Wednesday, February 13, 2013


Coase and Carey: Be Careful What You Wish For

I’ve been a fan of Kevin Carey’s for some time.  He gets a lot right, and even when he’s off, he’s interesting.

This week, he’s true to form.  

In response to President Obama’s hinted-at plans to open up financial aid for higher education providers other than traditional colleges, Carey developed a wish list that’s well worth reading.  He’s almost certainly right that direct government price controls on colleges wouldn’t work, or at least, wouldn’t work in a constructive way.  (Employer-based health insurance was born as an outgrowth of wartime price controls.  How’s that system working out?)  Real innovation typically comes either from new entrants into a field, or from panicked incumbents threatened by new entrants.  Without new entrants, you don’t get major change.  Opening up the financial aid system to new providers with new methods doesn’t guarantee a good outcome, but it certainly improves the chances.

Carey starts from that correct observation, and moves quickly to “and here’s how to do it.”  And that’s where he gets...interesting.

On the one hand, he calls for accreditation to move from institutions as wholes, or even degree programs as wholes, to the course level.  As he put it, “what if you want to specialize and provide nothing other than the world’s greatest Linear Algebra class?”  

I’ll flip the question around.  What if you wanted to be able to offer a whole host of courses in a bunch of different majors?  You’d have to go through the accreditation process for every.  single. course.  The administrative overhead -- assessment, documentation, verification, and the like -- would skyrocket.  It’s even worse if you want to offer something outside the traditional disciplines.  Linear Algebra is pretty well established.  But what if you want to offer, say, a philosophy course on the St. Louis Hegelians?  (Worst baseball team ever.  “There is nothing in the essence of the knuckleball that will not become evident in the series of its appearances...”)  Where would you even find the standards to follow?  What if you wanted to offer a course on the latest cutting-edge findings in a field -- the stuff that hasn’t been standardized yet?  I get a headache just thinking about it.

Worse, students would be left on their own to cobble together coherent and recognized programs of study from the scraps provided.  Many years ago, the economist Ronald Coase noted that the great utility of the “firm” in economic terms is that it reduces transaction costs.  It routinizes, which is its great strength.  Shatter firms, and every transaction has to start from scratch.  In a market with a severe information asymmetry, such as higher education, the idea of loosing untrained 18 year olds (or busy and distracted 38 year olds) into the virtual wilds to piece together what they can is a recipe for disaster, even assuming that each individual piece is good.  

Colleges as “firms” provide more than just courses.  They provide structure.  They provide guidance (usually called “advising” or “counseling”).  They provide legibility.  They provide social support, quiet places to study, and the reassurance of knowing that others have done what you’re trying to do.  They allow for the serendipity moments of discovering that the course of study you thought you wanted wasn’t really for you, and that you’re actually much more fascinated by something else.  

Offload all of those costs onto students, and you’re creating an inefficiency of monstrous proportions.  Worse, the students who would lose the most are the ones with the fewest resources at the beginning.  The wealthy, well-prepared, well-connected kid may be able to fend for himself relatively well in the virtual wilds; the poorly prepared and unconnected will likely either fall prey or fall out.

The one virtue of the course-by-course approach is that it could conceivably open the field to a host of scrappy new providers.  But then Carey falls into an uncharacteristic bit of wealth worship:

Organizational capacity. If Harvard and MIT form a non-profit to do this, their capacity, academic and financial resources should carry weight. If Carl Wieman wants to get in the Physics 101 business, his status as a Nobel prize winner and researcher on best practices in teaching introductory physics should work in his favor. If Pixar wants to teach computer animation, Wall-E should count in their favor. (Cars 2, less so.)

Um, this is not helpful.  The problem with the current system is not that Harvard, MIT,and Pixar are somehow shut out.  They do just fine.  The problem is that scrappy new providers -- and, to be honest, scrappy existing providers -- would be crushed by the wealthy and powerful.  Only the wealthy and powerful could afford to run separate accreditations for every single course, and only the wealthy and powerful would have the name recognition to grab the uninitiated from all over the country.  And as that happens, the argument for public support for access for everyone will get harder to sustain politically.  As both a citizen and an educator, I have to call that a disaster.

Where I draw hope from Obama’s message -- keeping in mind that it’s a long way from footnotes from a speech to enacted legislation -- is in recognizing that innovation requires new blood.  It does.  Creating space for new providers to try new things -- and thereby put some useful pressure on existing providers to get more experimental -- strikes me as a genuine good.  Let’s just not forget the strengths of what we have in the excitement of the possible.

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