The Road Ahead for America’s Colleges & Universities

We briefly cover higher education in Why Are the Prices So D*mn High? If you are interested in a longer treatment that covers many more issues I highly recommend Archibald and Feldman’s The Road Ahead for America’s Colleges & Universities. Archibald and Feldman reach the same conclusion we do with regard to dysfunction versus the cost disease:

We have offered two contending viewpoints about the drivers of college cost, and we have made a judgement between them. The dysfunction stories form the dominant narrative in public discussion, but we think it’s a story with weak foundations. Yet we agree that the status quo likely costs more than it could or perhaps should. You might notice that we mounted no defense of lazy rivers. Still, the cost consequences of true excesses probably are small. The major drivers of college costs are as follows (1) higher education is a service, and productivity growth in services lags productivity growth in goods; (2) higher education relies on highly educated service providers, and the income gap in favor of highly-educated workers has grown; and (3) higher education institutions adopt technology to meet a standard of care, even if meeting that standard pushes up cost.

In addition to discussing costs, Archibald and Feldman look at the demand for college, the role of the federal and state governments, online education, policy proposals such as free college and much more. Throughout their book they are data driven, analytic, and judicious.


Hi. I am Benjamin Taylor. If you are like I am, and I think you are, you care about children. You know they are the future of our great country and you want them to be safe. Well, it may come as a great surprise to you, but Hollywood doesn't necessarily have the best interests of your children at heart. Quite the opposite, indeed.

Mrs. Damares is a Baptist preacher and Brazil's Minister of Citizenship. She says she have been studying American cartoons for years. Her conclusions are alarming and devastating. You may say, "those are just harmless drawings, right?". Well, it is not that simple. According to Mrs. Damares, Universal's Woody Woodpecker teaches selfish, violent, anti-social behaviors and Disney's Frozen preaches lesbianism.

Since cartoons were introduced, crime, drug use, Irreligiosity and homosexuality skyrocketed. Do you know what your children are doing or watching right now? Can they be being covertly manipulated by Hollywood?

If there was ever a Thiago shark-jumping moment....

DSM5 code 300.14?

but yes that's very much a possibility. Still more likely massive troll.

but ze/zer/zem is sorta our troll and does seem to know stuff about brazil

Not a word on the possibility that the more than $1.5 trillion in student debt has helped inflate the prices of higher education?

Ignorance is Strength.

Forcing students to pay out of pocket for their education instead of government payiing half to nearly all the cost was supposed to drive down education costs.

I grew up in Indiana when getting a $1000 State government Merit Scholarship would pay almost all the tuition fee at IU, Purdue, Ball State, but in California, tuition for all students was effectively zero for children of Califonia residents, far better than only 10% of Indiana residents' children high school grads getting effectively zero cost tuition.

It was in the 70s when people like Friedman argued eliminating the government subsidies for all schools would drive down education costs. While subsidies for primary and secondary were not eliminated, they were cut.

For example, public schools subsidized job skill education when I was a kid. Students were given both job training, plus graduation credit for working for businesses where a government worker provided supervision for employers, remedial education on doing the job.

But the idea was, this cost too much for the government workers, the wood shops, metal shops, the sewing labs, the cooking labs, given credit for working first for free at businesses, and later at minimum wages and getting to pocket the cash, so, these programs were eliminated.

The argument was students would pay out of pocket for cheaper for profit job training schools saving taxpayers money, saving employers money, and delivering much higher skilled plumbers, wood workers, seamstresses, chefs and cooks, auto mechanics, steel workers, factory technicians, factory workers, heavy equipment operators, truck drivers in greater abundance. All US industries would grow faster due to the greater supply of highly skilled workers. All from kids shopping aroundd and paying for jobs training out of their own pockets.

Born in 1947, Ive lived through the development of free lunch economics, that by forcing people to pay for stuff with money they have borroweed and will never be able to avoid repaying, for profit businesses will deliver stuff at much lower cost than government in much greater abundance, while eliminating most of the costs to businesses for getting cheap highly skilled labor on demand.

Very high student debt was the key to lowering the cost of producing more highly skilled workers while lowering costs to businesses.


Care to argue that costs be lowered by having government pay for advanced education and lowering costs by eliminating profits,, and buying in bulk so it can set prices lower than current market prices? Basically by government hiring Walmart buyers to procure everything cheaper by digging into the value chain to eliminate costs, especially profits at suppliers.

Question for you Alex: if cost disease is the main culprit then why isn’t upper education that expensive outside of the US?

Just a guess but partly probably because tenured academics are paid less elsewhere.

Don't non-US governments subsidize their universities far more?

My impression is that universities in the losing countries of WWII -- Germany, Italy, and France -- were egalitarianized, with huge class sizes low or no tuition, and relatively open admissions in the wake of their elites being humiliated by losing the Big One. (The French started some small, slightly covert schools like École nationale d'administration to actually train their elites.)

In contrast, the elites that won WWII saw their universities -- e.g., Harvard, Yale, Oxford, Cambridge -- grow in prestige, exclusivity and expensiveness.

Moral: World Wars have consequences.

What would college prices look like in a competitive free market with no government intervention ??

what would WW II have looked like without Germany/Japan participation?

Outrageous college cost is not a difficult economic problem to analyze.

"What would college prices look like in a competitive free market with no government intervention?"

Probably a little cheaper, but still high as tuition captures willingness to pay. Median lifetime wages for someone with a bachelor's degrees vs. high school diploma is roughly $500,000-$1,000,000 and will probably continue to increase as long as the percent of the population of with a bachelor's degree is still a minority.

One may argue that more people are getting bachelor's degrees, which makes it so a barista job requires a college degree (this is probably true in highly educated places like the Bay Area, DC, Boston, Seattle, and college towns). However, the moving of the goal posts for the same job from "you need a high school diploma" to "you need a bachelor's degree" to "you need a professional/master's degree" is probably overstated. As of 2017, the population age 25-29 with at least a bachelor's degree was 35.66% vs. 34.16% for the population 25+. The true moving of the goal posts was when baby boomers attended college and bachelor's attainment jumped from ~1/15 to ~1/4.

Additionally, there clearly is high willingness to pay in either attending or getting a degree from good but not great schools like USC or Wake Forest, if wealthy parents are willing to fork over half a million dollars to circumvent the meritocratic process.

During my time outside academia my company pursued several studies to improve productivity for administrative costs. If you gave me 1 million dollars and my friends at Booze, I assure you we could return 10 million in savings, and service would improve internally. It will never happen because there is no one with authority to watch or control administrative cost. Colleges have a structural problem that can be solved if departments and colleges were forced to share services. I see duplication of services as rampant on the campus.

There is no incentive to reduce costs.

The old professors and career administrators, especially with tenure, have a comfortable existence and no incentive to permit, much less foster, change. Universities change slowly and once infested might take a century or more to get rid of the bad actors absent some inflection point event.

This is a major factor in the perceived "failure" of online courses. Old guys just videoing their live performances with all the accompanying mistakes. The interesting question is, why none of these suffering adjuncts aren't innovating in the online sphere. I suspect partly because it would damage them in getting a gravy position at a university. And any course would be valued for its knowledge transfer instead of its status/networking value.

There is a shortage of in the skilled manual arts (trades). There we do see individuals on their own developing content to improve the education as many of the college programs are outdated and don't develop troubleshooting skills.

Colleges are conglomerates not just institutes of higher education. Besides students they focus on endowment income, real estate, facilities, staff management, inter-collegiate sports, health care, dining contracts, student housing, printing and publishing, and on and on. The idea that somebody that pays for an education should get one gets lost in the shuffle. It's several hundred years past the time when the higher education experience should be updated. Advances in technology have made the original paradigm obsolete.

"Advances in technology have made the original paradigm obsolete."

True. However, the product consumed by the student is the credential, and traditional colleges have a monopoly on credentialing.

Sadly, few people actually care about education. Employers, including universities themselves, look for credentials. HR departments forward resumes to hiring managers based on credentials and experience, but entry-level white collar jobs focus on credentials, and professional career trajectories are profoundly influenced by the first job after college. The resume and the CV are basically a virtual wall onto which one hangs one's credentials and work history.

You would think online ed would put downward pressure on higher education prices, but it doesn't because the online ed credential has so much less market value.

The universities don't exist in isolation. They are part of a larger ecosystem that includes employers, government regulators, financial institutions that lend money to finance the purchase of the college product, and students and parents. Like any dynamical system you can't just tweak one part of the system without side effects.

Here's one of my favorite examples - the California secondary education teaching credential. There are many players in this dynamical system. Almost all high schools in California require a teaching credential, though there are rare exceptions, so if you look hard you can find one. Typically, the credential program requires a BA/BS in anything, it doesn't matter what. The credential program usually takes 1-2 years. There is no standard curriculum for a credential, so you can't start in one program and then transfer to another and transfer your units. Each credentialing program has to be evaluated and certified by a separate agency that has the sole power to do so. To teach in high school you need a single subject credential. To teach math, for example, you need a credential plus you have to pass a series of tests, but you don't need a BA/BS in math. You will be advised to not study the subjects covered by the tests but rather to "study to the test", that is, take the sample tests and study the individual questions and their solutions. I was told there is nothing in the real test that is not in the practice tests. There are fee based test prep programs to help candidates pass the tests. Once the credential program is completed and the tests are passed the candidate is eligible to teach in math in high school under supervision. If the person can survive 2 years they obtain tenure - they can't be fired. The end result is a teacher that does not necessarily have depth of understanding of or a passion for mathematics teaching kids. OTOH, you could have a Masters degree in math and you wouldn't be allowed to teach high school math.

This whole system is great for unionized credentialed teachers - it's a barrier to entry. It's great for the credentialing bureaucracy. It's great for the testing agencies. It's great for the test prep organizations. It sucks for the student.

I have a BA in mathematics from the University of California and a passion for the subject. I try to stay on top of it via EdX and Coursera etc. I have volunteered to help with math and science in my kids schools all the way through middle school and offered to do the same in high school but no one took up my offer, even though the demand is there.

The local high school scheduled a summer remedial math program which my kids were going to attend - they don't share my interest or aptitude for math - but the school cancelled the program because they couldn't find a credentialed teacher to sit in the class and answer questions from kids taking an online class. You see, the online class requires a credentialed babysitter and credentialed high school teachers sure do love those Summers off. I don't blame them.

Caveat, there are likely exceptions to everything I wrote and some of the info may be dated, but the most important info is correct and the whole story is basically true.

K-12 education costs do see to be driven in part by higher female participation in the workforce. Sort of a Baumol effect in that salaries for teachers needed to increase to keep female teachers in classrooms.

Plus the classrooms have fewer students. In part because of the power of unions, in part because of the changing population in the classroom. I was taught by nuns with about 40 classmates on average. That tells you something about their dedication and work ethic but also about their ability to do some minimal weeding of kids with disabilities. Many of these nuns worked tirelessly to help children with disabilities in other settings, but it would have made teaching 40 children at a time more difficult.

Most schools either by choice or by government regulation, are unconcerned with finding greater efficiency in the classroom. They are not rewarded and sometimes punished if they think in terms of greater efficiency. Schools have become less about education and more about pushing social agendas and notions of fairness. Test results mirror such changes in attitude.

In many school districts, the environment and regulations are unable to attract talented teachers. Credentials are often a replacement for talent. Salaries seem to have escalated even as the quality of instructors has fallen. Less to do with Baumol effects in that you need higher salaries to attract workers willing to work within the current system which does not seem strongly correlated with attracting the best potential educators.

In colleges, past discrimination might have played a role in faculty composition. Discrimination against Jews or foreigners, in general, may have made colleges the best career choice.

Top colleges now seem more obsessed with acquiring star talent which drives up salaries. Even if the acquisition of such talent does more to drive fundraising than improve classroom teaching. Colleges do seem to compete on things that seem to have little to do with classroom improvement. The labs arm race is more about recruiting star faculty than improving the education of undergrads. Indeed at many colleges, the undergrads finance the arms race in graduate schools.

The ability to cross-subsidize education is generally heralded as offering opportunities to underprivileged students but it sure looks a lot like getting the full consumer surplus of your market. You see escalating prices without a drop in demand. Colleges are very good at avoiding price competition by adjusting the net price to potential customers.

I have seen articles where some colleges struggling with admissions are dropping Woke classes and become more market driven. Seeking to find competitive niches where they can excel. Perhaps a more competitive market would see more of this. But top colleges will continue to offer BS classes financed by the cash cows of the institution through cross-subsidies and an agenda that has little to do with an interest in efficiency

BTW, as an example, the only way the nuns could teach 40 students was with the use of tracking - putting students together based on ability. Schools that do that today can run into trouble if the tracking is found to discriminate against some groups.

Efficiency and excellence are secondary to a social agenda.

They also could wield a mean ruler and had parental support.

It can be done.

These tracts appear to ignore the distortion produced by tax exemptions for many entities in the schooling industry. Untaxed entities have more profit to hold onto than taxed entities so they can pay higher salaries. If you compare taxed schools with untaxed schools, the untaxed have substantially higher faculty total compensation.

Theses tracts also ignore the successful rent-seeking strategies pursued in the industry. Many career licensure requirements are imposed at the behest of the education industry and this further increases the amount schools can charge for tuition.

In addition these tracts ignore the rent-seeking power of accrediting bodies. They are able to prevent price competition that might occur if administrative overhead expense were able to be cut. Even with this power, though, the administrative overhead of taxed entities is generally lower than untaxed entities.

Tabarrok should have learned a lesson when he beclowned himself be declaring it is utterly impossible to find any economic costs of regulation. Going to the counter-intuitive well based on the most tenuous of logical strains has not been a good look. One wonders how much damage he is doing to public choice understanding with those summer seminars.

Zywicki and McCluskey’s collection of essays entitled Unprofitable Schooling is where to find serious thinking on the Ed industry


Yes, rent seeking.


'tax exemptions' are but one type of the dozens of major government interventions into the nominal Educational-Services market.

The government essentially defines what "education" is via intricate accreditation /licensing regualtion at every level of schooling.

State and local governments actually own and operate huge numbers of K-27 "schools". Why ?

Is American private enterprise so pathetic that it cannot educate us ?
Market Failure in education forced our government to massively intervene and largely takeover the education market?

What is the true purpose of the Federal Dept of Education and its state counterparts? What do they do all day?

The price of education is reflective of what people are willing to pay. If I charge $100 for a tattoo and have clients queuing up, I will raise prices. I and others in the same industry will push prices up till we see declines in demand. We live in an environment where people are willing to pay bribes to get into USC. I don’t see any mystery.

Feldman dismisses the widespread data also ignored by Alex that rising numbers of increasingly overpaid administrators are at least part of the problem? Simply talking about "highly skilled" workers elides this issue.

Correct! All one has to do is look at the "Career Opportunities" page of any college or university

To illustrate Baumol's Cost Disease, it probably wouldn't be hard to find how much the famous law firm Cravath, Swain has charged per hour over the years and how much it has paid starting associates (I believe that hit $190k recently). Those are pretty static entities, so changes in prices would be illustrative.

if you go to chicago on the weekend
Violent Chicago weekend leaves 10 dead, at least 35 wounded

isn't that is even more gang shootings since the previous weekend in chicago and the weekend before that

... when black people kill other black people with handguns, only when white guys kill people with "assault weapons" because it reinforces the narrative.

The one where assault weapons are stupid for civilians to own?

That cover photo does NOT work.

The photo does NOT illustrate any "road" whatsoever: we see a quasi-residential street or we see a campus drive or a campus avenue, but no road.

The suburban charm (manicured grounds, ample foliage) and bourgeois bliss (comforting red brick, not one soul in sight [human beings all will be excluded from all future American colleges and universities??] suggest a gated community studded with cozy cul-de-sacs of intellectual inertia, which could be either the gist of the book or what the book's authors explicitly and tacitly fail to address.

Not a word about the huge government/central bank footprint in student loans?

Academic economists are amazing.

>The major drivers of college costs are as follows (1) higher education is a service, and productivity growth in services lags productivity growth in goods;

That's not obvious to me. Service industries have been getting rocked by technology lately. And education seems like it should be highly vulnerable to digitization.

>(2) higher education relies on highly educated service providers, and the income gap in favor of highly-educated workers has grown;

This is an easily fixed mistake. There is no reason to think that you need a phd to teach undergrads. Phd researchers should spend their time doing higher value work.

>(3) higher education institutions adopt technology to meet a standard of care, even if meeting that standard pushes up cost.

SoC is normally a negligence law term-of-art. Are you asserting someone will sue if they don't have sufficiently fast wifi?

I studied both calculus and particle physics in college, getting Bs from a good quality institution over 4 classes. Without really understanding either subject. Item years later I purchased two "popular" books on the subject and finally understand. I consider the great majority of my true post secondary education to have come directly from books or work. I consider much of my 6 years getting BS and MS degrees as wasted time. My son is attending Western Governor's University whole earning almost six figures. He is able to master coursework at the rapid rare his high IQ and superior focus allow. Both my and his experiences lead to me to conclude that traditional college has become a scam. Alex Tabbarrok's long winded rationalization for said scam strike me as the worst form of special pleading.

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