Kevin Carey Gives the Right Diagnosis; I’m Less Sure About the Prescription

In  piece for the New Republic that I missed when it came out, Kevin Carey provides a compelling diagnosis of the cost problem in higher education that’s worth quoting at length:

[H]ighly-profitable lower division courses in common subjects like Economics, Calculus, and Psychology have similar curricula at most colleges and rely on many of the same nationally-marketed textbooks. They are often taught by people with no formal training in teaching. These courses are, in the education context, commodities….

Non-profit colleges don’t pay taxes, even when they have billions of dollars in the bank. People can use their publicly-financed college vouchers—and, increasingly, claim lucrative tax credits—for private college tuition. Because nobody really knows which colleges provide the best education, consumers have been trained to think of colleges like a luxury good: The best are the most expensive, by definition.

Non-profit colleges also don’t have shareholders demanding that they maximize the difference between revenues and expenses. Instead, they’re run by administrators and faculty who are most interested in competing for status with other colleges, which is determined by the size, expense, and ornateness of the academic greenhouses in which basic research and scholarship are produced.

For-profit colleges, on the other hand, do have shareholders, and the for-profit sector has expanded rapidly in recent years. But most have made the very rational decision to get in on the subsidy scam….

In other words, everyone currently in the four-year higher education business has a host of strong incentives to raise prices and hardly any incentives to lower them. Unsurprisingly, prices often go up and almost never go down. In the long run, this will badly undermine the legitimacy of higher education and weaken the case for public subsidization. College will become a private good affordable only to the minority subset of the population that can afford it. America’s aggregate level of human capital will suffer and our competitive position relative to other nations will decline. According to the OECD, many other industrialized countries are already increasing their levels of college attainment faster than we are.

Colleges have a strong collective interest in preventing this from happening. But each college has a strong individual interest in mainlining student tuition hikes for as long as they can. After all, if only rich people can afford to attend your college, that means you have a selective-admissions college full of rich people—which is what most colleges want to be. It’s mathematically impossible for all colleges to win this game, but they all think they can be among the winners. And the people running them today are concluding, correctly, that they’ll likely be long gone before the day of reckoning comes.

All of which is to say that college tuition addiction, like any serious dependency, can’t be cured by gentle moral exhortation. College won’t kick the habit of raising prices until the things they care about—money and reputation—are seriously threatened by competitors. Therefore, federal policymakers should help create those competitors by helping establish many brand-new colleges and universities.

I think he goes a little too far in ascribing a particularly selfish and short-sighted mindset to college administration leadership, but that’s really irrelevant to his argument. At its heart, he is claiming that we have a tragedy of the commons situation. As long as you assume that the individuals making the decisions are rational economic actors, then their personal attitudes don’t really matter. And I think he’s right about the fundamental dynamic.

His answer, which he saw echoed (or at least hinted at) a few weeks later in President Obama’s State of the Union address, is to use the power of Federal Pell Grants to do an end run around existing accreditation processes, unbundle the degree, and empower non-traditional providers to compete. He writes in the original article:

Congress and the Obama administration should create a new policy framework under which organizations can become officially recognized providers of higher education. Note, I do not say “officially recognized colleges or universities.” That’s because one of the things that makes college so expensive is that colleges (and the college experience these institutions provide) are expensive and currently people can only receive government-subsidized higher education services from colleges. Under the new system, any provider could receive payment via Pell grants, federal loans, or other current and imagined federal aid systems if they agree to a few baseline conditions.

First, they would be subject to strict price regulation. They would be free to offer courses for less than the maximum allowable amount per credit, but not more. Second, they would have to be extremely transparent about quality. They would be required to provide public information about how much their students learn, and have their access to federal aid rescinded if students are not learning enough [emphasis added].

These new providers would not have to be approved by independent accrediting bodies run by existing colleges and universities, as recipients of federal aid are today. In fact, they wouldn’t have to be colleges at all. InsideHigherEd recently reported that a pair of well-known Stanford professors are currently teaching an Artificial Intelligence course to about 200 Stanford students—and more than twenty thousand students around the world, online. The non-Stanford students won’t receive credits from Stanford, but they will receive official documentation from the professors as to how they scored on course tests and their overall rank. Under this new system, those professors would be free to set up their own business teaching Artificial Intelligence over the Internet, and students would be free to pay them with federal aid. Other providers might take advantage of the fast-growing body of open educational resources—free online courses, videos, lectures, and syllabi—and add value primarily through mentoring, designing course sequences, and assessing learning.

Students, of course, won’t want to pay for these courses if they can’t receive college credit that can be translated into a degree. So as part of the new system, any existing colleges that want to continue receiving federal financial aid will be required to accept any credits granted by participants in the new system in transfer. Because these new providers will have the imprimatur of United States government approval, they will be able to compete for students who want degrees backed by sufficient reputation. And because they will be inexpensive and attached to verifiable data about how much students are learning, they will make a compelling value proposition when competing with traditional colleges that have no such data, charge more money, and are weighed down by legacy expenses and change-resistant cultures [emphasis added].

I like the general idea of opening up opportunities for new entrants and changing the financial dynamic to break the tragedy of the commons vicious cycle, but there’s a bit of magical thinking regarding the verification of quality. How would we do that? What would it look like? Frankly, we’re not very good at verifying the quality of even traditional programs. There’s a certain amount of social capital that these institutions earn through their long histories, reputations and, above all, their alumni. As Kelly points out, this system doesn’t work very well. But dismantling it without a clear sense of what would replace it is dangerous, and I see no indication that he (or anybody else) has good ideas about quality verification in an unbundled system. I’m not throwing up my hands and giving up on that question or saying that it should be an excuse to justify the status quo. But I don’t think we should ignore it either.

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About Michael Feldstein

Michael Feldstein is co-Publisher of e-Literate, co-Producer of e-Literate TV, and Partner in MindWires Consulting. For more information, see his profile page.
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6 Responses to Kevin Carey Gives the Right Diagnosis; I’m Less Sure About the Prescription

  1. Fred M Beshears says:

    The professors who develop a MOOC do have an indirect financial incentive if they have also authored a commercial textbook that covers the same material as the MOOC. So, even if students can take the MOOC for free (i.e. without paying for the commercial textbook) there may well be enough students who do buy the textbook to make it worthwhile for the professor teaching the MOOC.

    I believe that there are some schools (e.g. Antioch) that are establishing ancilary services that support students taking MOOCs and may also certify (and give college credit to) students who successfully complete a MOOC. These schools could provide facilities where students could take proctored exams, for example. And, they could provide other facilities and services such as rooms where students could meet in small study groups. (By the way, having small study groups of students watch videos of lectures while they work on problem sets and study guestions is a very old idea. It goes all the way back to the early seventies when Stanford introduced the idea of Tutored Video Instruction.)

    Finally, these schools could identify the MOOCs that meet their criteria for being a viable course in their curriculum. In other words, these schools import the content of the online course much as they do now with textbooks. But, unlike a traditional course, they don’t have to pay a faculty member to “teach” the course in the traditional fashion.

    State funded schools will probably come under pressure from state governments to import MOOCs and to let students transfer in more credits from MOOCs and standardized courses taken elsewhere.

    Also, both the federal government and state governments will start funding the development of open online textbooks that can serve as the basis for MOOCs and as a substitute for commercial textbooks.

    So, these three ideas – (1) Tutored Video Instruction, (2) open online textbooks, and (3) MOOCs – can all be used to drive down the cost of instruction. I’ve written about all three in my blog – see for example

    From Tutored Video Instruction, to Online Textbooks, to MOOCs
    http://innovationmemes.blogspot.com/2013/01/from-tutored-video-instruction-to-moocs.html

    Two ways to reduce the cost of education.
    http://innovationmemes.blogspot.com/2013/01/two-ways-to-reduce-cost-of-education.html

  2. You’re right about magical thinking in relation to quality, especially in the current situation where reputation of an institution is being used as an entirely magical proxy for the experience of learning in a course delivered by someone employed at that institution. The variability of student survey feedback, even of the same material delivered by the same person in two different years, shows that there are multiple factors that contribute to the quality of the experience of studying a course, that we barely understand, let alone control.

    So developing standards for the measurable features of unbundled educational services and products is achievable provided we accept that these standards can’t stand in for the whole experience of being a learner. Perhaps the place to start is probably with the way that we manage research: international expert peer review. Higher education is already comfortable with the idea of “college of experts” models of disciplinary oversight — editorial boards, conference committees, all these sorts of operations pursue the ideal that standards can be articulated, and that people can come to understand them and apply them in the exercise of judgment.

    It’s all subjective, and it’s incomplete, but it might be a place to start. In online education, we certainly need something, as at the moment what we have instead of standards is horse-trading: “Professor X is at a top-tier institution and therefore the opportunity to hang-out in a stadium sized crowd while Professor X lectures is guaranteed to be a top quality learning experience. Sign up now to be part of this world-record enrolment experience!” It would be great to develop a more sophisticated metric, capable of concluding sometimes that: “Adjunct Z holds a PhD on this very topic, thinks about it night and day, is actually the world expert on it, and the chance to get together with Adjunct Z in a small group of like-minded fellow travellers to discuss this research will be life-changing for you. Go for it.”

  3. Carey typically slides his bias casually into the conversation so subtly readers don’t know they’ve suddenly been thrust into dog-eat-dog capitalism. So too here.

    He writes, ” College won’t kick the habit of raising prices until the things they care about—money and reputation—are seriously threatened by competitors. Therefore, federal policymakers should help create those competitors by helping establish many brand-new colleges and universities.”

    Of course, the insertion of the phrase “by competitors” is completely unnecessary. Simply cutting the funding that enables tuition increases in public education will do the trick. The addition of “by competitors” is Carey’s way of inserting his own prejudice into what otherwise appears to be a logical argument.

    Therefore, he says, “federal policymakers should help create those competitors by helping establish many brand-new colleges and universities.” Or as you summarize, ” use the power of Federal Pell Grants to do an end run around existing accreditation processes, unbundle the degree, and empower non-traditional providers to compete.”

    In other words, Carey’s solution is to privatize higher education, and (I’m sure he enjoyed this part) having government create the very corporate entities that would effectively end public education.

    i think privatizing the existing system would be an absurd solution, and would lead to more scarcity and even higher prices (these are, after all, the typical results of privatization). Costs would be much greater because of the need for regulation and oversight (not to mention advertising and shareholder profits).

    I agree that universities have done little, if anything, to slow increasing tuitions, and have no particular motive to do so. But this need not result in an end to public education, just a change in the way we provide public education.

  4. Stephen,

    You state:
    “In other words, Carey’s solution is to privatize higher education, and … have government create the very corporate entities that would effectively end public education.”

    As I read his article, he’s saying that the federal government should get into the business of certifying specific courses that are offered by providers that could be private, non-profit, or public. And, he’s saying that existing schools need to accept transfer credits from these courses if they want to continue to receive Pell Grants etc. from the federal government.

    In my view, this will not put an end to public education, but it will shake up public, non-profit, and for-profit schools by forcing them to price the non-rival parts of courses that are commodities (e.g. online recorded lectures and textbooks) as commodities.

    Here’s why I say this.

    While it’s true that Carey does explicit state: “Therefore, federal policymakers should help create those competitors by helping establish many brand-new colleges and universities.” he is not explicitly stating that ALL of the “brand-new colleges and universities” would have to be private for-profit institutions.

    Also, Carey does citizen existing private for-profit schools when he explicitly states: “For-profit colleges, on the other hand, do have shareholders, and the for-profit sector has expanded rapidly in recent years. But most have made the very rational decision to get in on the subsidy scam.”

    Furthermore, he goes on the critize public, non-profit, and for-profit schools when he explicitly states: “In other words, everyone currently in the four-year higher education business has a host of strong incentives to raise prices and hardly any incentives to lower them.”

    On the other hand, Carey does explicitly state:

    ‘That doesn’t mean the U.S. Department of Education should start running its own university system. It would do this badly. Instead, Congress and the Obama administration should create a new policy framework under which organizations can become officially recognized providers of higher education. Note, I do not say “officially recognized colleges or universities.” That’s because one of the things that makes college so expensive is that colleges (and the college experience these institutions provide) are expensive and currently people can only receive government-subsidized higher education services from colleges. Under the new system, any provider could receive payment via Pell grants, federal loans, or other current and imagined federal aid systems if they agree to a few baseline conditions.’

    And later, Carey explicitly states:
    “These new providers would not have to be approved by independent accrediting bodies run by existing colleges and universities, as recipients of federal aid are today. In fact, they wouldn’t have to be colleges at all.” In this paragraph, he goes on to give the AI MOOC from Stanford as an example of a provider that could, if it meets government standards, be one of the new providers of education.

    And finally, Carey explicity states:
    “Students, of course, wont want to pay for these courses [government certified MOOCs, for example] if they can’t receive college credit that can be translated into a degree. So as part of the new system, any existing colleges that want to continue receiving federal financial aid will be required to accept any credits granted by participants in the new system in transfer.”

    So, when I read Carey’s article, I did not get the impression that he was suggesting that we totally “privatize higher education” and put an “end to public education” by replacing public schools with for-profit schools.

    Instead, he’s saying that the federal government should get into the business of certifying specific courses that are offered by providers that could be private, non-profit, or public. And, he’s saying that existing schools need to accept transfer credits from these courses if they want to continue to receive Pell Grants etc. from the federal government.

    In my view, this will not put an end to public education, but it will shake up public, non-profit, and for-profit schools by forcing them to price the non-rival parts of courses that are commodities (e.g. online recorded lectures and textbooks) as commodities.

  5. jrboyd says:

    While the notion behind the statement: “the federal government should get into the business of certifying specific courses” seems like a great equalizer such that consumers can confidently vote with their feet (something that is woefully absent today among public providers), the paralytic and politicized nature of our federal (and state) government makes me wonder what the glorious downside to such a certification process would be.
    For example, if a sociology course used Planned Parenthood as a resource, would they be removed from the “approved” roster of certified courses derived from a conservative department of education? I’m not saying let the perfect be the enemy of the good, but these kinds of discussions are certainly happening at the state level with respect to what’s happening in K-12, in spite of claims for the sanctity of “local control”.

  6. jrboyd,

    As I read Carey’s article, I do not see him explicitly stating that schools can ONLY require courses that have been certified, or that students HAVE to take the courses that have been certified, or that students can ONLY take the courses that have been certified.

    My guess is that their would be a political firestorm from both the left and the right if the federal government tried to assert total control over the entire curriculum of all schools that accept Pell grants etc. So, I don’t think this scenario is very likely.