Bad Education: A Response

I wanted to respond to the following comment on my Tom Paine piece:
Anya, I very much enjoy your writing. In this article, you write: "He's up against Richard Vedder of the American Enterprise Institute, an economist who has written a book and testified before Congress on his very convenient view that federal student aid is bad for affordability, because it encourages colleges to raise prices, and should therefore be curbed immediately." Doesn't Mr. Vedder's view have a great deal of credibility? If possible, please say a little more about why you disagree with Mr. Vedder. Thanks.

Dr. Richard Vedder is a conservative economist at Ohio State University (American Enterprise Institute, National Review) who describes his theory of why college costs so much in his book Going Broke by Degree and in this testimony before the House Committee on Education and the Workforce. He argues that there are inefficiencies in the higher education market. The ready availability of federal student aid makes students insensitive to price increases, which short-circuits the normal process of competition on price, and in turn encourages colleges to raise their tuition year after year without providing comparable improvements in quality.

I might be willing to agree with him, to a point. I think inefficiencies arise in the higher education market because students and parents are not fully informed about lower-cost college options, such as public vs. private schools, distance learning, vocational schools, and community colleges, and social stigmas also prevent people from shopping around. Also, the average higher education "customer" is not very well informed about the relationship between the tuition bill and the education they're getting, which allows schools to raise prices basically with impunity. Finally, the sources of funding and directions of spending for the average public university are so varied that it would be surprising if inefficiencies did not creep in--universities are often spending money on nonessential programs that don't serve the needs of their communities, and everyone likes to complain that bureaucracy and admin costs have gone out of control. I even agree with Vedder that it might not be a bad idea to put even more federal education aid in the hands of students, as a kind of voucher system.

Where Dr. Vedder and I differ fundamentally is in our views of the nature and purpose of higher education. Dr. Vedder complains that universities do not resemble businesses. "There is no clearly defined "bottom line" in traditional universities," he writes. "Did Stanford University have a good or bad year in 2003? How would we know?"
To me, one of the major values of our university system is its nonprofit, noncommercial status.
The university is one of the only institutions we have left in this society that is a truly public sphere. An institution like Stanford ought to measure its performance goals in generations, not in a single year.
Secondly, Dr. Vedder actually suspects that higher education's "negative externalities" may outweigh its "positive externalities." That is, the bad effects of universities, like higher taxes and the occasional campus riot, are worse than the effects of producing skilled workers, nourishing pure scholarship, shaping future citizens. I wish I could say that he is making this argument facetiously, for if not, why does he not resign his own senior faculty position? (I note he is teaching no classes this year, a deplorable example of the general productivity decline of which he complains.)

To sum up:
I don't want a guy making decisions about higher education at the highest level who doesn't see the difference between a university and a business, and I reiterate that it's very convenient for Spellings to appoint someone who thinks increased federal aid is a bad idea, whereas the vast majority of people in the field think it's called for.