Mr. North is Secretary of Chalcedon, Inc., a nonprofit Christian educational organization, and a Ph. D. candidate at the University of California, Advocates of the free market as a tool for the efficient allocation of scarce resources have long been critical of the way in which education is financed in the
Advocates of the free market as a tool for the efficient allocation of scarce resources have long been critical of the way in which education is financed in the
This realization, however, has been a distinctly minority revelation. The message has not come to the institutions of higher learning in this country. They have gone on as before, tinkering occasionally with the curriculum, adding a handful of courses like Black Studies or Chicano Studies, but generally proceeding in a "business as usual" fashion. Nevertheless, the violation of supply and demand that is fundamental in any system of subsidized education has now resulted in something wholly unforeseen by the bulk of American educators: the perennial shortage of teachers came to an end, quite abruptly, in 1968. The shock waves of that event are only now registering on the bureaucratic structure of American higher education.
The Glut of the Degree Holders
For how many years were Americans subjected to the perpetual hand-wringing of professional educators over the teacher shortage? How many news releases from the National Education Association were printed, without any criticism, by the public news media? It was one of the favorite themes of nearly everyone associated in any way with public educational institutions. Yet the myth was shattered in one academic year, 1968-69.2 The glut of teachers at all levels, from kindergarten to the graduate school, appeared almost overnight. The teacher-job "gap" simply was swallowed up in the outpouring of graduates in June of 1968; only in "special education"—the euphemism for the handicapped, the culturally deprived, and the retarded—is there a comparable gap, and the openings there are being depleted by falling school revenues.
This glut is not strictly an American phenomenon. It is as serious in the British Isles, perhaps worse. The British teaching certificate is just that, a license to teach; it is not easily transferred to any other occupation. The English have overbuilt their institutions of higher education, and the graduates are now reaping the whirlwind.
Previously sacrosanct fields like physics are now oversupplied. The post-Sputnik era saw a seemingly endless barrage of propaganda in favor of expanding our pool of available scientific talent. The "science fairs" in the high schools, the Federal scholarships, the televised miracles of space travel all combined to convince American students that the ticket to guaranteed security was the engineering degree and the Ph.D. in physics. Easy Street has once again turned into a dead end, as too many people crowded down its narrow path. Federal grants from such agencies as NASA have fallen dramatically; Federal loans to students have begun to dry up. Budget cutting has removed the fat from many Federal science programs, to the dismay of those scientists who have an ideological commitment to state-financed research.4
The extent of the glut in physics can be seen through a very specific case. Heidelberg College in Ohio last year had an opening for a teacher in physics. It received a total of 361 applications. Tiny Dayton High School, in Dayton, Texas, received applications from 15 Ph.D.’s in physics, yet the school has only 455 students, and it offers only a single course.5 Industry has been less and less willing to interview Ph.D.’s due to the highly specialized, unflexible nature of Ph.D. training. The cut-backs in aerospace have hurt the market for these trained specialists. An astounding 40 per cent of the 1969 graduates in physics were on post-doctoral fellowships in 1970.°
In the Social Sciences
The situation in the humanities and social sciences is even worse. A fantastic 1,000 applicants applied for eight positions in the English Department of the University of Massachusetts.? A total of 29,000 Ph.D.’s were turned out in 1969-70, perhaps double the number needed for college teaching posts. The Chronicle of Higher Education, a newspaper for college administrators, ran a series of articles on the crisis in late spring and early summer of 1970 dealing with the oversupply of teachers. It reported that the Cooperative College Registry, a nonprofit placement service for some 300 Protestant colleges, announced that in mid-May there were still 45 per cent of its 9,500 applicants without offers. Some 55 per cent of the applicants had the Ph.D.; prior to 1970, 45 per cent had been the maximum.
The extent of the crisis may be estimated by the fact that the Cooperative College Register is the "last chance" employer registry. The colleges tend to be small, low-prestige schools that can afford only below-average salaries. This normally makes them more flexible, however, since pay scales are more responsive to the conditions of supply and demand. A glut here indicates a crisis unrivaled since the mid-1950′s.
Causes of the Crisis
A standard explanation offered by the educational establishment is that there really is no oversupply of teachers, and there still is a shortage. However, the demand has dried up, a direct consequence of short-sighted legislators and angry citizens who keep rejecting bond issues.8 In other words, the failure of the educational market to clear itself of all prospective teachers is in no way related to the excessive zeal of academic departments in expanding course offerings and graduate fellowships; it is due to the tight-fisted taxpayers who refuse to spend additional billions on educational facilities, programs, and salaries.
This makes for good propaganda; economically, it skirts the real issue. Naturally, there is a limited supply of teachers. There is a limited supply of automobiles, televisions, diamonds, clean air, pure water, tortilla chips, and anything else that commands a price. We live in a world of scarcity. A scarce good, by definition, is one for which there is greater demand than supply at zero price. Imbalances in any market can be blamed on high or low demand, just as they can be blamed on high or low supply. The problem arises when prices are not flexible, thus creating permanent imbalances. If the phrase, "shortage of teachers," is to have any meaning at all, it must be qualified by the phrase, "at a particular wage level." There is no question about the fact that at present high wage levels, there is nothing resembling an under-supply of teachers. There is no question that there is an imbalance of supply and demand at present wage levels.
Educators need to ask themselves two crucial questions. First, why are wages so inflexible downward? Second, why were those whose task it is to forecast the needs in education so shortsighted? How did it happen, for example, that in 1963 the estimated need for new teachers at the college level in history was set at 390 for 1969-70, whereas the actual need turned out to be 500, and the actual supply was 881?9 Why did so few graduate advisors take seriously the estimates presented by Clark Kerr, then President of the University of California (1966), that only two-thirds of the 1971 Ph.D.’s could be employed in the colleges?"
Minimum Wage Floors
About 75 per cent of those attending institutions of higher learning are in tax-supported public schools. By their very financing structure, these institutions are notoriously unresponsive to market conditions of supply and demand. For many decades, legislatures have met the basic budget demands of the colleges in the United States, and this has tended to insolate the schools and scholars from external economic realities. They are not paid to forecast market conditions in the future, and they do not concern themselves with such matters, at least not at the graduate advisory level. The private schools, supported by foundations and government research grants, are frequently as lax as the public schools. They are, in every sense of the word, guilds.
Historically, guilds have resisted price and wage competition. They speak of themselves as "quality-oriented," which implies an elitist perspective, since it is price competition which has always characterized production for a mass market." Educational institutions have been caught in a dilemma: they are supposed to maintain quality without compromise, yet supply the needs of mass education. Schools are to be simultaneously democratic (supported by tax funds) and elitist (preserving quality, ignoring "crass" economic affairs). Higher education in America is institutionally schizophrenic.
A competitive market institution would respond rapidly to new conditions of oversupply of a factor of production by bidding down the price of the good. That is what faculties should do in the face of the Ph.D. glut. They should drop salaries at the starting level. It would enable schools to hire more people, and it would make very plain to prospective Ph.D. students just what the economic facts are in the employment market. But that is not the response of faculties. Faculties like high salaries for all those employed; it supposedly is a sign of institutional prestige to pay high wages, and thus prestigious to be employed by such institutions.
Faculties also have the ultimate job security: tenure. This protects those who have tenure from being fired. Thus, any drop in demand must be exercised at the level of the new professors, fresh out of graduate school. But if their salaries are lowered disproportionally, considerable institutional conflict may result. It may even lead to the decision by the administration to lower the salaries of those men whom it cannot dismiss. There is a built-in preference, therefore, for high wages and low competition on a semi closed market. It is a guild-like attitude. Those outside the system have a hard time breaking in. Their chief economic weapon, namely, their willingness to take a lower wage, is not easily exercised.
This is especially true in state schools which have fixed wage floors set by the legislature or local junior college school district. The California junior colleges are the prime examples. Like the high schools from which they recruit their teachers, the junior colleges pay men in terms of formal educational achievement: so many units beyond the B.A. yields so much extra pay. So much experience yields so much extra pay. The new Ph.D. has to be paid, in 1971, about $13,000; there is no bargaining possible. Few districts want to pay that much to a man who (1) may quit and go to a four-year college, (2) may embarrass a local administrator who holds only an M.A. in education, (3) may not teach the junior college’s substandard students as well as a man who has taught high school for ten years. The Ph.D. is effectively locked out of junior college employment (unless he started as an M.A. and earned his degree while employed). There is simply no wage flexibility. As a result, junior college districts are permitting an opportunity to "upgrade" their faculties at less cost than before to slip through their administrative fingers.
Tenure supposedly protects the professor from being fired for expressing opinions abhorrent to administrators, legislators, or local citizens (including students). This was a keystone in Prussia, where state-supported higher education was pioneered in the nineteenth century. It makes very little sense today. As Robert Nisbet has argued in his iconoclastic and reasonable essay on our Permanent Professors, no one is fired for mental or moral incompetence any longer, the two chief ways of dismissing tenured men. The exceptional mobility of modern teachers removes any serious threat to academic freedom, since institutions are varied enough to let men find a platform to teach almost anything. The very guild structure promotes a basic uniformity of methodology today, insuring general agreement within most academic departments—or so we found until the mid-1960′s. Finally, Nisbet argues, if academic freedom is really the issue, why limit it? Why not let junior members have it? "On what logical grounds, then, do we claim exemption for age and rank, in certain respects the most feudal of all feudal qualities?"12
Tenure, far from protecting men in their expression of controversial opinions, has enabled men to express no opinions at all. Teaching has become lethargic as men pursue their academic careers in the academic journals (100,000 in the world today13) and their annual meetings. Tenure protects the man without the flair for teaching, the man who has no controversial opinions to distinguish his lectures, the man whose very blandness insures his protection from "academic witch-hunters," but who has never learned to compete in the world of student education. Tenure has turned the university over to the drone, the pedant, the writer of over footnoted, mindless articles. It might even be true to say that the spirited junior teacher with controversial opinions has more to fear from his tenured, spineless, drab colleagues than from the outside public. And drones, it should be noted, are not known for their flexibility. Wage scales reflect this, especially when conditions dictate a downward revision. Institutional inflexibility rewards the inflexible. Nonmarket financing keeps the structures inflexible.
The Subsidized Product
The discussion above focused on the implications of the demand side of the equation. We must now turn to the supply side of the Ph.D. equation. Why are there so many of them being produced?
Many reasons exist. A primary factor was the existence, until 1968, of the graduate school military draft deferment. This functioned as an indirect subsidy to graduate departments. "Canada" was as close as the nearest university. Another factor is the tendency of all bureaucracies to expand to the limits of their fiscal capabilities. For example, academic departments in most state schools are funded in terms of student enrollment; this figure establishes the so-called FTE rating: Full Time Employees. In California, a fixed formula is used. A 28-students-to-one-faculty-member ratio operates, with lower division students rated 1, upper division students at 1.5, Master’s Degree candidates at 2.5, and Ph.D. candidates at the maximum weighting, 3.5. As David Breneman comments: "Note that each advanced doctoral student enrolled brings the campus 1/8 FTE faculty position."14 He adds that no strict mechanical relationship exists at the departmental level, but faculty appointments relate closely to weighted student enrollments. Furthermore, once the number of faculty appointments is established, "other resources such as office space and nonacademic personnel can be functionally related to the faculty members."15 It pays a department to expand graduate programs.
This does not mean that it pays departments to actually award a large percentage of degrees. On the contrary, departments must limit such awards to those students who will produce the greatest prestige for the department in the academic community. Also, some science departments must provide access to sophisticated experimental equipment to Ph.D. students, so some attempt will be made to flunk out inferior students at an earlier stage. This is not true, however, in the humanities. Breneman’s comments are illuminating:
From the perspective of the French faculty, then, the graduate student must be viewed as a very valuable member of the department’s economy. Not only does the graduate student teach the dull introductory courses, but he is a source of student credit hours and demand for advanced instruction. Departmental technology is such that having graduate students in residence for several years is cost-less to the faculty, and not without certain advantages…. Consequently, in this type of department faculty members have no incentives to make rapid decisions to terminate Ph.D. aspirants.
The taxpayers, of course, bear the major costs of this decision. The student may drop out for many reasons, but the longer he stays in, the closer he believes himself to be at the pay-off point, the granting of the degree. In the humanities, the degree is all-important, since it is the union card for college level teaching, and industry has little need for highly specialized humanities students. Thus, departments get bloated with graduate students, and while the percentage of those who are awarded the degree may stay low, the absolute number of awards increases. Jobs open up in other universities which are also expanding their graduate programs, thus creating demand for more Ph.D.’s. The entire structure is geared to the growth of graduate enrollments.
Colleges gain greater prestige by becoming full universities. If they do, they can gain access to Federal research funds, and these have expanded exponentially since 1950 (the cut-off came in 1968). Fellowships and teaching assistantships were multiplied, while loan programs at low interest were made available to those students who did not become part-time employees of departments. These loans, especially under the National Defense [the magic budgetary word in the mid-1950's1 Education Act, could be canceled after five years of teaching of the recipient.
Graduate students in the humanities do not generally understand economics. They are not so aware of the employment situation, and as Breneman shows, departments are often rewarded by keeping their students in the dark on this issue, thus encouraging them to stay in the program. Students without the Ph.D. have few college teaching employment opportunities, so the opportunity costs of staying in the program are lower than, say, an engineer who can take his M.A. and get a good job in industry (again, before 1968). So the main concern for the student in a state university is the size of his state-supported subsidy: the number of campus jobs, the size of tuition costs, the availability of loans.
Graduate education is costly. Obviously, in terms of faculty members employed, the Ph.D. student is around three times as costly, especially if he does not assume any teaching load as an assistant. There is simply no way of estimating the cost per student per year, or so I am told by the university budget department. French students cost less than physics students in applied physics, and possibly more than those in theoretical physics or mathematics. But it is possible to estimate in a crude fashion that it costs, at an average, $3,500 per student in the University of California; graduate students are more costly, though by how much it is difficult to say. But tuition, until 1970, covered at best less than 10 per cent of this, or $300. For the graduate student, the subsidy would be even greater.
Subsidies Have Consequences
Subsidize the production of a scarce economic good, and there will be an oversupply of that good in terms of true market demand. That law is as applicable in the Ph.D. market as in that for surplus wheat or Army fatigues. This is the fundamental cause of the oversupply of Ph.D.'s: planning was not made in terms of an unhampered market but rather in terms of a government-subsidized market. Demand was cut off sharply by falling school budgets, but candidates for the Ph.D. degree are not rapidly responsive to this contraction: the other man may not be able to find a job, but each candidate believes that he will finish his dissertation and get the available position. A market geared to the dream of continual expansion has been cut short, and few persons within the structure are economically oriented enough to respond as rapidly as free market participants are forced to do. Like the civilized Eskimos who have forgotten how to build an igloo, those supplying Ph.D.'s have forgotten the hard realities of a market characterized by uncertainty. The result has been the teacher glut.
This market, like all markets, will eventually respond to the conditions of supply and demand. Departments will cut back on enrollments, especially as budgets are trimmed during a time of inflation. Fellowships will shrink in number. Federal grants to the scientists will not increase exponentially any longer. In time, teaching loads will be increased in many universities; wage inflexibility downward will be compensated for through these increased teaching responsibilities. But it is unlikely that these changes will come overnight. It is likely that the glut will continue for some time. New graduates will find it very difficult to break into their first jobs; professors' mobility will drop, the inevitable result of wage inflexibility. One rigidity creates others. Inflation will continue to eat away at teachers' salaries, thus bringing real wages into line with the conditions of supply and demand, and the oversupply of available talent will thwart attempts to unionize the profession—attempts which are on the increase now, as the Ph.D., in and of itself, no longer functions as an effective barrier to entry into the guild.
What we are witnessing is a major transformation of the function of the Ph.D. degree itself. Once a prestige indicator and a monopolistic grant to the holder, today it is faltering in both capacities. In the long run, this development may be for the best. The mystique of the Ph.D. has for too long been unchallenged. It has degenerated into little more than an official certification of intellectual drudgery. As E. Alden Dunham of the Carnegie Corporation of New York has written:
Every ill besetting our colleges and universities is related in one way or another to the Ph.D. degree—student alienation, irrelevant curricula, uninspired teaching, ironclad adherence to what may be outmoded traditions, absentee professors, extravagantly high costs of research and graduate education.... [It is] inappropriate for most college teaching jobs in this country, especially at the lower division level. Yet it remains the only respectable degree for college teachers as we move into an era of mass higher education. The percentage of Ph.D.’s on the faculty continues to be the index of quality. Our system makes no sense.17
For too long, to paraphrase a generally accepted slogan when it applies to the military, education has been in the hands of the educators. Monopoly grants continuing over long periods of time tend to degenerate into less efficient units of service or production. Yet the crisis of the teacher glut is only one aspect of a major crisis in education. It is essentially a crisis of faith; relativism has led to irrelevance on the campus. Few students—few bright students —are dazzled by the initials "Ph.D." after a name, at least not beyond the sophomore year. No one knows where the educational crisis will lead us by 1980, but this seems certain: any crisis in financing will produce radical changes in the operation of any bureaucracy, even the educational bureaucracy. Inflation will take its toll; so will the allocation problem with regard to the creation of Ph.D.’s. Radical students will strike the institution at a time of change, internal confusion, and financial contraction. Few schools that have been caught up in the race for academic prestige will escape the coming transformation.
There is cause for hope among people who have not clung to a philosophy of relativism as a means of academic salvation. If both public and private academic institutions that have embraced relativism are now reaping the whirlwind, parents and students are going to be looking for alternative educational structures. Prospective teachers may not be able to compete in terms of price or academic degree on most academic markets, but they can compete in terms of both price and ideological commitment on those academic markets that are more openly committed to a particular view of the world. Pluralistic education has been stifled for almost a century by a philosophy of neutral education grounded in relativism and enforced by the various academic guilds. But the fruits of that view of education are exploding on those campuses that have been the formulators of the creed. Columbia, Harvard, Berkeley have all been hit precisely because the very bright students have seen through the myth of educational neutrality. Pluralistic education can conceivably be the ultimate beneficiary of the institutional crisis which we face.
Since the vast majority of the people holding the Ph.D. and other higher degrees are not really committed to anything beyond the latest fad among the professorial guild, the serious man who holds a degree but who also holds a systematic philosophy of life now is in a position to distinguish himself from the hordes of other applicants for jobs. The savings in search costs that the Ph.D. once offered ("no non-Ph.D.’s need apply") no longer works in a glutted market. There is an oversupply of degree-holders, but not an oversupply of free market advocates holding the degree. If the swing away from the intellectually castrated philosophy of neutral education (the only kind legally permitted by state-financed schools) continues, there should be a new demand for men and women committed to a consistent view. Only with such a view can serious education that is content-oriented rather than mere technique-oriented, i.e., liberal education in the traditional meaning, be maintained. Only value-oriented teaching can pick up the institutional pieces. This should be the hope of those behind private educational institutions.
The Effect of Controls
There is one last consideration. The imposition of price and wage controls becomes more and more of a possibility. These controls have disastrous effects in the long run, but initially certain zones of the economy are favored.18 One of these, as Prof. Hans Sennholz has pointed out, is private education. As money continues to be printed by the state and the state’s central bank, it seeks markets. Controlled markets within the economy dry up, as capital and labor shift to the uncontrolled zones—collectors’ markets, luxury goods, entertainment, travel, and education. State-financed educational institutions are caught in the wage-price squeeze: legislatures and bond-voters are tight-fisted (as their purchasing power continues to decline). But the private schools reap at least an initial subsidy. State schools limit or close enrollments, but people have money to spend, and these funds find their way increasingly into educational outlets. We should expect to see the expansion of private education of all kinds: high schools, colleges, night schools, cultural institutions. A true opportunity for the establishment of truly universal, pluralistic education would make itself available. The shift away from the public educational monopoly that is already showing signs of life would be subsidized by the very imposition of statist controls.
In the last analysis, the educational system has become overly dependent upon the state and the necessary educational philosophy of all state-financed education, i.e., the philosophy of neutral education. Today we see the erosion of the monopolistic foundation of the professorial elite, as the overproduction of members continues —an overproduction financed through the taxation of the democratic masses. The masses are finally saying no with their funds. A glutted elite will feel the pinch, as only an elite which has never faced squarely the realities of supply and demand can feel an economic pinch. The facts of economic scarcity can no longer be avoided in the ivy-covered halls. And that very fact may herald a new day for the advocates of value-oriented education. Technocratic liberal arts departments are running out of funds.
John F. Kennedy
THE FREE MARKET is not only a more efficient decision maker than even the wisest central planning body, but even more important, the free market keeps economic power widely dispersed.
Quoted in the Wall Street Journal, October 3, 1962
1 Cf. Benjamin A. Rogge, "Financing Higher Education in the United States," New Individualist Review, IV (Summer, 1965); available also from the Center for Independent Education, Wichita. E. G. West, Education and the State (London: Institute for Economic Affairs, 1967). Roger A. Freeman, "Crisis in American Education," Christian Economics (Sept., 1970).
2 Milton Friedman, Capitalism and Freedom (University of Chicago Press, 1962), ch. 6; Robert L. Cunningham, "Education: Free and Public," New Individualist Review, III (Summer, 1963). Governor Reagan of California mentioned the possibility of instituting a voucher system as an experiment; this, however, was in a campaign speech. The Center for the Study of Public Policy, located in Cambridge, Mass., has recommended the establishment of a 5-8 year experiment of 12,000 elementary students; the plan would cost $6-8 million. This was the conclusion in the Office of Economic Opportunity-financed study, Education Vouchers.
3 Newsweek (June 29, 1970) reports that the first year in which a surplus existed was 1967-68. This was not manifest at the time, however; it took a year for the glut to register as a permanent phenomenon.
4 Cf. Michael D. Reagan, Science and the Federal Patron (New York: Oxford University Press, 1969), Reagan favors such patronage, but he shows the problems inherent in such a relationship. He also provides considerable economic data on the extent of the aid.
6 The Chronicle of Higher Education, IV (June 8, 1970), p. 8.
5 Time (June 29, 1970).
7 Time (June 29, 1970).
8 Cf. statements by Cleo Craig and H. R. Rouse of the Wilson Scholarship Foundation (whose Ford Foundation funds were recently cut off): Chronicle of Higher Education, IV (May 25, 1970), p. 7.
9 Chronicle (June 8, 1970), p. 1.
10 Kerr’s estimate was revealed at a meeting of California Club, the student advisory body in the University of California. He was simply reporting the data gleaned in a study which apparently was available to all college administrators.
11 Max Weber, General Economic History (New York: Collier,  1961), p. 230.
12 Robert A. Nisbet, "The Permanent Professors: A Modest Proposal," (1965) in Nisbet, Tradition and Revolt (New York: Random House, 1968), p. 241.
13 M. King Hubbert, "Are We Retrogressing in Science," Geological Society of America Bulletin, LXXIV (1963), p. 366.
14 David W. Breneman, An Economic Theory of Ph.D. Production: The Case at Berkeley, mimeographed, June, 1970, a study sponsored by the Ford Foundation, p. 49.
15 Ibid., p. 50.
16 Ibid., pp. 67-68.
17 Dunham, quoted in The Chronicle of Higher Education, IV (March 16, 1970), pp. 1, 5. Edmund Wilson, in his devastating essay, The Fruits of the M.L.A. [Modern Language Association] (New York Review of Books Publication, 1969), writes that we missed our chance to abolish the Ph.D. as a "German atrocity" during World War I.
18 Gary North, "Price-Wage Controls: Effects and Counter-Effects," Commercial and Financial Chronicle (Aug. 21, 1969).