orgtheory.net

free college vs. cost-benefit thinking

Last month, Howard Aldrich made—as he often does—a good point in the comments:

There’s been an interesting subtle shift in the rhetoric regarding whose responsibility it is to pay for an individual’s post-secondary education. My impression is that there was a strong consensus across the nation 50 years ago, and certainly into the late 1960s, that governments had a responsibility to educate their students that extended up through college. However, I perceive that consensus has been under attack from both the left and the right….Liberals argue that much of the public subsidy goes to the wealthier high income students whose parents don’t really deserve the subsidy. Conservatives argue that as students benefit substantially from their college education, they should pay most of the cost.

This month, I’ve been writing about the history of cost-benefit analysis. (Why yes, I do know how to have a good time.) On the surface, it has nothing to do with universities. But there are important links to be made.

One of the arguments I’m playing with is that economic thinking—here just meaning a rational, cost-benefit, systematic-weighing-of-alternative-choices sort of thinking—has been particularly constraining for the political left. On the right, when people’s values disagree with economic reasoning, they ignore the economics and forge ahead. On the left, while some will do the same, the “reasonable” position tends to be much more technocratic. Think Brookings versus Heritage. Over time, one thing that has pulled “the left” to the right has been the influence of a technocratic, cost-benefit strain of thought.

Yes, I know these are sweeping generalizations. But stay with me for a minute.

There are a couple of big economic arguments for asking individuals, not the public, to pay for higher education. Howard’s comment gets at both of them.

One is that while there is some public benefit in educating people, individuals capture most of the returns to higher education. If that is the case, it makes sense that they should pay for it, with the state perhaps making financing available for those who lack the means. Milton Friedman made this argument sixty years ago, and since then, it has become ever more popular.

The other is that providing free higher education is basically regressive. The wealthier you are, the more likely you are to attend college (check out this NYT interactive chart), and relatively few who are poor benefit. Milton Friedman made this argument, too, but it is particularly associated with a 1969 paper by Lee Hansen and Burton Weisbrod, and continues to be made by commentators across the political spectrum.

Both of these arguments have become economic common sense (even though support for the latter is actually pretty weak). Of course it’s fair for individuals to have to pay for the education that they benefit so much from. And of course it doesn’t make sense to pay for the education of the upper-middle class while the working poor who never make it to college get nothing.

Indeed, these arguments have been potent enough that it has become hard to argue for free higher education without sounding extreme and maybe economically illiterate. Really, it kind of amazes me that free college is even being talked about seriously these days by President Obama and Bernie Sanders.

But even the argument for free college now depends heavily on claims about economic payoff. The Obama proposal headlines “Return on Investment,” arguing that “every dollar invested in community college by federal, state and local governments means more than $25 [ed: !] in return.” The Sanders statement starts, “In a highly competitive global economy, we need the best-educated workforce in the world.” The candidate who is a self-described socialist relies on a utilitarian, economic argument to justify free higher education.

So what’s the problem with thinking about college in terms of economic costs and benefits? After all, it’s an expensive enterprise, and getting more so. Surely it doesn’t make sense to just wantonly spend without giving any thought to what you’re getting in return.

The problem is, if the argument you really want to make is that college is a government responsibility—that is, a right—starting with cost-benefit framing leads you down a slippery slope. Benefits are harder to measure than costs, and some benefits can’t be measured at all. All sorts of public spending becomes much harder to justify.

Now, this might be fine if you generally think that small government is good, or that the economic benefits of college are pretty much the ones that matter. But if you think it’s worth promoting college because it might help people become better citizens, or increases their quality of life in some difficult-to-measure way, or you just want to live in a society that provides broad access to education, well, too bad. You’ve already written that out of the equation.

If you really believe there are social benefits to making public higher education freely available, then cost-benefit arguments will always betray you. But rights, on the other hand, aren’t subject to cost-benefit tests. Only a moral argument that defends higher education as a right—as something to value because it improves the social fabric in literally immeasurable ways—can really work to defend real public higher education.

Seem too unrealistic? Think about high school. There’s no real reason that free college should be subject to a cost-benefit test when free high school is not. Individuals reap economic benefits—lots of them—from attending high school, too. And high school is at least as regressive as college: the well-off kids who attend the good public schools reap many more benefits than the low-income kids who attend the crummy ones. It only makes sense, then, that families should pay for high school themselves, right? Perhaps with government loans, if you’re too poor to afford it.

And yet no one is making this argument. Because we all still agree—at least for now—that children have the right to a free primary and secondary education. We may argue about how much to spend on it, or how to make it better, but the basic premise—governments have a responsibility to educate students, in Howard’s words—still holds.

So I support the free college movement. But I’d like to see its champions stop saying it’s because we need to be globally competitive, or because it’s got a huge ROI.

Instead, say it’s because our society will be stronger when more of us are better educated. Say that knowing higher education is an option, and an option you don’t have to mortgage your future for, will improve our quality of life. Say that colleges themselves will be better when they return to seeing students as students, and not as revenue streams.

Say it’s because it’s the right thing to do.

Written by epopp

October 23, 2015 at 12:00 pm

12 Responses

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  1. Absolutely. But people have bought into this kind of economic rationality so much that they use it to argue against their own interests. For example, when I tell my students–most of whom struggle to pay their below-average tuition–about free college plans (here or abroad), all are in favor of less expensive tuition, and almost all in favor of increased government subsidy. But a sizable minority are opposed–on the grounds that students will not take college seriously unless they have to pay for it.

    Liked by 1 person

    Mikaila

    October 23, 2015 at 3:49 pm

  2. @Beth, great point: if higher education is an absolute “right” that will make all of us better off, not just the ones being educated, then it does seem pointless to bring cost-benefit analysis into the picture. But unless resources are in infinite supply – – and government has an infinite capacity to tax – – won’t this position run up against a very difficult constraint: In the 21st century, advocates of open access to health care for all, regardless of ability to pay, can make the same argument about the society being better off, when everyone need not fear being unable to afford to take care of themselves & their families. Advocates of a decent life for the elderly can argue that we are all better off if the aged have decent housing & medical care. What about public transportation? And so forth.

    I don’t think it is possible to make moral arguments about rights to some public good without considering whether providing more of that good will mean people will get less of another good. Or maybe none at all.

    Now, back to your premise: it is quite possible that some analysts would say, okay, let’s sort this out by considering the costs and benefits of the different public goods you’re arguing for. Then we are back to the same conundrum.

    I think the logical extension of your position is that the conversation about what we should ask the government to provide takes us into really difficult territory – – are the public goods we are assessing incommensurable, if we stick to absolute normative arguments? Will we be forced, sooner or later, into making judgments about whether something like “higher education” deserves more of the state’s resources than “publicly supplied healthcare” or “environmentally sustainable sources of energy.” By what calculus will those judgments be made?

    Wish I had an answer!

    Liked by 1 person

    Howard Aldrich

    October 24, 2015 at 1:09 am

  3. Preach!

    To Howard’s point(s), I think that there is a real conundrum. But I think that part of the problem comes from the fact that the abstraction of “free college” gets laid over getting for free what exists today: universities with state-of-the-art gyms, cafeterias staffed by high-end chefs, beautifully manicured lawns, etc. It would be possible to develop a system that is far less expensive than the current system. I don’t keep up on the literature, but I’m fairly certain that the benefits of college don’t come from rock walls.

    The one area where I might quibble, though, is in thinking of higher education as a “right” versus something we all agree is good. I think that we can believe in universal access to something without elevating it to a “right.” I think that efforts to define more and more things as rights has diminished the importance of rights that we do have. I don’t think of free compulsory primary and secondary education as a right, but as a good that we all agree — as a society — we should pay to maintain.

    Liked by 1 person

    mike3550

    October 24, 2015 at 2:18 am

  4. Didn’t the cost of college education in the US explode with government subsidies? Or is that a myth I have gullibly accepted? I’m also open to the US government having been incompetent here, where other countries (e.g. in Europe) were intelligent.

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    Luke Breuer

    October 24, 2015 at 6:56 am

  5. When I was a non-traditional student returning to school to pursue my BS, I faced so many other students who could not properly spell or construct a full sentence. These students were also working on their Bachelor degrees. I wondered many times how they were able to make it that far. I still do not have an answer. I can suppose though. Were they pushed through so they would continue plunking loans down for further education? I do not get to grace the presence of the people behind closed doors making these types of decisions, but the money is steadily coming in and people are getting richer. These institutions began as great beacons of intellectual knowledge and centers for world changing research, but just about everything has turned include to economical models and prepositions. Are we here for the education or the paycheck? Everyone wants to one up another now. There are a few left with heart and compassion for mankind, all the rest are egomaniacal without ever even knowing they are the ones funneling all the power and money to the top. The system has failed and cogs are getting stuck in all kinds of places. Higher education is just another bubble about to burst. It’s late and I hope some of this makes any sense.

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    ChaosandOrder

    October 24, 2015 at 7:11 am

  6. *include should be removed

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    ChaosandOrder

    October 24, 2015 at 7:13 am

  7. I think the OP is spot on but does not sufficiently address the error in thinking of the “liberal” cost/benefit discourse about education, i.e. the belief that more education can solve problems of inequality. It isn’t my field of expertise, but I believe the research in the vein of “maximally maintained inequality” in the sociology of education demonstrates that elites will replicate themselves in any educational system regardless of its pay structure. The general ideas, as I understand them, are: (1) if higher education is free, entry will be merit tested and the elites have the best resources to provide supplemental education to help their children win in the merit competition, (2) as one level of education becomes universal, the bar gets raised and a higher level of education becomes needed to achieve high rewards. In short, education cannot solve an inequality problem. More education or free education is a good thing insofar as having an educated citizenry is a good thing and skilled workers can run a better economy. But the best way to solve an inequality problem is directly via income transfers and social programs, so that education is not so highly correlated with life circumstances. I’m sure it isn’t perfect, but I believe the Finnish story is that educational reforms designed to raise the floor in student achievement (which include treating teachers well) had the effect of also raising the highest levels of student performance.

    A less-unequal society that values education for its intrinsic benefits only might well employ fewer college professors as teachers. However it might also intrinsically value knowledge-production and research institutes and pay people to do research without the fiction that they are teachers. However, a less-unequal society would also probably exhibit a smaller pay gap between professors/researchers and ordinary working people (as well as a smaller gap between managers and professors/researchers).

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    olderwoman

    October 24, 2015 at 2:50 pm

  8. Thanks, all. These are great points. Some reactions:

    1. Without weighing costs and benefits, how do we decide what to pay for in a world of limited resources?

    I have two answers for this. One is basically what Mike said – that the issue is less that there isn’t enough money being spent on higher education than that it’s being spent on things other than education.

    The other is that yes, at some level of course you have to make tradeoffs. Maybe we can’t afford to provide all conceivable social benefits at the levels we might desire. But the decision about those tradeoffs is (and I think should be) fundamentally a political one, not an economic one. To the extent that it becomes an economic one, the decision is still political, but the politics are hidden behind a technical debate.

    2. Aren’t costs out of control? Won’t increasing government funding just make that worse?

    Basically, the story of the last fifteen years is that spending at publics has been flat (but tuition has increased in conjunction with state funding cuts), and spending at privates has increased (along with tuition). Everyone depends more on tuition, but “tuition” also includes a large increase in federal grants and loans that are attached to students, not institutions. Colleges have become more responsive to student preferences, which tend to be for consumption goods (the proverbial climbing walls), not education.

    If I could wave a magic wand, I’d slash federal aid to students dramatically and give it to public institutions and not allow them to charge tuition. A lot, certainly though not all, of the upward cost pressure is about competing for student dollars (including their federal aid) with lifestyle amenities (along with a growing apparatus for recruiting students—branding, marketing, enrollment management, and so on). Seeing students as a revenue stream and not students has other negative effects on the institution too, so this would be a win-win. Except for private colleges, which would totally lose.

    3. Wouldn’t it be better to call higher ed a public good, rather than a right?

    Yeah. I hesitated on using the word “right”. But I’m basically making a political argument here, not an economic one. If you say higher ed is a public good, it’s fine if it’s expensive and we just provide a lot of loans for low-income students, since they benefit individually too. If you say it’s a right, that becomes a problem. Talking about public goods invites parsing of just how much of the benefit is public versus private, and trying to assign responsibility for payment accordingly. I just think many of the real public benefits can’t be measured that way, and so that’s a losing battle.

    4. The real problem is we think education can solve inequality, and it can’t.

    Yes. I agree that higher education can’t do a lot to fix inequality. So we should concentrate on 1) encouraging it to do what is widely beneficial (create a more educated population), and 2) try to avoid making it worsen inequality. So, while I’m off in fantasyland here, let’s take all the money currently going to for-profits and throw it at community colleges. That might help a bit.

    Liked by 2 people

    epopp

    October 24, 2015 at 5:24 pm

  9. I tend to agree with eppop on point 1, which I think it the fundamental issue here. But I’d go further: it is not really a question about tradeoffs. If higher education or healthcare are to ever be free after being paid for, it will probably be the result of a struggle. This is a struggle led by students in Chile. But there is not tradeoff between more funding for education or for health: more funding for education comes from new taxes or from taking away money from expenses that are not social rights and that people do not like (such as the military, politicians’ wages, etc.). No movement would claim “lets take money from health to put it to education”. True, once the new money is collected with a tax reform, it could go to health instead. But the tax reform would not have existed were it not for the pressure to fund education. So the tradeoff is fictitious. The real tradeoff is whether to have people pay for education or to tax the rich more (or cut funding from areas which are not social rights).

    I should note that the struggle of students in Chile was made mainly with arguments about education being a social right, not a public good or a good investment. They have not won free education yet, but at least the pressure made the president promise she would make higher education free and a reform is in the making (it probably won’t end up being what students expected though, the devil is in the details). So at least in terms of the political effectiveness of one type of argument or the other, the OP is right.

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    Sebastian Guzman

    October 25, 2015 at 2:49 pm

  10. Tertiary education (post secondary vocational, technical, collegiate) is the demonstrated means for an individual to achieve greater earnings potential. Tertiary education as a, to be politically defined hierarchical right leading to some perceived benefit other than, or in addition to improved individual economic opportunity is, as epopp/Aldrich notes a slippery calculus of limited resource competing interests. The availability and evolving use of massive open online courses (MOOC’s), in combination with tertiary education testing centers to assess an individual’s educationally-advanced capabilities, may disrupt existing cost prohibitive access to existing tertiary education opportunities.

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    dew (@danofdot)

    October 25, 2015 at 6:08 pm

  11. Epopp:

    I don’t think your response to Howard — “Maybe we can’t afford to provide all conceivable social benefits at the levels we might desire. But the decision about those tradeoffs is (and I think should be) fundamentally a political one, not an economic one.” — is sufficient. No one is arguing that our society does not have enough economic resources for everyone to get a basic college education. People are only arguing that the tradeoff isn’t worth it relative to other social goals (which themselves vary across groups). So we *are* deciding it politically; you don’t like the outcome. Nor do I, FWIW, but sometimes thems the breaks in a majoritarian system. That’s no evidence of a social problem.

    I would question the premise, btw, that in the 1950-60s there was a consensus that governments had a responsibility to send everyone to college. In fact I think that’s pretty obviously absurd, considering that many state governments enforced laws that actively prevented certain types of students (minorities, women) from attending even at their own expense. The G.I. Bill (est 1944) only applied to, erm, G.I.s. In the early 1970s fewer than 50% of high school graduates went on to any kind of further education (now it’s nearly 70%). So I think that consensus was, like so many other liberal consensuses of the period, either imagined or empty rhetoric.

    (Nor can higher education be considered a public good: so long as some institutions are more desirable than others, and some always will be, attendance is rivalrous in consumption and exclusion is necessary. Not everyone can go to Berkeley or Chapel Hill or Ann Arbor even if there was no tuition. I.e., the cost-benefit language really might be the most appropriate from the social utilitarian perspective.)

    Anyway, for me a more interesting question is: should we conceive of the free college experience as a four year residential retreat, detached from major urban areas, complete with semi-professional athletics, unbelievable amenities, and a wide-ranging curriculum at every location from which students can select a la carte? Is it really a right to have access to a football team that will be on tv, a lazy river, regular on-campus concerts/films/activities, a semester in Florence, on-campus art museums, and easy-A classes on fun topics?

    Surely not. Very few countries “educate” this way and it is enormously expensive. But closing up the Ann Arbor campus, chopping up the University of Michigan into more specialized Colleges and moving each of these to Detroit, Lansing, and Grand Rapids so students can keep living with their parents while they attend 3-4 years of classes in their major (and little else) is going to be a hard sell. But that’s what tuitionless models look like, at least in the places with which I’m familiar.

    It’s especially a hard sell when students seem so eager to pay for the whole shebang. I wasn’t. I attended a local community college for two years and then a mediocre directional in-state uni in a low-cost area for the other two, parlayed that into a (barely) funded grad program, and now teach at a flagship state uni. I have never had student debt because I lived horribly and that pathway is incredibly cheap: probably $15-20k all in, so let’s say $5k/year. But revealed preference suggests that I’m an outlier and the modal student wants the resort rather than the struggle. If that’s so then denying them the option in order to restructure the system to accommodate a “free” education almost certainly reduces societal utility.

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    Kindred Winecoff

    October 26, 2015 at 6:56 am

  12. Good comments — this is mostly a response to Kindred Winecoff. Certainly fewer people went to college in the 50s and 60s. And maybe “consensus” is too strong. But the California Master Plan (1960), a very mainstream document, held up the access for all, no tuition model as an ideal. It quotes the president of Minnesota calling tuition

    an incomprehensible repudiation of the whoIe philosophy of a successful democracy premised upon an educated citizenry. It negates the whole concept of wide-spread educational opportunity made possible by the state university idea. It conceives college training as a personal investment for profit instead of a social investment…It is an incredible proposal to turn back from the world-envied American accomplishment of more than a century.

    Maybe not everyone held that position, but it was very mainstream. What university leader do you hear saying that today?

    (Public goods: I know; I’m using the term in the colloquial “has intangible societal benefits” sense, not the non-rivalrous, non-excludable sense.)

    On “this is what students want”: Lots of students are willing to go into debt for the residential retreat model. But keep in mind that we enable that residential retreat with easily accessible, mostly subsidized, loans. (And some grants.) And lots of students have very little grasp of the financial decisions they’re actually making when they sign those papers. No doubt there are some rational consumption-smoothers out there who anticipate their future McKinsey job paying for their nice college apartment. But I think there are a lot more who bumble along doing what they think they’re supposed to be doing, or what everyone around them is doing, including paying for sports teams and luxury dorms.

    I don’t see how you can say that we’d reduce societal utility by eliminating the residential retreat model when very few people are actually paying for the residential retreat model themselves, or with the help of private, unsubsidized loans. They want it because they’re not paying full price for it.

    Finally, I agree that the outcome we have is a political one. What I am pointing out is that if you hold the political opinion that college is good, and low-cost college is better (even if it means no lazy rivers), starting your political argument by conceding that individuals get most of the benefit anyway and so they should pay for it themselves means you’ve basically already lost the debate. The disruptors at least don’t pretend they value the institutions we have.

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    epopp

    October 27, 2015 at 2:48 am


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