Needed: price cap-form of regulation

I’ve worked in regulated industries where there were incentives via limits on prices (e.g., price-caps). The goal was, to promote efficiency, by setting ceilings and goals, forcing firms to look inward to control costs.

Given the near-limitless demand for human services (e.g., education, medicine) — some limit on the upward amount of real price increases is required to prevent national bankruptcy.

For example, look at the percentage of GNP consumed by medicine in 1960 vs. 2005 — a percentage increase in the multiple-fold! The U.S. has the highest-performing medical teams in the world — that is why the Saudis travel here — it is also reflected in GNP consumed. Now, medical costs are crippling the U.S. industrial base.

Executive management in U.S. higher education talks a good game about cost control. Now — it is time to really produce significant, measureable results.

So some research departments are spun off. So some faculty actually have to teach — or leave. So money-losing majors are dumped. So some students are less coddled. So some non-academic areas are out-sourced. The purpose of a university isn’t to provide jobs — it is to produce qualified graduates at affordable prices.

R.A. Shaw, at 10:20 am EDT on July 18, 2006

The Second Draft

Higher education insiders on the Commission have revealed their clout and lust for more and more dollars. I used to believe that administrators could not control their budgets because they did not know how. I now believe that they simply do not care to and face the anger of the faculty.

Faculty depose presidents. Students and parents rarely if ever do.

Pat Leonard, A majhor step back, at 11:55 am EDT on July 18, 2006

Vague notions and platitudes

One major failure is to lump the criticisms of private institutions with those of public institutions. These two groups operate in relatively different worlds, particularly when addressing costs. Harvard University can afford to pay every cent of tution out of its own endowment, while Ohio University probably cannot survive without state funding and student tuition. Public universities have budgets that are probably ALL mandated as public information, while private universities’ budgets may be hidden. The critique of the cost of college is not on a level playing field, nor is it apparently well-informed:

Virtually NO academic department “turns a profit” outside of it’s mandate to teach, which means tuition. You want profits from tuition? Adjust the price to the demand. Do that, however, and the price will skyrocket even further than it has today or in the last 10 years... That, however, defeats quite a few arguments for communist price controls that I have read so far.

Of course, many students would rather not take Math or English composition, so such a “leaving things to market forces” would likewise play right into the other commission complaint that the structure of college curricula is a discombobulated mess, with a great deal of telling students they have some vague notion of “academic freedom” in selecting disconnected educational components to create what’s left of what used to be (excuse my not being PC today) a “liberal education.”

Feelings: As a pragmatic, I DON’T CARE about your feelings. When the commission piddles about with either ego stroking or mindless political whining, I can’t say that builds my respect for the group. Maybe it makes some idiot sitting on the sidelines happy, but it doesn’t win the war. I agree with Richard Vedder in saying that, so far, the commission report looks like political slop.

That said, a bit of advice:

* Avoid fuzzy notions and vague platitudes unless that is what you want in return.

* Create a rubric, setting clear standards and goals. What does “victory” look like? If you never know, you’ll never get there.

* A national educational agenda should consider international competition. Mostly I see a myopic focus on internal bickering — particularly of the political type.

* Know your audience. So far, the report reads like a cheap political statement designed to win votes, not a serious plan for future educational success. Political gamesmanship inherently sabotages success so that it can bank on the same issue again in the next election. I’m willing to bet that more people in your audience realize this than you would expect. So who is going to make these improvements? Private universities? The US DOE? Blanket statements not specifying responsibilities are easy to dismiss since everyone can assume that someone else can take care of it. Also, making ridiculous charges is likewise worthless. Let’s say we demand that a public university in New Orleans ought to just pay for the tuition of all students out of their endowment. Let’s say the reality is they don’t HAVE an endowment. What level of ignorant would we then assign to the commission? Responsibility, parsed out into it’s logical components, means it requires an ability to respond. There are a lot of unfunded mandates I keep reading from some of our more ignorant commentators. Where’s your data? Where’s your specific plan? Nothing. Nada. So anyone with knowledge about how the financing of higher education works will immediately recognize what you’re saying as hot air. Were you really focused on results, you would provide more of plan. Instead, you just whine. So my last bit of advice is this: If that’s all you can produce, do the rest of us a favor and shut up.

Oh, and those that think that communist price controls on tuition is the solution, you may want to consider what impact that sort of thinking had on the Soviet Union. Maybe you missed out on the last century of history, but I didn’t.

Advisor Ian, at 4:30 pm EDT on July 18, 2006

It will happen. But which way is better?

I tend to think, if nothing solid get out of the report, the for-profit institution will make the wave.

The current call for accountability in the higher ed, is people’s voice of rejecting the current higher ed. model. If the report can’t generate a right model, the society, the people will continue to push it to the right direction. It just take longer and may wasting more resources and may lost our competition edges.

When business learn from experiences that some for-profit institutions do produce the right people they need, they will hire them. Those institutions will market it and their cost saving nature in using ready made resources, non-elite instructors etc... would not matter. A succesful model will be duplicated. Not cost effective institutions( includeing non-for profit) will simply don’t have students.

The problem of waiting this to happen is the social cost to pay. Without good regulations, flaws are inevitable and it will take longer for those good institution to shine. It will also take much longer for the society to enjoy the fruits and it maybe too late to be competitive in the international world.

Duncan, at 11:50 am EDT on July 19, 2006