Administrative Bloat: Remarks to the Texas Public Policy Foundation, Austin, Texas, January 7, 2015

Posted on January 7th, 2015, by

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Dr. Vedder spoke to the Texas Public Policy Foundation on January 7, 2015. The following are his remarks regarding administrative bloat.






America’s prosperity results from the continual increase in labor productivity. The Labor Department tells us on average workers today produce twice as much per hour as their counterparts did at the time of America’s Bicentennial in 1976. That has made things more affordable –it takes less time at work to pay for a loaf of bread, television set, airplane trip or a pair of blue jeans then it did in 1976.

College education is an exception. It takes far more hours of work to pay the tuition at the University of Texas or A & M then it did in 1976, despite those school’s vast endowments. There are many reasons for that which we cannot go into here, but a huge part of the problem is productivity has not risen in higher education –it has almost certainly fallen. And while the costs associated with faculty have increased, and while some faculty are very well paid for what appears to be little teaching or highly meaningful research, this problem is overshadowed by the problem of administrative bloat.

In 1976, it took about three professional non-instructional persons to service every 100 college students. These persons are what we would roughly call administrators –deans, associate provosts, diversity coordinators, public relation specialists, and so on. Today, instead of three, it takes six of these persons. What are the implications of this? Assuming UT Austin followed the national trend, there would be about 1,650 more administrators than in 1976 even after adjusting for enrollment growth; assuming these persons made, with benefits, and average of $80,000 a year, there is $132 million more spent on administrators –or nearly $2,500 per student. Put differently, the tuition at Austin could be reduced by nearly one-fourth if the school today was as lean administratively as 39 years ago. Or put still differently, one-third of the gap between reality and the $10,000 degree could be filled by slashing administrative staff back to 1976 levels, adjusting for enrollment growth.

I looked at an organizational chart for UT Austin. It was fairly complex, with 34 boxes for various administrative units. But that was just the tip of the iceberg. I looked into one of the units with a box, the College of Liberal Arts, and it had its own organizational chart with 43 boxes –not only was there a Center for European Studies, but there was a second center for East European and Russian Studies, and  yet a third for Slavic and Eurasian Studies. Isn’t one European studies administrative unit enough?  I opened another of the 34 boxes under the President’s Office, the one for the Development Office, and counted 118 employees.  This is just one UT campus. And don’t forget not only the other universities, but also staff offices overseeing entire systems, such as at A and M, where there are ten major offices under the Chancellor, often with duplicative offices at the level of the individual campuses. And, I am not done yet – Monday I counted 205 employees working at the Texas Higher Education Coordinating Board.

Universities complain that new regulations, such as safety and affirmative action rules, force them to hire more staff for compliance purposes. While this has a grain of truth to it, I would bet no more than 10 percent of the staff increase is mandated by any law. I am not intimidating, by the way, that Texas is any worse than typical nationally –indeed, the University of California has nearly 2,000 nonteaching employees working just in their central office. But being “typical” is a disgrace in itself.

There is another factor that suggests I have been mildly understating the administrative bloat problem. While good comparable historical data are hard to find, it is clear that salaries for at least some of the expanded bureaucracy have been rising far faster than the rate of inflation, compensation of employees generally, and more than that of the faculty who perform the core academic mission.

We all know about multi-million dollar football coaches and even million dollar university presidents and chancellors, but we do not realize that salary escalation goes further down the administrative hierarchy. At my typical state university in Ohio, the chief financial officer in the mid-1970s made perhaps 25 to 50 percent more than the typical full professor. Today, he makes almost triple the average full professor’s pay. It is not uncommon for schools to replace retiring CFOs making $250,000 a year with new ones making double that. I suspect a similar trend is happening here.

Two questions arise: First, why has happened? Second, what can be done about it?  The simple two word answer to the first question is: “perverse incentives.” In the competitive for profit market sector, business managers are rewarded for cutting costs, increasing profits, stock prices, bonus payments, etc. In the not-for-profit government subsidized university sector, rewards for efficiency are mostly non-existent, and, indeed, managers who add staff are given accolades by fellow employees who, strangely enough, often play a role in the evaluation of the bosses. When I was a department chair, I talked the university into giving me an extra faculty member, increasing my staff from 17 to 18. Labor inputs rose, services provided changed little, so productivity fell. But I was given high marks by my colleagues whose evaluation of me partially determined my salary. So inefficiency was rewarded.

Make no mistake: the vast expansion of federal student financial assistance has provided the cash to allow all of this to happen. Schools have raised fees to capture aid dollars given to students, and used the fee money to fund more administrators, higher salaries, and other amenities, my favorite being the “lazy river” at Texas Tech that allows students to contemplate life or sleep while floating on a raft.

The federal solution to the administrative bloat problem requires downsizing or eliminating federal student financial aid. In Texas, it lies in three “I” words –information, incentives, and innovation. We have no idea most of the time whether new administrative positions produce positive benefits to the school, because we do not typically measure outcomes well. For example, we create administrative positions to help fight high dropout rates, but where is the cost-benefit analysis of those positions?

We can reverse perverse incentives in various ways. Change funding formulas to reward schools who better contain costs to students – let the schools charge whatever fees they want, but effectively “tax” them on big tuition increases by reducing subsidies. Perhaps give bonuses to institutions lowering the ratio of administrative staff per student, although schools will game the system by redefining the word administrator.

Finally, let me make a comment specifically about UT and A & M that Bill Powers and John Sharp will not like, but so be it –I am an outsider with no skin in the game. These schools, especially UT, have advantages no other public university has –huge constitutionally protected endowments. Allow them, indeed force them, to use those endowments more aggressively to lower student costs. At UT, if half the endowment income were dedicated to tuition reduction, fees could come down about $2,000 a year. Or maintain current fees but give need-based scholarships that reach also moderately affluent middle class families. With huge endowments, these schools should either be the very top American public universities, which they are not, or they should be relatively cheap, which they are not as well.

Time is up. Thank you.

The Seven Deadly Sins of Higher Education

Posted on November 19th, 2014, by Leave a comment

Dr. Richard Vedder spoke to the Federalist Society this past weekend, outlining as he sees it the “Seven Deadly Sins of higher education.” His remarks follow:


NOVEMBER 15, 2014

On the file cabinet in my office, inspired by Winston Churchill, I have written “Never have so many paid so much for so long to learn or earn so little.” That could be the executive summary of my remarks today.

I think the following Seven Deadly Sins of colleges exist today:

  1. The cost of attending American colleges and universities is rising far faster than people’s incomes, increasing the financial burden of college dramatically;
  2. The learning in college—either factual content or such things as critical reasoning skills—is embarrassingly small and probably declining over time;
  3. Recent college graduates are to a very significant extent underemployed—not working, working part-time, or holding low skilled jobs traditionally held by high school graduates;
  4. College students spend less time on academic matters than the typical eighth grade student or than their counterparts did two generations ago, but receive high and rising grades for their modest academic efforts;
  5. There is considerable amount of successful rent-seeking in the academy, with university president salaries rising sharply while professorial teaching loads fall; the proportion of faculty teaching fewer than four hours a week has more than doubled in this century;
  6. The colleges accept large numbers of marginally qualified students who borrow and subsequently default on their student loans, with no adverse consequences whatsoever to the colleges initiating the loan activity;
  7. Increasingly, colleges are suppressing ideas and knowledge that somehow offend hypersensitive members of the university community, dramatically mocking the First Amendment and destroying intellectual diversity, inconsistent with the assumption that universities promote a robust marketplace in ideas.

Because of time limitations, I will only touch briefly on a few of these points. Tuition fees are double what they were a generation ago even after adjusting for inflation. There are multiple factors at work explaining this, but two are worth noting here. First, the federal programs of student financial assistance have exploded since about 1970, enabling universities to raise fees dramatically, ironically crowding out lower income students that the assistance programs were designed to help. Second, in 1971 the Supreme Court in Griggs v. Duke Power dramatically curtailed the ability of employers to test for employee competency. This inadvertently enhanced the value of the college diploma as a screening device, increasing college demand and leading to higher fees.

The rise in college fees has financed an academic arms race resulting in the hiring of armies of administrative staffs, the construction of fancy student facilities including climbing walls and even “lazy rivers” where students lie on rafts and contemplate life or sleep, whichever comes first. While student amenities have grown, the schools have also used government-induced increases in demand to finance better lives for the staff at the expense of the students. Second-rate faculty are increasingly writing third-rate papers on topics of trivial interest published in fourth-rate journals that nobody reads. For example, from 1985 to about 2005, over 21,000 papers were written on William Shakespeare, or nearly one every eight hours, day and night. Wouldn’t 1,000 have been enough to keep Shakespeare scholarship alive? Doesn’t diminishing returns set in with regards to research into the Bard as in most other things? Additionally, university facilities are vastly underutilized, with typical classrooms empty on Fridays, Saturdays, Sundays, and several months every summer, and at any given time most faculty offices are typically deserted.

Arum and Roksa show that seniors taking the Critical Learning Assessment test on writing and critical reasoning skills do little better than freshman. The Intercollegiate Studies Institute test of civic literacy shows appalling lack of basic knowledge of important facts that any educated person should possess, such as roughly when the Civil War occurred. By 2010, we had over 115,000 janitors with bachelor’s degrees, and the number of college graduates working in retail stores today is far greater than the number of soldiers in the U.S. Army. We have 25 times the proportion of taxi drivers with college degrees than we did in 1970. While in college, government time use data suggest that students average about 27 hours a week on class attendance, studying, writing papers and the like, far less time than spent on recreational pursuits. Yet over 40 percent of those entering college full-time fail to graduate within six years. And the New York Federal Reserve recently estimated that 46 percent of recent college graduates are underemployed. Arum and Roksa have found that 24 percent of graduates two years out of college are still living with their parents. Students who do graduate in the bottom quartile of their class on average earn about the same amount as typical high school graduates.

In short, as it operates today higher education is a bit of a scam. In a free unfettered market economy, consumers would realize what is going on, reduce their demand for the product, and declining revenues would force many schools out of business –Schumpeterian “creative destruction.” I compared the top 10 schools on the US News national university list for 1994 with the list today, and did the same for the top companies on the Fortune 500 list. Every school on the US News College list is still going strong. Eight of the top 10 in 1994 are still there today, and the most dramatic change is Cornell fell from 10th to 15th, hardly a momentous change. Contrast that to American business. Of the top 10 on the Fortune list in 1994, seven of them have had dramatic changes—mergers, bankruptcies, etc. Markets forced needed behavioral changes in business—government subsidies, tax exemptions and the like allow for inefficiencies to persist in higher education. Colleges are not allowed to fail even when they should.

The solution requires some tough love and forcing colleges to be less shielded from the vicissitudes of changing tastes and technology. We need to radically downsize the federal student financial assistance programs, make colleges have some skin in the game regarding student debt delinquency, privatize some state universities, and reexamine tax exemptions, particularly for non-academic ventures. We need to radically change accreditation. We need to give consumers information on the post-college vocational success of students and the amount of value added by the college years. We need to offer non-degree approaches to certifying vocational competency, including a national college exit exam. Above all, it is time to allow creative destruction to come to higher education.

Thank you.

The Coming Crisis in American Higher Education

Posted on October 22nd, 2014, by Leave a comment


By: Richard Vedder

Thomas Carlyle called economics the “dismal science,” and after today’s presentation you will probably agree with him. I will argue today that there are several forces at work that mean that American higher education will undergo fundamental change OVER the next generation. Traditional universities will not disappear, and many of the things we do now as professors will continue to be done. But the changes will nonetheless be profound.

We often brag that we have the best system of higher education in the world, and it is true that in world rankings of universities, the U.S. dominates the top 100 schools. American universities are heavily involved in the training or the employment of Nobel Prize winning scientists, for example, and there is a huge global in-migration of students to avail themselves of the superior education available in this country.
While these things are true, a number of major problems facing higher education will force significant changes in coming years. Let me mention just three of them. First, the costs of attending college has been rising far faster than people’s incomes, something that is mathematically and economically non sustainable indefinitely.

Second, the strong financial advantages from attending college are proving increasingly elusive for recent college graduates, with large proportions of them clearly being underemployed. As the perceived advantages of attending college begin to erode, more Americans are questioning whether to make the investment in a college degree, and others are even questioning whether the costs of entering some of the professions exceed the benefits.

Third, there is growing evidence that students are learning relatively little while in college, showing only marginal gains in critical thinking and writing skills, and spending more time socializing and exercising their bodies through sports and sex than in exercising their minds. The countryclubization of the American university is proceeding apace, with learning increasingly becoming a secondary focus in many schools.

I plan to elaborate on these three points a bit, and then return to first principles and ask, “What are the missions of the modern university, and how are we doing in accomplishing them?” I will conclude with some tentative speculations about the future.


Rising Costs

From about 1910 to about 1980, tuition fees at American universities rose at an annual rate of about 1.5 percent greater than the overall rate of inflation. Fees were initially very low, and this level of fee increase was quite sustainable, because the consumption of Americans was rising about 2 percent a year, adjusting for inflation. Indeed, for the average American, the burden of financing college in the late 1970s was actually lower than it had been a couple of generations earlier: the tuition cost to income ratio was falling, albeit modestly. In the last one-third of a century, however, tuition fees adjusted for inflation have risen around 3.5 percent annually, far more than incomes, which have been showing smaller growth in this century owing to an increasingly stagnant economy. The ratio of tuition fees to income has soared.

Let me use Ohio University as an example. In the 1977-78 academic year, the tuition fee at OU was $870, which was 11.7 percent the level of personal income per person in the Buckeye State. In the current academic year, 2014-15, the tuition fee is $10,536 which is 24.9 percent of estimated 2014 personal income per capita. The proportion of income devoted to tuition fees over doubled. Ohio University is very typical of the experience statewide, or, for that matter, nationwide.

Why are tuition fees rising so much faster than prices or even incomes in general? I wrote a whole book on this once, as have others, so let me give a very abridged answer. First, we can say definitively that the demand for higher education has risen far more than the supply, leading to both rising prices and higher enrollments. But let me offer three more specific explanations. The first is the hypothesis put forth by William Baumol of Princeton in the 1960s, and recently promoted by Robert Archibald and David Feldman of the College of William and Mary. Higher education is a service industry, and service industries are inherently inflationary. It is difficult in universities to cut costs by substituting capital equipment for labor, unlike most industry. Think of teaching as being similar to acting: it takes as many actors to perform King Lear today as it did 400 years ago when it was written. We cannot automate actors or teachers.

There is some truth to the Baumol hypothesis, but it only goes so far. First of all, it is increasingly possible to automate the teaching function and increase the number of students to professors, as on-line education has demonstrated. Second, faculty salaries are, at best, only about one-third the budget at a modern research university. The explosion in non-instructional staff, including administrators, is not explained by the Baumol hypothesis. You can automate many of the business functions of universities. The Baumol thesis might explain much of the 1.5 percent increase in real fees before 1978, but cannot explain the majority of the much more rapid fee increase since.

The argument state university president’s use when asked to explain rising costs usually revolves around the declining share of university budgets accounted for by state appropriations. While around 1960 or 1970 the state typically put up 40 to 60 percent of funds, today the figure is typically somewhere between 10 and 35 percent, necessitating aggressive tuition increases. Again, there is some truth to the assertion, but it really explains at best a small proportion of rising fees. State appropriations for higher education are greater today in an inflation adjusted sense then in, say, 1985. Rising enrollments have meant that per student appropriations have remained roughly the same, rising in some years and, particularly from 2007 to 2012, falling in others. The reason state appropriations have fallen as a share of university budgets in considerable part is because it takes more dollars, even in an inflation-adjusted sense, to fund one student today than it did 30 years ago. Again, universities have chosen to add armies of administrators and build fancy, costly buildings and student amenities. Moreover, the tuition fees at private institutions over the long run have risen almost as much as those at public schools, and the private schools receive little or no state appropriations. The bottom line is state appropriation deficiencies are not the main cause of rising tuition costs.

That brings me to the Bennett hypothesis; Education Secretary Bill Bennett in a February 1987 New York Times op-ed opined that federal financial aid money allowed colleges to raise fees more aggressively, and that they have done so. The universities, not the students, have captured these funds. Higher tuition fees have largely funded the academic arms race, allowing for million dollar presidents like Gordon Gee, armies of what Benjamin Ginsburg calls deanlets, fancy dormitories, climbing walls and now “lazy rivers” at Texas Tech, where students can float on rafts while contemplating life or sleep, whichever comes first. Highpoint University reportedly has a luxury restaurant for students and offers valet parking.

The empirical evidence increasingly at least partly confirms the Bennett Hypothesis. One reason states have not raised appropriations aggressively for colleges is that they believe the schools can live off federally financed tuition payments. It is not coincidental, I think, that the acceleration in tuition increases almost exactly coincides with the rapid growth of federal student financial aid. I think rising federal student aid not only explains a large portion of the extraordinary rise in university fees –but also probably such other pathologies as declining academic standards, underemployment of students, grade inflation, and so forth.


Underemployment of College Graduates

The crowd that advocates postsecondary education for all correctly cites statistics showing that college graduates earn dramatically more than high school graduates. But if one confines the analysis to recent, newer college graduates, the picture is not so rosy. The New York Federal Reserve suggests that about 46 percent or recent graduates are underemployed—a few fully unemployed, others working part-time, still others working in low paying jobs where most workers have high school diplomas. The sequel to the Arum and Roksa Academically Adrift volume, called Aspiring Adults Adrift, suggests that a large majority of students two years after graduation still depend in part on their parents for financial support, and nearly one-fourth are living with them. The Fed shows that of those graduating from college in the bottom quartile of their class, average earnings are little different than that of average high school graduates. Going to college today is risky—remember also that 40 percent of kids entering college full-time fail to graduate in six years.


Little Learning, Lots of Partying

There are several surveys that are remarkably consistent in their findings: American college students on average spent well under 30 hours a week in class, studying, writing papers, and so forth, down about one-third from half a century ago. Indeed, I suspect the total academic time spent by college undergraduates is less than that spent by eighth graders. The amount of time spent in recreational activities –partying, physical exercising and the like exceeds the time spent on academics. The socialization dimension of college overwhelms the academic one.

It is no wonder then that Arum and Roksa report college seniors have little more critical reasoning or writing skills than freshman. It is no wonder that federal adult literacy surveys show that today’s college graduate on average is less literate than his or her counterpart of a generation ago. It is no wonder that the Intercollegiate Studies Institute test on civic literacy shows seniors know very little more than freshman, and that there is abysmal ignorance about such things as when the Civil War occurred. It is no wonder that a large proportion of employers complain that new college graduates lack skills needed to function well in the workplace. Yet today’s student typically has a far higher grade point average than graduates of 50 years ago. Students work less for higher grades and spend more time partying then learning.

Another way of addressing the coming higher education crisis is to return to first principles, asking “what is the purpose of a college education?” Alas, that is where the trouble begins. A university education means different things to different people, and the resultant confusion in determining the mission often leads to mediocre results—half-achievement of a half dozen sometimes conflicting objectives, to wit:

  1. The vocational goal. Given the contemporary zeitgeist, probably the most important motivation for many paying customers (students) for attending college is they think they will derive a greater income; college is allegedly an “investment in human capital” with big private payoffs;
  2. The moral goal. When American universities were founded in the 17th and 18th centuries, they were perceived as a way of inculcating virtue –civic virtues and well as traditional Christian virtues like integrity, honesty, kindness, thrift, and industriousness;
  3. The egalitarian goal. Strongly influencing 19th and 20th century university expansion was the belief that universities were powerful tools in achieving the American Dream, allowing persons of humble circumstances to advance economically;
  4. The knowledge/critical thinking goal. But isn’t college about learning things –discovering truth and beauty, and how to think about complex problems? A good college is one where graduates know a lot more about the world in which we live than they did upon entering four (five, six ?) years earlier;
  5. The research goal. At many campuses, however, an important, sometimes dominant interest is in the creation of new knowledge, not the disseminating of existent facts. Indeed, many university presidents eloquently proclaim the need of becoming a world-class university belonging to the elite American Association of Universities, to which two Ohio universities, Ohio State and Case Western Reserve, belong;
  6. The economic growth goal. Some believe universities are engines of economic growth, creating and expanding human capital through teaching and research, and by offering their superior wisdom to policymakers allocating public resources.

Any decent assessment of higher education asks, “How are we doing with regards to these goals?” But goal achievement comes at a cost –it takes considerable resources to run American higher education, and monies used for universities could be used for other things that we value as individuals and as a society. Are we getting good “bang for the buck?” If not, where are we getting low value for our expenditure? Why is productivity lower than it should be?

Also, we need to ask, who is paying for the education? Are large public subsidies of higher education justified –is it really largely a “public good” that has huge positive externalities (spillover effects) deserving of public support? Why do we tax “for profit” higher education that does similar things as subsidized not-for-profit universities? But first, let us look at detail at our success with respect to the varied missions of universities.


Are We Achieving the Goals of Higher Education?

The Vocational Goal

The Higher Education Research Institute at UCLA every few years conducts extensive surveys on faculty and student views on various aspects of higher education. On the most recent Freshman Survey, the proportion of respondents who said college was important to them for getting a good, high paying job reached an all-time high for the survey, surpassing 85 percent. It far out distanced other motivations.

I have already suggested that recent graduates are not getting good jobs. For example, far more college graduates work in retail stores for low pay than there are soldiers in the U.S. Army. We have over 115,000 janitors with bachelor’s degrees, and 25 times the proportion of taxi drivers with bachelor’s degrees today than was the case in 1970. When only 11 percent of adult Americans had college degrees –1970 – a degree almost always denoted an individual with very high cognitive abilities with high accumulations of knowledge. Even graduates of the Wright States or Youngstown States of the world were considered something special. Now that over 30 percent have degrees, employers are finding many college graduates do not have above average levels of intelligence or high amounts of discipline and drive. Hence, the graduates of mediocre universities are having huge trouble getting jobs relative to those attending the elite private schools that still command respect because most of their graduates have higher levels of cognitive abilities and greater drive. The gap between the Harvards and the Youngstown States o have widened dramatically.

The Moral Goal

It is true that typically college graduates have some virtuous characteristics. For example, statistical evidence suggests that they are less likely to commit major crimes, but more likely to volunteer to work for charitable organizations than high school graduates. College graduates tend to have higher levels of civic engagement, voting more than others, and being disproportionately elected to public office, etc. It is over 60 years, for example, since we had an American president without a bachelor’s degree. Again, it is unclear, however, how much of the increased “virtue” associated with these positive characteristics came from experiences associated with college life. Crime rates and divorce rates are higher than they were in, say, 1930, even though the proportion of adult Americans with college degrees has multiplied ten-fold to over 30 percent of the population. Childbearing out of wedlock has expanded dramatically. Rising college attendance has coincided with stagnant church attendance (even though college educated persons themselves remain attend church somewhat more than the population as a whole), and a notable anti-religious sentiment seems to pervade much of higher education.

It is not clear, then, that the move to increase participation in higher education has actually contributed to a society with less dishonesty, crime, substance abuse, and uncivilized behavior. If one examines practices on campuses, doubt about the moral dimensions of higher education are often heightened. Indeed, many moral relativist professors and college residence life staffs routinely disparage traditional restraints on human behavior like the Ten Commandments, or time-tested institutions like traditional marriage.

Although an unscientific highly non-random sample, I looked at six of the most heinous criminals of the past half century: Ted Bundy, Jeffrey Dahmer, Ted Kaczynski, Adam Lanza, Charles Manson, and Timothy McVeigh. Between them, they killed scores of people and committed other hideous crimes like rape and body mutilation. One-third were college graduates (one from Harvard), educated at a time when a vastly smaller portion of the adult population received four year degrees. Only one (Manson) of the six never attended college at all—a below average proportion. At the highest levels of evil, college attendees are disproportionately highly represented.

The Egalitarian Goal

University presidents claim higher education provides opportunities for all to reach the top of the occupational ladder and financial success. From the Morrill Act of the 1860s up to the Higher Education Act of the 1960s, there was an underlying premise that higher education should allow able and meritorious people to achieve their dream regardless of financial circumstance. And, at the time the Higher Education Act was passed in 1965, there was some reason to believe expansion in college attendance had expanded income equality and economic opportunity. The Gini coefficient, the most commonly used measure of income inequality, had fallen rather noticeably from the 1920’s for example, concomitant with a rapid expansion in university enrollments.

In 1970, before Pell Grants, the federal government’s student financial assistance programs totaled well under two billion dollars; today, they are about $180 billion. In inflation adjusted terms, these programs have grown at an astonishing 7.3 percent a year. Yet despite all of this, the share of recent college graduates coming from the bottom quartile of the income distribution has fallen. Meanwhile, as the proportion of the adult population with four year degrees has gone from 11 to 30 percent, measured income equality has fallen. Daniel Bennett and I, in a recent paper, suggest diminishing returns to income equality goals long ago came to higher education, to the point the “college for all” movement is probably on balance worsening equality in America.

Within higher education, the gaps between the wealthy, prestigious schools and the less expensive and selective state schools have grown over time. In 1988, eight state schools were listed in the top 25 in U.S. News & World Report rankings of universities; in 2014, only three were. Similar, the 2012 NACUBO/Commonfund Endowment survey showed that the top one percent of surveyed schools had over 30 percent of all endowment money, a sign of very high wealth inequality within higher education. While prestigious expensive selective admissions universities with relatively low representation of poor persons routinely graduate 80 percent or more of entering students within four years, the rate at open admission state schools catering to low income students is typically 20 percent or less. This likely promotes greater, not lesser, income inequality.

The Knowledge/Critical Thinking Goal

Do graduating seniors know much more about our civic surroundings, our historical, economic and political milieu, than do freshmen? No, if the aforementioned test administered by the Institute for Humane Studies has meaning. Do they think a lot more critically, making them better able to make perceptive judgments about complex sets of facts? No, if the extensive findings of Arum and Roksa are accurate. Some will say evidence like this is deficient and very limited in scope. Yet colleges, in the knowledge business and researching all sorts of esoteric trivia, simply do not know themselves how much “value added” is occurring during the college years, and, if they do know, they fail to tell the public out of fear of being shown inferior to competing schools. A lack of transparency is a major problem in higher education.

The Research Goal

It is true that much very useful research has come out of American universities, improving both the quality and quantity of our lives. We are the envy of the world in collegiate basic research. We dominate the lists of winners of Nobel Prizes and other important scholarly forms of recognition. Yet most college faculty are not scientists doing cutting edge research, and even within the STEM disciplines, the law of diminishing returns applies –some research is of no doubt pretty trivial value.
Outside the STEM fields, vast numbers of papers are written that virtually no one reads or cites, as Mark Bauerlein of Emory has pointed out on multiple occasions. Moreover, professors are teaching less (the proportion of professors with teaching loads of four hours a week or less has over doubled since 2000), robbing students of experienced, knowledgeable professors. Incentives push professors to do ever more trivial research, while low paid adjunct faculty do more of the heavy lifting in the classroom. At most schools, professors with many publications are rewarded relative to those with fewer publications but good teaching reputations. However, did we really need 21,000 or more papers written on William Shakespeare since the mid-1980s? Wouldn’t 1,000 have been enough?

The Economic Growth Goal

Politicians proclaim “investment” in higher education is necessary to remain globally competitive, and that greater university spending promotes economic growth. I have probably run over a thousand regression equations looking at the collegiate spending/economic growth relationship and I find either: more spending actually retards growth, or, that the correlation between university use of resources and economic growth is negligible. Again, diminishing returns are at work – taking funds from an efficient private sector to spend turning out persons taking jobs as taxi drivers seems intuitively counterproductive–there are better uses of those scarce resources.

Other Problems and Pathologies

The emphasis on evaluating outcomes, while useful, neglects many of the details that explain why colleges are excessively costly, delivering few benefits per dollar spent. For example, resources are vastly underutilized, including often empty classrooms and offices, professors teaching little, and students doing little studying. Moreover, even when utilized, many resources are used ineffectively. Incentives are all screwed up –advising students brings little reward, but publishing for the Journal of Last Resort does.

University governance is typically archaic. It is often unclear who makes major decisions, and even where lines of authority are well drawn, much governance is by committee, which leads to slow decision-making, often non-innovative compromise solutions to problems needing prompt and radical innovation. The goals of universities are often nebulous and difficult to measure –there is really no clear “bottom line,” making evaluation of success difficult. Administrative bloat is endemic to many universities, with some schools having more administrators than faculty. A growing percentage of faculty do little real teaching. Big-time athletic programs are not only costly, but scandalously corrupt. Rent-seeking behavior is rampant, and excessive salaries paid some administrators are not only costly but reduce the moral high ground historically held by collegiate institutions. Colleges admit vastly too many underprepared students, as there are no negative consequences to the school from their dropping out. And this list is not exhaustive.

Costs are rising rapidly in higher education. The economic and intellectual success of higher education must relate the benefits to the costs. It costs far more to educate an American college student than one in, say, Great Britain, France, Germany, Japan, or Korea, all major industrial peers. In inflation adjusted terms, the typical student today pays three or four times as much to go to school as his or her predecessor did 50 years ago. The share of the national output devoted to higher education has roughly doubled over that period, despite the substantial growth in that output.


Is There Hope?

Plato was on to something when he allegedly proclaimed “necessity is the mother of invention.” As universities become both more costly and deficient in meeting basic goals, we look for alternatives. Enrollments are starting to fall. According to the Census, total higher education enrollments fell nearly one million between 2011 and 2013, and the early indications are that they did not rise substantially in the fall of 2014 –meaning they are clearly lower today than three years ago. Moody’s Investors Service has issued progressively more negative assessments of the financial situation at American universities.

Back to Plato and invention. New technologies and innovations have spawned MOOCs (massively open on-line courses) and some for profit entrepreneurs are offering pretty high quality course content at reasonable prices. But the market forces that ordinarily would correct many problems are muted or offset by massive government subsidies that prolong inefficiencies and mediocrity. Even here, however, there is hope. Many states, increasingly cognizant of the problems cited here, have reduced appropriations. Huge federal deficits and irresponsible spending will eventually force a rethinking of the ineffective, dysfunctional federal student financial aid programs, arguably the largest cause of the senseless and wasteful academic arms race. My guess is that government tax exemptions/subsidies of universities will be curtailed, tenure will continue its slow death, and many expensive but mediocre schools will die, reflecting Schumpeterian “creative destruction.”

I would be surprised if fewer than 500 degree granting schools close their doors over the next decade. Already in Ohio, Urbana University is being merged into Franklin University, and Wilberforce University is apparently on life support. The problem extends to community colleges as well. At Hocking College, for example, enrollments have fallen over 40 percent, leading to budget crises, and forced leadership changes. Rumors have it that some state universities are financially challenged, such as Youngstown State. So change is coming, but not painlessly, for many in today’s academic establishment.


Richard Vedder directs the Center for College Affordability and Productivity, teaches at Ohio University and is an adjunct scholar at the American Enterprise Institute.

Three Dirty Academic Words Ending in ‘Ity’

Posted on October 3rd, 2014, by Leave a comment

UPDATE: Ayaan Hirsi Ali spoke to Yale last night without significant interruption or disturbance according to the Yale Daily News, and received a standing ovation.

A decade ago, the favorite word out of university presidents’ mouths was “diversity.” A few years later, the cool word to use was “sustainability.” Today, the new mot du jour is “civility.” Universities have ruined all three of these once perfectly good words. For the record, I am against “diversity,” “sustainability,” and “civility” –at least as they are misused by university apparatchiks.

“Diversity” came to mean evaluating people not on their intellectual merit, the strength of their character, or other legitimate means, but rather by some biological group characteristic, such as the color of their skin or their gender. The maddening thing about the term was the Orwellian dimension of it all –universities were bragging about their commitment to “diversity” meaning skin color and other such genetically determined characteristics, when they were becoming increasingly contemptuous and even hostile to meaningful, good diversity — a wide range of different ideas and opinions. According to Harry Enten, who analyzed the politics of commencement speakers at top 30 universities for 2013 and 2014, 25 Democratic political figures were invited to speak, but no Republicans. Where is the diversity there?

Then came “sustainability.” To this day, I am not sure what it is. But most of what is called “sustainable” activity is to my mind truly ignorant, wasteful, inefficient behavior in any meaningful economic sense. Colleges will spend $30 million on solar panels that lower electric bills by $1 million a year, for a low rate of return of 3.3 percent –and that does not account for depreciation and maintenance costs, making the investment completely non-economic by any sensible measure. Students would get a better value from better uses of university resources. Sustainability coordinators will urge the university food czars and czarinas to “buy local foods,” when it is often far more costly to do so. The law of comparative advantage says the wealth of nations is thwarted if people fail to trade over long distances. The same people who say global warming is going to hurt us soon despite 15 years of continuous global cooling are convincing universities to waste monies and raise tuition fees to promote bad policies that are costly.

Now, there’s “civility,” the most dangerous word of all. It is a code word that means that people on campus should express themselves in a way that offends no one. It is a form of censorship. It is anti-freedom of speech, the antithesis of what a great university is all about. Universities increasingly are trying to muzzle freedom of expression. To be sure, there are a few limits on speech that are legitimate –persons who threaten to kill persons who disagree with them are going too far. At my university, the Student Senate president recently condemned Israel in a strident fashion, which while arguably moronic and wrong, was legitimate speech, but when she implied she might be speaking for both the student body and the university as a whole, she went too far, and the university president was correct in condemning that claim.

The latest episode in the free speech wars is occurring now at Yale. Ayaan Hirsi Ali is speaking there. This is the woman to whom Brandeis withdrew an invitation to speech at its commencement. Muslim students at Yale protested her visit, but President Peter Solovey issued a good statement defining Ali’s right to speak. But then, with approval apparently from the university, the school’s chaplain, Sharon Kugler, said “We are deeply concerned by Ms. Ayaan Hirsi Ali’s long record of disparaging, and arguably hateful comments about Muslims and Islam.” She proposed the Buckley Program that sponsored Ali’s visit add some anti-Ali speakers.

This is outrageous on multiple grounds. First of all, as one who has read Ali’s writings, listened to her speak, and conversed at some length with her personally, Ali may be speaking “hurtful” things to some Muslims –but they appear to be the truth. She has fought genital mutilation and other offenses against women. She has pointed out passages from the Koran that are not particularly in keeping with modern views on right and wrong. She has told the truth as she knows it. She has exposed barbaric practices. She is doing exactly what persons like her should be doing on university campuses. Should her sponsors be forced to offer alternative speakers? No. Absolutely not. What those disagreeing with Ms. Ali should do is offer alternative speakers themselves with different perspectives, not try to stop Ms. Ali’s appearance. And Yale should repudiate the chaplain’s use of the word “we” to imply she is speaking for an entire university community.

A good very brief new book on the “civility” charade comes from Greg Kukianoff, president of the Foundation for Individual Rights in Education (FIRE), Freedom from Speech, which picks up on other campus pathologies, such as speech codes and the new rather inane concept of “trigger warnings” to alert our tender little minds that someone might say something with which some might strongly disagree.

A person who tries to stop another person from speaking peacefully is intolerant. Why aren’t universities spending more time talking about tolerance, and less about talking about “civility,” a code word for suppression of ideas, including some “inconvenient truths?”


This post originally appeared on our Higher Education and the Economy blog at

College: Adventures With Pollyanna

Posted on September 30th, 2014, by Leave a comment

After reading the Richard Arum and Josipa Roksa book Aspiring Adults Adrift, a sequel to their 2011 book Academically Adrift: Limited Learning on College Campuses, I thought of the 1913 novel Pollyanna. The term today refers to a blindly optimistic person — one who remains naively positive about things regardless of the evidence. That is pretty much how Arum and Roksa describe today’s recent college graduate in “Adrift 2.0.”

Having previously demonstrated that students typically show very little improvement in their collegiate years in the generic but important skills of developing critical reasoning and an ability to write well, Arum and Roksa turn their attention to two things: the socialization dimension of higher education and post-graduation outcomes. Again, the findings are not pretty. Students today are very much absorbed by making and enjoying friends in college –to the point of spending far more time on this “consumption” dimension of higher education than on the more “investment” oriented dimension of acquiring knowledge, the ability to think, the desire to become civically engaged, etc. Students typically study for only a dozen or so hours each week –and a lot of that is in groups. Even the academic learning process has been socialized.

And to what benefit? One very important dimension of success (probably even more important than the authors, both sociologists, are willing to admit) is the ability of college graduates to transition into jobs that are both remunerative and enjoyable. Yet, the Arum and Roksa graduates to a very large extent found themselves taking jobs that paid poorly. Indeed, over half (53 percent) of those not continuing in school either were unemployed, working part-time, or in jobs paying under $30,000 a year two years after graduation. To be sure, this is in 2011 in the aftermath of the Great Recession, but recent data from the New York Federal Reserve and other places suggests this result is actually pretty close to the truth even today.

Yet the recent graduates were not downtrodden. Most of those interviewed thought they would have a better life over their lifetime than that of their parents. They thought their current mediocre economic position was temporary, even though a solid majority was still getting some financial support from their parents. The pecuniary advantages of going to college, but it will take some time.

The gap between perception and reality among recent college graduates is appalling. They think they are pretty smart and knowledgeable, while the objective evidence suggests the best single word to describe the group (although this certainly does not apply to all of them) is “clueless.” They simply don’t know that they don’t know — much — about the world in which they live. The ethos — once confined to the university academic ghetto known as the College of Education — that life is all about having a high self-esteem, has spread throughout the university.  It is as if Forest Gump has married Pollyanna, and they are poorer than church mice and dumber than the typical Division I football player, but they are happy.

You might say, “So what?” If we are happy during our finite years on Earth, isn’t that success? Perhaps the colleges are right in promoting socialization, with schools copying Texas Tech’s multi-million dollar “lazy river” that allows students to relax and sleep off their alcoholic haze while floating on some rubber raft. A recent National Bureau of Economic Research study shows colleges get more bang for the buck with respect to luring students by emphasizing amenities rather than academics. Make the students happy: Plato is out, hedonism is in. To be crude and slightly over-exaggerating, it appears to young America college is primarily about getting drunk, getting laid, and feeling good about one’s self.

But what are the opportunity costs? In 30 years, are these young Americans going to be running or ruining America? What happened to rigor, to hard work, to learning? To be sure, this sounds (and is) the rant of an old traditional college professor. And I, in my 50th year of teaching at The Ohio University, have had some of the best students of my career in the last few years — young men and women who work hard, are smart, and are doing very well in their post-graduate careers. But they are a minority. Also, as one who teaches at what is always a contender on the lists of the nation’s leading party schools, I am the first to admit that some good comes from the socialization — it is often important vocationally to develop interpersonal communication skills, for example, and the party-going student does that typically better than the nerd who spends Friday and Saturday nights in the library reading, or fantasizing about the classmate that he or she would like to get to know in the biblical sense.

But why should governments subsidize the country club dimensions of higher education for mostly middle and upper income persons? We tax real country clubs, not subsidize them. Why should we do different for colleges and universities?


Richard Vedder directs the Center for College Affordability and Productivity, teaches at Ohio University, and is an Adjunct Scholar at the American Enterprise Institute.

Misconceptions About The Profit Motive In Higher Education

Posted on August 21st, 2014, by Leave a comment

Daniel Bennett, a research fellow at CCAP, has a piece in the most recent edition of Career College Central which challenges the conventional “problems” that a profit motive brings to higher education. He discusses the difference between the short term profit: luring a naive student to capture the federal money that comes with it with no regard for the student’s outcome or well-being, with a more likely goal of long term profit: Develop top notch programs that produce successful graduates, increasing the reputation of the institution. He says:

It is in the investors’ best long-term interest to pursue a strategy that seeks to develop a strong brand name by offering an educational product that satisfies its consumers; demands at a price at or below their willingness to pay. In contrast to the view espoused by Shireman and other critics, the profit motive actually provides an incentive for collegs to meet the educational needs of their students.

He further discusses the role of Moral Hazard in higher education, and has a discussion of whether information asymmetries are a market or government failure.


Read the full story here.

Dr. Vedder to Appear on NPR Today at 2:10pm EST

Posted on August 20th, 2014, by Leave a comment

Dr. Vedder will join a panel including Sandra Baum of the Urban institute, President Michael Roth of Wesleyan College, and Graeme Wood of The Atlantic this afternoon on KCRW’s “To the Point” hosted by Warren Olney.  The panel will discuss the rising cost of college tuition and what colleges are doing about it. The program will run from 2:10pm to 2:45pm Eastern Time.

Tune in to your local NPR affiliate, or online here.


Schools That Are Keeping Costs Low: Infographic

Posted on August 20th, 2014, by Leave a comment

While we generally do not accept guest infographics, this one is interesting as it highlights the Affordability aspect of higher education that we promote.

The underlying data is provided here.


Making College Affordable

Bloomberg Chart of the Day: Soaring Costs of College

Posted on August 18th, 2014, by Leave a comment

Bloomberg ran a chart of the day today tracking the rise of college tuition over the past 35 years. In the discussion section they quote Richard Vedder saying:

Some schools are effectively limiting cost increases by bigger tuition discounting, but on the whole college presidents have not adjusted to a fundamental shift in attitudes toward the value of a high-cost education … Colleges are too slow to reinvent themselves.


The chart of the day is below. Find the full story here.



O’Bannon v. NCAA Ruling Could be a Game Changer

Posted on August 15th, 2014, by Leave a comment

On Friday, August 8th, Federal Judge Claudia Wilken of United States District Court in Oakland California handed down a 99-page ruling that prohibitions of player compensation by the National Collegiate Athletic Association violate Section 1 of the Sherman Antitrust Act. O’Bannon brought forth a class action lawsuit against the NCAA in 2009 to “challenge the association’s rules restricting compensation for elite men’s football and basketball players. In particular, Plaintiffs seek to challenge the set of rules that bar student-athletes from receiving a share of the revenue that the NCAA … earn(s) from the sale of licenses to use the student-athletes’ names, images, and likenesses.”

Ed O’Bannon, Power Forward for the 1995 Championship UCLA Bruins. (photo credit: Los Angeles Times)

The Amateurism Fallacy

In the course of the trial, the NCAA argued that it’s restrictions on player compensation established to maintain amateurism in collegiate athletics. In her ruling, Judge Wilken outlines how the bylaws surrounding amateurism and compensation have changed drastically over the NCAA’s 100+ year history. She states, “Indeed, education – which the NCAA now considers the primary motivation for participating in intercollegiate athletics – was not even a recognized motivation for amateur athletes during the years when the NCAA prohibited athletic scholarships.”  She rules that the court finds these restrictions on student-athlete compensation “not justified by the definition of amateurism in its current bylaws” and that the “restrictions on … compensation do not promote competitive balance.”

The NCAA also argued that it does not serve as a monopoly, and therefore was not guilty of enabling price fixing, arguing the plaintiff’s claim that the NCAA was in violation of Section 1 of the Sherman Act.  Wilken sides again with the Plaintiff, citing the Supreme Court when it relies on then Judge Sotomayor’s concurrence with Judge Salvino that “competitors ‘cannot simply get around’ antitrust liability by acting ‘through a third-party intermediary or ‘joint venture.’’” Here she points to the NCAA as establishing Monopsony practices that harm suppliers. She points to Mandeville Island Farms v. Am. Crystal Sugar Co. which provides the precedent “suppliers … are protected by antitrust laws even when the anti-competitive activity does not harm end-users”.

Addressing the issue of using the players’ names, images, and likenesses, the ruling of O’Bannon v. NCAA allows for universities to set up trust funds for players to be drawn from after graduation, or at the end of athletic eligibility. This effectively enables players to be compensated for their part in the multi-billion dollar industry that flourishes off the use of their likeness. This is in addition to annual payments that match the total cost of attending, including the previously capped amount (tuition, fees, room and board, books, certain supplies, tutoring, and academic support) and adding allowances for other incidentals.

Judge Wilken does enable the NCAA to impose limits on these trust fund amounts, however. The court rules that the NCAA cannot prohibit these payments on anything less than $5,000 per year. This total payout of $25,000 is much less than the hundreds of thousands that players were hoping to get, according to ESPN’s Lester Munson.

Other Antitrust Concerns

If the NCAA were truly pro-competition they would remove the limits to eligibility of transfer athletes that require a one year no playing probationary period after switching schools and teams. Further it would allow unbridled compensation for players, which would reduce the incentive for schools to expend resources on lavish facilities, and expensive coaches that currently seduce the college recruits.

Today the top teams in the big market conferences do not compete with Division 1 schools in lesser conferences. The Big 10 is leaps and bounds ahead of its neighboring Mid-American Conference (MAC).  The NCAA pretends to create a fair playing field for all schools across the same divisions through compensation probation, when in reality the schools that would entice players with large salaries, instead build the biggest stadiums, promise national coverage, and buy the best coaches.

This case highlights some of the problems that plague collegiate athletics, but the fact remains that these athletic programs in many markets are not self-sustaining. These programs rely on steep student subsidization which in turn increases the cost of attendance. This tied good (in order to receive the education you must also pay the fee to subsidize the athletic teams) opens even more room for anti-trust scrutiny, but on an institutional level.

NCAA Board Approves Autonomy for ‘Big 5 Conferences’

Other developments challenge the status quo elsewhere in the NCAA. Thursday, August 7th, the NCAA’s Division 1 Board of Directors voted to allow the “Big Five” athletic conferences – Southeastern Conference, ACC, Big 12, Big Ten, and Pacific-12 – autonomy to vote on changes in a vote of 16 to 2. One of the first items on the list of topics addresses a similar issue to what is discussed above, namely the additional benefits for student-athletes in the NCAA’s highest-revenue sports.  The Washington Post reports that this vote “puts an effective end to the suggestion that all 351 Division I programs operate on a level playing field.”

This new set up coupled with the recent ruling of O’Bannon v. NCAA open the door to increased recruiting compensation at these top schools, over the smaller programs. The smaller programs should be advised that to remain competitive with these major market teams is to incur huge costs to the institution. These costs will be transferred onto the students by way of higher fees, further increasing the cost of college.