Richard Vedder, president of the Center for College Affordability and Productivity (CCAP), interviewed with Inside Academia this week on the economics of college education and on why tuition costs have gotten to be so high. One reason, he said, is that colleges have no profit incentive: "You don’t make more money if you do a good job."
Talking about why the economy doesn't do better when we spend more on higher education, he said, “We’re taking money from an efficient part of the population, namely the taxpayers, and giving it to another sector of the economy that is less efficient, and that can actually have a drag on economic growth.”
Ultimately, it would be best if the government removed itself from higher education altogether, he said, but we have to work with the system we have.
Click on the video below to watch the 15-minute video.
- 1:26 – Why so many college grads end up in low skilled, low paying jobs (2 mins)
- 3:25 – Jobs aside, is a quality education being achieved? (1:30 mins)
- 4:55 – High state ed spending, yet low economic growth (2 mins)
- 7:30 - Public good? More negative than positive spill-over effects (1 min)
- 8:53 – Why is the cost of tuition so dramatically high? (1 min)
- 10:00 - There are no incentives to cut costs or to do a good jobs (1:30 mins)
- 12:30 – Give money to students instead of to the institutions, like a voucher system. (:30)
- 13:45 - Should government get out of the higher ed business? (1 min)
Andy’s Show Notes
Are Universities doing less with more? Distinguished economist Richard Vedder seems to think so. He argues that the more public spending we seem to put into it, the lower the rate of economic growth. In the article “The Great College-Degree Scam“, he revealed Bureau of Labor Statistics showing that “60 percent of the increase in the number of college graduates from 1992 to 2008 worked in jobs that the BLS considers relatively low skilled—occupations where many participants have only high school diplomas and often even less”. In aggregating data from 1992 and 2008, he concluded that there was a sizable increase in the number of college grads working such jobs than before.
He argues this is mostly attributable to an increase of college grads, despite a dearth of some skilled jobs since the 2008 recession. He believes this is largely a result of public policy, with loans and grants for people to attend college, along with public appropriations.
But Dr. Vedder also concedes that the quality of education has also become wanting, along with the seemingly less work students are putting into their studies. He cites Arum and Roksa’s “Academically Adrift”, saying students are studying less and don’t learn very much more by their third or fourth year than when they started.
But within the institutions themselves, he argues there are no incentives for institutions to be efficient. Dr. Vedder cited the late famous economist Milton Friedman, who in the early 1950′s supported public subsidy to Higher education. But before he died, he was asked by Vedder if he still felt the same way, to which he apparently replied that schools should be taxed rather than subsidized.
In keeping with the Spirit of Friedman, Vedder writes in “Over Invested and Over Priced: American Higher Education Today“: “The people paying a majority of the bills in higher education are not the users of higher education services. When someone else is paying the bills, consumers are less conscious of cost considerations, and that in turn leads to some distortion and inefficient use of inputs used to produce higher education services.” In referring to government spending, Friedman said: “when a man spends someone else’s money on someone else, he doesn’t care how much he spends or what he spends it on.” The analogy applies to many public universities.
Vedder’s research and writings largely challenge the conventional wisdom of college being the ticket to success for most people, and he largely cites the public policy that has exacerbated the problems as a result of all the public subsidy. As an alternative form of public policy, he suggested taking public support in the form of appropriations and giving it to students in the form of a voucher, the idea being this would force universities to compete for their students.
But in our interview he seems to concede that federally backed loans and grants to students have not incentivized universities to keep tuition low. So the question becomes if schools have been able to get away with dramatically raising tuition due to the publically-backed increased supply of tuition-paying students, then why wouldn’t the same trend continue just because they come in with vouchers?
So what should happen? Should the government get totally out of the higher education business altogether? Find out in our interview with Dr. Richard Vedder.