Arnold Kling  

Richard Vedder, Sounding Reasonable

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Richard Vedder writes

The more evidence that I see that I believe is creditable and meaningful, the more I am convinced of the following:

* Too many students, not too few, are going to college;

* College and universities are extremely inefficient, and at the marginal public spending on them more likely lowers rather than raises economic growth;

* The federal financial aid programs have contributed to raising higher education costs, lowering efficiency, and increasing corruption within higher education --and done precious little good, sending few more kids to college than would have gone anyway (which, given the first point, is not all bad);

Thanks to Peter Klein for the pointer.

One of the signs that someone is being unreasonable is that they make mutually contradictory attacks without realizing it. For example, in "Sicko," Michael Moore at one point describes public schools as an example of something that shows we can trust government provision of services and at another point shows lousy public schools as an example of how bad America is compared to other countries.

I confess to having thought of Vedder as a bit like Moore. But the quote above shows that Vedder is careful about trying to limit self-contradiction. In fact, the entire post is reasonable.

A recent article on Vedder's research says,

Its major finding, that increased state appropriations for higher education actually correlate with lower economic growth, is counter to both established understanding and conventional wisdom.

The study, also sponsored by the Center for College Affordability and Productivity, will have its critics, to be sure. The primary author, Richard Vedder, has defended his work from other economists in the past. He has made a name for himself — and earned a spot on the Spellings Commission — by criticizing colleges as too expensive and poorly run. But Vedder, a distinguished professor of economics at Ohio University, the director of the college affordability center and a visiting scholar at the American Enterprise Institute, believes he has found “startling enough” results that others will want to try to look at the issue themselves — a development he’d welcome.

The study says,

We used a data set encompassing observations for all 50 states for each year over the 46 years from 1960 through 2005. Most of the statistical models run have far more than 1,000 observations. We incorporate lags to acknowledge the fact that money spent today may take years to have a pay-off — students for example, take four, five or even six years to get through school. Research monies similarly may have long term pay-offs. We also looked at economic growth over a short time horizon (five years), as well as longer periods (10 or 15 years). We incorporated a large number of non-higher education variables into our model to at least partially control for the considerable non-educational determinants of income growth over time.

The results are intriguing. In general, the model’s explanatory power is greatest for longer time lags. Consequently, we will talk mainly about equation three in the table, which looks at economic growth over a 15-year time horizon and relates it to state appropriations made 15 years previously, to allow generously for the lagged impact of appropriations.

There is much that can be said about the results. Most importantly, however, in all three equations (and dozens of other equations not presented here) we obtain a negative relationship between state and local higher education expenditures and economic growth. In two of the equations, the results are statistically significant at the 1 percent level.

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COMMENTS (5 to date)
Drtaxsacto writes:

Vedder took a bunch of data and mushed it with correlations - so what? Who wouldn't expect such results? Does that mean that all dollars at the margin for higher education are non productive? Were Vedder a true researcher he might look more carefully at the effects of higher education spending. Indeed, even a casual observer would see that every dollar spent on higher education, or ice cream, or even policy research is not spent productively but what counts is an understanding of which kinds of spending actually make a difference. Which dollars at the margin are the most important? (A principle any good economist would think about immediately.)

Does Vedder argue that the framework of support for research in higher education, originally proposed soon after WWII has been non-productive for the economy since that time? Does he suggest that the expenditures for student aid, starting with the GI bill have been equally non-productive? Is there a difference between funding general fund dollars to student aid versus student subsidies? Is money better spent on supporting undergraduates or graduates? Which kinds of spending contribute to the short term and long term vibrancy of our economy? Those are the interesting questions not these kind of sweeping generalizations.

As Nassim Nicholas Taleb argues in the Black Swan, there is a lot of silly research that uses math to assume normal statistical relationships which clearly are not real. This most recent study seems like a prime demonstration of Taleb's principle.

spencer writes:

We have a basic problem in dealing with education in that there is no productivity in the education sector. As a matter of fact, one of the most widely accepted measures of education quality -- the teacher-student ratio -- implies that we improve education by reducing productivity. Moreover, it is not just public education that has no productivity, there is absolutely no evidence that private schools do any better then and maybe have worse productivity-- i.e., a lower teacher-student ratio. As long as studies or comments like this do not take this into account
they are completely useless.

David Thomson writes:

Our society continues to pay the awful price resulting from the disastrous 1971 U. S. Supreme Court decision, Griggs v. Duke Power Co. Its unintended consequence was to tacitly institutionalize the demand that virtually everyone must have a college degree to obtain a well paying job. The reality, of course, is that few people possess the IQ required to do so. Common sense dictated that academic standards had to be lowered. The concept of merit took a back seat to the utopian understanding of equality.

David Strom writes:

I have met with, shared panels with, and interviewed Dr. Vedder numerous times.

His findings are certainly surprising to many, but surely worth a serious review. He is a thorough researcher and serious thinker. The simple reaction that "he must be wrong" because his findings surprise or even startle is simple establishment bias.

Even on its face Vedder's findings shouldn't startle anyone. Universities and institutions of higher education are ridiculously inefficient in the allocation of their own resources (a janitor at the University of MN is a unionized worker making a wage more than 100% above average for their peers in the private sector), and there is no dispute that much that is categorized as "research" or "teaching" at institutions of higher education borders on the ridiculous.

Hence, it is easy to imagine a situation where UNDERinvestment in higher education/research harms the economy and workers, but also true that it is quite reasonable to assume that we can OVERinvest in "higher education" and create a ridiculous and deleterious premium on credentials instead of actual skills or experience.

Or even, heaven forbid, simply provide many with a 4-year vacation from reality in which they party themselves silly and learn relatively little about real life, except that professors are often ridiculously naive.

Ignoring Vedder might be a reasonable decision (none of us can follow every lead or stray thought that surprises us), but dismiss him out of hand at your peril. Vedder is likely to be much more right than you expect.

Academics: look around at your colleagues, your college administration, and the decision-making behavior of intellectuals, and you can quickly come to believe that we put too high a premium on "education" and credentials and too low a premium on teaching basic reading, thinking, and reasoning skills that will serve students much better in the long-run than another class on the aesthetics of Madonna.

Mr. Econotarian writes:

One issue is that better public Universities can charge higher tuitions to students.

For example, the University of Maryland has gone from being a cheap school that wasn't known to be very good to one that is vastly improved (especially within some disciplines), but is no longer "cheap" for students.

States probably need to spend more on bad schools to lower their tuition in order to maintain matriculation levels.

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