Thursday, June 19, 2014

Are USA universities in crisis?

I have only slowly come to realise the crisis facing US universities. A tipping point was the release this week in movie theatres of the documentary The Ivory Tower. Seeing that people are willing to pay money to watch a negative documentary suggests there is a ground swell of public concern.

A few other things that showed me the extent of the problem are the following.

The article, Universities on the Defensive, by Hunter Rawlings  a former President of Cornell, and currently the President of the Association of American Universities, a consortium of 60 of the leading North American universities.

The Seattle Times recently ran a front page story about the problems of mushrooming student debt and eight myths about why college costs so much.

My UQ economics colleague John Quiggin has a piece in The Chronicle of Higher Education discussing how inequalities in the US system reflect the broader inequality in society.

The table below, taken from another interesting article, Navigating Culture Shock in The Chronicle of Higher Education contrasts the relative resources of Stanford and nearby San Jose State University.

What does this have to do with Australia?
Recently, the government introduced major reforms of Australian universities, aimed at making them more like the US system. This seems to be based on two simplistic notions:

1. because the US has the best universities in the world if we copy some of the features of the US system [making it very expensive for students] then we are going to end up with some world-class universities.

2. deregulation and "free markets" always produce better outcomes.


  1. The best way to turn something priceless into something worthless is to make sure everybody has it.

    It seems that Australia and the US both have a popular illusion that everyone should get to go to university if they want to. In the US, they believe it strongly enough that the supply/demand balance has been short circuited by political decisions to lend out loans without due diligence. Faced with a "cash reservoir" in the form of cheap student loans, the universities have raised fees and tuition accordingly. So, basically, demand is not limited right now. Money flows through the short circuit from the public coffer to the universities. The student's families get to bear the risk as a loan.

    In Australia, the system is public, which is different. Money is supposed to flow from the public coffers to the universities. The government wants to allow Universities freedom to charge their own fees, which are paid for by the HECS system. The government is committed to reforming the HECS system by making it harder for students to not pay (e.g. by living overseas). The result is similar: money is short-circuited from the public coffers to the universities, with the student shouldering the risk as a loan.

    I think that the ability of the universities to raise prices so high might be limited here. So, they will be inclined instead to take a mix of fee-hikes and service reduction.

    1. I think your analysis does hold water, but I take exception with your first sentence; while that may be true for tangible items, I think knowledge does not obey your statement.
      (Obviously that assumes a college education leaves one with knowledge... but that is another story.)