HIGHER EDUCATION AS IF EDUCATION MATTERED.

There's a recent University Diaries post that details the World Gone Wrong. Two points induce further review.

Start with the concluding paragraphs.

The current focus on the scandal of government support for rip-off for-profit schools is drawing attention to the civilizational integrity, if you will, of the non-profits. The only argument lobbyists for the for-profits have going for them is that many non-profit universities are just as scummy as they are, and they get federal support! Why shouldn’t the for-profits?

To quote my dad, "why compare yourself with the worst?"

Too true. Too true. What’s University Diaries been telling you all these years? If your non-profit university is as much of a joke as the for-profits, you should be slammed just as hard as they’re about to get slammed. If you give your president millions in compensation, graduate few students, give most of your money to athletics, hoard your endowment, stuff your boards of trustees with hedge fund managers or corrupt local merchants, put most of your courses online and make remaining on-campus courses gigantic lectures no one attends, have ghostwritten industry flacks among your researchers — If you are, in other words, a seriously anti-intellectual, seriously money-grubbing sort of jobbie, you’re doing f***-all for civilization, and no self-respecting government should have anything to do with you.

To which the Superintendent notes: as long as there is excess demand for perceived prestige degrees, your chairman, your dean, your provost, your president, your regents are leaving money on the table pushing access-assessment-remediation-retention.

What appears to have provoked the post is an accumulation of news of the commercialization of formerly above-commercial-fray organizations such as galleries, museums, and universities.

The Smithsonians, the Guggenheims — these places, like universities, are considered public goods, worthy of government support in the form of things like direct funding, or tax-deductible donations, or other goodies. (An article in the Economist magazine worries about whether the escalating commercialization of American museums will threaten the fact that they “fall under a category of non-profit organisation that is tax-exempt and that qualifies for charitable giving.”)

Strictly speaking, none of these are public goods (lacking both the nonexclusive and nonrivalrous properties) although you can present your aesthetic prejudices under the rubric of merit goods and perhaps get the (now aging) Right People to Nod Approvingly.

The Smithsonians are mostly tax-supported (though their come-and-go exhibits aren’t), and the Guggenheims much less so, but both are non-profits; and there’s a profound, delicate, and complex understanding in this country that the non-profits among us — places like museums and universities — stand above the merely material world, have to do with higher things, represent not merely monetary but civilizational values, and therefore must be especially cherished by us all. Special exceptions must be made for them; they are worthy recipients of special forms of support.

The Superintendent does not approve of using tax moneys to present illustrations of Nature Without Trains or preserved nonfunctional Spinning Wheels and Farm Implements while presentations of illustrations of Trains Running Through Nature and preserved functioning Steam Trains and Trolleys must make do with whatever admission revenues they can eke out.

Then comes Stanley Fish, who must have really set University Diaries off.

How much of this instinct toward cherishing non-profits like universities is sentiment, and how much substance?

An important question. Yet people who defend the non-profit nature of universities tend to be merely sentimental, rather than substantive, in defending their higher, civilizational claims.

For instance, Stanley Fish, in his latest blog post, expresses fury at a recent report out of England arguing for greater privatization of universities and a greater emphasis on preparing students for a vocation.

That gives Professor Soltan the opportunity to call Professor Fish mean things, without calling him out on his bad economics.

Higher education is no longer conceived of as a public good — as a good the effects of which permeate society — but is rather a private benefit, and as such it should be supported by those who enjoy the benefit. “It is reasonable to ask those who gain private benefits from higher education to help fund it rather than rely . . . on public funds collected through taxation from people who have not participated in higher education themselves.” No one who has not been to a university has any stake in the health or survival of the system.

At the end of the report, the authors congratulate themselves: “We have never lost sight of the value of learning to students, nor the significant contribution of higher education to the quality of life in a civilized society.” A first response to this declaration might be to describe it as either a lie or a joke. There is no recognition in the report at all of the value of learning; quality is a measure nowhere referenced; civilization, as far as one can see, will have to take care of itself.

But at second thought this paean of self-praise is merited once we remember that that the report’s relentless monetization of everything in sight has redefined its every word: value now means return on the dollar; quality of life now means the number of cars or houses you can buy; a civilized society is a society where the material goods a society offers can be enjoyed by more people.

It's apparently bad manners to walk into the common room and say "non-exclusive and non-rivalrous" to the lotus-eaters.

But then, economists live in a state of detente with the rest of the academy. Let's treat the public good argument more rigorously, as a positive externality.

Externalities are policy irrelevant when the externality is supplied irrespective of the capacity to exclude non-payers. The decision of a householder to provide a rose-garden for her personal enjoyment may not, for example, be affected by the capacity to charge onlookers for ‘viewing rights’. The distinction between policy relevance and irrelevance here depends on whether the externalities are infra-marginal. This scenario refers to externalities that exist, as in the case of the rose garden, but where interventions would not produce marginal improvements to the level of supply. Thus, if the government subsidises gardeners to increase the production of roses the externality is infra-marginal when the subsidy exceeds any value placed on the additional roses by passing members of the public who may not register the existence of a few extra flowers. In other words, the externality is infra-marginal because for purely private reasons the gardener is already taking into account (albeit unintentionally) the interests of external beneficiaries.

Buchanan and Stubblebine’s analysis suggests that owing to the social nature of life externalities are ubiquitous but most of them are irrelevant from a policy perspective. Purely private decisions to adopt a rigorous skin care regime or to attend fitness classes to maintain the interest of one’s spouse may, for example, generate positive externalities for others who appreciate the beauty of the human form and may benefit ‘society’ as whole by improving the aesthetic ambience in which we all live. It is unlikely, however, that a more satisfactory level of supply could be induced by government encouraging people to spend additional resources on their appearance. Indeed, to do so might be to transfer resources away from what are potentially more valued uses.

Seen in this context, there is little reason to suppose that education generates policy relevant external effects. First, it is not clear that benefits generated by private decisions are uncompensated or that they might not readily be internalised via private mechanisms. The fact that an educated person may raise the productivity of others with whom they interact is likely to be reflected in that person commanding a higher wage or salary than a less educated person. One would expect profit-seeking firms to pay more for workers who raise the productivity of their co-workers.

Second, insofar as decisions over education do generate uncompensated effects these seem likely to be infra-marginal and thus policy irrelevant. Given that people have purely private inducements to invest in literacy and numeracy– such as the greater likelihood of finding a job – it is not clear why governmental efforts to encourage additional investment would be worthwhile. A similar analysis applies to private decisions to invest in more sophisticated training such as higher education. In general, the expectation of commanding a higher wage or salary will itself be sufficient to induce the supply of any relevant spill-overs, irrespective of whether these are compensated directly by ‘society’. As Mario Rizzo has argued in a recent post on The Unbroken Window, these personal inducements to attend university should now be recognised to include a much broader range of personal benefits such as better dating opportunities and improved prospects in the ‘marriage market’.

(Via George Leef who summarizes the externalities as appropriable.)

Richard Vedder, however, identifies the fundamental problem in higher education today, and it gets to the heart of both the private benefit and the merit good argument.

The number going to college exceeds the number capable of mastering higher levels of intellectual inquiry. This leads colleges to alter their mission, watering down the intellectual content of what they do. Rather than studying advanced mathematics, physics or --as I did-- 18th century French literature in the native language, more students are studying business administration, communication skills, and doing vocational-school type work on the intricacies of health care provision or administration. Instead of five or 10 percent of students getting "A" grades, we give 40 percent or more. We have created a Potemkin Village -a few truly good universities that come close to meeting the former academic standards, but a vaster melange of institutions that are often neither "higher" nor even "education" in the classical sense, particularly since the typical student spends less than 30 hours a week on academics. Bottom line: too many people go to college.

Neither the Higher Things nor the big paychecks materialize.

Break it down this way. Income inequality appears to be more pronounced, at the same time that more people are beginning university. Hypothesis: a greater reward for ability, but employers competing for fewer people with that ability.