Higher Education Bubble Watch

I read about the Enstitute: Learning By Doing in Forbes. This may not replace MIT, just yet, but I love seeing these upstart experiments to offer something different from the traditional seminar model of education.

I think this kind of stuff should start around 5th or 6th grade, maybe sooner.

Less College for All

As I frequently write on this blog, college education isn’t what it use to be because of the heavy government subsidies. Just a few days ago I wrote:

College degrees no longer signal intelligent self-starters with moxie. Now degrees are signals risk averse, color-by-numbers people. Bureaucratic employers value these people for their conformity and aversion to risk.

Robert Samuelson agrees in the Washington Post. He wrote:

The college-for-all crusade has outlived its usefulness. Time to ditch it.

The real concern is the quality of graduates at all levels. The fixation on college-going, justified in the early postwar decades, stigmatizes those who don’t go to college and minimizes their needs for more vocational skills. It cheapens the value of a college degree and spawns the delusion that only the degree — not the skills and knowledge behind it — matters. We need to rethink.

Thanks to Mark Perry of Carpe Diem for the link.

Having the American Dream should not be an entitlement

Rather, you should be entitled to the pursuit of the American Dream.

From Mark Perry’s blog post, Opening the Floodgates:

Government housing policies turned “good renters into bad homeowners” and created an unsustainable housing bubble.  It’s now becoming apparent that government education policies have turned “good high school graduates, many of whom should have pursued tw0-year degrees or other forms of career training, into unemployable college graduates with excessive levels of student loan debt that can’t be discharged,” and created an unsustainable higher education bubble.

That got me thinking that the underlying driver of politics — both liberal and conservative — of the past decade or two has been to try to guarantee the achievement of the American Dream, rather than guarantee its pursuit.

Politicians tried to remove “barriers” to home ownership, college education, cadillac health insurance, jobs and an overall comfortable life. By doing so, they’ve changed what these things mean. Back in the day, having a pair of Jordache jeans meant something…until everybody had a pair.

It’s a grave misconception to view all hurdles to achieving the American Dream as discretionary and unfair barriers. Most are not barriers, the hurdles are the very things that make achieving those things valuable and removing or lowering them also reduces the value in achieving them.

Consider college education. In the old days you had to work hard to earn it. Even if you were fortunate enough to have parents who would cover your college costs, you still had to make the grades to stay in. If you had to scrounge to finance it yourself, even better. That meant you were a self-starter and could balance financial and academic responsibilities.

Getting a college degree wasn’t easy. Earning one demonstrated that you had some moxie. Employers valued that because they wanted people who could use that moxie to contribute to their organization.

Making it easier to get a college degree changed its meaning and value. College degrees no longer signal intelligent self-starters with moxie. Now degrees are signals of risk averse people without much moxie.

Home ownership is another good example. In the old days you were expected to make a down payment of 20% and take out a loan that you could afford to repay.

Having saved enough to make a 20% down payment was a test. Passing this test demonstrated to lenders that you had enough financial discipline to keep your expenses in check and save money, which means you were more likely to pay your mortgage each month than someone without that financial discipline. It also gave you a vested interest in maintaining your property.

Removing this barrier (or hurdle) changed the meaning of home ownership. As someone once said, a homeowner with no or negative equity in their home is a renter.

Rather than wanting politicians to give us the American Dream (and destroy the meaning of it it in the process), we should ask government to help ensure that we can pursue it.

That means keeping us safe from foreign invaders and keeping our fellow citizens and government from infringing on our freedoms.


Nice job Joe Gerarden, in the video below, for getting Joe Biden to admit that government subsidies have increased college tuition.  Here I criticized Obama for seeming to be unaware of this fact of basic economics.

I’ll give the Vice President credit for demonstrating a better understanding of basic economics than President Obama.  He admits that government subsidies have increased tuition.

I also agree with Biden that subsidies have increased the number of college students.  That is basic supply and demand.

But, unlike Biden, I’m not confident that’s a good thing.  Too bad Mr. Gerarden didn’t have a counterpoint for that.

How do you convince someone like Biden that more college graduates isn’t necessarily a good thing?

After some discussions about this topic with the “more is better” (MIB) crowd, I’ve been asked, Do you want to be the one to tell Susie she can’t go to college and has to figure something else out?

I think the MIB crowd envisions two outcomes for potential college students:

  • Outcome 1: Allowed to go to college and then you have a better shot at the good life.
  • Outcome 2: Not allowed to go to college and then life will be miserable and a struggle.

I see two problems with this vision.

First, I would not need to tell Susie that she cannot go to college. No one disallows Susie from going to college, except for Susie herself.  It’s her decision.

Just because demand for a college education is lower in a world without government subsidies, doesn’t mean that someone is telling anyone they can’t go to college.

It means fewer people choose college because they view their other options as having more relative value without the government subsidies distorting the picture.

We all make similar economic choices every day without noticing it.  You might pass on your first vacation choice because airfare is too expensive and settle on your second choice and still enjoy yourself.   Or you choose the less expensive cut of meat or the lower priced bottle of wine at the grocery store.

Second, having a college degree isn’t the determining factor between success and failure many people seem to think it is. 

I know statistics say that college graduates have higher lifetime earnings, but remember that statistics can be misinterpreted.  College graduates include a few degree programs that do have high wages (primarily due to artificial constraints on supply) like doctors.  Also, a few business folks do climb to the top of their bureaucratic piles and make a lot of money.  Take just these two groups out of the college crowd and the earnings for the rest begin to look closer to a lot of non-college grads.

Also, remember, the non-college grad group includes a lot of folks that may not spend as much time in the work force because they raise families.

Remove some of the outliers from both groups and college grads and non-college grads start to look a lot more like our friends and family.  I know plenty of both who have done well.

So, nobody is telling Susie that she can’t go to college and she isn’t being consigned to a miserable life. Rather, she’s deciding for herself to pass up on the $100,000 liberal arts degree to start a cupcake catering business in her kitchen that eventually grows into a successful business.

Innovation in College Education


MIT Kresge Auditorium

Image via Wikipedia

MIT will begin offering certification for its online courses (HT: Carpe Diem blog).  The online courses are free, but there will be a fee for certification.

The discussion in the comments on Carpe Diem brings up some good points.  Will the certification be worth anything?  Will employers put much stock in it?

One commenter, morganovich, points out that the true value of an MIT degree to an employer is the screening process you go through to get into MIT.  This process won’t be in place for the online courses, since anyone can take them.

He may be right.  Or maybe employers are wrong.  Maybe the screening process of getting into MIT isn’t all that great and this might help some employers figure that out.

It’ll be interesting to see how this evolves.  Here are some things I could see happening.

This might start to unravel the lecture model of higher education.  Maybe while at MIT you end up taking some of online courses on the side, but your core curriculum becomes built around doing more apprentice-like things — starting businesses, working on research projects, working with companies on projects.  Instructor become more like your advisers, mentors and project leaders.

Maybe this happens at your local state schools too, you take MITx online courses part-time and then work on projects the rest of the time.

Perhaps high schools let students take the MITx courses and earn high school credit as well, so they can enter college ahead of the game.

Maybe it does nothing. Maybe a people take the courses, they learn some things and MIT and the rest of higher education persists as is.

Nobody knows, but it’s good to see such storied institutions trying new things.

“Shhh…do you hear that?”

“I don’t hear anything.”

“Exactly.  Peace and quiet.”

Most parents have had this exchange as they head out for a quiet dinner after leaving their kids with a babysitter.

This came to mind as I was reading the Wall Street Journal report about two new books on education, Learning the Hard Way.  Here’s a flavor of the report:

Like so many debates in America today, the fight over public education is as polarized as it is consequential.

Spending more money is of course a perennial demand. Since 1970 America has more than doubled the real dollars spent on K-12 education. We have increased the number of teachers by more than a third, created legions of nonteaching staff, and raised salaries and benefits across the board. Yet fewer than 40% of the students who graduate from high school are ready for college. At the same time, students in other countries are moving ahead of us, scoring higher—often much higher—on international tests of reading, math and science skills.

The debate over education broadly divides into two groups. On one side are what might be called “traditionalists,” consisting largely of unions purporting to represent the interests of teachers. The members of this group argue that poverty is the great impediment to educational success and that we must lift people out of poverty if we are really to better educate our kids—and in the meantime we can’t expect schools to perform miracles. The traditionalists propose that we pay teachers more, hire more of them and spend more dollars on public education overall.

On the other side are what might be called “reformers” (some traditionalists refer to them as “deformers”). This group is made up largely of policy analysts skeptical of the status quo and young idealists, many of whom came to education through Teach for America, the nonprofit program that places talented college graduates in high-poverty, urban schools.

As this article rehashed much of the noisy K-12 education debate, I had a “Shhh…do you hear that?” moment regarding college-level education.

There isn’t much debate regarding college education.   It’s relatively quiet.   There’s some debate.  Thing like: Should ‘we’ pay for everyone to go to college?  Are some college degrees worth it? 

But we don’t get near the noise level with college level education debate as we do with K-12 education.   Why not?

Walter Williams gives us the answer in his classic May 2010 column, Conflict or Cooperation.  I’ve included the full text below.

Different Americans have different and often intense preferences for all kinds of goods and services. Some of us have strong preferences for beer and distaste for wine while others have the opposite preference — strong preferences for wine and distaste for beer. Some of us hate three-piece suits and love blue jeans while others love three-piece suits and hate blue jeans. When’s the last time you heard of beer drinkers in conflict with wine drinkers, or three-piece suit lovers in conflict with lovers of blue jeans? It seldom if ever happens because beer and blue jean lovers get what they want. Wine and three-piece suit lovers get what they want and they all can live in peace with one another.

It would be easy to create conflict among these people. Instead of free choice and private decision-making, clothing and beverage decisions could be made in the political arena. In other words, have a democratic majority-rule process to decide what drinks and clothing that would be allowed. Then we would see wine lovers organized against beer lovers, and blue jean lovers organized against three-piece suit lovers. Conflict would emerge solely because the decision was made in the political arena. Why? The prime feature of political decision-making is that it’s a zero-sum game. One person’s gain is of necessity another person’s loss. That is if wine lovers won, beer lovers lose. As such, political decision-making and allocation of resources is conflict enhancing while market decision-making and allocation is conflict reducing. The greater the number of decisions made in the political arena, the greater the potential for conflict.

Take the issue of prayers in school as an example. I think that everyone, except a maniacal tyrant, would agree that a parent has the right to decide whether his child will recite a morning prayer in school. Similarly, a parent has a right to decide that his child will not recite a morning prayer. Conflict arises because schools are government owned. That means it is a political decision whether prayers will be permitted or not. A win for one parent means a loss for another parent. The losing parent, in order to get what he wants, would have to muster up private school tuition while continuing to pay taxes for a school for which he has no use. If education were only government financed, as opposed to being government financed and produced, say through education vouchers, the conflict would be reduced. Both parents could have their wishes fulfilled by enrolling their child in a private school of their choice and instead of being enemies, they could be friends.

Conflict in education is just one minor example of how government allocation can raise the potential for conflict. Others would include government-backed allocation of jobs and education slots by race and sex, plus the current large conflict over government allocation of health services. Interestingly enough, the very people in our society who protest the loudest against human conflict and violence are the very ones calling for increased government resource allocation. These people fail to recognize or even wonder why our nation, with people of every race, ethnic group and religious group, has managed to live together relatively harmoniously. In their countries of origin, the same ethnic, racial and religious groups have been trying to slaughter one another for centuries. A good part of the answer is that in the United States, there was little to be gained from being a Frenchman, a German, a Jew, a Protestant or a Catholic. The reason it did not pay was because for most of our history, government played a small part in our lives. When there’s significant government allocation of resources, the most effective means of organizing for the gains are those proven most divisive, such as race, ethnicity, religion and region.

As our nation forsakes our founders’ wisdom of constitutional limitations placed on Washington, we raise the potential for conflict.

We don’t fight about college education because it is largely still based on the choices of those using it.  Students choose if they want to go.  Students and their parents decide where to apply.  Then they decide on a school and area of study that meets their preferences.

We do fight about K-12 education because many of the choices there are in the political arena.

The funding is in the political arena because we force folks, many who aren’t using the system, to fund it.

The curriculum is in the political arena.  In addition to parents, teachers, and administrators,  we have self-proclaimed education ‘experts’, academics, consultants, politicians, unions, environmental groups, family planning groups and other special interests actively seeking to inject their own preferences into the curriculum.

The administration of our schools are in the political arena.  We elect school boards.  Our state governments have some oversight and our Federal government has inserted itself into the mess, using our money as the “string” to get their preferences in.

The management of teachers is in the political arena.  Unions, parents, administrators and taxpayers are in this fight.

I believe much of the noisy debate in K-12 education would go away by bringing in more choices for parents while removing the political arena for parties who don’t even have children in the public schools.

It should be like this:  If you want a say in K-12 education, you should have a child in the school or you should start your own school and see, in the real world, if your way of doing things actually works better.  And parents get to decide.

Credentials please

In the February 28 issue of Forbes magazine, Steve Forbes writes about how the Internet and other technology will change higher education.  He quotes from a February 1 Forbes.com piece by Louis Lataif of Boston University:

If you can buy a self-paced calculus course on DVD for $67, is it worth spending $5,000 to take the same course at a private university? Of course, the mutual learning that occurs in college is of value. But is it worth spending 75 times more for the same body of knowledge?”

Good question.

I enjoyed both articles.  Though, I think they missed key aspects of the value of higher education.  Higher education isn’t just about learning.  It’s also — and maybe more — about signaling, credentialing and networking.

I’ll be interested to see if new forms of education can marginalize these aspects of education.  I believe much of this value derives from bureaucratic organizations.

Bureaucrats love to hire credentialed associates,  if only to protect their own job from when a hire turns out bad.

Well, he was from [big name school].  How was I supposed to know?

He had such-and-such experience on his resume.  How was I supposed to know?

Unfortunately, in bureaucratic organizations such nonsense is met with a shoulder shrug , a nod and better luck next time, instead of a more appropriate corrective action like, Part of your job is hiring, developing and promoting good people.  Perhaps you should look beyond things like their school or experience and evaluate your hires based more on the what they have actually accomplished–much like a basketball or baseball coach might do. You don’t hear many pro baseball coaches explaining away their duds by claiming they were from such a good baseball school.

Here are some of the things I wouldn’t be surprised to see emerge for education over the next 25 years:

  • Effective bottoms-up instructional education efforts for preschool through 8th grade will emerge away from the central command of the DoE and state control.
  • Much of the formal instruction that occurs from 9th grade through the 2nd year of college will become somewhat more of commodity and easier to intersperse with other forms of education.
  • One of those forms of education will be learning-by-doing.  That might mean that doctors start on med school a couple years earlier.  Entrepreneurs might find apprenticeships with venture capital firms, business owners will work with folks directly.   Seth Godin recently experimented with a learning-by-doing MBA project, where he screened several folks to come in and work with him on their own self-directed, intense projects over a few month period.
  • There will still be room for universities.  But in addition to degree programs, colleges will more and more offer certification programs.  These will be smaller and more specialized snippets of knowledge.

Of course, there will be many other things that make an impact.  Screen casting is just now catching on.  I’ve learned a good deal about economics while jogging and listening to podcasts.

I’m very interested to watch what will unfold.