Opinion

Felix Salmon

The rhetoric of tuition inflation

By Felix Salmon
November 16, 2010

Let’s say I earn $50,000 a year, and a widget costs $1,000. Then my pay goes up 3%, while the cost of the widget goes up 10%—year after year. Would you say that the widget has been getting more affordable over time? Stanley Fish would. Fish is approvingly citing a new book from Robert Archibald and David Feldman, which he quotes saying that “for most families higher education is more affordable than it was in the past”:

Here their target is a way of framing the issue. Usually the question asked is, “What percentage of a family’s income goes to the cost of higher education?” Archibald and Feldman prefer to “ask instead whether the amount left over after subtracting the cost of college is rising or falling over time.” The answer they give (buttressed by statistical tables) is “rising”: what their data show is that “over long stretches of time, college costs have been rising at a faster pace than income per worker, yet the average worker’s actual dollar income has gone up by more than the costs, leaving more resources on the family to spend on other things.”

I fear to think what statistical sleight-of-hand might be hidden in that qualifier about “over long stretches of time,” especially since in recent years real college costs have continued to rise fast even as real median incomes have gone nowhere or shrunk. But in general this approach to gauging affordability is absolutely bonkers: the percentage rise in price is completely ignored, and only the dollar rise in price matters. Using this technique, just about anything can be considered “more affordable than it was in the past.” If the widget rises in cost by $100 and my annual pay goes up by $1,500, that does not in and of itself settle the question of whether the widget has become more affordable.

What’s more, I haven’t read the book, but Fish’s take does seem to be at odds with its official blurb:

A technological trio of broad economic forces has come together in the last thirty years to cause higher education costs…

A college education has become less reachable to a broad swathe of the American public at the same time that the market demand for highly educated people has soared. This affordability problem has deep roots. The authors explore how cost pressure, the changing wage structure of the US economy, and the complexity of financial aid policy combine to reduce access to higher education below what we need in the 21st century labor market.

I’m also completely unconvinced by Fish’s explanation of the main reason behind cost inflation at colleges:

Chief among these is the change in the sophistication and cost of the technology that has at once transformed the setting of higher education and become one of the areas of knowledge higher education must impart to students. Students expect to be instructed in the new technologies, and that instruction requires their installation, and then as new refinements emerge, their re-installation. “[A] modern university must provide students with an up-to-date education that familiarizes students with the techniques and associated machinery that are used in the workplace the students must enter.”

Were colleges and universities to strike a Luddite stance and hold out for pencil, paper and blackboard instruction, they would “in effect be guilty of educational malpractice.” When it comes to incurring these new expenses, they “do not have a real choice.” In no sense, then, are changes in price “driven by any pathology in the higher education industry.

It’s true that computers are more expensive than pencils, and it’s surely true that some part of the typical college-tuition fee is spent on information technology. But we’re talking about fee inflation here: in order for Fish’s argument to hold water, IT costs at colleges would have to be rising faster than inflation year in and year out. Which strains credulity, in a world where IT is getting steadily cheaper and where a lot of IT services can now take place in the cloud. Even if the move into the cloud is only now beginning, I very much doubt that it’s ever going to result in a decrease in tuition fees.

The fact is that technology is a way of reducing the costs of education much more than it is a factor in their growth. That’s why Rupert Murdoch has just hired Joel Klein:

The likelihood that Murdoch’s education strategy will involve either charter schools or online college-diploma mills is very close to zero. Instead, it is all but certain to revolve around one of the most fertile areas of innovation today: the application of digital technology to learning. In the next few years, “what you’re going to see in educational software and new solutions and online learning is going to be game-changing,” says Klein, in terms of “the ability of new technology to both improve instruction and the quality of it through new learning platforms.”

“Archibald and Feldman,” says Fish, “allow us to say that at least in the area of costs the fault lies not in ourselves, but in the stars.” Which I’m sure is convenient for Fish, who describes himself as a “dean who encountered the rising costs of personnel, laboratory equipment, security, compliance demands, information systems and much more every day.” But it’s not particularly believable.

Comments
18 comments so far | RSS Comments RSS

So why shouldn’t college absorb all of the increase in GDP over decades? This probably seems logical to a college administrator.

And basing this analysis on mean rather than median income is crazy in a society with third world income inequality like in the US.

Posted by clawback | Report as abusive
 

Personnel costs have gone up? Many professors/administrators I talk to bemoan the problem that there’s several (if not dozens) of qualified applicants for any open positions, and that in order to simply get hired one has to be even more educated, experienced, and accomplished than ever before. This would seem to indicate that supply>demand and personnel costs should be decreasing, presuming on a large scale this is actually true, at least.

Posted by Anal_yst | Report as abusive
 

The problem is very simple and explains why both the cost of education and health care have increased faster than the CPI.

(1) They depend on highly educated individuals, requiring roughly ten years of post-secondary education for an ENTRY-level job.

(2) The economic value of our best and most highly educated minds has increased steadily over the last 20 years as globalization and technology have extended the reach of an individual.

(3) You can’t outsource either one.

Posted by TFF | Report as abusive
 

Thank you. I read the Fish piece this morning and it seemed to make no sense at all. There’s the hope with him that his struggles to communicate have something to do with new insights but generally he’s kind of weirdly — and willfully? — obfuscatory. Not sure they the Times gives him so much space.

Posted by mfritter | Report as abusive
 

One of my favorite quotes is Mark Twain’s “there are lies, there are damn lies, and there are statistics.” This interpretation of statistics would require a fourth category of lies. I’m guessing Fish is hoping that enough people will repeat what he has said and that it will be accepted as truth, much in the way Larry Speakes, the press secretary for Ronald Reagan, said about all the things they would make up.

My wife and I both attended state supported colleges in the 70s, and we were able to afford those educations with part time jobs and minimal support from our parents, as tuition and fees was less than $1000 per year. To attend the same schools today, students whose parents earn the same income as ours did would have to take on at least $50,000 in student loans or scholarships (for just one of the colleges). Loans that would then consume a ridiculous percentage of post-college income. So not only does an education cost more than it used to, but it also returns less value.

Posted by OnTheTimes | Report as abusive
 

The irony, OnTheTimes, is that quality education is worth its weight in gold. We aren’t about to compete in the global economy by training better manual laborers. We might have a hope if we can raise a generation of skilled and innovative engineers.

Unfortunately, the US spends just 5.7% of its GDP on education, an appalling figure for the world’s leading economy, roughly unchanged since the 70s.

It makes sense for a wealthy society to spend an increasing portion of its GDP on education and health care, as there is truly nothing more valuable to spend it on. Our failure to do so has allowed other nations to catch and pass us.

Finally, note the demographic dilemma. The demographic with the greatest resources (two professional-class parents) has a very low birth rate. It is exceedingly rare to find educated families with more than three children. The demographics with the highest birth rate (recent immigrants and not-college-educated parents) don’t have the financial resources to pay for college.

Public funding of college education is more important now than ever before, yet public support for education is slipping.

Posted by TFF | Report as abusive
 

My favorite feature of this line of reasoning: college education is becoming more affordable, and health care is becoming more affordable, but college education and health care combined are becoming less affordable. (I don’t know this, but wouldn’t be surprised, and it’s certainly mathematically possible.)

Posted by dWj | Report as abusive
 

Fish is completely off-base here, as is usual for him of late. No one is complaining about instructor salaries or IT spending, both of which are quite under control at most colleges (probably too low in many cases). There is simply no one else competing to hire, e.g., English PhDs, and salaries reflect this fact. The thing that’s curious is that you have individual students paying over $50k in tuition and fees for the privilege of being one student in a 50-student class where the instructor makes less than $50k per year. Something has gone wrong, but it’s not that someone who can deliver a lecture about Dickens and a Powerpoint projection system become 10% more costly every year. Those academic fields that are more costly, such as the sciences, law, and business, typically in large part pay for themselves via research grants, successful alumni, etc.

People ARE complaining, with good reason, about spending on athletics, administration, unnecessarily fancy construction, and the provision of country-club luxuries to students who see college as a four-year vacation rather than training for a career. Layering these expenses on top of the cost of education, particularly at top schools, leads middle class students to consider weaker schools, take more student loan debt, ask their family to make excessive sacrifices, and work too many hours at outside jobs. It takes someone truly detached from reality to think that an education costing more than the median household income remains affordable in an environment when most of the middle class spends ~100% of income simply to maintain food, clothing, shelter, transportation, and health.

Posted by najdorf | Report as abusive
 

Going to campuses periodically since the 1970s when I went to college has been enlightening. Many of the private colleges appear to be filling up much of their open space with new buildings but the student enrollment doesn’t appear to be going up much at those colleges. Buildings cost money to fund-raise, build and maintain.

Also, dorms have moved away from buildings that they could simply firehose each summer to clean out the innards to edifices that would do many hotel chains proud.

College education is one of the great equalizers of the middle class. If you make less than $100k, grants and low-cost loans are available for most of the cost. If you make $100k – $200k, kiss your disposable income good-bye as long as you have kids in college if you want them to go to a private college since they offer little or no financial aid and the tuition tax breaks disappear.

Our first child went to a private college. We learned our lesson when they cut off all financial aid at the beginning of senior year when you were effectively trapped.

Our second went to community college. Our third is going to school in Canada (dual-citizen at resident tuition rate) where she may end up staying to work afterwards. No. 4 is probably going to a ommunity college for the first two years.

Posted by ErnieD | Report as abusive
 

College education has become a social positioning good and as such is bid up to consume all available resource. in an economy based more on credentialling than meritocracy, the positional nature of a “good” degree as recognized by peers becomes very important.

In recessions and periods of heightened economic stress socially ascribed or structurally ascribed status (via) university credentials becomes ever more important as a way of establishing social status. Universities are more positional good than “normal” competitive good and as such will rise to consume all available resource available.

What parent won’t spend almost all they have to give their children, the “best” head start?

Positional goods eventually crash as they are bubbly by nature, not being tied to a competitive pressure. Housing became a positional good with cheap money as did education.

Posted by Nick_Gogerty | Report as abusive
 

TFF, you might not want to tell the college grads with $100K student loans that are working at Starbucks or waiting tables about how their education is worth its weight in gold. I’m sure a lot of them are wondering why they took on so much debt to get a job that didn’t require that “quality education”.

I agree, in general, that the nation needs to spend more on education, but given the current business management mindset, I’m not convinced it would matter that much to today’s economy. If we had more engineers and scientists they would either be lower paid or not working in their chosen fields, as the businesses that are hoarding cash refuse to invest more in R&D. American tech companies complain about the shortage of engineers, but that is mainly because they have to pay more than their foreign competition, and I don’t get the feeling they would create more products if engineers were paid less – they would pocket the profits and execs would get bigger bonuses.

Posted by OnTheTimes | Report as abusive
 

OnTheTimes, did you ask them what they studied? And how hard they pursued those studies? And where?

*Quality* education is still valuable, but there is a lot of dross out there.

Your points about the economic imbalance are well taken, however.

Posted by TFF | Report as abusive
 

Yesterday I heard Clayton Christensen (The Innovator’s Dilemma) give a keynote talk at the Supercomputing conference, and he said that online education is now applying the same low-end pressures to traditional higher education that other industries have seen in the past several decades. While he didn’t come right out and say it, it was clear that he at least strongly considers the possibility that the online disruption means the beginning of the end of traditional higher education.

Posted by Curmudgeon | Report as abusive
 

Curmudgeon, that isn’t going to take hold until students graduate high school with decent skills. Once a student has a solid foundation, he can self-study or profit from online courses.

Ultimately I see online education as a supplement to traditional education rather than a replacement. The traditional system is still appropriate for at least a quarter of our students, including anybody seeking advanced degrees. I do agree that attempting to shoehorn another 25% of the population into the traditional system (as we have been doing) is perhaps a poor approach.

Posted by TFF | Report as abusive
 

Third-level degrees are increasingly about status signalling, as information technology democratizes the learning aspect, making it abundant. The prices will rise until the degrees are scarce again.

Posted by BarryKelly | Report as abusive
 

TFF, I think online education is going to quickly expand to become much more interactive and personal, potentially rivalling in-person education. Think Second Life. You go to college virtually, your avatar interacting with others on an ongoing virtual world that includes classes, sporting events, and socialization. I think current trends in society support this; it may be much more important for our youth today to be able to interact online than it is in person.

Far-fetched? Possibly, but I wouldn’t bet against it. It rather reminds me of some of social implications described by Asimov decades ago in his Robot novels.

Posted by Curmudgeon | Report as abusive
 

Curmudgeon, we might end up there EVENTUALLY, but I don’t think that is feasible in the immediate future.

At its heart, learning is necessarily interactive and personal. As long as the traditional setting offers greater interaction and more personalized attention than online courses, it will hold its primacy. That may (should?) change some day, but we aren’t there yet. Perhaps my next career step will be helping to make that happen.

The ultimate goal is to create “self-directed learners” who seek and apply knowledge to address problems at hand. Almost none of my understanding of economics or investing comes from traditional coursework. Nor does most of my knowledge of history, statistics, physics, gardening, or a dozen other topics. Nevertheless, all of the above rests on a foundation of skills that was built in high school and college. I would not be where I am today without that foundation.

Finally, don’t dismiss “status signaling” too lightly. When I was younger, my degrees signaled to employers a high mathematical aptitude and a strong work ethic. Because of that I have never lacked for job offers.

If you had a daughter with exceptional academic performance in science and dreams of becoming a doctor, would you counsel her to attend the local community college? Online courses? A third-tier state university where half the student body is enrolled in remedial courses? Or would you shoot for Stanford? Which would offer her the best chance of acceptance into medical school?

For that reason, the traditional system will remain with us for a while longer.

Posted by TFF | Report as abusive
 

Feldman and Archibald break up their affordability measurements by income percentile in their working paper, which makes the whole thing more interesting.

http://news.yahoo.com/s/yblog_thelookout  /20101117/us_yblog_thelookout/economist s-what-college-cost-crisis

Posted by LizGoodwin | Report as abusive
 

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