Milton Friedman on Universities

Posted on November 7th, 2012, by 1 Comment

While perusing in the archives, I came across this quote from Nobel Laureate Milton Friedman on the business model of universities (in a 1991 interview with Forbes magazine) that is as salient now as ever:

I have always argued that universities are multiproduct enterprises. They produce three major products: schooling, research and monuments.

Even separately, any one of those three missions can be expensive (particularly when a university is trying to impress mom and dad with a brand new, Donald Trump-esque college). Combining all three of those enterprises under one roof can easily lead to the scenario in which the total is much greater than the sum of the parts.

Now That’s Some Business Model!

Posted on November 1st, 2012, by Leave a comment

If you want to learn more about the University of Michigan’s costs, finances and tuition pricing policies? How about enrolling in a course offered by UM entitled, “The Challenge of College Affordability: Financing the University.” As Matthew Dolan reported for the Wall Street Journal,

Fifty-six students are registered this semester for “The Challenge of College Affordability: Financing the University,” a series of seven two-hour lectures taught by top administrators at the public university. The course, geared toward sophomores, is designed to explain where the school gets revenue, what drives its costs and how that translates into tuition rates and financial-aid packages.

“We were interested in elevating the thinking about the topic,” said Phil Hanlon, the university provost who co-teaches the course. “It is often the case that it’s controlled by sound bites.”

Mr. Hanlon and his co-instructor, Vice Provost Martha Pollack, said the course tells the school’s side of the story but not at the expense of a balanced, academic approach. “We wanted students to reach a better understanding of the issue, particularly the interaction between academic quality, cost of attendance, investment in financial aid and expenditure reductions we’re doing on campus,” said Mr. Hanlon, who is the school’s chief academic and budget officer.

So let me get this straight: if you want to be able to hear a defense and/or analysis of the existing operating model and tuition pricing policies at elite public universities, you must first pay tuition (set, of course, by existing pricing policy) for the privilege of attending a class devoted to that subject at one of those elite public universities. That’s absolutely brilliant.

College Sports DO Have Positive Spillover Effects!

Posted on October 25th, 2012, by 1 Comment

While I have wondered before whether college athletics really have the benefits so often attributed to them, it turns out that they do, in fact, have some rather important positive externalities. It’s just those spillover effects are not necessarily the kind one would immediately think of when addressing the topic of college athletics. In a piece for Slate, Tyler Cowen and Kevin Grier point me to this paper by Andrew Healy, Neil Malhotra, and Cecilia Mo which demonstrated that there is “clear evidence that the successes and failures of the local college football team before Election Day significantly influence the electoral prospects of the incumbent party, suggesting that voters reward and punish incumbents for changes in their well-being unrelated to government performance.” The paper shows that football victories within 1o days of Election Day boosts the incumbent’s vote share by 0.8 percentage points, with larger effects for localities with teams that generate high attendance or are powerhouse programs.

However, on second thought, I’m not so sure that I can really call these “positive spillover effects.” After all, whether or not they are “positive,” really depends on how one views the particular incumbent in each political race. If the incumbent happens to be on the other side (as defined from each voter’s individual perspective), then the spillover effect would be a negative one, so whether this effect yields an overall social benefit is a wash. The only problem now is that some politicians may decide to call for more spending on college athletics in the hope of stimulating their vote in the next election (just kidding!).

Minnesota Struggling to Enter 21st Century?

Posted on October 22nd, 2012, by 2 Comments

The internet was abuzz last week after the Chronicle of Higher Education broke the news that Coursera, the free online course provider, had updated its terms of service to inform residents of the Gopher State that “under Minnesota Statutes (136A.61 to 136A.71), a university cannot offer online courses to Minnesota residents unless the university has received authorization from the State of Minnesota to do so.” Coursera had added this language after pressure from the Minnesota’s Office of Higher Education, citing a law dating back a couple of decades (the letter from the State to Coursera is available here).

Substantial backlash on this move (see Robert Talbot for the ChronicleAlex Tabarrok of MarginalRevolution or Will Oremus of Slate) caused Minnesota to do a little bit of backpedaling (or clarification, depending on how charitable one feels toward the Office of Higher Education). As Nick Anderson of the Washington Post reported, Larry Pogemiller, director of the Office, has followed-up the initial news reports to say that the Office was not trying to enforce a blanket prohibition of any and all free online education in the state and will allow Minnesotans the opportunity to enroll in free online courses.

It seems the law the Office was initially so keen to enforce is one that deals with degree-granting institutions, which Coursera is assuredly not. Furthermore, as others have pointed out, the rationale for the original requirement in Minnesota for degree-granting colleges and universities to obtain government permission is to protect higher education consumers (i.e., students) from scammers, a rationale which can’t apply to Coursera because 1) its courses are free and 2) it does not offer any degree. (Besides, none of the university partners of Coursera offer traditional academic credit for completion of Coursera courses.)

While it is heartening to see that the Minnesota Office of Higher Education is wanting to revisit the old law and update it to reflect the technological realities of the 21st century, I’m not so sure that the Office fully realizes how far its current rules are from reality. After all, Coursera really is not in a position to being the academic equivalent of a University of Minnesota bachelor’s degrees. While I’m sure Coursera would love to be in a position where it could offer the equivalent of a degree, it really can’t offer that at this point, at least in terms of a credential that employers would recognize as the equal of a traditional degree. If traditional universities want to be part of the technological frontier by partnering with organizations like Coursera, that should be perfectly fine. These universities are involved with Coursera, at least at this point, not to supplant their traditional model of offering degrees but to experiment with a completely different kind of educational offering. Otherwise, these institutions would allow full credit for Coursera courses and allow students to receive degrees for nothing more than proven completion of Coursera courses.

All that aside, however, if we do prohibit, in some form, free offerings of online courses, should we not also prohibit college professors from using free online sources (a YouTube video or online textbook) in their courses? Should we not also prohibit the more than 33 percent of professors who use social media in their classes? I doubt we want to open up that can of worms.

Quote of the Week

Posted on October 12th, 2012, by Leave a comment


Baumol’s theorem on cost disease only holds if you refuse to accept change. It requires you believing that you can only heal yourself if some doctor with 12 years of education spends 20 minutes talking down to you. The same holds for the college industrial complex. If you think that “college” means a fancy campus with fancy professors doing fancy research and jetting around the world, you can be assured that the prices will continue to skyrocket.

Transcript of My Testimony Before Committee of the PA House of Representatives

Posted on October 11th, 2012, by 1 Comment

This past summer I testified before the Pennsylvania House of Representatives State Government Committee on a package of bills that had been introduced to make a number of regulatory changes to the Pennsylvania State System of Higher Education (PSSHE). The transcript has now been released and is available on the Pennsylvania legislature’s website (a link is also available on our website). I primarily focused on what I saw as the positive development proposed in the bill which would have made student activity fees non-mandatory (by providing for students to opt-out of those fees) at PSSHE schools. I argued that this is a desirable policy because it increases student’s freedom of choice and would force schools to demonstrate to students that the activity fees they assess are justifiable and worth the cost to the students.

NB- At one point during the hearing I mistakenly said “marketing” when I think I really meant “management.”

A Student’s Perspective on MOOCs

Posted on October 8th, 2012, by 1 Comment

It seems like everywhere one looks today in the world of higher education, one cannot help but see news on the Massively Open Online Courses (MOOCs) offered by servers such as Coursera, Udacity and EdX.  But how are students supposed to take advantage of these new opportunities?  What are the experiences like?  For whom are these classes?

In visiting each of these sites, it quickly becomes clear that, to date, Coursera offers the most courses in the broadest range of topics with over 100 classes.  Udacity and EdX are much smaller, offering fewer than twenty courses apiece.  All of their classes are in the math and science fields, with a very strong emphasis on technology related courses.  And while there is nothing at all wrong with focusing on these topics, the wider variety offered by Coursera led me to enroll in several of their classes to get a better understanding of the MOOC experience.  As a person with much more on a penchant for history, literature and the like, I was naturally drawn to Coursera.

From this experience, I have come to several conclusions about the value of MOOCs and areas in which they need to improve.  As I wrote in a previous post, MOOCs have a lot of potential to become a powerful tool in improving the availability and efficiency of education.  They do, however, still have a number of issues to work out before becoming truly viable.  The primary issue is the almost complete lack of personal interaction.  This dearth of connectivity applies to both troubleshooting and to the actually class experience.

When a technical issue arises, students are instructed to post in a forum for such issues.  However, when I had an issue with a quiz submission, I received no assistance on that forum, nor from anywhere else.  I found this to be troublesome, as it direct affects a student’s ability to pass the course for a reason other than a lack of a grasp on the material.  MOOC providers such as Coursera must find a way to satisfactorily address technological issues that inevitably arise in an online class format.  A disruption in internet connectivity, a power surge or an overheating computer should not adversely change a grade.  It should not be assumed that every student has a top-of-the-line computer that always works exactly as it should.  A student should not be punished for having a four-year old machine that has developed some annoying tics, which are likely to show themselves on occasion during an online class, given the amount of online time it takes to complete each week’s assignments.

Another issue that needs to be addressed by MOOC providers is the general lack of personal communication and feedback that is rampant in this very large type of online class.  With no common time or place that they share, students feel dissociated from the class.  The forum format that encourages students to start a thread to discuss class material is, at best, a poor substitute for actual classroom discussion.  At worst, what students write is ignored, not responded to, or just plain lost in the sheer volume of responses, even if they have valuable insight.  The forum also requires each student to spend a large amount of time browsing earlier posts in order to engage in a dialogue, which certainly cuts down on the efficiency of having a face-to-face conversation in the classroom.  A “conversation” could take several days to complete as opposed to hashing out ideas in just a few minutes.  While there certainly are more potential good ideas in a MOOC to discuss than in a much smaller traditional classroom, students and instructors must wade through in order to exchange ideas.

This is not to say that the concept of the MOOC is a bad one.  To the contrary, it offers many distinct advantages that a traditional classroom does not including, but not limited to, the sheer number of students it can reach and the ability to serve people with irregular schedules.  The student experience, however, is diminished due to the lack of personal interaction and the difficulty and disappointing substitute of the forum.  In order for MOOCs to even hope to become a source of viable, long-term mass education, instead of just a flash in the academic pan, the companies that offer these courses must come up with solutions to these problems so that students will not become disaffected with the classes they are taking.

Say it Ain’t So!

Posted on October 8th, 2012, by Leave a comment

There is much to commend the for-profit Christian school, Grand Canyon University, in this profile Paul Fain did for InsideHigherEd. Seeking to add NCAA Division I athletics is not one of them.

Canary in the College?

Posted on October 1st, 2012, by 1 Comment

While it may just be a matter of coincidental timing, the recent announcements in the last week of retrenchments at both Bridgepoint Education Inc. and Kaplan Education (two of the largest for-profit higher education institutions) may be an augur of what is to come for the for-profit sector, at least for the near future. Interestingly enough, it appears that both moves were driven in no small part by concerns about accreditation. With respect to Bridgepoint, it appears that the cuts in admissions are focused on dealing with addressing student success problems that lie at the heart of a challenge to its accreditation while in the case of Kaplan, the decision to close campuses evidently stems from the threat of loss of accreditation at several campuses. In both of these instances, of course, the underlying importance is that the accreditation agencies function as gatekeepers for federal financial aid dollars (a role which has its problems, as CCAP points out in our report on accreditation, but that is a topic for another day), so a lose of accreditation would place these institutions in a difficult financial posture. It will be interesting to see if these trends in cutbacks continue or if other companies will take similar action or if these measures that have been taken will be sufficient and adequate.

SUNY Moves to Address Student Debt?

Posted on September 26th, 2012, by Leave a comment

The State University of New York System announced recently a new statewide effort to reduce the rates of defaults on student loans.  This plan is the most comprehensive one attempted by a large state university system to combat one of the biggest challenges facing higher education, namely student debt.  This year six schools in the SUNY system are using a pilot version of the program and next year the plan is for all 64 schools in the system, including community colleges and four year colleges and universities, to be using it by next year.

The five-point plan includes establishing a central online location from which borrowers can get information on their loans as well as establishing offices at all 64 schools.  The plan also includes setting up a partnership with the United States Department of Education to track and share data concerning potential risk factors that correlate to loan defaults that could be used to predict potential issues and to take steps to counteract them.

The SUNY system is to be commended for taking this approach on dealing with student loans in a comprehensive manner as opposed to minor tuition or fee changes that are common with other state systems.  The price of higher education has risen to a point where a very large number of students require loans in order to attend school and New York is recognizing this reality and taking steps to address it rather than simply wishing it away.

One potential tool that schools and federal loan providers could use to combat student loan default is education.  The infamous entrance and exit counseling that all students must complete when taking federal loans do not count.  Many students in college have had very little real world experience when it comes to handling money and the repayment of debts and do not understand the financial jargon used in these online counseling services.  There is no one there to ask the inevitable questions that arise from people who have never had to deal with repayment plans or APRs.  Schools should offer an actual seminar for all first-time borrowers and for those students about to graduate with student debt.  These courses could even be offered for 1 credit, such as the “Freshman Orientation” seminar required at many schools.  Actually having a forum in which students could be educated about what student loans actually entail beyond, the vague “you must pay them back” may very well go a long way in encouraging more responsible loan-taking and repayment over the long term.