Arnold Kling  

Market Failure in HIgher Education?

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Libertarian Jeff Miron asks,


In what sense is Democratic predominance a problem? And what "market failure" is responsible?

Perhaps the truth is that many conservatives do not really believe in competition; instead they want conservative ideas imposed because these ideas are not doing well in the marketplace.


I think that his last statement goes too far. I do not think that conservatives want to impose their ideas. Their issue is whether conservative ideas get a fair hearing in academia.

But Miron's question is important. Where is the market failure? I am not sure, but I definitely do not believe that consumers are sovereign. The accreditation monopoly is one market imperfection to which I can point, but I suspect that it is not decisive.

Colleges compete most aggressively for affluent students. They compete more on the basis of amenities than on the basis of substance. I suspect that this is a segregation equilibrium, in which affluent parents seek out schools chosen by other affluent parents, and amenities serve as a signal of affluence.

Perhaps parents care more about whether their children will be happy in college than about whether they will obtain a valuable education there. As a result, college is a period of extended adolescence. Moreover, one could argue that many faculty are attracted by the prospect of perpetual adolescence. The liberal bias is part of that perpetual adolescence.

As parents, my wife and I want something other than extended adolescence as a college experience for my daughters. Most of my friends, who are liberals, share our preferences. For us, the market has failed. I am not sure why.

UPDATE: See Richard Vedder's blog (he is a critic of the higher ed industry) and note this post on one competitor.

UPDATE 2: I think that one source of market failure could be the fact that government is so heavily intertwined with higher education. For colleges to hire anti-government professors would be to bite the hand that feeds them.


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The author at Economic Investigations in a related article titled A Bit of Everything writes:
    Here’s a quick round-up of interesting recent content: Stimulated by Miron, Arnold Kling discusses the issues of the US higher education system. Knzn considered the upcoming US recession to be Not the End of the World. Greg Mankiw discusses Apply... [Tracked on August 6, 2006 7:04 AM]
COMMENTS (12 to date)
Matt writes:

Remember that just because you and your friends don't get what you want doesn't mean there's market failure. There have to be enough of a demand in aggregate to make it a viable option (I do agree with you that there certianly should be a big enough market for it).

The other thing is that you don't "receive" an education from any institution. Perhaps at one point in the past you did, back when they had things like rigor and standards and wouldn't let you slide through without meeting them. I've come to the conclusion that you can get a fine education at pretty much any university these days, but you will never "receive" one. You have to take it for yourself. The university obviously matters, but the decisive element is the person and their desire for and education. This incidently would make it rational for parents to make the happiness of their kids the #1 concern.

James writes:

Arnold,

I think you've already explained a big part of this. A university is like a kibbutz connected to an ATM that never runs out of money. For people living in such an environment, something like scarcity seems like a fiction made up to justify the way that capitalism impoverishes third world children.

Johan Richter writes:

Would hiring an anti-goverment professor really reduce the funding from the goverment? Especially now, with an anti-goverment goverment?

PrestoPundit writes:

There is a literature on the economics of the guild structure of the university system.

One big problem is the German system of professionalization adopted by American universities. This has created a great Ponzi scheme of "research" -- much of it either pseudoscience (eg. much of the formal math and empirical statistics in economics and sociology) or leftist politics by other means (most all of the humanities).

What needs done is an elimination of the Ph.D system.

Keith writes:

I have two thoughts on this. My first guess here is that liberal parents weight the politics of the university more importantly than conservative parents or students do. Conservatives just want to get the best education for the money, with the best "pedigree" on their resume, etc. Liberals seem a lot more likely to aim for certain programs at 'socially responsible' schools and the like.

Secondly, it could just be a sort of 'kudzu effect' where the leftwing professors already there squeeze out more moderate or conservative faculty, who then choose not to start their own university, but to go work for Pfizer or something. People working in academia are a self-selected group and all self-selected groups have a long-term tendency towards expelling the dissenters and moderates, whether it is academia or an evangelical church.

quadrupole writes:

As someone who ran screaming from the academic track, might I offer the following hypothesis:

For many conservatives, the opportunity cost of going into academia is to high. (Please note I mean no offense to those who have decided they have a vocation for academia and pursue it).

Compare the following career tracks, for a bright young person who had the ability to be a physics prof:

The academic track:

4 years of college (cost: $40-160k)
5-7 years of grad school (income: ~$10-20k/year as TA)
2-6 years of postdos (income: ~$40-50k/year)
7 years as professor pre tenure: ($60-80k/year)
tenured prof: ($80-100k/year)

Please note, at any point prior to tenure, you could loose the majority of your investment by not making it to the next step. So it takes you 18-24 years to get to a stable career for your self (putting you at age 36-42).

If a similarly capable young person went into say...tech... their career path would look like:

4 years of college ($40-160k)
starting job ($60-80k/year)
five years of experience ($80-140k/year)
management (? possibly after 10 years): ($150k+/year)

Conservatives are much more likely to be able to assess the different here, which makes them more likely to decide that whatever the intangibles of academic life, they just aren't worth the cost.

Then you get to quality of life issues. Working in tech you can choose to live in a variety of nice locals, depending on your taste. Going into academia, you have very few options in terms of jobs, and so pretty much end up where you end up. I have friends who have ended up with the only job available to them making the post-doc to prof jump being in bumblefuck nowhere, not nice places to live.

Or to put it differently: if you are capable of doing well in the private sector, you have to either strongly value the intangibles of academic life or fail to accurately see the trade-offs. I would maintain that liberals are less likely to perceive the trade offs.

Dezakin writes:

Arnold, why do you spend so much time worrying about liberal bias in academia? Just send your kids to an engineering school. Ideology of any sort doesnt really gear you well for productivity anyways.

What's the point of this post anyways?

Brad Hutchings writes:

College is a period of extended adolescence anyway. Heck, life is a period of extended adolescence if you want to make it that. You can be very successful without a graduate degree or without an undergraduate degree. Examples: Rush Limbaugh, Steve Jobs, Bill Gates. Among high profile examples, there always seems to be a little "huckster" in the successes and some real immaturity that one can't help but wonder if college might have been a good time for these people to each sort out. Among lower profile successful people I have met, worked with, or dealt with, I'd say the same thing. Especially in the world of computers and software, you either get successful by applying more and more relevant knowledge than your competitors or by being totally freaking nuts. But the freaking nuts are few and far between and for the most part the nuttiness correlates with loser rather than winner.

Besides the binary "did you get the degree?" question, the other question that matters is where you got it from. On the Left Coast, in California, there is the obvious pecking order of UC vs. Cal State. Listen to Jim Rome (sports talk) on this one issue and you can really start to get the depth of it in our culture. It is more than deep enough to be career limiting for CSU grads. And of course, I don't pull out my UCI degree with a yardstick and compare to my friends' Stanford degrees. There is no point; their paper is better even if I can whip their butts at dice games.

Accept that this is how it is and just play the game. During the game, your daughters can actually get an education, can challenge the establishment if they like, can work toward an M.R.S. if that pleases them more (and there are just as many guys in college looking primarily for wife too, so no disrespect intended there). The important thing is to stick with it and get the degree, get honors if they can. If they ever, later in life, find themselves homeless on a street, the degree will be worth a heck of lot more than the $100K Bryan's homeless guy on Showtime got. I can claim that without any doubt.

A degree (earned of course) can also do a lot for slower kids to give them confidence as adults. My best friend from growing up went to University of LaVerne (private SoCal college). It was like a summer camp, it was expensive as *&^%, and they had some very "interesting" assignments. I could write hours of A+ comic material based on his college coursework. And he's a great person, a great friend, but as a kid, not the sharpest spoon in the drawer. College and grad school actually turned him into a pretty sharp cookie. He now works as a network administrator for a small college, gets great money, and is my goto guy for questions about that stuff (and when I have questions, they are tough ones). His oldest brother is a very bright guy (probably borderline genius), great mechanic, didn't go to college, probably won't make 1/2 as much money in his career.

Clearly, there is a lot of BS in the whole college scam, but the prudent thing to do is make the best of it and get the most out of it. Or just get 50% of the most out of it, and your daughters will be ahead of 90% of their peers.

Steve writes:

"They compete more on the basis of amenities than on the basis of substance."

I'm skeptical. The amenities arms race is only a recent innovation. College reputation is still everything. Conservative parents may gripe, but they'll still dream of sending their kids to the same dozen or so schools. They are pragmatic. At least the ones who aren't afraid of their kids being taught evolution in biology classes.

As for extended adolescence, not all schools, and not all students are like that. There are "grind" schools, and there are people who work hard, get top grades, and learn a lot even at frivolous places.

Editor Theorist writes:

Some ideas:

1. The liberal bias in the USA is a specific example of a 'statist' bias of universities generally. Historically, universities have usually been about preparing government officials (priests, clerks, public administrators, teachers at state-run schools). In much of Europe almost all universities are run by the state, and professors are state-employed/ appointed.

2. I think that the liberal bias will be corrected by the market, but the market in college education works very slowly - has great inertia. The market will also bear down on tuition and other costs, if they are indeed excessive (it may be that cost increases merely reflect increased services). But think decades, rather than years.

3. Re: the comment on 'tech school' - I agree - the trend for university research to become more science oriented will continue, and will spill over into a greater proportion of science teaching. Part of this will be driven by the desire of conservative students to avoid the liberal political pre-supposition which permeates the arts, humanities and social sciences.

Brad Hutchings writes:

Steve,

Amenities are by no means a "recent" innovation. Up and coming schools have been doing that for decades to get good students. Case in point was my alma matre, UC Irvine. In 1988, they must have spent more than $100 on letters recruiting me, telling me of their new Campuswide Honors Program, new dorm facilities, new sports facilities, planned building for the next 5 years, campus clubs, etc. Many students I went to school with there mentioned the same thing. They acted interested and did things that made me want to go there. It wasn't all academic stuff either, although there was a lot of that too. Clearly now, however, more colleges are realizing that marketing matters and personal marketing is important.

J.W. Koebel writes:

Extended adolescence may have an overwhelming number of benefits that can't be calculated quite so readily with equations...extended adolescence and emergent adulthood, both of which are recent developments in our (and other post-industrial) cultures allows for more time to be spent developing higher skills and abilities.

Precocity (forced or not) is universally a bad thing from a developmental perspective. The more precocious an organism is, the sooner its development stops. Animals (reptiles, fish, mice, etc.) which have near-adult levels of functioning immediately or within a very short time period have a very low level of overall functioning. More complex organisms, which have a longer "childhood" such as primates, larger mammals, etc develop more complex abilities and behaviors, as a result of being allowed to hone their mental skills through play and experimentation before they're forced to fend for themselves. The same goes for humans as well -- a child who is forced into service at 6 years old strip-mining shoes or whatever in a sweatshop in Cambodia will never, ever be as capable as someone who doesn't start work until 16 -- or 26.

By extending adolescence for our culture, we're allowing more time to get an education, and with it, skills that will allow for a more productive life after the adolescence is concluded.

Granted, I do think most colleges are a joke these days, since somewhere along the line it went from a privilege to a right for people to have a college education. Also, the Federal government doesn't provide enough assistance to people who would like to take their own initiative and end their own adolescence early. For a full-time student to pay his own way through college, living on his own, would require approximately 3 times the Federal aid money on top of a part-time job.

The system itself is enforcing extended adolescence by mandating that degrees either be accomplished with heavy financial subsidies by parents ( because there are simply not available loans and other mechanisms of aid to most students who would willingly go into debt in order to gain a measure of independence ) or take 6-8 years to earn a 4-year degree while working full time to make ends meet.

Really, it should be an option, not a requirement.

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