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why do universities salivate over money-losing grants?

Happy new year. Guess what my New Year’s resolution is. To that end, a few quick thoughts on universities and the grant economy to dip a toe back in the water.

We all know that American universities (well, not only American universities) are increasingly hungry for grants. When state funding stagnates, and tuition revenues are limited by politics or discounting, universities look to their faculty to bring in money through grants. Although this may be a zero-sum game across universities (assuming total funding is fixed), it is unsurprising that administrations would intensify grant-seeking when faced with tight budgets.

Of course, it’s only unsurprising if grants actually make money for the university. But a variety of observers, from the critical to the self-interested, have argued that the indirect costs that many grants bring in – the part that pays not for the direct cost of research, but for overhead expenses like keeping the network running, the library open, and the heat and electricity on – don’t actually cover the full expense of conducting research.

Instead, they suggest that every grant the university brings in costs it another 9% or so in unreimbursed overhead. In addition, about 12% of total research spending consists of universities spending their own money on research. While some of this goes to support work unlikely to receive external funding (e.g. research in the humanities), I think it’s safe to assume that most of it is related to the search for external grants – it’s seed funding for projects with the potential for external funding, or bridge funding for lab faculty between grants. (These numbers come from the Council on Government Relations, a lobbying organization of research universities.)

If that’s the case, it means that when faculty bring in grants, even federal grants that come with an extra 50% or so to pay for overhead costs, it costs the university money. Money that could be spent on instruction, or facility maintenance, or even on research itself. So how can we make sense of the fact that universities are intensifying their search for grants, even as the numbers suggest that grants cost universities more they gain them?

I can think of at least three reasons this might be the case:

1.  The numbers are wrong.

It is notoriously difficult to estimate the “real” indirect costs of research. How much of the library should your grant pay for? How much of the heat, if it’s basically supporting a grad student who would be sitting in the same shared office with or without the grant? There are conventions here, but they are just that – conventions. And maybe universities have a better sense of the “real” costs, which might be lower than standard accounting would suggest. COGR has an interest in making research look expensive, so government is generous about covering indirect costs. And critics of the university (with whom I sympathize) have a different interest in highlighting the costs of research, since they see a heavy grants focus as coming at the cost of education and of the humanities and social sciences. (See e.g. this recent piece by Chris Newfield, which inspired the line of thought behind this post.)

Certainly the numbers are squishy, and the evidence that grant-seeking costs universities more than it gains them isn’t airtight. But I haven’t seen anyone make a strong case that universities are actually making money from indirect costs. So I’m skeptical that these numbers are out-and-out wrong, although open to better evidence.

2. It’s basically political and/or symbolic, not financial.

A second possibility is that the additional dollars aren’t really the point. The point is that universities exist in a status economy in which having a large research enterprise is integral to many forms of success, from attracting desirable faculty and students, to appearing in a positive light to politicians (more relevant for public than private universities), to attracting donations from those who want to give to an institution that is among the “best”. Or, in a slight variation, maybe the perceived political benefits of having a large grant apparatus – of being on the cutting edge of science, of being seen as economically valuable – is seen as outweighing any extra costs. After all, what’s an extra 10% per grant if it makes the difference between the state increasing or cutting your appropriations over the next decade? (Again, most relevant for publics.)

These dynamics are real, but they don’t explain the intensification of the search for grants in response to tight budgets, except insofar as tight budgets also intensify the status competition. But it really seems to me that administrators see grants as a direct financial solution, not an indirect one. So I think that symbolic politics is a piece of the puzzle, but not the only one.

3.  Not all dollars are created equal.

Different dollars have different values to different people. Academic scientists often like industry grants because they tend to be more flexible than government money. Administrators, on the other hand, don’t, since such grants typically don’t cover overhead expenses.

Perhaps something related is going on with the broader search for grants. Maybe, even if grants really do cost more than they bring in for universities, administrators don’t perceive the revenues and the expenses in parallel ways. After all, those indirect costs provide identifiable extra dollars the university wouldn’t have seen otherwise. But the “excess” expenses are sort of invisible. The university is going to pay for the heat and the library either way; even if you know the research infrastructure has to be supported, you might assume that the marginal overhead cost of an additional grant doesn’t make that much difference. (Maybe you’d even be right.) And people might not see some costs – like university seed funding for potentially fundable research – as an expense of grant-seeking, even if that’s why they exist.

I think this is probably a big part of the explanation. The extra revenues of grants are visible and salient; the extra costs are hidden and easy to discount. So, rightly or wrongly, administrators turn to grant-seeking in tight times despite the fact that it actually costs universities money.

There are some other possibilities I’m not considering here. For example, maybe this is about the interests of different specific groups within the organization – e.g. about competitions among deans, or between upper administration and trustees. But I think #2 and #3 capture a lot of what’s going on.

So, if you think this dynamic (the intensification of grant-seeking) is kind of dysfunctional, what do you do? Well, pointing out how much research really costs the university – loudly and repeatedly – is probably a good idea. Make those “extra” costs as visible and salient as the revenues. (Though it would be SO NICE if the numbers were better.)

But don’t discount #2 – even if any extra costs of grants are made clear, universities aren’t going to give up the search for them. Because while the money grants bring in matters, they also have value as status capital, and that outweighs any unreimbursed costs they incur. Grants may not quite cover those pesky infrastructure costs. But the legitimacy they collectively confer is, quite literally, priceless.

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Written by epopp

January 4, 2016 at 1:54 pm

the most overlooked trend in U.S. higher education

State defunding of public higher education has received a lot of attention in recent years. And budget cuts like the $250 million one Scott Walker made this year to the University of Wisconsin mean this trend continues to get media play.

Less visible in the media, but still well known, is that as public funding has eroded, colleges have become more dependent on tuition dollars for revenue. For public institutions, this has meant both tuition increases for in-state students and, where possible, a greater percentage of out-of-state and international students. While the net price of college hasn’t increased nearly as much as the sticker price, it’s still beat the cost of inflation year after year.

Both of these narratives are completely true. Yet this story of a shift from public to private funding overlooks one critical factor: the expansion of federal student aid.

During the past two decades, as state appropriations per postsecondary student flattened then declined, federally supported financial aid made massive gains. In 2002 its volume passed that of state appropriations, and by 2010 it was twice as large.

Funding

Stunning, right? This suggests a very different story than the one about the privatization of public universities we hear so much about. Instead, it looks like there’s been a shift from state funding of higher ed to federal funding. So what’s going on here?

Well, a couple of things. First, the federal aid figures include both grants and loans. Data sources like the College Board and the Delta Cost Project include loans as part of net tuition, not as federal funding. That makes sense, if you’re interested in the financial burden of college on students and their families. And the loans don’t cost the government anything like their face value.

But counting this way downplays the fact that those loans ultimately exist because the federal government makes them possible. Colleges are doubly dependent in this scenario: on students’ choices about where to attend, but also on the feds to make them available in the first place. And if you’re coming at this from an organizational perspective, we should expect resource dependence — whether on students, on the feds, or both — to have effects.

Second, this chart collapses public, private non-profit, and for-profit institutions together. The state appropriations are only going to publics (which also enroll about three-quarters of the students). But as of 2010, more than a quarter of student aid was going to the 10% of students enrolled in for-profit institutions. Moreover, because private colleges are so much more expensive than public colleges, they also receive a disproportionate fraction of federal loans. I haven’t pulled these numbers apart by institution type. But if we just compared state appropriations and federal aid to students at public institutions, the chart would surely be less dramatic.

It would be misrepresenting reality to say that public institutions have experienced a substantial shift from state to federal dependence (at least without substantially more number crunching). And it would be similarly wrong to argue that schools haven’t become more tuition dependent (since loans do come to schools via individual students).

But you can absolutely make the case that at the field level, higher education has increased its dependence on the federal government relative to state governments. And this makes colleges susceptible to a whole wave of federal demands that simply weren’t there before. The college ratings system Obama proposed and then abandoned is one example of this. Education Secretary Arne Duncan’s drumbeating for accountability is another.

Colleges have a lot of political clout and are well-organized. They ground the ratings proposal into a shadow of its former self. And it will take a lot of doing before we see No College Student Left Behind.

Nevertheless, if organization theory tells us anything, it’s that resource dependence matters. When, five years down the road, we get a Race to the Top rewarding colleges that meet completion and job placement goals at a given tuition cost, I know where I’ll be looking: at that point in 2002 where higher ed waved goodbye to the states and hello to the feds.

[Data from the College Board’s Trends in Student Aid 2014 and Grapevine reports, various years, deflated with BLS CPI.]

Written by epopp

August 31, 2015 at 12:34 pm

relational styles in micro-finance

A long standing issue in network analysis is the analysis of when people initiate and maintain relationships. Rodrigo Canales and Jason Greenberg have a forthcoming Management Science paper that uses data from interaction between micro-finance loan officers and clients to establish that interactional style is one of the big drivers of relationships. From the abstract:

Social scientists have long considered what mechanisms underlie repeated exchange. Three mechanisms have garnered the majority of this attention: Formal contracts, relational contracts, and relationally embedded social ties. Although each mechanism has its virtues, all three exhibit a common limitation: An inability to fully explain the continuation and stability of inter-temporal exchange between individuals and organizations in the face of change. Drawing on extensive quantitative data on approximately 450,000 microfinance loans made by an MFI in Mexico from 2004-2008 that include random assignment of loan officers, this research proposes the concept of “relational styles” to help explain how repeated exchange is possible in the face of personnel change. We define relational styles as systematically reoccurring patterns of interaction employed by social actors within and across exchange relationships — in this paper, between microfinance clients and loan officers. We show that relational styles that are consistent facilitate a clear understanding of expectations and thus exchange. We also demonstrate that consistency in the relational styles followed by successive loan officers mitigates the negative impact of a broken loan officer-client tie. This paper thus proposes and empirically tests a social mechanism based on relational styles that often accompanies relational embeddedness, but may also serve as a partial substitute for it.

Check it out!!!

50+ chapters of grad skool advice goodness: Grad Skool Rulz ($2!!!!)/From Black Power/Party in the Street

Written by fabiorojas

July 16, 2015 at 12:01 am

teaching, tenure, and academic freedom

As events continue to unfold in Wisconsin, defenses of tenure are popping up in various places. For the most part, these are focused on how weakening tenure would 1) limit academic freedom, 2) drive faculty to other universities, and 3) subject them to political reprisals.

These are all true. One only has to think about climate research, or UNC’s Poverty Center, to realize that the threat to academic freedom is very real.

What is less clear is why the public should care. Sure, some will. But lots of people believe climate science is corrupt, and that centers like UNC’s are inappropriately political. Any good defense of the public university—of tenure within it or support for it more generally—has to appeal to a broad swath of people.

I suggested the other day that the business community cares about science, and that that is one potential source of support for higher ed, at least, if not necessarily for tenure. But what the average American cares about most with regard to universities is not science, but teaching.

And here…crickets.

Clay Shirky argued at Crooked Timber that in fact professors don’t do very much teaching, and when the public learns this they will revolt. I think he sees the world too much through the lens of NYU, and that if you look at the higher ed field as a whole, there is lots of teaching going on, including by tenure-track faculty.

But where he is right is that what most people outside higher ed care about is not research, but teaching. Fortunately, there are strong arguments to be made that link tenure and teaching quality. For example, Mikaila pointed out in the comments that

performance funding initiatives which emphasize on-time graduation rates would tend to encourage a decrease in academic rigor so that students make adequate academic progress and do not fail or withdraw from courses–something we could easily achieve by giving our students open-book fill-in-the-blank tests with As for all. It is tenure which protects us from such a demand and thus tenure that gives us the best chance of ensuring that students have the opportunity to receive a high-quality, rigorous education that challenges them and helps them learn and develop the skills which will benefit them economically, socially, culturally, and personally for the rest of their lives.

These are the kinds of arguments that are likely to have traction. Not that tenure is good for professors, or things like academic freedom that a minority of people care about. But tenure is good for students.

The flip side of that is that we can’t profess that tenure helps students and then denigrate or simply neglect teaching. Nor can we go along with “I won’t grade you too hard as long as you don’t demand too much.” Nor is this position compatible with allowing the system to continue to survive on contingent labor.

I’m still working out what the ethical thing to do is as someone who is (as we all are, in one way or another) caught up in this system. One thing I’m pretty sure about, though: appealing to faculty self-interest is not a winning strategy for gaining public support.

Written by epopp

June 11, 2015 at 8:15 am

how the financial crisis and obamacare improved student loans

Student debt is in the news a lot these days. It currently stands at $1.2 trillion in the U.S., having surpassed credit card debt in 2010. The Occupy movement pushed the issue onto the front pages with its call for debt forgiveness, and since then loans have bounced in and out of the news under headlines like “crisis” and “crippling.”

student loans

Of course, there’s always two ways of looking at things. Since the college wage premium (or, more accurately, the noncollege penalty) has increased, plenty of folks have argued that college, loans and all, is still a great deal despite rising tuition, and that many students should actually be borrowing more.

That’s hard to tell an underemployed 24-year-old, but never mind. In general, our shift toward loan-driven higher ed financing is a big problem. But there’s one important, and often overlooked, way in which things have gotten better. Much better.

Read the rest of this entry »

Written by epopp

January 5, 2015 at 2:23 pm

Posted in education, finance, markets

history, the stock market, and predicting the future

So the stock market has been freaking out a bit the last couple of weeks. Secular stagnation, Ebola, a five-year bull market—who knows why. Anyway, over the weekend I was listening to someone on NPR explain what the average person should do under such circumstances (answer: hang tight, don’t try to time the market). This reminded me of one of my pet quibbles with financial advice, which I think applies to a lot of social science more generally.

For years, the conventional wisdom around what ordinary folks should do with their money has gone something like this. Save a lot. Put it in tax-favored retirement accounts. Invest it mostly in index funds—the S&P 500 is good. Don’t mess with it. In the long run this is likely to net you a reliable 7% return after inflation, about the best you’re likely to do.

Now, it’s not that I think this is bad advice. In fact, this is pretty much exactly what I do, with some small tweaks.

But it has always struck me how, in news stories and advice columns and talk shows, people talk about how this is a good strategy because it’s worked for SO LONG. For 30 years! Or since 1929! Or since 1900! (Adjust returns accordingly.)

And yes, 30 years, or 85, or 114, are all a long time relative to human life. And we have to make decisions based on the knowledge we’ve got.

But it’s always seemed to me that if what you’re interested in is what will happen over the 30+ years of someone’s earning life (more if you’re not in academia!), you’ve basically got an N of 1 to 4 here. I mean, sure, this may be a reasonable guess, but I don’t think there’s any strong reason to believe that the next 100 years are likely to look very similar to the last 100. Odds are better if you’re just interested in the next 30, but even then, I’m always surprised by just how confident the conventional wisdom is around the idea that the market always coming out ahead over a 25- or 30-year period—going ALL THE WAY BACK TO 1929—is rock solid evidence that it will do so in the future.

Of course, there are lots of people who don’t believe this, too, as evidenced by what happened to gold prices after the financial crisis. Or by, you know, survivalists.

Anyway, I think this overconfidence in the lessons of the recent past is something we as social scientists tend to be susceptible to. The study that comes most immediately to mind here is the Raj Chetty study on value-added estimates of teachers (paper 1, paper 2, NYT article).

The gist of the argument is that teachers’ effects on student test scores, net of student characteristics (their value added), predicts students’ eventual income at age 28. Now, there’s a lot that could be discussed about this study (latest round of critique, media coverage thereof).

But I just want to point to it—or rather, broader interpretations of it—as illustrating a similar overconfidence in the ability of the past to predict the future.

Here we have a study based on a massive (2.5 million students) dataset over a twenty-year period (1989-2009). Just thinking about the scale of the study and taking its results at face value, it’s hard to imagine how much more certain one could be in social science than at the end of such an endeavor.

And much of the media coverage takes that certainty and projects it into the future (see the NYT article again). If you replace a low value-added teacher with an average one, the classroom’s lifetime earnings will increase by more than $250,000.

And yet to make such a leap, you have to be willing to assume so many things about the future will be like the past: not only that incentivizing teachers differently and making tests more important won’t change their predictive effects (which the papers acknowledge), but, just as importantly, that the effects of education on earnings—or, more specifically, of teacher value-added on earnings—will be similar in future 20-year periods as it was from 1989-2009. And that nothing else meaningful about teachers, students, schools, or earnings will evolve over the next 20 years in ways that mess with that relationship in a significant way.

I think we do this a lot—project into the future based on our understanding of a past that is, really, quite recent. Of course knowledge about the (relatively) recent past still should inform the decisions we make about the future. But rather a lot of modesty is called for when making blanket claims that assume the future is going to look just like the past. Maybe it’s human nature. But I think that modesty is often missing.

Written by epopp

October 20, 2014 at 11:01 am

money, money, money … at Yale

Yale is hosting a conference on $$$, which is open to the public, next Fri., Sept. 12th at Yale.

The line-up is both impressive and exciting, not least of all because it involves our orgtheory crew plus beloved colleagues and dear orgtheory readers!

Friday, September 12, 2014
Hosted by:
Nina Bandelj ~ Sociology, University of California at Irvine
Daniel Markovits ~ Yale Law School
Frederick F. Wherry ~ Sociology, Yale University

With papers from:
Bruce Carruthers ~ Sociology, Northwestern University
Christine Desan ~ Harvard Law School
Nigel Dodd ~ Sociology, London School of Economics
Akinobu Kuroda ~ Institute for Advanced Studies on Asia, Tokyo
Simone Polillo ~ Sociology, University of Virginia
Akos Rona-Tas ~ Sociology, University of California at San Diego
Alya Guseva ~ Sociology, Boston University
Rene Almeling ~ Sociology, Yale University
David Grewal ~ Yale Law School
Kieran Healy ~ Sociology, Duke University
Marion Fourcade ~ Sociology, University of California at Berkeley
Supriya Singh ~ Sociology, RMIT, Australia
Stephen Vaisey ~ Sociology, Duke University
Shane Frederick ~ Psychology, Yale School of Management
Daniel Markovits ~ Yale Law School

SPECIAL SESSION:
The Social Meaning of Money
Turns 20
Nancy Folbre ~ Economics, University of Massachusetts
Arlie Hochschild ~ Sociology, University of California at Berkeley
Eric Helleiner ~ Political Science, University of Waterloo
Bill Maurer ~ Anthropology, University of California at Irvine
Jonathan Morduch ~ Economics, New York University

Co-Sponsored by The Office of the Provost, Yale University ~ Yale Center for Cultural Sociology
Center for Organizational Research at the University of California, Irvine
Yale Center for Comparative Research ~ Yale Law School ~ Yale School of Management

Here’s the program:

Money Talks: A Symposium at Yale
Friday, September 12, 2014

Venues:
Morning Sessions:Yale School of Management, Evans Hall, 165 Whitney Avenue. Class of 1980 Classroom, 2400
Afternoon sessions: Yale Law School, 127 Wall Street, Room 127 (TBC).

9:00 ~ 9:15 AM Welcome
Richard Breen ~ Yale University, Chair of the Department of Sociology
Daniel Markovits ~ Yale Law School, Symposium Co-host
Frederick Wherry ~ Yale University, Symposium Co-organizer
Nina Bandelj ~ University of California, Irvine, Symposium Co-organizer
9:15 ~ 10:45 AM Panel 1: Money and Markets
Bruce Carruthers ~ Northwestern University
Some A-B-C’s of Financial Fables: Rethinking Finance and Money
Akinobu Kuroda ~ Institute for Advanced Studies on Asia, University of Tokyo
The Characters of Money: A Historical Viewpoint from Complementary Currencies
Simone Polillo ~ University of Virginia
A Macro-Sociology of Money
Alya Guseva ~ Boston University & Akos Rona-Tas ~ University of California, San Diego
Money Talks, Plastic Money Tattles
Moderator: Alice Goffman ~ University of Wisconsin, Madison
10:45 ~ 11:00 AM Coffee Break
11:00 AM ~ 12:30 PM Panel 2: Money and Morals
Rene Almeling ~ Yale University
Money, Technology, and Bodily Experience: Comparing the Production of Eggs for Pregnancy or for Profit
David Grewal ~ Yale Law School
The Meaning of the Mirage: Money and Sin in Early Political Economy
Marion Fourcade ~ University of California, Berkeley & Kieran Healy ~ Duke University
Seeing Like a Market
Supriya Singh ~ RMIT University, Australia
Money and Morals: The Biography of Transnational Money
Moderator: Olav Sorenson ~ Yale School of Management
12:30 ~ 2:00 PM Lunch Break
2:00 ~ 4:00 PM Panel 3: The Social Meaning of Money, 20 Years Later
Nancy Folbre ~ University of Massachusetts, Amherst
Accounting for Care
Arlie Hochschild ~ University of California, Berkeley
Going on Attachment Alert: Paying Money, Managing Feeling
Eric Helleiner ~ University of Waterloo, Canada
The Macro Social Meaning of Money: From Territorial Currencies to Global Money
Bill Maurer ~ University of California, Irvine
Zelizer for the Bitcoin Moment: The Social Meaning of Payment Technology
Jonathan Morduch ~ New York University
Economics, Psychology, and the Social Meaning of Money
Moderator: Nina Bandelj ~ University of California, Irvine
4:00 ~ 4:15 PM Coffee Break
4:15 ~ 6:00 PM Panel 4: The Moralities, Solidarities, and Meanings of Money
Stephen Vaisey ~ Duke University
What Would You Do For a Million Dollars?
Shane Frederick ~ Yale School of Management
Positional Concerns
Christine Desan ~ Harvard Law School
Money as a Constitutional Practice
Daniel Markovits ~ Yale Law School
Economic Inequality and the Meaning of Money
Nigel Dodd ~ London School of Economics
Is Bitcoin Utopian?
Moderator: Frederick Wherry ~ Yale University
6:00 PM A Conversation With Viviana Zelizer
Moderators: Nina Bandelj ~ University of California, Irvine & Frederick Wherry ~ Yale University
6:30 PM Reception ~ Yale Law School, The Alumni Reading Room

Written by katherinechen

September 5, 2014 at 2:47 pm