Friday, November 16, 2012

New Atlantic column: The case for a Federal University System


My new column in the Atlantic makes the case that we should establish a Federal University System in parallel to the state and private systems we already have. Excerpts:
[T]he price of college is high. And attendance has been growing...When you have increasing price and increasing quantity sold, Econ 101 tells you that what you're seeing is a shift in the demand curve. Lots more people want to go to college, and they are willing to pay more. The reason for the increase is not surprising -- it's the college wage premium, combined with low unemployment among people with a college degree... 
And we can only expect demand to increase, especially if we do what we ought to do and let in a lot more high-skilled immigrants. Those immigrants will be great for the economy, but their kids are going to be competing with native-born kids for college spots. Unless we do something, that competition could cause a xenophobic backlash among the high-skilled native-born, as well as driving up tuition even further. 
What do you do when you have a big increase in demand for a product? Well, if you're a company, you probably ramp up supply... 
So here's my idea for increasing the supply of college: A system of federal universities...
Federal university systems have been very successful in other countries. One prime example is the Indian Institutes of Technology (IIT)...Another example is Japan's federal university system... 
A system of national universities would (1) fight the rise in tuition, and (2) accommodate all those smart second-generation kids whose parents we should be recruiting to our country in droves. But it will also help the nation in a 3rd way by giving us an outlet for higher research spending. The U.S. has been spending less and less on R&D as a percentage of our GDP, even as R&D becomes more and more important. In part because of this, there are legions of PhDs being forced to take private-sector jobs in which they have no expertise. These trends need to be reversed in order to maintain America's status as the leading technological nation. And a system of federal universities is the perfect vehicle to increase research spending and provide an outlet for all those PhDs... 
Federal universities are an idea whose time has come.
   

27 comments:

  1. Anonymous7:39 PM

    There are already very high quality state universities that would be even better with more funding. Imagine what the Cal State system could look like with a major injection of funds. It's a good idea, but there's no need to start from scratch.

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    1. Read the column to find out why that's not enough! ;-)

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    2. "Read the column to find out why that's not enough! ;-)"

      Anonymous did read the column...

      This is just magical unicorn thinking. Somehow Federal universities will magically spend their dollars more efficiently than existing state and private schools and/or Congress will magically expand total spending on education simply because Federal universities exist.

      The last thing the United States needs is a system of centralized elite schools. We have far too much of that already.

      As for "more skilled immigrants"...

      I guess unemployment rates are still too low for sane thinking on that subject.

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  2. Reminds me of the land grant colleges. From one I obtained my BS. Are you sure we need more sport dynasties? I keep getting this vision of professors taken from the conservative think tanks.

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  3. Argosy8:02 PM

    "[T]he price of college is high. And attendance has been growing...When you have increasing price and increasing quantity sold, Econ 101 tells you that what you're seeing is a shift in the demand curve. Lots more people want to go to college, and they are willing to pay more."

    "they are willing to pay more."

    Willing AND ABLE!

    What are your thoughts on the increased availability of federal or federally subsidized private loans. Does this play a role in the increases in college tuition (and college-town rent)?

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    1. What are your thoughts on the increased availability of federal or federally subsidized private loans. Does this play a role in the increases in college tuition (and college-town rent)?

      Yes.

      A supply increase will increase competition and relieve price pressure, making students less willing to take out loans. Also we should restrict student loans by law...

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    2. Down at Clemson in my public finance course we discussed something known as the Targeting Principle. It basically says what Noah's talking about...if you want to do influence the market price of something the most efficient way to do it is to tackle the problem directly. For example, instead of handing out loans to students (who then are burdened with debt usually about a decade after they leave school) just increase supply, or maybe decrease demand somehow...though that last one probably doesn't make so much sense if we want to educate ourselves more.

      I'm pretty sure the Targeting Principle is a function of the Chicago School.

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    3. bjssp1:32 AM

      "Yes.

      A supply increase will increase competition and relieve price pressure, making students less willing to take out loans. Also we should restrict student loans by law..."

      Can you go into this a little more, Noah?

      I've heard the argument that the student loan system makes college more expensive, but it's not entirely clear to me, outside of a very basic, almost banal, Libertarian-ish explanation. These same people (cough, Megan McArdle, cough) never, ever mention how state funding for public schools has done down by a lot, especially in recent years, something I've been told is a much more likely direct cause.

      How/why should we restrict loans? Should it be for the type of schools?

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  4. I would rather see the federal government fund experiments in new forms of higher education like University of the People, Khan, Westerns Governors University. The issue in higher education isn't so much competition for students but rather access and quality. Working on ways to increase quality of education and decrease cost is what we really need. One of the biggest hole in R&D is in education.

    If we want to increase R&D we should just increase existing programs like the NSF and NIH and look at tax incentives for private firms.

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    1. Anonymous7:31 PM

      Western Governors University REFUSES to publish its graduation rate. Outside independent analysis puts their graduation rate somewhere near the 30 percent mark.

      Are you willing to pay big bucks for an institution with a 30 percent success rate?

      Arizona State had an interesting response to cuts in funding and changed their educational model to include more flexibility in programs and increase enrollment by about 50 percent. Perhaps that is a far better model to mimic than WGU?
      -jonny bakho

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  5. Has there seriously never been a federal university in the history of this country? Other than the military academies I don't know of any.

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  6. I completely agree that prices have gone up because of inelastic supply at an increasing demand. The Q is why is university supply so dreadfully inelastic? I doubt it's because we haven't mired education in enough monopoly and centralization yet.

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  7. A few issues:
    1 a) At public schools, tuition hikes are driven by state subsidy cuts more than by demand and partly by administration awareness that sticker price != actual price paid (i.e. price discrimination)
    1 b) At private schools, tuition hikes are driven by price discrimination.
    2) The demand/supply mismatch is at the bottom of the education system, not the top. You can learn physics just as well in Indiana U's Honors College as at Stanford.
    3) To get economies of scale, federal schools would have to have many tens of thousands of students (like Ann Arbor), which makes it impossible to compete with MIT or Stanford. There just aren't that many top students.

    I did like the picture of Healy Hall, though. And it was nice of the photographer to de-emphasize what a complete s***show Georgetown Day is. Think of the "human capital formation, Stanford style" picture, but in broad daylight in front of Healy Hall.

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    1. Nathanael1:51 AM

      Given what I've seen of physics teaching, I'd rewrite your point 2 as follows:

      "You can learn physics just as badly at Stanford as at Indiana U's Honors College."

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  8. I'm not sure a wholly new university system is necessary, nor even the best way to achieve the goal of providing more education to more students. Why not a program targeting existing public universities, with one of the requirements being that the funding be used for new students? It could even be for new 'colleges' within or attached to existing public universities

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  9. "Federal universities are an idea whose time has come." Well, maybe. But I can't see that big a spending program--even if, over the long-run some of the costs will be paid for through tuition--getting through congress now, or anytime soon.

    Given the increased population, and the increased college-earings premium, of the US, and rising incomes (and population) around the world, it's clear that the demand for higher education everywhere--and especially in the US, has increased. What has puzzled me for years is that high-quality private institutions have not leveraged their brand names to create additional campuses. Certainly places like Harvard and Yale and the University of Chicago (and perhaps hundreds of others as well, including my undergraduate institution, DePauw University) have large enough endowments, and attractive enough products, to create new campuses. Yet little of this has happened.

    Clearly, not enough of the administrators at these institutions are economists.

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  10. "The U.S. has been spending less and less on R&D as a percentage of our GDP, even as R&D becomes more and more important. "

    I'm betting Obama will change that in his second term. We are about to enter the Age of Aquarius after all!

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  11. Anonymous3:23 PM

    Since most "state" reasearch universities have an large and increasing dependence on the overhead (50% or more) they take from DOE and NSF grants, you could make the argument we have already headed down this road. Most states are cutting funding for schools; the schools are raising tuiton + overhead in response. Raising tuition makes lots of vocal people mad. Raising overhead makes a few research professors mad.

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  12. Anonymous7:03 PM

    Look at you knock on Ohio and the lack of a high-end university. Dig on OSU for sure!

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    1. Hehehe I love it when people get my little "Easter eggs"...

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  13. Anonymous7:25 PM

    I agree.

    The Privatization-Voucher system used for US Post secondary education (and increasingly for K12) drives up the cost of education. Schools compete on services, not on price. The For-Profits are scamming the system and ripping off the Voucher (Pell Grant and student loan) money. The private for-profit colleges are terrible with low graduations rates and marginal quality. Many are little more than a scam to feed at the Voucher trough with by preying on gullible students.

    At the K12 level, private schools compete for the best talent leaving the public schools bereft of leadership. The same happens at the college level with State Universities scrambling to compete with subsidized private schools.

    State Universities that embark on UMichigan wannabee programs drive up their tuition costs and fail to serve the population of their state. We should use Public funds to create affordable Public education opportunities, instead of Privatizing education and creating a more expensive system that serves fewer students.

    -jonny bakho

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  14. Seems to work well with other government institutions, just look at our grade school and high schools.. failing... or better yet, maybe the DMV?? how about the postal service that just blew an $18bln hole in a monopoly business... No? not there?? FHA? they've only lost $35bln this year? did I mention the fact there is already an education bubble funded by the government, have you ever even looked at govt gteed student loan numbers, they are exponential!!! and funding what?! unclear!! can someone please find me a govt institution that isn't bloated and wasteful and has some degree of success??!!

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  15. State and city/regional universities are public goods, and suffer from the same pressure for underprovision. After all, college graduates are quite mobile. So why fund higher education in your state when you can simply recruit from the next state over? Politically there may be a constiuency among the elite. But then restrict, don't expand, so that the brand value doesn't get diluted!

    However, your alternative need not be any better. I've spent time in Japanese national universities ... remember there's one in each of the 47 prefectures. How many have you heard of? – unfortunately, there's a good reason you've not heard of them. As national universities, they face the need to employ an objective entrance standard, a standardized test. Not high school grades, not athletic prowess, not "legacy" considerations. So ... high school becomes how to take the test, supplemented by cram schools. The latter are expensive, so perpetuate the elite. The focus on the test means that those not elite college bound benefit little from high school. Oh, and stemming back to the days when there weren't many colleges, companies recruit students as juniors. So the academic side of college matters little.

    Anyway, these pieces co-evolved so are now hard to disentangle. But Japan has overcome the supply-demand imbalance: demographic decline means there are more seats available than students pursuing college degrees. That doesn't solve the cost issue, however, because even if faculty are adjuncts, fixed costs remain high.

    So ... a national system could be good, but it need not prove so.

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  16. Milton Friedman must be screaming in his grave.. and rightly so!

    This is riddled with so many problems it easily earns the title of worst idea I've heard this week.

    Friedman on this: http://www.youtube.com/watch?v=yx6-PHKzHvM#t=17m30s

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    1. "there are legions of PhDs being forced to take private-sector jobs in which they have no expertise. [..] And a system of federal universities is the perfect vehicle to increase research spending and provide an outlet for all those PhDs..."

      Sounds a bit like: I think the federal government should set up an agency that pays me just for being me, so that I am not "forced" to do something I don't like to do :)

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  17. Anonymous5:55 PM

    Coming from an admirer who routinely appreciates your brilliance, despite whether or not I am in complete agreement with your respective conclusions (for the record, though, I usually am), this particular idea strikes me as uncharacteristically lacking in your typical thoughtfulness. Particularly when viewed through the lens of current public policy realities/assumptions, it sort of puts the proverbial cart before the horse.

    As you observe, it does indeed take money to make money. Moreover, investing public revenues in education is one of the precious few areas one can historically look to produce a rather robust example of the, often terribly ambiguous, relationship between equality and prosperity. As it stands, though, government has not yet proven capable of achieving even the most basic meaningful advances in secondary school reform. And, until they efficiently repair the bottom rungs in the proverbial ladder toward equality of opportunity, it seems premature to divert desperately needed resources/attention toward the upper rungs.

    A slightly more prudent approach (though by no means the only one), for example, might be centered on successful policy prescriptions for pre-school education and improving current secondary school choices while somehow mitigating the landmine of teacher's unions which, incidentally, have become an Achilles heel on social mobility. The possibilities for effective, widespread government-sponsored higher education will remain somewhat moot, however, until public high school schools can manage to consistently graduate a majority of students who are prepared with the necessary tools to successfully pursue that path. And, right now, they simply are not.

    Prior to government tackling the glaring education issues already on its overflowing plate, innovations in access to affordable higher education are probably better left to the likes of Coursera, etc.

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  18. Nathanael1:49 AM

    While a federal university system is a fine idea, it doesn't address the basic problem with higher education today, which is student loans.

    As an economist, you should pay attention to these monstrosities which can't be discharged in bankruptcy.

    A system of *cheap* federal universities would be lovely. A system where people are forced to take out indentured-servitude loans to go to them would be just as bad as the current system.

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