Schumpeter on College Problems

Schumpeter is a regular commentary in The Economist.  In the 4 - 10 September issue, Schumpeter takes up the status of the decline of colleges with many of the same concerns addressed in my post of a few days ago, The Soon-to-Burst Education Bubble.  He adds some interesting facts, which we will take note of here.

He notes that as the world was once in awe of GM, it remains in awe of U.S. universities.  The Shanghai Ranking Consultancy evaluates universities worldwide and claims 17 of the top 20 universities are in the U.S.  Of the top 50 universities, 35 are in the U.S.  70% of the living Nobel laureates in science and economics are teaching in U.S. universities.  A disproportionate number of academic journal article citations are those of American academics.  Despite this, there are signs of major problems.

These problems are seen in these facts:

• While median U.S. household income has grown by a factor of 6.5 in the last 40 years, in-state costs to attend a state college have increased 15 times and the out-of-state costs have increased 24 times.  Private college costs are up by a factor greater than 13.
• An Ivy League college costs $38,000 a year, excluding room and board.
• Only 40% of students graduate in 4 years or less.
• A professor's reputation is based on his research, not his teaching ability.  They are said to give students light workloads and inflated grades in a trade in which students are supposed to leave the professors alone.
• Senior professors at Ivy League schools get sabbaticals every third year now, where it used to be every seventh year.  Of the 48 history professors at Harvard this year, 20 are on sabbatical!
• The patents and licenses resulting from federal R&D funding have been decreasing in numbers for several years.  One reason is that legislators are directing funding largess away from centers of excellence.
• A study of 198 top U.S. universities shows administrative spending is greatly outstripping spending on the teaching faculty.  This problem is even worse in elite private colleges than it is in state colleges.  Administrative spending per student at Harvard is up by 300%.  Almost half of Arizona State University employees are administrative staff.  College presidents are living regally.
• Universities are ranked by the research prestige of their faculty, not by the quality of their teaching.  They are also generally subject to little scrutiny on costs.  In fact, some universities such as George Washington University compete by offering lavish facilities at a high cost.

Schumpter concludes:

This luxury model is unlikely to survive what is turning into a prolonged economic downturn. Parents are much less willing to take on debt than they were and much more willing to look abroad for better deals.  The internet also poses a growing threat to what Bill Gates calls "place-based colleges".  Online, you can listen to the world's best lecturers for next to nothing.

 America's universities lost their way badly in the era of easy money. If they do not find it again, they may go the way of GM.

The education bubble is due to a combination of government interference and self-indulgence at the universities.  The government with subsidized and guaranteed student loans and loans to student's parents have made it easy for the universities to pass on cost increases, which have gone up even more than medical costs.  Government R&D research grants have overly distracted faculty from teaching.  Administrators at universities have taxed those government research funds with higher and higher overhead charges over the years, which has allowed them to live higher on the hog.   This has decreased the fraction of the funds actually being used for research, so the efficiency of research has fallen.  Finally, many politically correct aims and government mandates such as affirmative action, diversity, social activism programs, and Title IX athletics requirements have all driven up university costs, particularly administrative costs.

The universities have been hotbeds of socialism and Progressivism.  As such, they require an environment from which reality is excluded.  The longer reality has been denied access to the universities, the more ravenous it has become.  Reality will not wait for these complacent and otherworldly universities to open their doors to it.  It will simply cave-in the walls and stomp through those hallowed halls all too soon.