at the for-profit higher-education industry

It should come as no surprise that ED is putting this thing on hold given the serious criticism the rule has received (e.g - Parthenon Group, Charles Rivers Associates, Mark Kantrowitz) and the fact that ED received up to 130,000 comments on the rule that it is obligated to review, not to mention the political timing is terrible as midterm elections are in less than 40 days.

CCAP is generally among those critical of the proposal on the grounds that it was crafted in haste and its methodology is seriously flawed, it will decrease access to postsecondary education for many non-traditional students, it will likely add to the costs of providing an education, and the fact that the rules were designed to attack one sector while largely giving the others a free pass. We do however recognize that there are some serious issues in all of higher education (growing debt burdens, predatory recruiting, malfeasance, etc), and not just the for-profit world, that need to be eradicated and should be prosecuted. Taxpayers are forking over (perhaps the proper analogy is being knived for) hundreds of billions of dollars annually to subsidize so-called higher education, and many people on the receiving end of these expenditures, as supposed public stewards, are abusing their privileges.

Does Education Pay?

By: Matthew Denhart and Jonathan Robe

Tuesday the College Board released its triennial study: Education Pays. The study's opening line reads:

Students who attend institutions of higher education obtain a wide range of personal, financial, and other lifelong benefits; likewise, taxpayers and society as a whole derive a multitude of direct and indirect benefits when citizens have access to postsecondary education.

And thus with the following line it concludes:

Accordingly, uneven rates of participation in higher education across different segments of U.S. society should be a matter of urgent interest not only to the individuals directly affected, but also to public policy-makers at the federal, state, and local levels.

The authors' argument is quite clear: higher education has tremendous benefits, and therefore should be encouraged. In short, "Education Pays," and more specifically, higher education easily passes a cost-benefit analysis.

Yet, while the report provides useful data in a well displayed fashion, it lacks the clear-cut evidence needed to support its thesis that the benefits overwhelmingly outweigh the costs (see further CCAP discussion of this study on YouTube). The authors use a tremendous amount of data that show that, on average, college graduates earn more, live healthier lives, and vote at higher rates than do their counterparts possessing only a high school degree.

However, this study suffers from a confusion of correlation with causation. The authors clearly acknowledge the difference between the two and concede that the mere comparison of people with different educational backgrounds "do not reliably determine causation or measure the exact size of the effects [i.e. the effect of college on outcomes]." Nonetheless, the authors continue to suppose that such comparisons are best treated as: "broadly gauged evidence of the powerful role that higher education plays in the lives of individuals and in society."

It strikes us as odd that comparisons that are unable to reliably predict the size of the effect of higher education on these beneficial outcomes, can concurrently provide reliably "broad gauged evidence" of a "powerful role" for higher education.

Perhaps the greatest problem with our higher education system today is that the public is entirely unaware of the real value of a college degree. Comparisons such as those used in the College Board study ignore the fact that the same types of students who are disciplined enough to complete college are likely predisposed to also have traits that will lead them to earn more money, participate in elections and live healthier lives. Furthermore, as Charles Murray noted in his insightful book, Real Education, these comparisons can be highly misleading, even damaging, to those people who are poor fits for occupations requiring college degrees but who would perform excellently in other careers. Charles Miller and others have pointed other problems with the College Board's approach, as the Chronicle pointed out in its story.

Being able to conduct an honest cost-benefit analysis of higher education is essential to informing our public policy priorities. Better efforts need to be made to measure the benefits that can actually be attributed to college attendance itself. Likewise, cost estimates must go beyond the simple monetary and opportunity cost of attendance to students to include the cost of taxpayer resources that subsidize the system and the opportunity cost of those funds which are thus made unavailable for other, perhaps more productive, uses.

Neglecting to tease out the specific benefits added from college attendance and failing to factor in societal costs of subsidizing higher education, means that the College Board's study grossly overstates the ease with which higher education passes a cost-benefit analysis. Rather than encouraging private citizens and policy makers at all levels to take "urgent interest" in promoting college attendance, we prefer to encourage them to strive to better understand the true costs and benefits of higher education. Only then can an honest analysis take place.

Should We Abolish Colleges of Education?

By Richard Vedder

I believe the following stylized facts are roughly correct.

1. American K-12 students perform in a mediocre fashion on international standardized tests, and other data likewise suggest that the academic performance of American students is disappointingly modest.

2. Following from the first point, poor K-12 academic preparation is a significant reason why colleges need remedial education programs, and why they have high drop-out rates.

3. Great teaching leads to better results than mediocre teaching.

4. Most K-12 teachers have studied extensively in colleges of education.

5. Teachers who do not come from a college of education background do as least as well, and often better, than those with certification gained by taking education college courses. Programs relying on non-education-college-trained personnel like Teach for America are highly successful.

6. Standards in American colleges of education are appallingly low, and a sort of anti-knowledge, anti-intellectualism is often apparent. Typically, education students have below-average indicators of college performance (e.g., relatively low high school grades and test scores), yet tend to receive extremely high grades in their education courses. averaging A- or even higher. Research done at the center I direct (the Center for College Affordability & Productivity), took a sample of 174 public institutions with education schools and obtained grade data from campusbuddy.com. Looking at over 1.3 million grades, we found that the average GPA in education classes was 3.65, and 76 percent of students received an A- or better. Contrast that to university-wide GPAs that averaged 2.99, with 41 percent receiving A grades. (I have talked about the wider problem of university-wide grade inflation here and here).

7. The colleges of education have often fought genuine education reform that rewards teachers on the basis of student learning. They have fought to keep certification rules requiring students to take many education courses. Too often, they seem to believe that the maximization of student self-esteem is more important than the acquisition of knowledge.

To be sure, not all colleges of education fit this model, and there are some effective education professors teaching at some schools. By and large, however, colleges of education are considered vast wastelands of mediocrity at most comprehensive universities. And it certainly seems that most of the good research on learning, educational costs, etc., is being done outside education schools by psychologists, political scientists and economists.

Thus it seems to me it is a dubious proposition that undergraduate colleges of education make any sense at all. I am not, of course, suggesting that it is not worthwhile studying the process of learning, and trying to improve it. To the contrary, we do too little, not too much, research into what works in terms of improving student educational outcomes. But future teachers are better served by getting good grounding in academic subject matter, augmented by some practice in teaching under the guidance of an experienced mentor. Courses in the history of education, for example, are less useful to the future math teacher at the intermediate or secondary level than a course in advanced calculus.

State governments should consider defunding students in colleges of education, requiring future teachers to major in an academic subject, etc. There should be upper limits on the amount of work in pedagogy allowed in a bachelor's program, and requiring teachers to get a master's degree in education (a way educrats might use to preserve the education schools) likely should also be prohibited. Most top-flight schools already do not have undergraduate education schools, but this blight on true "higher education" should be discouraged at all institutions depending on taxpayer funds.

Incentives Matter

by Daniel L. Bennett

Economist Gary Wolfram reviewed CCAP's recent study on for-profit education for the Pope Center's Clarion Call. He largely agreed with our conclusion that incentives matter in education:

The profit motive creates a strong incentive to satisfy customers (in this case, students) at the lowest cost. The lack of the profit motive means less attention to the needs of students and less effort at making education affordable for them. That’s probably the most crucial point of all.

Creativity < Financial Reality

by Andrew Gillen

Judith Nichols and William Nichols write

Attempts to apply business practices in education lack the wholeness of vision we associate with acts of imagination… corporate thinking has made our institutions vulnerable to technological and managerial fads that undermine creative thinking…

What? To me, it takes quite a bit of creativity to spend $75,000 per student on administration (as Wake Forest does), or to write 24,674 separate pieces on Shakespeare over a 26 year timeframe.

This is a bit unfair to the Nichols’, as the latter part of their piece focuses on creativity in the classroom. It is only the part that doesn’t that bothered me. I’m all for creativity, but at some point, it must be tempered by financial reality. Colleges can come up with a million creative ways to spend more money, but how many creative ideas have they come up with to cut unnecessary spending? If contamination by corporate fads (like limited budgets) leads to more of the latter, that is a good thing, especially if you believe the type of spending referenced above is unsustainable.

Links for 9/23/10

Seth Roberts

we can ask if colleges exist: 1. To teach the students. 2. To employ the teachers. 3. To help businesses who will eventually employ the students (the signalling function of college)…

Dan Ariely

We ordered a typical college term paper from four different essay mills, and as the topic of the paper we chose… (surprise!) Cheating…

The essay mills charged us in advance between $150 to $216 per paper.

Two weeks later, what we got would best be described as gibberish…

At this point we were rather relieved, figuring that the day is not here where students can submit papers from essay mills and get good grades for them…

two of the papers were 35-39% copied from existing works… contacted the essay mills requesting our money back. Despite the solid proof that we provided, the companies insisted that they did not plagiarize. One company even tried to threaten us by saying that they will get in touch with the dean at Duke to alert them to the fact that we submitted work that is not ours…

Kevin Carey

States technically control access to the higher education market by building public colleges and universities and chartering private non-profit institutions, but that hardly ever happens anymore… In practice, state higher education regulatory bodies spend a lot of time approving and disapproving individual programs at existing public institutions…

The result is that state higher education regulatory agencies end up creating elaborate procedures for program approval, institutions that enjoy the fruits of regulatory restriction expend lots of resources protecting their turf, and meanwhile whole realms of higher education policy–like whether the programs in question are any good–remain essentially unexamined.

Scott Jaschik

What if the alumni preferences are significant? What if significant numbers of these alumni children wouldn’t have gotten in anyway? And what if -- contrary to conventional wisdom -- alumni preferences have no impact on alumni giving? Those what-ifs are all true, according to a book being published and released today by the Century Foundation (and distributed by the Brookings Institution Press). The book is a collection of research articles by scholars, journalists and lawyers arguing that much of what colleges have said over the years about alumni admissions preferences isn’t true -- and that they amount to the book’s title: Affirmative Action for the Rich…

Student Fees are Funding the Athletics Arms Race

by: Matthew Denhart

USA Today has struck a major chord again. In the paper's feature article today, Steve Burkowitz, Jodi Upton, Michael McCarthy and Jack Gillum report shocking evidence that the largest portion of growing student fee monies go to subsidize swelling intercollegiate athletics (ICA) budgets. Furthermore,as McCarthy points out in a complementary article, students are largely unaware of how their dollars are being used.

USA Today's ongoing efforts to make details about ICA finances available to the public has allowed much greater exploration into showing how student fees are used to fund ICA. According to today's article:

Students were charged more than $795 million to support sports programs at 222 Division I public schools during the 2008-09 school year...Adjusting for inflation, that's an 18% jump since 2005, making athletics funding at public schools a key force in rapidly escalating cost of higher education.

As CCAP has pointed out in our recent Regressive Tax study on intercollegiate athletics, fees vary greatly across different institutions, and that the effect is highly regressive. McCarthy summarizes with this quote from me:

Those who can most afford to pay a subsidy tax actually pay the smallest amount, [and] Those who can least afford it pay the most.

At some schools the athletics fee is extremely high. USA Today reports that ICA fees can amount to as much as 23% of the total in-state cost of a higher education. Probably the most disturbing thing about all this is that students are often times left in the dark. Although states such as Virginia and Tennessee have laws mandating fee disclosure, institutions do not always comply, and if they do, fee amounts are very difficult to find.

The experiences at several schools with respect to student fees suggests that students have mixed feelings. Students at the University of Montana organized to reject a plan (by a vote of 2 to 1) to increase fees. Although the Hawaii board of regents imposed an ICA fee for the first time recently, students there protested it strongly. Yet, at Bowling Green State University and Utah State, students willingly voted in increase their ICA fees (despite the fact that existing fees already account for more than 5% of total in-state costs at each school already).

CCAP is preparing to embark on a large-scale study examining the issue of student fees and how they are perceived by students. Our results should provide rich information to continue this important line of reserach that USA Today has ignited.

Links for 9/22/10

Bill Dickens

if there was a much more efficient way to do whatever it is that education does, somewhere some society would have found it and we would all be trying to copy them…

I work for Northeastern University which has for decades distinguished itself by offering "co-op education." Students spend about a year during their time at the university working in jobs related to their field of interest. NU does OK (we have a niche market), but we aren't revolutionizing the way universities do business. If work was so much more productive at teaching what needs to be taught you would expect we would have a real leg up on other institutions. From what I can tell, our graduates don't do much better or much worse than other universities for time spent…

Bryan Caplan

I agree that education has some positive externalities that partially balance out the negative externalities of signaling. But I think that these positive externalities are overrated, and in any case stem from a tiny subset of coursework…

I'd like to be able to say that government is the whole problem. But that just seems false. Long before government subsidized higher education significantly, schools designed meaningless hoops, students jumped through them, and employers rewarded them for it…

David Glenn

If Fayetteville State students encounter classroom exercises like those seven or eight times a semester, they're likely to improve their scores when they take the actual CLA exam. But that does not mean, Mr. Valenti says, that this is a hollow teaching-to-the-test project. The thinking and writing skills captured by the assessment test, he says, are genuinely fundamental to a high-quality college education…

Dean Dad

Should professors with full-time positions at college A be allowed to teach as adjuncts at college B?...

Work is work. If the issue is competition, let’s take that one to court and see how well it holds up. Can police officers work private security? If so, why can’t professors at state schools moonlight at for-profits? Another commenter objected that for-profits are parasitic on the production of knowledge; taken literally, that comment would seem to apply to any teaching-focused institution…

Chart of the Week: U.S. Expenditures on Higher Education vs. Selected Nations' GDPs

In 2008 the United States spent $432 billion on higher education- more than the entire annual output of most countries, including many developed economies in Europe, as this chart shows.

Links for 9/21/10

David Glenn

The CLA is a direct measure of skills, in contrast to surveys about how much time students spend studying or how much they believe they have learned. And unlike multiple-choice-based measures of learning, the CLA aspires to capture a student's ability to make an argument and to interpret multiple types of evidence. Those skills are close to the heart of a liberal-arts education…

Richard J. Shavelson, an educational psychologist at Stanford University and one of the CLA's creators, makes a similar point in his recent book, Measuring College Learning Responsibly: Accountability in a New Era (Stanford University Press). "If you want to find out not only whether a person knows the laws governing driving but also whether she can actually drive a car," he writes, "don't judge her performance solely with a multiple-choice test. Rather, also administer a behind-the-wheel driving test."…

the CLA typically reports scores on a "value added" basis, controlling for the scores that students earned on the SAT or ACT while in high school. In raw terms, the highest scores in the Texas system are at Austin and Dallas, the most-selective campuses. But in value-added terms, it appears that students at San Antonio and El Paso make stronger gains between their freshman and senior years…

by 2012, the CLA scores of more than 100 colleges will be posted, for all the world to see, on the "College Portrait" Web site of the Voluntary System of Accountability…

JARON LANIER

For every good teacher who is too creative to survive in the era of “no child left behind,” there’s probably another tenacious, horrid teacher who might be dethroned only because of unquestionably bad outcomes on objective tests.

We are tempted by the demons of commercial and professional ambition to pretend we know more than we do. This hypnotic idea of omniscience could kill the magic of teaching, because of the intimacy with which we let computers guide our brains… [AG: My computer told me to say that we don’t need to worry about this.]

KEVIN KELLY

My son studied the popular programming language C++ in his home-school year; that knowledge could be economically useless soon. The accelerating pace of technology means his eventual adult career does not exist yet. Of course it won’t be taught in school. But technological smartness can be…

This just isn’t fair. I haven’t seen the inside of the gym in years, so not only am I a slovenly, misshaped, poor excuse for a human being, but apparently it's making me dumb too.

MAC vs. Big 10

By: Matthew Denhart

Early in the college football season, it is common for teams to play non-conference games. This past weekend featured four games that pitted Mid-American Conference (MAC) schools against counterparts in the Big 10 Conference.

The Big 10 teams swept these contests. Ohio State University defeated Ohio University 43-7, Penn State blanked Kent State 24-0, Purdue topped Ball State 24-13 and Illinois squeaked out a victory over Northern Illinois 28-22.

This domination is largely to be expected. After all, the Big 10 schools have athletic budgets that are as much as five times larger than those at MAC schools. However, the ironic part is that the students and schools at MAC institutions actually pay a much heftier fee to subsidize their intercollegiate athletics (ICA) departments than do those in the Big 10 (see this CCAP report). Since the Big 10 teams regularly dominate their MAC opponents, in essence students at MAC schools are paying more and getting less (in terms of wins).

How is this possible? The simple answer is that the demand for MAC sports is too low for these athletic departments to generate revenues great enough to offset their expenses. Yet, rather than down-scaling their operations, they simply rely on subsidies to pick up the bill.

On average in 2008, ICA departments at MAC schools were subsidized to the tune of nearly $15.7 million, while Big 10 schools only required an average of $2.7 million in outside funds to balance their budgets. The figures below represent the ICA subsidies for seven of the eight institutions mentioned above (Penn State does not report to USA Today's database):

Ohio University: $15.05 million
Ohio State University: $0.00

Ball State University: $15.14 million
Purdue University: $0.00

Northern Illinois University: $15.15 million
University of Illinois: $4.51 million

Kent State University: $13.60 million
Penn State University: N/A (does not report to database)

As you can see, two of the four Big 10 schools have a subsidy equal to zero. Yet, all MAC schools require substantial subsidies. These monies come from student fees, government support, and the wider institution's budget and thus act as a tax on resources that could have been used in other ways to promote student learning. This tax is highly regressive since it falls much more heavily on poorer schools. In 2009, MAC schools had an average endowment of $159 million while Big-10 schools (even excluding the private Northwestern University) had an average endowment more than 11 times larger at almost $1.8 billion.

Such large subsidization of ICA is madness. Given the regressive nature in which it falls on different institutions, schools in the major conferences are very unlikely to ever pursue reforms. Thus, it is up to the institutions in conferences like the MAC to lead the way to reform through conference-wide agreements to curb athletic expenditures and end the futile arms race.

Bubbly College Debt

by Andrew Gillen

Minding the Campus has published my essay on The Amazing College Debt Bubble. My favorite parts include:

by far the largest share of blame for the tsunami of debt falls on the colleges themselves. As Robert Martin argues, "higher education finance is a black hole that cannot be filled." Colleges have nonetheless attempted to fill the hole with student borrowing. Such greed, when filtered through a well-functioning market, need not be a cause for concern as the market channels it into useful and productive activities. Unfortunately, the higher education sector cannot be characterized as a well functioning market...

and

the best way to put these figures into perspective is to realize that the $1,456 per student that colleges actually spend on instruction implies that the $126 billion that Americans borrow would cover the instructional costs for 86.3 million students. Using the higher figure of $2,366 for instructional costs, Americans' borrowing would still cover the instructional costs for 53.3 million students. And yet we only send 18.7 million students to college (and many of these are part time students)...

Links for 9/20/10

Tyler Cowen

Signaling models are important but they are not the only effect and of course a lot of signaling is welfare-improving for reasons of screening and sorting and character reenforcement. The traditional story of high social returns to education is supported by evidence from a wide variety of different fields and methods, including cross-sectional growth models, labor economics, political science, public opinion research, anthropology, education research, and much more. You can knock some of this down by stressing the endogeneity of education, but at the end of the day the pile of evidence, and the diversity of its directions, is simply too overwhelming.

Dean Dad

A cliche of economic history is that the early railroads failed because they thought they were in the railroad industry, but they were actually in the transportation industry. Trucks ate their lunch. The educators who will thrive in the future will be those who understand that they aren’t in the Tenured Professor business; they’re educators…

Steve Kolowich

the University of Texas at San Antonio’s Applied Engineering and Technology Library… its on-site collection is only available electronically.

Mike Mandel gives us this chart:

CCAP on YouTube: More on the Tuition Bubble

In this most recent video, Richard Vedder, Christopher Matgouranis, Jordan Shirkman and Michael Koslen consider whether a "tuition bubble" exists.

Jonathan Robe recently summarized the growing "blog literature" on the tuition bubble, and his summary can be viewed here.

For more YouTube videos from CCAP, please feel free to visit and subscribe to our channel.

Links for 9/17/10

Jessica Wakeman

I regret that I took as many gender and sexuality studies courses as I did…

Stephen Burd

One of traditional higher education’s best kept secrets is the extent to which colleges are undermining the goals of the federal Pell Grant program.

When Congress created Pell Grants in 1972, it expected that the federal government would work hand-in-hand with colleges (as well as states) to eliminate the financial barriers that all too often keep low-income students from attending college. But as we have seen, both public and private four-year colleges are increasingly working at cross purposes with the government by using their institutional aid dollars to try and lure in the students they desire, rather than to meet the full financial need of their students. As a result, Pell Grant recipients who choose to enroll in these institutions often have little choice but to go deeply into debt to do so…

Clara M. Lovett

But, by and large, the offshore "clones" of American business schools attracted significantly different student bodies: young men from an emerging urban middle class whose families struggled to send them to an American business school, and young women for whom study abroad was neither financially possible nor culturally appropriate.

Those new, and potentially far larger, student populations seeking an American business education did not easily meet the standard criteria for admission, such as SAT scores for undergraduates and GMAT scores for prospective M.B.A.'s. Not all applicants were ready for English-only curricula and for Western norms concerning such matters as relationships with faculty members, respect for deadlines, and definitions of plagiarism. These issues aside, AACSB-accredited business schools could not provide programs of study at prices that middle- and low-income students could afford. Their business model is dependent on the use of research-active full-time faculty members with terminal degrees in business disciplines. That is expensive faculty, even by American standards. The model was simply not viable in environments where enrollments of masses of students, limited resources, and inadequate infrastructure were the norm…

The Economist updates us on the state of human capital contracts.

The College Bubble Just Keeps Floating Around

by Jonathan Robe

There has been quite a bit of discussion recently about a ballooning "higher education bubble" (or, if you prefer, a "tuition bubble"), and some are warning that this bubble could soon collapse and burst, with serious economic consequences.

Of course, none of this discussion should surprise us. The threat of an imploding tuition bubble is, after all, something CCAP's Andrew Gillen warned about over 2 years ago and which Forbes, The New York Times, and The Chronicle of Higher Education all discussed to some degree soon after that CCAP report came out. CCAP also has recently discussed this issue in a YouTube video.

Back in June of this year, Glenn Reynolds wrote an excellent column in the Washington Examiner about the college bubble. Since then, Mark Perry mentioned it on his own blog and at the Enterprise Blog, and The Economist picked up the story. Michael Barone wrote another column on the subject for the Examiner and Matthew Shaffer added his thoughts at Phi Beta Cons, as did Paul Rahe over at ricochet.com and Peter Wood for the National Association of Scholars, as well as many others for various outlets.

It’s easy to see the growing concern about the tuition bubble: the burden of paying for college tuition has grown significantly over time. As this chart shows, from 1976-2008, average undergraduate tuition at 4-year year schools has gone from about 10% of median household income to nearly 25%. In other words, a typical household would have to pay a quarter of their annual income today to send one child to college. And that doesn’t even touch room and board costs or other living expenses.

At its most basic level, the tuition bubble reflects a widespread misallocation of resources and distortions of incentives. Resources which would otherwise be allocated by individuals and the public towards alternative uses are being devoted to higher education because individuals are told that it is in their best interest to obtain a college degree and the public is told that we need to push hard for increasing higher education in order for the U.S. economy to remain a world economic leader. However, there is now some evidence suggesting that many are beginning to see that higher education is not all that it has been cracked up to be.

I think part of the reason that the tuition bubble continues to persist (even during a particularly sluggish economy) is directly related to peculiar nature of higher education. First, demand for higher education can increase substantially during recessions as more people opt for going to school to either develop a new set of marketable skills or to wait out a poor job market. Since the supply of higher education is fairly static (or even shrinking slightly), this leads to increases in prices even during recessions. Furthermore, it has been very easy for students and families to rack up huge debts in an attempt to pay for college, and additional third-party payments (particularly from government agencies) tend to further blunt the effects of rapidly rising costs.

I suspect that, while the collapse of the tuition bubble is perhaps inevitable, it may not happen for a while, particularly because a college education is still widely and highly regarded. The collapse can also be temporarily postponed due to the pervasiveness of third party payments and the deep coffers of many of the highly respected schools. (According to the most recent NCES statistics from 2007, 63 institutions of higher education held 58% of all college and university endowment wealth in the U.S.; those same 63 schools received 44% of all federal research grants for colleges and universities.) If demand for college education falls fast (putting schools in a tight spot), it is quite possible that we will see a renewed push for massive higher ed bailouts, resulting in heavy federal intervention to prop up these schools despite growing concern about the government’s own long-term fiscal outlook. Throwing even more money at schools in this way ultimately won’t prevent the bubble from collapsing; it will only make the collapse more painful, and, as David French observes, will impact colleges disproportionately.

UPDATE: Don't forget the bubble talk that's going on also at EduBubble.

Links for 9/16/10

Joanne Jacobs

Sixty percent of new community college students aren’t ready for college-level work…

Emilie Deans

Earlier this year, the Congressional Budget Office (CBO) said that the fiscal year 2011 appropriations bill would need to provide at least $23.2 billion to support that [Pell] grant amount. But Democrats ignored the estimate, shortchanging Pell Grants by $5.5 billion (providing only $17.7 billion) and redirecting that money to fund other programs to make it look like the overall bill would fit under the $169.6 billion spending cap. Since students getting lower Pell Grants next school year would be an unpopular budgeting decision, the bill’s sponsors attempted to cover up the funding problem…

included an unprecedented instruction in the bill requiring that CBO ignore the budget rules and disregard any discrepancy between what the Pell Grant program will cost and the funding provided in the appropriations bill…

Peter Meyer

Can’t poor black kids catch a break here?

We throw them into segregated inner city public schools all over the country and blame poverty for their poor performance. Someone comes along and actually educates them, proving that poverty is not the cause of their academic problems, and we cry segregation!

Harvey Mansfield on grade inflation.

More Evidence that We Need New System of Quality Control

by Daniel L. Bennett

Recently, I piggy-backed off excellent reporting by Education Sector's Ben Miller and commentary from Kevin Carey that described the public Chicago State University as one of the nation's growing number of drop-out factories and a non-trivial source of financial impropriety:

state audit found that even as the university suffered budget cuts, [Elnora] Daniel [former President] and other employees had spent lavishly on meals, alcohol, and first-class airfare. Daniel had brought five relatives and a university administrator with her on a nine-day Caribbean cruise for a “leadership conference.” Lax financial oversight allegedly resulted in the university paying more than a quarter of a million dollars for two photocopiers purchased from a company owned by a university employee.

Meanwhile, students contended with broken elevators, dirty classrooms, and ill-equipped labs. As enrollment declined, so did graduation rates. Of the first-time, full-time freshmen who started in 1996, about 18 percent graduated within six years.

Carey described situation at CSU as also being one of gross incompetence that will likely go unchecked:

Because colleges and universities are unusually well-regarded institutions that serve a noble societal purpose and are run by people with esteemed academic credentials, the public conversation about them tends to discount the possibility of gross incompetence. In reality, universities can be terribly mismanaged just like K-12 schools, fire departments, or huge multinational oil companies. Failure to acknowledge this prevents us from tackling the problems that most need to be solved.

Now the Chicago Tribune reports that Carey's prophesy was correct:

Chicago State University's accreditation has been reaffirmed after being in limbo for more than a year due to concerns about poor retention and graduation rates.

This provides more fuel to the fire that our nation's quality control system is seriously flawed and in dire need of real reform. Now, I obviously need to learn much more about CSU's history to be in a position to make a judgement as to whether it should be eligible for federal aid, but it seems common sense that its accreditation status should not be simply reaffirmed because it has:

started several new programs to help students who are struggling. Among them: an early alert system that every month flags students who are missing class, not turning in homework or failing exams. Tutoring is then offered to those students.

The library is now open until midnight, and the university purchased textbooks that are kept at the library for students who can't afford their own. The university also worked with the Chicago Transit Authority to add a bus stop on campus.

In other words, the poorly performing school is being awarded for spending more money. At best, the school should be given a short-term probationary status with some goals that must be reached in order to retain accreditation. What I'm saying is that our accreditation system has no teeth. It is afraid to make any tough decisions due at least partially to the fact that it is a self-regulated collegial system. CCAP has been exploring accreditation reform recently and will be releasing a paper in the near future that includes our recommendations for a better quality control system of higher education. Stay tuned.

Student Loan Defaults: The Blame Game

by Daniel L. Bennett

The big news in higher ed thus far this week has been the ED's release of the latest data on federal student loan default rates. No big surprise that default rates are up all across the board, given that college tuition continues to soar while the state of the economy has made it more difficult to find good-paying jobs for fresh grads. Here are the figures:

the FY 2008 national cohort default rate is 7.0 percent, up from the FY 2007 rate of 6.7 percent. The default rates increased from 5.9 to 6 percent for public institutions, from 3.7 to 4 percent for private institutions, and from 11 to 11.6 percent for for-profit schools.

ED Secretary Arne Duncan took the opportunity to single out and harangue the for-profit sector:

This is a disservice to students and taxpayers

rapid growth of enrollment, debt load, and default rates at for-profit schools in recent years prompted the Obama Administration to embark on a year-long negotiation with the higher education community to develop a set of proposals that strengthen the integrity of the federal student aid programs and ensure that taxpayer funds are used appropriately

Duncan's words are actually reflective of the entire higher education system and the government's misguided entrance into the student loan business. After all, default rates continue to rise among all college students as we pour more money into student loans for all, which has become a de facto entitlement.

My colleague Andrew Gillen predicted awhile back that we are experiencing the inflation of a tuition bubble as a result of generous federal aid programs. This is not unlike the housing bubble that recently popped and sent our economy into a tailspin. Rather than singling out the sector which enrolls only 10% of all students for being a a disservice to students and taxpayers, we should be questioning the federal government's takeover of the student loan business as a disservice to the entire public and a source of economic rent-seeking for universities of all stripes.

But then again, as my colleague Richard Vedder described, we do have an Administration that:

has taken control of iconic private automobile and financial-service companies, has viciously attacked Wall Street greed, has tried to manipulate more than ever the private use of money and credit, is favoring a huge increase in taxes on capital gains

Chart of the Week: Growth in Federal Aid

After a long absence, the CCAP Chart of the Week is making a return.

The below graph depicts the growth in real terms of total federal student aid since 1980. These figures exploded in the last decade, nearly doubling between 2000 and 2009, beyond the rate of inflation.

The Public Be Damned

by Richard Vedder

Two decades ago, give or take a few years, a spate of books highly critical of higher education appeared: Charles Sykes' ProfScam, Thomas Sowell's Inside Higher Education, Martin Anderson's Imposters in the Temple, and Allan Bloom's best selling The Closing of the American Mind are four examples. These books were critical of the unproductive use of time and resources of faculty, on the alleged political bias of the academy, of the failure to teach important verities about life itself.

In spite of all of this, nothing really changed. The points Sykes made over 20 years ago hold more or less the same today, for example. While the academic muckrakers of the late 20th century had little impact, the muckrakers of the early part of the same century like Upton Sinclair (The Jungle) or Ida Tarbell (History of the Standard Oil Company) measurably impacted policies relating to food, health and anti-trust legislation. Is higher education inoculated against reform?

A new generation comes along, and a new bunch of books critical of academia are starting to appear. Two recently out include Andrew Hacker and Claudia Dreifus' Higher Education? and Mark Taylor's Crisis on Campus. We are told colleges have lost their way, have lost sight of what is important, namely shaping young minds and turning immature adolescents into responsible young adults. The last round of muckraking had a decidedly conservative cast to it, while this one is more conventionally left wing or apolitical. But until there is mass indignation about the behavior of colleges--their obscene costs, their bloated bureaucracies, the scandalously low teaching loads, the tons trivial academic research, the corruption of intercollegiate sports (the University of Alabama has rescheduled classes for November 18 because they were worried classes might be a distraction for the Alabama-Georgia State football game that day), the high salaries of presidents, etc.--little will happen. Reform requires threats of reduced funding from the financiers of higher education.

As previously noted in this space, the pollster Scott Rasmussen perceptively argues that the nation's Political Class (politicians, lobbyists, party operatives, etc.) believe radically different things than the People believe, and given the people's ultimate control over the politicians, this spells big changes soon. One can argue that the Academic Class has radically different perceptions that the public that funds higher education. The public believes state universities have as their top mission the intellectual and leadership development of undergraduate students, while the Academic Class believes that research and graduate education is truly more important.

The public believe university presidents are public servants who should live comfortably but not luxuriously, compensated in part by their job security and the satisfaction derived from leading institutions of importance in furthering the continuation and development of Western Civilization. The Academic Class believes colleges must compete with corporations for top talent and thus pay salaries perhaps double what the public would view as justified.

The public believe faculty should spend a majority of their time teaching, advising students, preparing for classes and other instructional functions, whereas the Academic Class thinks that research deserves first billing, and that students should be limited in their access to professors.

How far can the Academic Class and the People diverge in the way they view higher education? Is a day of reckoning coming to higher education? Nothing happened in response to the academic muckrakers of c. 1990, but will the people of 2010 start demanding tough love towards American colleges and universities, tying funding to true reforms. Stay tuned.

Links for 9/15/10

Peter Wood

when the American higher education bubble bursts, we will still have an abundance of smart students, good books, and capable teachers. All we will need is a better way to put them together.

Sarah Kaufman

"You've been fooled into thinking there's no other way for my kid to get a job . . . or learn critical thinking or make social connections," hedge fund manager James Altucher says.

Altucher, president of Formula Capital, says he sees people making bad investment decisions all the time -- and one of them is paying for college...

Robert J. Samuelson

Standard theories don't explain this meager progress. Too few teachers? Not really. From 1970 to 2008, the student population increased 8 percent and the number of teachers rose 61 percent. The student-teacher ratio has fallen sharply, from 27-to-1 in 1955 to 15-to-1 in 2007. Are teachers paid too little? Perhaps, but that's not obvious. In 2008, the average teacher earned $53,230; two full-time teachers married to each other and making average pay would belong in the richest 20 percent of households (2008 qualifying income: $100,240). Maybe more preschool would help. Yet, the share of 3- and 4-year-olds in preschool has rocketed from 11 percent in 1965 to 53 percent in 2008.

"Reforms" have disappointed for two reasons. First, no one has yet discovered transformative changes in curriculum or pedagogy, especially for inner-city schools, that are (in business lingo) "scalable"…

The larger cause of failure is almost unmentionable: shrunken student motivation…

Eric Kelderman

The basic question is whether a system of accreditation developed in the 19th and 20th centuries meets the needs of a 21st-century higher-education landscape…

Peter T. Ewell, vice president of the National Center for Higher Education Management Systems, said the debate boils down to whether accreditors should serve primarily as consumer protectors or continue their traditional role of monitoring academic quality more broadly…

Links for 9/14/10

Greg Mankiw

In the end, the goal of the rent control laws is thwarted (the low rents are enjoyed by well-paid tenured faculty rather than the needy), the income tax laws are thwarted (a sizable part of compensation is untaxed), and all this is done by a nonprofit institution (the university) whose ostensible purpose is to serve the public interest.

The Boston Globe

But there’s another, less honorable, explanation for the run-up in coach’s salaries: Athletic directors compete to see who has the best overall won-loss record, spanning all sports. Thus, they throw big money at the winningest coaches. That smacks not only of misplaced priorities, but financial irresponsibility. University presidents take note: Only managers operating with no sense of limits would make such decisions.

George Leef

There is a lesson here: We ought to have a separation of education and state.

The Wall Street Journal

State universities have become the favorite of companies recruiting new hires because their big student populations and focus on teaching practical skills gives the companies more bang for their recruiting buck. Big state schools Pennsylvania State University, Texas A&M University and University of Illinois at Urbana-Champaign were the top three picks among recruiters surveyed.

Eric Gorski

The number of college students who defaulted on their federal student loans climbed in the fiscal year that ended in September 2008, according to new government data released Monday.

And once again, those who attend for-profit colleges and universities were the most likely to default.

The grim numbers are no surprise, given that the timeframe roughly aligns with the start of the recession. But they come at a politically charged time, as for-profit colleges fight proposed regulations that would cut off federal aid to some programs if too many students default on loans or don't earn enough after graduation to repay them.

Here's A Novel Idea - Money Back Guarantee

by Daniel L. Bennett

American business was transformed forever some time ago when firms began focusing on customer satisfaction, producing great schemes such as the money back guarantee, risk-free trials and the mantra that the "customer is always right." Kaplan's visionary CEO Andrew Rosen wants to bring this concept to higher education. In a letter sent to ED Secretary Arne Duncan in response to the controversial gainful employment and other stringent new regulations of his industry, Rosen

suggested that by making the introductory portions of its for-profit higher education program "risk-free," and the tuition refundable, the company could address any concerns over how students are recruited into the program or whether they get what they pay for.

That this customer-focused idea stems from the for-profit sector does not surprise me the least bit. The economics of education do after all require that for profits to be made, a provider must offer

educational services that are in high demand. Those educational services would not likely be in high demand for long if they were of dubious quality or did little to increase a student’s employability. The track record of for-profit education is long enough at this point that if the industry were providing a product of little value, the customers would be aware of this and simply go away. They have not. Demand at for-profits is as strong as ever. If demand for a product is strong, the product must be providing something of value for the customer.

Kaplan's proposition, if permitted to come to fruition, will only enhance the value of its product. Let's hope that state and federal regulators, as well as accreditors, will see the potential of such a customer-focused approach to higher education and clear the way for Kaplan and others to change the market in a positive way.

CCAP in the News

A Washington Post story last week on the rising costs of a college degree and whether the degree is worth the cost quoted CCAP director Richard Vedder.

In the WSJ college rankings published in today's edition of The Wall Street Journal, the Journal cited CCAP research as one of their sources for their rankings.

Richard Vedder was quoted in a feature piece on college accreditation in the Chronicle of Higher Education.

Be sure to check out Richard Vedder's regular contributions to the Chroniclen's "Innovations" blog, as well.

Human Capital Contracts and Microfinance

By: Matthew Denhart

A growing movement in international development is the continued development of the microfinance sector. Microfinance attempts to overcome market failure in lending to the poor, who often do not have the means to post collateral to help offset a bank's risk of lending. To manage risk, microfinance institutions insist that borrowers arrange themselves into peer groups, and that the entire group guarantee repayment of the loan. This allows people with very local knowledge of the credit worthiness of their peers to provide information on potential borrowers that would have been extremely costly for the microfinance institution to obtain for itself. Although microfinance seems to work better in some countries than others, and microfinance institutions have varying levels of success, overall this system of personalized lending appears to be a promising way to help finance the productive activities of the poor.

Earlier this week, a few of my colleagues and I had lunch with a bright young lawyer, Tonio DeSorrento. Tonio has a number of clients who are trying to develop another innovative financial product, namely human capital contracts (HCCs) to finance higher education. CCAP has discussed this equity-like concept in a number of places (see here, here, and here).

At lunch I was intrigued to learn from Tonio that a few HCC arrangements currently exist, and that they operate in a similar way as microfinance arrangements (see this article in The Economist). Perhaps the greatest challenge facing HCCs is the question of whether contracts can be enforceable. An investor agreeing to pay college costs up front for a percentage of a student's future income must know that the student will be good for the money. This can be very difficult to discern since there are a number of ways one could evade future repayment.

Two organizations, Lumni and Enzi, have largely taken the microfinance model and applied it to HCCs. Lumni seeks donations from individuals that go into a fund they manage and then use to invest in equity contracts with students. Enzi operates by connecting individual investors to individual borrowers through the internet in a fashion similar to the popular online microfinance organization, Kiva.org. These peer-to-peer arrangements attempt to overcome the enforceability issue by personalizing the loans, similar to microfinance.

As Tonio related to me, most HCCs are currently being originated with below market-rate capital. Can the idea be translated into a successful for-profit financial product? Microfinance has had some major successes.

HCCs have other significant challenges too though. As Andy Gillen points out, probably the most significant is that readily available and cheap government loans pose very stiff competition since they offer interest rates that fall well below the market rate. This creates an adverse selection problem for HCC providers. Only those students who believe they would have a lower repayment obligation by agreeing to pay a portion of future income would prefer HCCs to subsidized loans. The students finding themselves in this predicament are those who are likely to not have high incomes upon graduation, and thus are generally a losing financial proposition for HCC providers.

However, Tonio informs us that there are several start-ups who are trying to overcome these, and other challenges. This is an encouraging sign. I will be following the development of this industry closely.