Tuesday, September 18, 2012

 

Picking Up the Twenty

Economists aren’t known for being funny on purpose, but this one isn’t bad..  An economist and his grad student are walking across the quad when they spy what looks like a twenty dollar bill on the sidewalk.  The grad student looks at the professor for cues, and notices that the professor is still walking.  The grad student asks “aren’t you going to pick it up?”  The professor responds “if it were really a twenty, someone would have picked it up by now.”

In California, there’s a big, fat twenty on the sidewalk, and it’s been there for some time.  I’m not surprised that someone’s picking it up.

With California’s community college system putting literally hundreds of thousands of prospective students on waiting lists, an ambitious for-profit is swooping in to offer an alternative.  UniversityNow, which this piece describes as a “social venture,” has partnered with Patten University to offer 19 credits’ worth of general education courses at the same per-credit cost the community colleges would have charged.  The courses start in early November and run into December, so the “hook” is that students could get the credits they would have earned anyway, and can get back on track for the spring semester.  Patten is accredited, so the credits are likely to transfer.

I don’t really understand the relationship between UniversityNow and Patten, so I’ll bracket that.  Either way, there’s no way Patten is making money on this, in the very short term.  And yes, it’s entirely possible that some students will transfer back to the community colleges in the spring, assuming the community colleges have room for them.  (In light of the tax referendum coming up this November in California, that’s not a given.)  

But I recognize a loss leader when I see one.  That’s what this is, and from Patten’s perspective, it’s a pretty good one.  

In retail, a loss leader is an item on which a store takes a loss on purpose.  It uses the loss leader to get people in the door, on the theory that once they’re there, they’ll buy more and make up the loss, and more, with other purchases.  (The classic example is the convenience store with cheap milk.)  Patten is offering the opening mini-semester at what has to be a loss, in order to get students in the door.  Once those students are in, it’s easier to sell them more semesters.

A few thoughts.

First, this would not be even vaguely possible if not for the staggering and chronic imbalance in the academic labor market.  The fact that a for-profit can swoop in opportunistically and assemble an entire cohort of classes on short notice is possible only because they can find the faculty to staff those classes.  I don’t say that to cast aspersions on Patten’s faculty -- as longtime readers know, I started out at a for-profit -- but just to face a basic fact.  

Second, the fact that Patten is focusing on the easily transferable gen eds -- the evergreens -- actually makes the staffing that much easier.  Faculty for certain specialized technical programs may be hard to find, but faculty for first-year composition and Intro to Psych aren’t.  

Third, the market space that Patten is looking to fill is entirely an artifact of a perverse funding system in California.  When you charge less than the marginal cost of production, and you don’t even get to keep the money you charge, then the only way to stay within your appropriation is through enrollment caps.  The California community colleges can’t grow their way out of the problem.  For the for-profits, though, growth more than pays for itself.  When one sector experiences growth as a cost, and the other as a benefit, it’s easy to predict where the growth will be.

Traditional academics often like to talk trash about for-profits, and there’s certainly no shortage of trash to talk.  But at a really basic level, the for-profits are on the scene that the publics have abandoned.  From the perspective of a frustrated would-be student who just wants to get on with life, the choice isn’t between Patten and the local community college.  It’s between Patten and no college at all.  In that situation, I wouldn’t blame any student who took the best actually-available option.  In his shoes, I would.

Whether the polity is willing to admit it or not, there remains a need and an expressed demand for mass higher education.  That is just a fact.  If the public sector doesn’t provide it, others will.  

I don’t know if Patten, in particular, will succeed.  But if it doesn’t, another one will.  Sooner or later, someone will pick up that twenty on the sidewalk.  

Comments:
When is the higher ed community at large going to loudly say to California that their system sucks and they are hurting their students by what they are doing? It seem fairly obvious that the schools know it's not working as currently set up. I realize they probably don't have the power to say to the state, fix this but something needs to be done. It's not going to take long for other for-profits and even online non-profits to figure out a way to provide the education that California students need at the right cost and then where will Cali be?

I'll bet that regulations regarding out of state institutions will magically appear over night.
 
Anonymous 9:56 am

Those that came up with the propositions in California that created the current climate wanted exactly what you are referring to, a dramatically smaller public sector. That was the point. It is a feature not a flaw from their point of view. It was sold on other grounds.
 
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