Lower Standards Lead to Bad Results

An Associated Press article released Monday decries College dropouts cost taxpayers billions.

States appropriated almost $6.2 billion for four-year colleges and universities between 2003 and 2008 to help pay for the education of students who did not return for year two, a report released Monday says.

In addition, the federal government spent $1.5 billion and states spent $1.4 billion on grants for students who didn’t start their sophomore years, according to “Finishing the First Lap: The Cost of First-Year Student Attrition in America’s Four-Year Colleges and Universities.”

Is this a surprise?

We should have learned with the housing crisis that lowering lending standards to qualify homes loans for people with bad credit histories was not a good idea.  It turns out that rather than being an arbitrary impediment to owning a home, credit history is a valid test for assessing if a person has the responsible habits that are important when it comes to owning a home.

Why would we expect different results with education?

Over the past several decades there has been a push to get more people into college which has resulted in things like more tax money to support expansion of higher education, financial aid for students and lowering of academic standards for admissions.

As with credit history with home buyers, it turns out that academic performance is a valid test for assessing if someone is ready for college.  It’s not an arbitrary impediment.  It shouldn’t be such a surprise that if you lower the screening standards for admittance, you’ll increase the dropout rates.

I’m all for home ownership and college education.  But, I’m not for government sponsored shortcuts to achieving these milestones.  Those end badly with the good intentions being clobbered with unintended consequences.

The root problem is that people confuse cause-and-effect.  They think home ownership and college education is a cause of a better life, when in reality they are effects of responsible financial and academic behavior and hard work.

If we truly want the good effects we should positively reinforce the behavior that leads to those effects rather than shortcuts.

Buffett and Goldman

I received a link to this write-up about the Berkshire Hathaway shareholders meeting from the Motley Fool:

Buffet defends Goldman? — Philip Durell, Inside Value advisor
I expected Warren Buffett to be on the defensive over the SEC’s civil charge and subsequent Manhattan U.S. Attorney’s Office criminal investigation, both of which accuse Goldman Sachs (NYSE: GS) of fraud. So I was stunned by his response, which I’ve paraphrased below:

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