All Commentary
Thursday, February 2, 2006

Other People's Money Poisons Higher Education

by George C. Leef

George Leef is the book review editor of The Freeman.

Supporters of the statist quo usually recoil in anguish from the idea of deregulation. They can be counted on to try to discredit it at almost every turn. A recent article in the Chronicle of Higher Education does just that.

In The Lessons of Deregulation (January 20), Gordon Davies, director of the National Collaborative for Postsecondary Education Policy, argues that the United States should not copy the deregulation of higher education that has occurred in New Zealand, calling it market experiment gone bad. That phrase caught my attention; in my view, true market experiments that go bad are rarer than alligators in the Yukon. So what was going on?

The market experiment, Davies notes, was New Zealand's policy, beginning in 1989, of allowing a proliferation of postsecondary educational institutions, only some of which grant degrees, to tap into . . . state funding. The idea was to encourage greater consumer choice. The result, of course, was an explosion of sub-degree programs. In just a few years government grants to such programs went from half of what was provided to degree-granting institutions to parity.

As Davies points out, many if not all of the sub-degree (or certificate) programs are flimsy academically. Davies provides a number of excellent examples, including funding for Maori singalong courses and programs in golf studies. One polytechnic institute scammed more than $9 million for a course that consisted of nothing more than sending students a CD for them to study at home. Davies concludes that this policy of deregulation has been enormously wasteful, writing, [T]he money in New Zealand is now spread out over so many institutions and so many programs of questionable value that support for important but high-cost programs — like those in medicine, computer science, and engineering — is unrealistically low.

Undoubtedly, a lot of higher-education money is being wasted in New Zealand, but it's an abuse of English to call this policy a market experiment. Yes, free markets maximize choice for consumers, but another condition is necessary: that consumers spend their own money. You don't really have a free market where the government puts money in people's pockets and then says, You're free to spend it here, here, and here.

Davies worries that similar market experiments might spread to the United States. He notes that in several states, policymakers are asking for greater autonomy for public universities. Colorado, South Carolina, Virginia, Washington, West Virginia, and others have been lured by the call of the open market, he says. Better not allow it, he cautions, at least not without making sure that the state keeps enough control to fulfill a public agenda that meets the needs of [its] residents. Davies proceeds to praise Virginia because it ties deregulation of its institutions to commitments to provide greater access regardless of student income, to improve retention and completion rates, to increase research support, to create partnerships with schools, and to be actively involved in economic development.

When politicians write legislation that aims at pleasant-sounding but vague objectives, they hardly ever accomplish anything. Greater access means trying to get a few more marginal students into college rather than into the job market on the assumption that more formal education is always better — but it isn't. Improving retention and completion means efforts to keep weak students from dropping out — on the same assumption. The result is primarily to increase the number of college graduates with poor skills who will end up taking high school jobs. (That trend is documented in Who's Not Working and Why by economists Frederick Pryor and David Schaffer, who lament the low standards of American higher education.) Putting more money into research sounds good, but a lot of the research that goes on in our universities is of negligible value. Partnership with schools (government schools, that is) won't do anything to overcome the inherent flaws in government-run education. And it is mission creep to call on universities to become involved in economic development, which, if needed, will happen spontaneously.

More to the point, though, even if some or all of those policy notions worked, they would not solve the problem of higher-education dollars being drained away into academically feeble programs and courses. That started happening long before anyone was talking about deregulation. American colleges and universities have majors like golf-course and casino management — perfectly useful fields in which on-the-job training has always been adequate. They also have had lots of identity programs — Women's Studies, African-American Studies, Latina/o Studies, and so on — that don’t transmit a body of knowledge to students, but attempt to engender certain attitudes of resentment. And they have numerous vapid courses on pop culture. Just as in New Zealand great amounts of money are spent on the equivalent of educational junk food. Why?

Other People's Money

As Milton Friedman says, 'No one spends other people's money as carefully as he spends his own. When it comes to education, students (and parents) are largely spending taxpayer money. Davies correctly observes that students are not wise decision-makers: Too many naive young people will opt for the offer of a free cellphone or for a 'fun' program like surfing rather than select the education that they truly need. That's undoubtedly true, and all the more reason not to put young people in a position to squander other people's money.

The recent National Assessment of Adult Literacy shows that despite the prodigious sums lavished on education, we have a startling low level of literacy in this country, even among people with college degrees. If parents, students, and other interested parties were putting up their own money, they would take far more care than they do now to assure that it wasn’t being wasted on educational cotton candy. Because education is mostly paid for by government, however, many students drag out their years of formal schooling, often accomplishing less in 16 years than people a century ago did in eight.

If we are serious about the waste of education dollars, we ought to focus our attention on the real problem — government funding. There is nothing wrong with greater consumer choice in higher education, as long as the people who make the choices are spending their own money.