Restoring the Promise: Higher Education in America

Restoring the Promise: Higher Education in America

by Richard K. Vedder

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American higher education is increasingly in trouble. Universities are facing an uncertain and unsettling future with free speech suppression, out-of-control Federal student aid programs, soaring administrative costs, and intercollegiate athletics mired in corruption. Restoring the Promise explores these issues and exposes the federal government's role in contributing to them. With up-to-date discussions of the most recent developments on university campuses, this book is the most comprehensive assessment of universities in recent years.

Product Details

ISBN-13: 9781598133301
Publisher: Independent Institute, The
Publication date: 05/01/2019
Sold by: Barnes & Noble
Format: NOOK Book
Pages: 416
File size: 3 MB

About the Author

Richard K. Vedder is Senior Fellow at the Independent Institute and Distinguished Emeritus Professor of Economics at Ohio University. He has been Senior Economist at the U.S. Joint Economic Committee and Visiting Fellow at the Center for the Study of American Business, Washington University. He is the author of Going Broke by Degree: Why College Costs Too Much. His articles have appeared in numerous scholarly journals, the Wall Street Journal, Christian Science Monitor, National Review, Washington Times, and Investor's Business Daily.

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Why Go to College Anyway?


COLLEGES AND UNIVERSITIES perform services that society thinks are valuable. It is asserted that educated persons are more productive than noneducated ones — their superior knowledge enables them to use resources more efficiently, including finding new and better ways to do things. Educated people can communicate better with one another as well. It can be argued that colleges also teach virtues, such as honesty, a willingness to help others, and a respect for the rule of law, that are indispensable to a prosperous, peaceful, and well-ordered society.

In addition, since modern day universities do a good deal of basic research, it can be argued that higher education's success in expanding the frontiers of knowledge allows us to invent new objects and create new technologies that improve the quality and quantity of our lives. All advanced, prosperous societies have large numbers of universities and college-educated citizens; very poor societies usually have few college graduates or institutions of higher education. Higher education is closely associated with prosperity and civility.

While college and universities serve a useful function, it is not clear as to how much university education is optimal. The law of diminishing returns applies to education like it does to everything else in life. Eating is necessary and even can provide a lot of satisfaction, but a lover of filet mignon who greatly enjoys the first six-ounce steak will be uncomfortable or even sick if forced to eat five of them in one sitting. Similarly, a four-year bachelor's degree will on balance benefit a large proportion of Americans, but pursuing a second, and especially a third, fourth, and fifth such degree will not be on balance satisfying. The opportunity costs in terms of lost income will be huge, and the incremental benefits vocationally in having multiple degrees will fall dramatically and even become negative (who wants to hire a perpetual student who goes to college to age 40 to avoid the world of work?).

Figure 1–2 suggests that as individuals gain more education, the extra or marginal benefit of, for example, another year of schooling starts to decline, while the costs of providing additional years of education do not decline and, indeed, tend to rise as the complexity of subject matter grows — it takes more money to educate a PhD candidate per year than it does an elementary or secondary school student. An optimum is reached where the marginal benefits from education equal the marginal costs. At lesser amounts of education, educational expansion is on balance beneficial; at amounts beyond the optimum (three college years as depicted in Figure 1–2), expanding education on balance is excessively costly in relation to the benefits.

It is important to note that the shape of the curves in Figure 1–2 will vary from individual to individual. A person with enormous cognitive skills and a lot of curiosity about the way the world works will achieve education optimum at a higher level than a person who is physically quite adept but who has limited cognitive skills and curiosity about the world. For the bright, inquiring individual, diminishing returns set in less substantially and later than for others.

By summing all individuals depicted in Figure 1–2, we can derive a curve that indicates the median number of years of education that is optimal for society as a whole — a number that maximizes the social welfare (Figure 1–3). The social welfare probably is closely related to, but not precisely equal to, the amount of goods and services produced. Therefore, it is not inappropriate to speak of the output-maximizing level of educational attainment. For example, what percent of adult Americans should have bachelor's degree for GDP (gross domestic product) to be maximized?

The previous discussion provides a theoretical framework in which to evaluate the fundamental question as to how much we wish to educate our society. Yet there are huge measurement issues, and a good deal of debate about higher education relates to differences in perceptions about the precise shape of the curve indicated in Figure 1–3. Some people, whom I generally call the "college for all crowd," believe the marginal benefits of education remain very high through a high level of educational attainment and that most persons derive substantial personal benefits from attending college. This extreme position is that the line in Figure 1–3 is a positively sloped one throughout — it is better to have the typical adult with 20 years of schooling (roughly a PhD) than, perhaps, 16 years (merely a bachelor's degree).

Others argue that human differences and diminishing returns limit the optimal proportion of persons who should get a bachelor's degree (or master's degree or a PhD). I subscribe to that position, depicted in Figure 1–3. It is possible to be overinvested in college (such as being at point B in Figure 1–3), with too many persons earning degrees from the standpoint of maximizing welfare or output (which is at point A).

Of course, in the real world of higher education it is not simply a matter of deciding the number of students who should go to college. There are all sorts of issues and questions that need to be asked and answered: Should some students attend career colleges not offering diplomas rather than community colleges? How much education should be done online and how much through traditional instructional techniques? What is the optimal amount of library purchases a school should make in this age of computer-based information access? Should colleges stress "general education," a core body of knowledge and ideas that nearly all students should study, or put more emphasis on directly vocationally relevant forms of instruction, such as training civil engineers and accountants? Should vocational training mostly occur on the job or in the colleges themselves? Should universities also be in the food and lodging business? Should they engage in large commercialization of intercollegiate athletics? Should research be carried out mainly in universities or specialized research institutes? What is the optimal amount of research — are we going too far or not far enough in our universities? Perhaps above all else, "Who should pay for higher education?" The questions abound, and we'll wrestle with them in this book.

Six Goals of a College Education

College means different things to different people. And there are many forms of postsecondary higher education. Harvard is quite a different kind of place than Chicago State University or Sinclair Community College. Still, most people attending or supporting higher education are pursuing at least one of six goals. These include an earnings goal, a consumption goal, a research goal, an egalitarian/equality goal, a virtues/morality goal, and a citizenship goal.

1. The Earnings Goal. Data from the Freshman Survey of the Higher Education Research Institute at UCLA and other polling data suggest that most college students indicate their primary goal in college is to get a good job. For example, in the 2015 Freshman Survey, over 60 percent of respondents, referring to the college they chose to enter, said it was "very important" that "this college's graduates get good jobs." They think of college as the ticket to a middle-class life, to financial and vocational success. They are told, correctly but somewhat misleadingly, that average earnings of college graduates are far greater than similar earnings amongst high school diploma holders. Students borrow to go to college, since higher education is sold to them as an investment, one with a good return.

2. The Consumption Goal. College also provides enjoyment and satisfaction to students — they "consume" college the way they might consume ice cream cones, concerts, or sporting events. There are two different forms of consumption. First, the material taught in college can be fascinating and enjoyable. I read King Lear in college and a lot of French plays (e.g., Tartuffe) and generally enjoyed them. The intellectual satisfaction from college learning provides a context for understanding and enjoying books and plays, and so on, even decades after attending school.

On another level, college provides students with new friends and new life experiences. Students drink a lot in college and experiment with sex and sometimes drugs. College "consumption" can be intellectual and uplifting, but it also can be rather hedonistic and crass. But in both cases, college provides enjoyment for its participants.

3. The Research Goal. Universities are the single most important institution in modern society for expansion of the frontiers of knowledge through research. While nonuniversity institutions, especially private corporations, are more important in applying principles that develop from basic research to commercial use, universities perform a large portion of the basic research from which practical applications evolve. The importance of the research goal varies enormously between institutions: It is nearly nonexistent at many community colleges or for-profit institutions, while it is the dominant reason some institutions exist (e.g., Rockefeller University in New York). Some universities have large semiautonomous research centers with virtually no student involvement, such as the Hoover Institution at Stanford.

4. The Egalitarian/Equality Goal. Universities are viewed by many as a means of promoting income mobility and a society that is more a meritocracy than aristocracy. College is a path toward the American Dream. A quintessentially American perspective is that anyone, no matter how poor or disadvantaged he or she is at birth, should have a good chance at succeeding financially as well as socially. In a modern industrialized society, it is argued that education is the key to economic and social advancement.

5. The Virtues/Morality Goal. From the very beginning, colleges and universities were considered important bulwarks of religion and morality, with a major role in inculcating virtue in the leaders of society and through them, to others as well. Universities were viewed as civilizing influences that promoted moral absolutes, the difference between right and wrong, and the rule of law. In a majority of the nine colonial colleges existing at the time of the American Revolution, at least 30 percent of their recent graduates entered the ministry. Even to this day, a significant number of colleges and universities have a formal religious affiliation, in many cases rather nominal, but in others quite strong and meaningful.

6. The Citizenship Goal. Universities are sometimes viewed as agents for promoting common goals of peoples, of providing the glue that binds them together as a nation. At universities, students learn of their common heritage and learn about the evolution of the civic institutions that govern them. In some universities, students receive simultaneous training to become military officers. Many of the people who will lead society in future generations are trained at universities — the political leaders, the judges, the business leaders, the leading artists and performers.

The importance of these goals varies enormously between institutions and between individual students and faculty that make up university communities. Notre Dame and Brigham Young universities, for example, believe the strengthening of morality and virtue are important components of a university education, albeit their approaches to promoting it are different. Johns Hopkins is much more researchoriented than nearby Towson State University. The goal of providing equal access to the poor and disadvantaged is an integral part of the mission at some urban universities, at historically black colleges and universities (HBCUs) and even some rural colleges (Berea College in Kentucky is an outstanding example). Some schools cater to affluent students who want particularly to enjoy their college years — High Point University in North Carolina is a good example.

Who Should Pay for College?

For a large majority of goods and services purchased by individuals in a typical prosperous Western democracy, the forces of demand and supply interact to determine the price of the good — and the buyer pays for it from his or her own funds. Competitive free market capitalism is highly effective in producing goods and services because incentives lead producers to strive for efficiency (more goods per unit of resources) and to provide exactly what the consumer wants. Incentives exist to innovate — to cut costs and improve product quality.

Yet things are different in education. In contemporary America, a large portion of the funds used to cover the costs of delivering higher educational services is provided by someone other than the buyer of the services. A large portion of funding comes from governments. The federal government provides research grants of tens of billions of dollars annually to universities and extends the better part of $200 billion in various forms of financial assistance to individuals — grants, loans, subsidized work-study arrangements, tuition tax credits, and so forth. State governments subsidize universities with tens of billions of dollars annually in appropriations. Private donors add still more billions, and private endowments provide $20 or $25 billion more in annual support.

At the same time, students also pay part of the bills through tuition fees. In recent years, such fees account for over 25 percent of total higher education revenues. There are some schools that essentially are tuition free, while others often cost $40,000 a year or more — not counting room and board charges. Moreover, there is massive price discrimination: The amount charged varies enormously from customer to customer, unlike, for example, with new car or refrigerator purchases, where everyone pays roughly the same price.

Why should governments subsidize the purchase of higher education services but not the purchase of refrigerators or cars? Government subsidization of universities is justified usually on three grounds. We can call them the "positive externality," the "egalitarian," and the "investment" justification.

Positive Externalities

First, it is argued that higher education has enormous positive externalities — good spillover effects. If Johnnie gets a college degree and goes to work, the wisdom and productivity that Johnnie receives rubs off on co-worker Johanna — raising her productivity. Therefore, a society that invests more in higher education should see higher rates of economic growth. In a sense, according to this reasoning, college subsidies pay for themselves — they require a use of current resources, but they also expand the amount of future resources available.

Moreover, these alleged positive spillover effects go even further. Having wise and educated citizens allegedly leads to a more informed electorate, leading to wiser choices with respect to democratically elected leaders of the nation. College graduates commit fewer crimes, so the expansion of the proportion of the population with college degrees should lead to general crime reduction, and a lowering of costs associated with protection of lives and property including significantly lower correctional costs. College graduates smoke less, and so the expansion of higher education should mean fewer lost lives from lung cancer. The damages and annoyances associated with secondhand smoke will be curtailed.

The evidence suggests that college graduates make particularly good citizens. Not only do they tend to be productive and law-abiding, but they also show a concern for the broader community that leads to a higher community quality of life — or so it is alleged. College graduates are more likely to volunteer to lead Red Cross blood drives, to contribute to Habitat for Humanity efforts, and finance church-funded food pantries. They lead the efforts to fund arts centers and improved playgrounds — things that at the margin significantly improve the attractiveness of communities.

Egalitarian Arguments

There is a second argument in favor of public (governmental) support of colleges and universities. America's distinctiveness, its exceptionalism, in large part evolves from the extraordinary ability of persons of all economic backgrounds to get ahead in life. Historically, high intergenerational income and wealth mobility has characterized the nation. It was this fluidity that moved Alexis de Tocqueville so much during his visit to America.

In the eighteenth and nineteenth centuries, a person with relatively little formal education could get ahead — Abraham Lincoln had little formal education and the richest man at the time of Lincoln's death, Cornelius Vanderbilt, was barely literate. That has changed dramatically, however, and most economic opportunities to workers come from using one's brains rather than through demonstrations of physical strength — professional athletes notwithstanding. Education has become a necessary, albeit not sufficient, condition for economic success, or so it is argued. Yet young Americans from low-income backgrounds are disadvantaged, first, because they tend to attend inferior inner-city schools that prepare them poorly, and second because they lack the resources to pay increasingly high tuition fees. To assure that the American Dream endures, many believe that we need to provide the financial means for diligent and hard-working lower-income Americans to get the ticket necessary to compete for success — a college degree. Thus, presidential hopefuls speak in favor of no-tuition colleges or student loan forgiveness for those borrowing for school but ultimately having difficulty paying back their loans.


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Table of Contents

Introduction 1

Part 1 Higher Education's Triple Crisis 9

1 Why Go to College Anyway? 13

2 College Is Too Costly 29

3 Students Aren't Learning Critical Knowledge and Employable Skills 45

4 College Graduates Are Underemployed 69

Part II How Did We Get Here? 87

5 Nearly Four Centuries of Higher Learning 89

6 Why Fees and Costs Are Rising So Fast 103

7 Why Endowments Don't Lower the Cost of Tuition 123

8 The Federal Student Financial Assistance Debt Crisis 143

Part III Where Does All the Money Go? 165

9 Universities' Spending Perversities 169

10 Nonacademic Activities and Rip-Offs 189

11 The Edifice Complex 205

12 The Costly Enterprise of Intercollegiate Athletics 217

Part IV Is Educating Students a Top Priority? 233

13 The Conundrum of Research 235

14 The Academic Cartel of Accreditation 253

15 The Scandal of Diversity 269

16 The Weaknesses of Current University Governance 287

Part V Where Do We Go from Here? 301

17 The Three Is of University Reform 303

18 The Failure of Government Higher Education Policy 319

19 Reforming Higher Education 333

Notes 357

Selected Bibliography 379

Index 387

About the Author 400

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