Tuesday, September 29, 2009

Costly Lessons in America

How traditional universities rip students off


In a typical year over the past generation, the cost of attending college has risen at about double the rate of inflation. Family incomes have not kept pace. And despite huge increases in federal financial assistance, the proportion of lower-income Americans in the college population has actually declined over the past 30 years.

The other sector that has seen comparable inflation over the past generation is health care, and this is no accident. In both sectors, government intervention largely neuters the ability of markets to allocate resources efficiently, by establishing third parties (neither consumers nor producers) that pay many of the bills. When that happens, the consumer is not very sensitive to prices, and consumes wastefully. For these and other reasons, a good argument can made that we are overinvested, or at least mal-invested, in higher education.

Compounding the problem, over 90 percent of American higher education is nonprofit. Nonprofit institutions lack incentives to be efficient. The officers of for-profit entities work hard to do two things: increase revenues and reduce costs. But there is no well-defined bottom line in nonprofit higher education. Is Yale having a good year in 2009? Who knows?

For-profit corporations compete to win new customers and despair when they lose market share. But in the U.S. News & World Report rankings, higher scores come from turning customers away — in the form of a lower acceptance rate. Supply therefore tends to be rigid and unresponsive to demand at many of the nation’s best-known colleges and universities. Moreover, with third parties paying part or all of the bills (via government and private “scholarships,” subsidized loans, and subsidies of institutions), schools can often raise fees without dire financial or academic consequences. In particular, they sock it to more affluent customers — whose financial condition they know in exquisite detail, thanks to the Free Application for Federal Student Aid, which requires a level of disclosure unique in American consumer life.

The supply of educational institutions is itself rigid. Accreditation organizations have restricted the ability of innovative education entrepreneurs to enter the market. The for-profit higher-education sector costs less and, perhaps ironically, disproportionately serves the low-income, first-generation university students whom premier universities have largely abandoned.

In addition, perverse incentives for administrators and students often increase costs. It is often ambiguous who actually runs the school — the university trustees? Top administrators? Faculty? Students? The alumni and major donors? Tenured faculty and their deans usually control the curriculum and can make life miserable for university presidents. The presidents, to buy peace, give the faculty nice salaries and benefits, light teaching loads, and good parking, and maintain low-demand academic programs that should be axed. Students are given fancy country-club-like facilities in which to live and play, and a curriculum of decreasing rigor (average GPAs on a four-point scale have risen from about 2.5 to around 3.1 or 3.2 over the past 50 years), as well as the opportunity to lead lives focused on partying, booze, and sex. The alumni’s favorite collegiate entertainments, typically sporting events, are heavily subsidized. In short, everyone who is part of the “shared governance” of universities is paid off. To make things worse, decisions are often made by committee in a costly, bureaucratic fashion.

Allow me to offer a personal anecdote of university inefficiency at work. In a weak moment a quarter of a century ago, I agreed to be a department chairman. I conned my dean into letting me hire a new faculty member, meaning that 17 people now did what 16 had done before. In other words, the department’s productivity fell — yet I was nicely rewarded for my efforts, since my compensation was based partly on peer evaluations and my colleagues were grateful to have less work. (In what other business do employees have partial control over their boss’s salary, and even a say in who their boss is?)

Universities do little to measure what students learn, and it is hard to assess the value of their research, so good estimates of academic productivity are hard to come by. Nonetheless, under almost any reasonable assumptions, it is lower than it was 40 years ago — and it is certainly not higher. Yet over the past 30 years or so, the number of non-instructional university employees, adjusted for changing enrollment, has roughly doubled. My university has a sustainability coordinator, a recycling coordinator, and umpteen diversity and public-relations specialists — almost none of whose posts existed when I began teaching. How much do they improve the instructional and research programs? Not at all.

Speaking of research, much of it achieves only trivial refinements of insignificant issues, and is produced for a nearly nonexistent audience. Jeff Sandefer of the Acton School of Business estimates that an academic-journal article costs on average $50,000 — and is read by 200 people. That’s $250 per reader. Mark Bauerlein of Emory University notes that over 22,000 articles about the works of Shakespeare have appeared since 1980. Are there that many new and insightful thoughts to be had about the Bard? Have not diminishing returns set in — for this topic and many others?

More generally, statistical analysis from the Center for College Affordability and Productivity suggests that the correlation between economic growth and state-government appropriations for higher education is negative — i.e., resources are taken from the highly productive for-profit sector and reallocated to relatively inefficient universities, retarding growth. As the late Milton Friedman said to me a few years before he died, perhaps he was wrong in his early writings, and instead of subsidizing higher education we should tax it.

The solutions? Reduce, do not increase, the federal student-loan programs that have raised both demand and prices. Give money directly to students, rather than to institutions, and restrict aid programs to those who are truly needy and perform well (40 percent of students do not graduate within six years; support should be cut off after four years of full-time undergraduate study). Substitute a system of good consumer information for most of the current accreditation process, which stifles competition. Make it easier for students to transfer between institutions, and favor lower-cost community colleges that are not as afflicted with the ailments described above. Develop non-university programs for certifying vocational competence — for example, tests similar to the CPA examination.

More radically, a strong case can be made that higher education is a truly private good, that the positive spillover effects of universities are vastly overrated or even nonexistent, and that government should get out of higher education altogether. In short, we should implement roughly the opposite of the strategy favored by policymakers in Washington and most of our states.


British science uptake figures are 'science fiction', says report

Lies never stop from a Leftist regime

Labour has been accused of fiddling the figures on the number of students studying science and maths, covering up the nation's skills crisis. The Government has trumpeted a "significant increase" in the numbers of pupils taking separate GCSEs in physics, chemistry and biology.

But a new report claims the rise is accounted for, in part, by the growth in the number of 16-year-olds, while the proportion studying science A-levels has dropped since 1997. At university level, big increases in the number of undergraduates studying science, technology, engineering and maths (STEM) subjects are also a "fiction", according to the study.

The Government now includes as "science", courses such as nutrition and complementary medicine, geography studies, sports science, nursing and psychology, even though in dozens of universities it is classed as an arts degree. "The Government is deliberately trying to make the statistics on STEM subjects appear better than they really are," said Anna Fazackerley, the head of education at the Policy Exchange think tank, which produced the report. "This must stop. We must have a sound picture, based on consistent and meaningful data, of what is really happening to these skills in our schools and universities."

Industry experts insist that Britain need more science skills if it is compete internationally. According to the Confederation of British Industry, 92 per cent of firms across all sectors require employees with science, technology engineering and maths skills but nearly two thirds have problems finding them. By 2014, there will be more than two million extra jobs which need STEM skills.

Ministers have acknowledged their importance and in 2007 designated STEM as "strategically important subjects" to the economy. Since then, they have claimed success in boosting the numbers studying the subjects. But the new report, due to be published tomorrow, said the figures do no stand up to scrutiny.

In 2006, Gordon Brown pledged that all children achieving high grades in science tests at 14 would be "entitled" to study three separate sciences at GCSE. But less than half of state schools entered at least one pupils for the traditional science GCSEs last year. [Not even ONE student!] The percentage of pupils studying three separate sciences barely improved from 1997 to 2007, rising from 6 per cent to 8 per cent. Instead, the vast majority of pupils take a single science GCSE which focuses on scientific literacy and issues that are in the public eye, such as global warming and mobile phone technology.

Teachers and academics warned that the qualification, taken for the first time in 2008, was a "dumbed down" version, needing little scientific knowledge and understanding. One question in a recent science paper asked "why is wireless technology useful?" - the correct answer was: "no wiring is needed". Earlier this year, the exam regulator Ofqual admitted there were serious problems with the exam and ordered it to be redesigned.

At A-level, the percentage of pupils taking biology, chemistry and physics has actually fallen since 1997. In 2008, 6.5 per cent of students were studying biology, down from 7.2 per cent in 1997, while 4.9 were studying chemistry, down from 5.5 per cent. The proportion studying physics fell from 4.3 per cent to 3.3 per cent in 2008.

University level STEM subjects seemed to be rising. The number enrolled has grown from 370,000 to 515,000 in just over a decade. Even when converted to a percentage, they are still increasing, from 38 per cent in 1997 to 42 per cent in 2008. But analysis by the think tank shows that study of the traditional subjects of biology, chemistry and physics has barely changed over this period. Biology has actually fallen, from 13,923 students in 1997 to 12,515 in 2008. The dramatic increase in science numbers has been driven partly by the growth in new subjects and the manipulation of what counts as science.

The Government's classification is now much broader and includes subjects such as sports science, forensic science and complementary medicine. Psychology students have been included as "biological science" students since 2003, adding more than 13,000 students to the STEM total. Even students at universities which classify psychology as an arts degree are included.


Britain: University terms begins again, and the Chinese are back

I was in Sainsbury’s yesterday afternoon. Looking around me I might have been in Guangzhou Tesco. The occasional foreigner (as they will insist on calling us, even in our own country), but otherwise wall-to-wall the sons and daughters of the Middle Kingdom. And then I remembered; it is the end of September, and I live in a small university town.

Yes, around this time of year we go Chinese. I merely observe; I have no racist reactions, and nor does anyone else. Firstly, this is the era of globalisation; virtually a quarter of the world’s population is Chinese, and why shouldn’t that be the case here? Secondly, these are all bright and valuable undergraduate and postgraduate students; they’re not on the dole, and if you get beaten up late at night it won’t be one of them who does it. No doubt they keep our university afloat with the fees they pay. (Economists often complain about the high Chinese savings rate; I wonder if they realise what a large proportion of those savings go to British and American universities, to educate the savers’ grandchildren.)

The strange thing is that Chinese universities are riding high in the world rankings. Only the very best UK/US places of learning can compete with the best of Beijing and Shanghai. So why are so many Chinese parents so keen to send their kids to our universities?

Partly, of course, because the top universities in Beijing and Shanghai are not so easy to get into. The word is that it doesn’t exactly depend on school results. Natives of those cities enjoy a built-in advantage, and good connections also help. Chinese who don’t enjoy these advantages feel better off sending their kids to Western universities than second-rate Chinese ones. Western education, you see, still carries a certain innate cachet. In a society where “face” is everything, it’s interesting to see that our products are seen as automatically superior, however debased we may sometimes feel it is. The Chinese theoretically believe their culture is superior to all others; but they are voting with their feet, or at least their children’s and grandchildren’s feet – and long may it remain so.


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