Monday, January 03, 2011

Schooling That Works: Four Great Innovations

By: Richard Vedder

Readers of my rants about higher education know that I generally believe that higher education in America is highly inefficient, overpriced, and produces dubious outcomes, including many graduates who end up in relatively low end jobs. But not all of higher education is like that. I would like to discuss four examples of schools or ideas that work –that lead to either a higher quality or lower cost educational experience –or both. This list is hardly exhaustive, but it is indicative of how higher education could transform itself into being more effective.

Acton School of Business

No doubt the most unusual M.B.A. program in the country is run by the Acton School of Business in Texas. It is built on the premise that incentives matter and that higher education’s failures are usually attributable to a lack of proper incentives. The school is the brainchild of Jeff Sandefer, a Texas business professor and entrepreneur who started the institution. As I understand it, new entering students pay a relatively high private school tuition to attend their first semester. They work like dogs –sort of a boot camp for entrepreneurs, working typically more than 12 hour days at least six days weekly –no 30 hour work weeks as is common in academia. Students successfully completing the first semester are given the second semester free of charge. If they complete the second (and last) semester, they get a rebate on the tuition for the first semester. They are expected, however, to pledge eventually make donations to the school at least equal to the value of the tuition if they feel they benefited materially from it (this is more of a moral than legal obligation, I understand).

Not only are students incentivized to work hard, so are faculty members.Salaries are modest –$5,000 or so per course. But huge bonuses are given for superior teaching performance ($20,000 or more per course). And each year, the lowest performing professor, based on student evaluations, is dropped from the faculty –no tenure here. Princeton Review considers it one of the nation’s top MBA programs, and my guess is its reputation among employers, etc., will grow over time. Obviously, a lot of private funds are needed to make this program work, and its advantage is less the cost savings per student (which are nonetheless real) than the high quality of the finished product.

Berea College

In many regards, Berea is a fairly typical liberal arts college, with a pretty good reputation for quality. What makes it different is that its leaders take extremely seriously the notion that college should be affordable. Most students are from relatively low income backgrounds in the surrounding Appalachian region. They pay no tuition fees beyond which are covered by external grants (e.g., Pell Grants). All students work at the college to reduce non-academic personnel costs. The college’s great commitment to access and affordability has led to loyal alums and others giving the school a lot of money, so it has a huge endowment that covers tuition charges rather than spending on costly administrators, fancy buildings, etc. Located in one of the nation’s poorest regions, the school offers affordable high quality (but low frill) college to poor students. Berea is not alone in pursuing this type of mission –College of the Ozarks in Missouri and Coopers Union in New York City have similar commitments, but this focused concern for the customer as opposed to the wishes of others (faculty, administrative staff, etc.) is relatively rare and refreshing.

Olin School of Engineering

In just eight years, the Olin School of Engineering has become one of the best undergraduate schools of engineering in the U.S. It is small (a bit over 300 students), extremely selective and unique in several ways. Until recently, there were no tuition charges, a policy dropped because of the 2008 financial crisis, but the school hopes to revert to 100 percent scholarships for all students. It is a teaching not a research institution. Most engineering schools load the students up on a heavy dose of theory and basics early in the career, and have only modest amounts of hands-on training with real engineering problems. Olin gets students into hands-on real-world like experiences early, although the standard basic cources in math, etc., are still taught, and rigorously. (Like many good engineering schools, students work very hard, but largely because they want to — these kids seem to love the place).

The school is focused on one narrow mission. It does not pretend to be a research powerhouse. Teachers are hired because they are bright, innovative, but above all good in the classroom. The school emphasizes the real-world a good bit, and realizes that many engineers end up as corporate managers and even entrepreneurs –hence some emphasis also on entrepreneurship and the liberal arts. I have talked to several very successful business executives who are high on this school, and hope others are learning lessons from this new venture.


One of the most innovative entrepreneurs in higher education is Burck Smith, who founded and runs StraighterLine and a companion company called SmartThinking. A Williams College and Harvard graduate, Smith has strayed far from his traditional elitist educational background, offering cheap courses on line in many subjects that can then be transferred to accredited colleges and universities with which he has developed a working relationship. Many of these schools are for profit institutions like Kaplan, Capella, or Ashford University, but some are more traditional state schools, like Fort Hays State in Kansas (run for over 23 years by the estimable Edward Hammond, himself one of the greatest public sector entrepreneurs in America), or Western Governors University, a non-profit private on-line university with relatively high standards (and run by another visionary leader, Bob Mendenhall).

StraighterLine claims a person can take a year’s worth of college courses for a thousand bucks. Even if you buy รก la carte off their menu (catalogue) of courses, the cost of a year’s education is far less than most four year schools. Yet StraighterLine offers no degrees itself, and is not accredited, although it apparently has a good relationship with the premier trade organization for higher education, the American Council of Education.

Most courses use McGraw-Hill text materials. The economics course uses the iconic McConnell and Brue textbook. Campbell McConnell decades ago wrote a slightly watered down but still sound version of the flagship text by Paul Samuelson. It has been updated forever. I used the book to teach principles of economics over 40 years ago. Although some would say it is a little light with the latest theoretical fads in economics, it still remains a good rendition of basic economic principles. Students taking the course have some use of on-line tutoring services, of no doubt varying quality and accessibility. While not perfect, I think StraigherLine is a neat concept and one worth emulating —and a great argument for expanding the ease of credit transferability.

Note: all of these innovations are in the private sector. There are some good examples of new innovations at public schools such as Fort Hays State, but I think a disproportionate part of positive change in higher education will come from private sector innovators, many incentivized by the same profit motive that gave us such innovations as the personal computer, iPhone and iPad, and, for that matter, Scotch tape and probably sliced bread.

This post originally appeared on CCAP's "Higher Education and the Economy" blog at on December 28, 2010.

1 comment:

Glen S. McGhee said...

Prof Vedder,
I think you are missing what is truly innovative about StraighterLine.

Just like with bundling sub-prime mortgage loans and then selling them as securities, StraighterLine is having partnering-schools vouch for the quality of its courses.

This is what Fort Hays was doing, even though HLC/NCA had no knowledge of the practice.

StraighterLine does this by
exploiting a little known loop-hole in the system of higher ed QA/QI, which delegates the authority for course approval to the schools themselves. This is why, for example, you will find on-line course quality all over the map, high and low, even at 4 yr schools. There is no consistency because there is no oversight -- other than that provided by the schools themselves. Accreditor involvement in this area, if any, is largely symbolic, and they simply don't have the resources to follow-up on problems. In fact, they appear to becoming more lax in this regard, instead of more stringent.

What's really different here is the delivery mode, pricing, and shifting of course-level QA/QC from a non-accredited knowledge-networking organization to an accredited partner or client college/university, who then takes responsibility for course quality.

This shifting of quality-risk is what's new with this business model, not the curriculum. Non-accredited courses are bundled in with a school's own, home-grown on-line classes, just like sub-prime mortgages were.

What about the instructors and their qualifications? Public institutions are taking on a risk by using this kind of pass-through consortium for distance learning, and the public should be worried about the lack of transparency in this regard.

That this is actual practice speaks volumes about the inability of the present system of accreditation to independently ensure quality, especially for distance education. This arrangement is rife with conflicts of interest, allowing schools to -- in essence --accredit their partners, whose courses they then market themselves.

The Secretary of Education, and NACIQI, need to establish a mechanism for evaluating free standing courses that are not part of an institution, on the basis of their own merits.

But here's the catch: once independent courses can be accredited, then those same standards could be turned back on the public and private schools that have *bundled* their on-line courses, good and bad. And the schools that are already accredited would not stand for this level of scrutiny; not ever.

If anything, we owe StraighterLine a lot for opening up the debate on education quality.
What no one -- not any of the so-called higher ed experts -- has looked at is the unit of analysis for quality at the level of the classroom course. Until now, the level of review has always been conducted at the level of the individual institution, the school itself. In this regard, these proposals move the debate on education quality in an entirely new direction -- one which the established structures will resist.