Customer Reviews

Going Broke by Degree: Why College Costs Too Much

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Richard Vedder's collection and analysis of information regarding college costs and quality is an excellent exercise of statistical work. If, however, you're not familiar with stats, or just don't like them, you may want to find another book on the subject.

To simply forward Vedder's conclusion, the rising cost and dropping quality of college education is due to, ironically, alumnus donations and government subsidies, and lack of market stimuli (although higher education is protected from these for the sake of improving quality).

Although the use of tables, graphs, and other statistics is very pronounced- sometimes too easy to get lost in- there are occasions when there just isn't the specific number that would tie everything together. There is a point where Vedder is attempting to describe a regression line, and mistakenly describes a kind of logarithmic function, by using a percentage of a variable instead of a percentage of a constant (the constant, even if you notice it's missing there, doesn't appear to be anywhere else). It also seemed to illustrate a very important point, and it's regretable that the point is so hard to grasp.

This example is the worst I could find in the book. Such as it is, Vedder's book is good if you're interested or patient enough regarding the number-crunching; most of it is coherent and makes sense easily enough. His theories rest solidly on the evidence, and his perspective will resonate with those of you who believe the government is too wasteful and/or corrupt to be handling the schooling of the young.

Probably, the best use for this book will be as a source of numbers in debates concerning higher education, as Vedder goes to considerable length to crunch them for the reader.

Dr. Vedder's book and insights reaffirm the issue facing both our system of higher education and our state and local governments - how to pay for the growth of our post secondary education system and prepare students to become productive and qualified workers.

With less than 20% of college costs being covered by tutition, on average, in the U.S. and graduation rates at 4 year colleges (over a 6 year period) in the 50% range and at 2 year colleges (over a 3 year period) below 30%, it is hard to see how the public can continue to subsidize a system that fails to acknowledge its obligation to educate students, not build organizations and infrastructures that are uneconomic.

Unfortunately these issues were clearly oulined in 1998 in "Straight Talk About College Costs And Prices", Report Of The National Commission On the Cost Of Higher Education, January 21, 1998.

Where the Commission said:

"This Commission, therefore, finds itself in the discomfiting position of acknowledging that the nation's academic institutions, justly renowned for their ability to analyze practically every other major economic activity in the United States, have not devoted similar analytic attention to their own internal financial structures. Blessed, until recently, with sufficient resources that allowed questions about costs or internal cross-subsidies to be avoided, academic institutions now find themselves confronting hard questions about whether their spending patterns match their priorities and about how to communicate the choices they have made to the public"

Over the next several years this is a topic that will start to show how little our politicans understand about one our country's most prized assets, and also highlight the fact that our university professors and administrators care much more about their own quality of life than that of their proported customer, the students.

The market for college tuition suffers from the same problems as that for healthcare - the large impact of third-party payors (eg. government, scholarship discounts makes consumers far more indifferent regarding costs than they otherwise would be. Vedder also should have mentioned that comparing quality has also been difficult in both markets, and that suppliers are rewarded for their errors ("rework" in healthcare, increasing time to graduation due to lack of course availability). Other problems include admitting those unqualified, and high drop-out rates.

One problem with the book is that Vedder concentrates too much on tuition costs. Tuition hikes are a result of both increased costs and shifting funding sources - since the latter is extraneous to any issues of spending, it simply confuses the issue. Vedder's efforts would be more useful if he had instead focused on trends in inflation-adjusted costs/fte.

"Research" is often cited as the reason for increased college tuition - however, Vedder points out that much of it is trivial, and those undertaking it generally receive grants to offset the costs. Regardless, at some point, for example, the additional studies of eg. King Lear garner vanishingly small returns.

Vedder's alternatives to publicly funded (high-costs universities) include private institutions (Vedder cites the University of Phoenix (UofP)- however, subsequent reports have found that the UofP has very high dropout rates and questionable marketing practices), community colleges, company-administered examinations (eg. demonstrations of Oracle or Microsoft expertise), and providing aid to students instead of schools (would hopefully better reward institutions providing better attention to student needs - eg. course offerings, and could encourage graduation by forgiving a portion for those graduating).

It is difficult to make a case that the increased education spending has brought improved college instruction - Graduate Record Exam (GRE) results have declined slightly over the years, the proportion of classes taught by adjunct faculty and teaching assistants has increased, the school year has decreased (Vedder, however, did not indicate how much it has decreased), and the percent of students taking five or more years to graduate has increased.

Trends in spending allocation: Instruction: 39% in '76-'77 - 34% in '99-'00. Research: 18.4%, 22.4%. Total staff/100fte: 18.5% to 20.8%. Faculty/100fte: 7 to 7.6.

Faculty as a PerCent of Staff: 48% in 2 yr. institutions, vs. 28% in 4 yr. ('99-'00)

Teaching loads have declined from about 9 hours/semester at major research universities, 12 at medium-quality state/private, and 15 at somewhat lesser known. This is a MAJOR cost issue, however, and Vedder does not treat it in sufficient detail or with clarity.

Summarizing, "Going Broke by Degree" is an important start, but only a start. The problem is worse than Vedder portrays, and his conclusions do not stress enough the issue of declining productivity. Too much of the book is filled with arcane economic theory that clarifies little. Further, he does not address important side issues - the vast amounts wasted on students admitted without proper preparation or who quickly drop out, and those who graduate but then take jobs that do not require a college degree.

This is an interesting book, one that runs counter to, e.g., Ronald Ehrenberg's book (Tuition Rising) on the growth in university costs. Where Ehrenberg is largely accepting of `the way things are' in higher education and more prone to reforms at the margins, Vedder portrays himself as an `outsider' and a skeptic, questioning fundamental assumptions about the funding of higher education and offering striking, even radical alternatives.

His position is that of a gadfly, challenging received wisdom and commonly-accepted methods of proceeding. He is, however, a university professor (at Ohio University), not a real, raging outsider, and he is, like Ehrenberg, an economist. As an economist, he is fond of charts, graphs, data and evidence and his book is particularly useful for the information that it offers. For example, even when he juxtaposes for-profit education with not-for-profit education in ways that might make those who participate in the latter uncomfortable, he offers useful and informative material on, e.g., the University of Phoenix.

His principal concern is economic. Much of U.S. higher education is, in effect, being funded by third parties (the government, lending agencies, endowments . . . ) and individuals are far less likely to be sensitive to price when someone else is paying (or helping to pay) the bill. This is exacerbated by the fact that universities spend all their available money (more or less) and are not constrained by the need to yield profits. In economic terms, they lack fiscal discipline, a situation further exacerbated by their governance mechanisms.

Hence he poses big questions. Should we abolish tenure? Should we privatize all public education? Should we suspend all government support for higher education? Should we have single indirect-cost rates for all research universities, rates that would be lower than the current average? Should we move to a system of vouchers in which the government money should all go directly to students? Should the vouchers be portable across state lines (and include private institutions)?

His conclusions tend to be more moderate, since they are tempered by political and cultural realities. The information which he adduces, however, when he pursues his questions, is very useful and informative.

I would recommend that readers of Ehrenberg also read Vedder (and vice-versa). The two complement one another in interesting ways and both offer interesting material for consideration.

I found this book to be groundbreaking. I have not found other books that directly address the subject matter as this book does. It would be a plus if you have an understanding of Economics, but it is not completely necessary. I applaud Richard Vedder for shining light on this subject. I only hope he continues to further explore the subject of rising tuition and declining productivity in higher education. I would like to see proposed solutions too. Well done.