Tuesday, December 13, 2011

Team O's Denial on College-Cost Crisis

Want to do exactly the wrong things to fix US higher education? You can't do much better than the recent offerings from Education Secretary Arne Duncan. To a system blackout-drunk on taxpayer money, the Obama administration would deliver even more booze while only whispering about tough love.

Speaking at a Nov. 29 Las Vegas gathering of financial-aid administrators, Duncan addressed exploding college costs, a problem highlighted by Occupy Wall Street protesters angry over rising student debt. He lauded loan forgiveness and repayment reduction, and exhorted colleges to do, well, something to become more efficient.

While trumpeting the bogus claim that the average college graduate will earn $1 million more over his lifetime than someone with just a high-school diploma, he didn't even hint that taxpayer-funded student aid (including easily forgiven loans) enables schools to blithely raise their prices.

In short, Duncan said all the wrong things. Start with the "million-dollar jackpot." While there is an average net gain for those who actually complete four-year degrees, the "$1 million prize" doesn't factor in lost earnings while in college, the high cost of schooling or other variables. Include those, and the average lifetime premium is probably closer to $300,000. And, by definition, roughly half of all grads won't even hit that average.

Yet the real problem is this: Only about 57 percent of people who start four-year programs finish within six years, and most of the remaining 43 percent will probably never graduate. So lots of people will gamble for $1 million, but few will win.

Of course, the jackpot isn't the only reason millions keep paying even as tuition skyrockets. There's something even bigger: ever-expanding government aid.

Between 1985 and 2010, inflation-adjusted federal student aid rose from about $30 billion to about $140 billion, a 367 percent leap. Pell Grants alone ballooned from $8.1 billion in 1985 to $41.7 billion in 2011.

Add various tax credits and deductions to that, and it's no wonder college prices have inflated even faster than health care: Government has ensured that ever-higher bills can be paid.

But hasn't the real culprit been declining state support for colleges, forcing schools to raise prices? Duncan cited that one, too; it's another dodge.

Consider: State funding doesn't much affect private colleges, yet their tuitions perpetually boom. Plus, while public institutions do raise their prices when state support falls, they also raise them when support is rising.

Anyway, state and local support hasn't been gutted. From 1985 to 2010, inflation-adjusted state and local funding rose from about $54 billion to $75 billion. Support only appears to drop when looked at on a per-pupil basis, because higher-education enrollment has also ballooned.

Which brings up the last point: The Obama administration has set the goal of leading the world in the percentage of the population possessing a college degree.

But the reality is that we've already got armies of people in college who'll never finish. There's little reason to think we could get even more people in and through.

But there's a plan to deal with that — sort of. Duncan says the administration will "challenge" schools to improve their graduation rates. Great.

Colleges' most likely response will be to run warm bodies through to graduation, while giving them few if any college-level skills. Indeed, we've been seeing this for years, with literacy for degree-holders dropping and earnings for people with only a bachelor's degree falling, too.

Ultimately, none of Duncan's prescription will make college much cheaper or more effective. Only taking the jet fuel — federal student aid — out of college pricing, and being frank about the real value of higher education, could do that.

But Duncan didn't even hint at such things — because that would really be tough love.


Don’t just try

He stood in front of my desk, fidgeting, and avoiding eye contact. This was a necessary but not pleasant conversation.

"Look," I said, "to get a B in the class, you will need to do just a little better on the final than you have so far on your previous tests. But just a little. Remember: Students usually raise their averages on the final exam. You have seen most of this material before. You understand it better now. And since the final is weighted more heavily than the other tests, I'd say you are in a pretty good position to pull out a B. Can you do it?"

He looked up from the floor. "Well, I'll try."

It's a conversation I have multiple times toward the end of every semester. A student wants to clarify where he stands in the class and what he needs to earn on the final to both maintain his current grade and to perhaps even raise it.

It's a short, one-act play in which we both know our parts. I pull out my calculator and show the student the necessary score. Often, I'll add that I am not saying that he has to ace the final but only improve his previous performance by a small, marginal amount.

And then the student says, "Well, I'll try."

It wasn't until the most recent semester that this retort began to bother me. I have long known of the insidiousness of this attitude, yet I rarely noticed when it stood right in front of me, wearing blue jeans and a grey North Face jacket.

The thing is, I teach in a college of business, with an emphasis on the word teach. Although I am very active in research, I have not forgotten that the primary social function of the professor is to profess the truth about the world, or at least his area of specialty, from one generation to the next — and that we prove our worth to the extent that we achieve this in the classroom. To be sure, we also prove ourselves by refining and adding to the present understanding of how the world works, but this is all for naught if the present understanding is not continuously transmitted from professors to students, year after year after year.

When the great liberal economist Ludwig von Mises defined education as the transmission of doctrines and values, he also noted its limitations. Contrary to some of the promotional literature of many of our leading business schools, Mises wrote that qualities highly valued in market economies such as innovation and genius cannot be taught. Did Steve Jobs really learn to be Steve Jobs during his semester at Reed College?

Still, this does not diminish the importance of understanding correct doctrines and values.

In my area of interest, economics, we have learned over the last few years what happens when the received wisdom of centuries of thinking is poorly transmitted to the present generation that populates society's institutions. For instance, we have forgotten that creating money derived from nothing results in a stealthy transfer of wealth to whatever groups get to spend the new money first. Scholastic thinkers as early as Nicholas Oresme, writing in the 14th century, knew well of this effect of fiat money. This Catholic prelate, philosopher, and author of the De Moneta would hardly be surprised by changes in capital ownership, productivity, savings, and wages in the years since 1971, when the United States and the world officially ditched gold-backed currencies for fiat money.

But that's not what I want to tell my student, who is standing before me, promising to try his best. As a teacher in a college of business, I know that business isn't about trying. It's about achieving results. Colleges of business should not be in the business of graduating a bunch of triers. Successful entrepreneurs do not simply try, nor do they waste their money hiring employees simply to try. Those who actually accomplish their assigned tasks — ethically, consistently, and with purpose — are those who both reap the greatest benefit from their business degree and will be the most likely to live out successful vocations in business.

We serve students poorly when we teach them that if only they try, they will succeed. Trying is necessary but not sufficient for success in a competitive business environment. That students are conditioned to think it is necessary and sufficient occurs for several reasons. One is that colleges themselves promote the idea. One ironic aspect of colleges of business is that they are often staffed by individuals who would not survive in business in the first place and who, as a result, gravitated toward academia. In fact, many have tried in business and failed, and then found academia as a second vocation.

Universities tend to contribute to this mentality as well because it lowers the bar for student success and allows for a greater number of students and, by extension, student-loan and tuition revenue. Even universities with reputations for academic rigor maintain less-publicized programs that offer easier degrees to tuition-paying students. By providing avenues through which those who simply try can get degrees too, universities diversify rigor and maximize enrollment and revenue.

Ohio University economist Richard Vedder wrote about perverse university incentives to reject performance-based scholarships in his important 2004 book Going Broke by Degree. When students are assured scholarship money not tied to actual outcomes, Vedder noted that they change majors, take light loads, and continue to take courses after meeting graduation requirements. When achieving specific outcomes (such as graduating in four years) is not rewarded relative to simply trying, students remain in college for fifth or sixth years and universities can lengthen the demand for their services.

The emphasis on trying alone is also a carryover from the public-school mentality that the way for students to survive is not to question the system in which they are compelled to operate. Getting along is the overriding value in the public schools, and those who think critically about education and perhaps even resent its focus on subservience to authority are often labeled delinquents worthy of shame, punishment, and Ritalin. But if you get along — or at least show a willingness to try to get along — you will survive through high school while helping to pay the salary of many an administrator in the process. Meanwhile, anything of value that you learned you probably would have taught yourself anyway.

It's a mentality that colleges of business should thwart if their business degrees are to signify any value to entry-level labor markets, because no business will survive if the bulk of its workforce is content with just trying to achieve its objectives.

Woody Allen may have said that 80 percent of life was simply showing up. That may be true for life in the public sector, which so often looks like a glorified jobs program, subsidized by the plundered wealth of the productive. In that sector, the primary bureaucratic concern is spending this year's budget so as to justify an increase in next year's budget. The employment-results relationship is weak by design.

It's surely not true for life at a Dell or a Macy's or even your local grocer, where a firm's very survival is based on its ability to convince customers to engage in voluntary trade for one more day, and where showing up and merely trying at work does not guarantee meeting those objectives necessary for customer satisfaction and firm success.

Colleges of business should punish those who only try. We do those firms that hire our graduates no favors when we don't.


Australia: Shocked Education Minister orders probe into student suicides, mental health issue among teens

The abandonment of effective discipline has given free rein to bullies and we are seeing the result of that

VICTORIAN Education Minister Martin Dixon has ordered an investigation after schools registered "a spate of alerts" about the mental health of students during VCE exams last month.

Department officials have found that, on average, one Victorian student attempts suicide each week of the school year. Preliminary findings show 24 students, in government schools alone, are believed to have taken their lives over the past four years.

Mr Dixon, a former secondary school principal, said he was shocked. "These are lives that are lost, or these are lives that are in obvious turmoil," he said.

Mr Dixon is calling for open discussion about mental health and the huge pressures facing today's teenagers and younger children. "It's something we just can't hide under the mat any more," he said. "Any statistic in this field is tragic, whether it's one or it's 30."

The Education Department's figures, which are based on initial "alert reports" by schools, also detail other causes and indicators of severe "mental stress".

In 2011 so far, there have been 122 reports of students threatening to commit suicide, self-harming, or suffering as the result of another person's suicide. This compares with 96 last year, and 77 in 2008.

Mr Dixon said he wanted to bring attention to the previously taboo topic because "(now) the best clinical advice is that we can't turn a blind eye to it and pretend the problem doesn't exist".

"I had been made aware of alerts coming into us, where schools had reported incidents regarding children self-harming and threatening to self-harm. "There just seemed to be a spate of them. It was around (VCE) exam time, and I thought, 'I need to go a bit deeper on this and see what's happening'."

Suicide rates across Australia have fallen over the past decade, including among teenagers, according to the Australian Bureau of Statistics.

But one-in-four young people will experience a mental-health problem over the next 12 months, according to Orygen Youth Health.

Dr Vicki Trethowan, Education Department senior psychologist, said mental-health problems were distinct from "normal adolescent behaviour, where moods will fluctuate".


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