Monday, January 30, 2012



President Obama used the term “value” in outlining the criteria he’d use, if he had his druthers, in allocating Federal funding to higher ed.

First, the obligatory disclaimer: he doesn’t get his druthers very often.  He doesn’t quite seem to get that the Republicans have no intention of letting him succeed at pretty much anything.

That said, though, the idea of looking at “value” is suggestive.  

I’d like to look at the “value” of continued wealth polarization.  Let’s also look at the “value” of the highest incarceration rates in the developed world.  While we’re at it, let’s take a long, hard look at the “value” of wars of choice, the carried interest tax deduction, and HMO’s.  Higher education has its issues, but any objective barometer of “value” would suggest that there’s far more surplus value to be squeezed out of any -- let alone all -- of those than you’ll ever get out of educating people.  

That said, though, I suspect some sectors of higher ed should be more worried than others.

I’ve suggested before that there are really four categories of colleges.  Allowing for the obvious oversimplification, they are:

high prestige, high cost -- Harvard, MIT, Swarthmore

high prestige, low cost -- UC Berkeley, Michigan, UVA

low prestige, low cost -- community colleges, state colleges

low prestige, high cost -- innumerable little private colleges scattered hither and yon, for-profits

Even granting that these are very broad strokes -- I like to think that my own cc punches well above its weight in academic quality, and I have the transfer stats to prove it -- the first three categories strike me as passing the basic “value” test.  The fourth, not so much.  

A standard cynical response would argue that “hither and yon” could be rephrased as “in a host of Congressional districts,” and would suggest that localist political concerns would prevent any real harm from befalling the college in so-and-so’s district.  There’s some truth to that, but it neglects the fact that most Federal financial aid is channeled through students, rather than sent directly to institutions.  While that has predictable and sometimes pernicious effects, it does mean that a blanket change to Federal policy can happen without singling out any particular place.  Lowering the cap on federal student loans, for instance, would hit any college or university that charges above the cap; students would have to decide whether the particular college was worth it.

Over time, I expect that the most viable survival strategy for the endangered sector is to start playing a different game.  Instead of offering an undistinguished bachelor’s degree for a premium price, start experimenting with different kinds of credentials.  (I’m intrigued by the “badges” craze, for instance, and I suspect that it’s just the beginning.)  If I were high up at a struggling private college, I’d seriously consider starting some conversations with the Feds about alternative credentialing and financial aid.  Yes, it’s a break from tradition, but if sticking with tradition involves a fast slide into oblivion, the argument for experimentation is easier to make.  Add value where you can, even if it isn’t where you initially had in mind.

With cost becoming an ever-more-serious consideration, the only way I see that fourth sector surviving is by changing its value proposition.  That may not be the intent of the “reforms,” but I’ll take a happy unintended consequence.  If the veiled threat of oblivion spurs innovation in one sector, and that innovation spreads as it catches on, so much the better.  It wouldn’t be the first time that a problematic idea had a happy outcome.

In the meantime, let’s talk about the “value” of those tax cuts for the one percent...

Excellent analysis. I expect your fourth category of colleges to simply disappear over time, as we have excess higher ed capacity.

Minor point. There's no tax deduction for carried interest. Rather, carried interest returns are taxed as capital gains rather than as ordinary income (because they really are, in fact, capital gains). There's a logic to it, but it has outlived its usefulness.

The key actors blocking change the last time this came up were the Senators from Wall Street, Schumer and Clinton. A change in carried interest tax treatment ought to be used to offset the extension of the payroll tax reduction. Harry Reid already ruled that out.

The tax code is full of opportunities, I don't quite understand the outrage when the 1% respond to the incentives that have been offered. Personally, I'd eliminate tax-free munis and the charitable deduction in a heartbeat, key legal dodges that the 1% employ to excess that have led to severe economic distortions. The "Buffett rule" is a band-aid on an open wound.
Are the small, non-selective liberal arts colleges hurting for enrollment? I thought that most kids (of a certain class) who can't get into the selective colleges are more likely to fall back on the smaller liberal arts colleges, and those kids are less likely to need financial aid, too.
I follow the analysis, however I have to question why it necessarily follows that 'value' is derived from 'prestige'. I think that this is one of the biggest problems that affect 4-year higher-ed, that families are obsessed over institutional prestige, as opposed to the actual learning opportunity.

This is one of the things that I love about CCs, that nobody argues about which CC has greater prestige than another; instead they argue about which has the best learning opportunities and quality of programs. Wouldn't it be so much better if we treated 4-yr colleges the same way?

I know plenty of kids who went to "low prestige" liberal arts colleges, and who were transformed by the experience. Until the Great Recession hit, nobody questioned whether or not those students obtained sufficient 'value'. And if they did, nobody (except bean counters) used prestige as a yardstick for measuring value.

Finally, as states continue to disinvest in higher education, tuition at state colleges and university will continue to soar toward the cost of private non-profit institutions. Pretty soon, those so-called 'low prestige, low cost' institutions will merge with the 'low prestige, high cost' group. What then?
Finally, as states continue to disinvest in higher education, tuition at state colleges and university will continue to soar toward the cost of private non-profit institutions. Pretty soon, those so-called 'low prestige, low cost' institutions will merge with the 'low prestige, high cost' group. What then?

Before that happens, someone in the private sector will raise a ruckus, claiming that because private industry is always more efficient than the government*, the public system should be sold off to private operators. With support from the Teabaggers** this will pass, and so no more public system to worry about.

*By definition, and therefore not needing proof.

**Who either don't care because they went to school long ago, or don't understand how much government support they get.
AI's comment about prestige led me to the following thought:

Those of us in the third category have to be concerned with "outcomes assessment", because what comes into our institutions can be highly variable. Reputations are built individually and usually locally, based on what students learn from us.

Those in the first two categories are primarily concerned with "incomes assessment", because almost any process will result in competent to excellent results if the students entering the college are fantastic to begin with, even if no value gets added. That is essentially the view behind Peter Thiel's move to divert those who don't really need to go to college, elite or otherwise. It also leads to cheating on "incomes measures" like the story in today's IHE about faking incoming SAT scores.

Finally, is it then the case that those in the fourth category are mostly concerned with the assessment of income?
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