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Wednesday, December 22, 2010

Word of mouth is an important factor in sustaining the “image” of a college

This article in the Huffington Post is the kind of drivel that we hear too frequently on the cost of college.

The author, David Skorton, the President of Cornell University talks about the “net price” of college as being less than the sticker price. But if one adds the cost of all the subsidies (parent, government and donations) of at least $10,000 per student per year (in governmental subsidies alone) the “actual cost” of college today is actually much higher than the sticker price. The student may experience a lower net price but only because someone is picking up the rest of the tab.

This article never asks: 1) What in the heck are students actually studying today at college? 2) Why have we combined minor league football and college? Why not move minor league football outside of college like we have in professional baseball? 3) Why are we paying professors more for their esoteric “research” rather than their effectiveness in educating our youth? 4) Why do we have to invest so much in the ambiance of the campus (large park-like settings with resort dorms and meals that are fit for a cruise ship)?

College should be tough and we should have standardized tests that allow us to determine who is producing the most useful education for the dollar spent (this is called productivity).

Word of mouth is an important factor in keeping up the “image” of a college. So the author points to a recent study by the American Council on Education that says 89% of alumni reported that “their college experience had been worth it”. First, many of these grads have not paid for their education yet and so it is too early for them to experience buyer’s remorse. And more importantly, with what do these unemployed, deep-in-debt, Sociology majors have to compare their college experience? Once you drink the Kool-Aid, you are vested in getting the next poor schmuck to drink the Kool-aid as well. Do we really expect the recent grad to say: “I was an idiot, and my parents were morons to push me into attending six years of college to pursue my dream of an Ethnomusicology degree. I am working at Kentucky Fried Chicken right now but at least I can now better understand the rhythm and the melody of a hard working fast food operation.”

Skorton goes on to state: “The increasing emphasis on higher education in China, India and other emerging economies is testimony to the near-universal agreement that success in this world, not to mention national competitiveness, requires more, not less, higher education. Thus, we as a country need to expand, not contract, the availability of higher education and increase public investment in colleges and universities.” In other words, because others agree with our madness, do not give up the ship. And he insinuates that we need the existing college establishment to do this expanding.

The author states: “We can no longer avoid true, tough and thoroughgoing reviews of faculty productivity and quality, including after tenure is granted.” But how does tenure help provide a great education at a competitive price? If we move towards a market based system where we see what institutions and entrepreneurs transmit the most education for the dollar spent then tenure and public employee unions will be left in the dust.

And then Skorton goes on to opine: “Given our continuing uncertain economy, I call on my colleagues in higher education to reduce the rate of rise of our operating costs through focus, connectivity, accountability and administrative streamlining.” What do you mean reduce the rate of rise? How about cutting your costs at Cornell by 50% (tuition alone is now $39,450 for undergraduate nonresidents of New York)?

Skorton’s comments would be akin to the former CEOs of Braniff, Eastern, and PanAm airlines explaining: “We will be charging $1,000 per trip from Los Angeles to Las Vegas because the rate of inflation and the tenure agreements we have with our pilots have resulted in our costs going up at twice the rate of inflation.” And then expecting Southwest Airlines to just sit back and do nothing. Instead Southwest blew the competition away by challenging the basic value proposition. They were the first to say: “We won’t give you meals; we will give you peanuts. We won’t assign seats instead we will give you an incentive to show up early and line up so we can turn our planes around faster than the old school.” Guess what Dr. Skorton - you are the old Brantiff Airlines. You are an old unionized and protected industry that needs to face and adapt to real competition.

We need outsiders and new entrants to challenge the way incumbents deliver college education. We have to be careful about listening too much to 18 year old students complaining about their dorm rooms and tenured professors bitching about not having enough time for their “research”.

Dr. Skorton deals little with basic supply and demand principles because of all the subsidies built into the US college system. Perhaps he should go online for a free refresher course in how the Khan Academy and Google Books are educating the world.

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