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Internet Speed in 2001

An 2001 article from the Wall Street Journal. How well has it held up? Note that, despite listing a half dozen issues that engage college students, they fail to mention climate change.

What omission will seem similarly surprising a decade from now?

When Protests Proceed at Internet Speed

By MICHAEL S. MCPHERSON and MORTON OWEN SCHAPIRO

In the 1980’s, U.S. higher-education institutions struggled over whether they should divest the stocks they owned in companies that did business in South Africa because that country engaged in apartheid. Colleges, including Macalester and Williams, where we serve as presidents, formed committees of faculty members, students, and others to deliberate and discuss what constituted socially responsible investments. Boards of trustees adopted statements of principle guiding their investment policies.

It’s difficult to determine how much influence the divestiture movement had on political reform in South Africa. But many corporations unquestionably felt the heat that colleges’ stock-divestment policies generated, and the white South African government worried mightily about the impact apartheid would have on that country’s economic future. Most observers have characterized the divestment moment as a remarkable example of effective collective action by higher-education institutions.

Although groups dedicated to the principle of social responsibility have remained active — often through churches and state pension funds — issues like apartheid, which affect people far beyond the boundaries of a campus, have faded from the radar screens of most colleges. Until now. The time may well have come to reawaken, or re-create, those committees and to dust off those policy statements. The second coming of social responsibility is upon us.

This time, however, social activists have different types of concerns and, more important, employ different methods of communication and consensus building. That means that college leaders must develop different ways to respond to those concerns.

Investments in tobacco, nuclear-energy, genetic-engineering, and other companies remain potential targets for student protests and shareholder action. Today, however, students are also questioning another significant aspect of higher education: how colleges raise and spend their cash. The issues include fair pay for campus workers and purchasing from environmentally aware companies.

But at the top of the list these days is the “sweatshop” issue: the role that colleges play in the marketing of clothing bearing their name or image. Because colleges license apparel with their logo on it, and that apparel can be made in overseas factories with abusive labor practices, higher-education institutions have become a focal point in the struggle to improve conditions for foreign textile workers. Student activists, worried about corporate control of the global economy, and spurred by labor leaders with their own complicated agenda regarding the relationship of workers and management, have employed a mixture of opinion mobilization and 1960’s-style protests and sit-ins to provoke responses from institutional leaders.
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Decision Day

Many people describe today, May 1, as National College Decision Day.  At most selective colleges, including Williams, today is the deadline to accept or decline an offer of admission and place a deposit for the first year of college.

A few years ago, Michael McPherson, the former Williams Dean of Faculty, economics professor, and, later, President of Macalester College, wrote a piece in the Wall Street Journal defending the current debt-financing model for colleges and encouraging students and parents to continue to assume mountains of debt in pursuit of higher future earnings: Get Smart About College: Parents and students like to think they’re rational when it comes to picking a college and paying for it. They aren’t.

With co-author Sandy Baum, past Skidmore College department chair in Economics, McPherson writes:

For starters, a college education is really a joint production between both the college and the student, so “fit” matters greatly. The best college for one student might be a nonstarter for another. Second, both the benefits and the costs, at least for the two-thirds of students who borrow, are extended over a long period of time, requiring a kind of investment perspective.

Moreover, investing in college is not something families deal with frequently, so learning from experience is hard. Reliable information is hard to come by, and decisions aren’t reversed easily or without cost; transfer is possible, but it’s often expensive and risky.

This framing of the problem is reasonable.  But are McPherson and Baum correct in their conclusions?

[P]eople tend to overvalue current consumption relative to future opportunities. Small wonder: It’s always difficult to pay now, or soon, for benefits we won’t enjoy until years in the future… This myopic approach can lead people to opt for schools that offer better prices, regardless of whether the schools are the best fit—and that can be a huge mistake.

When people read news articles about students who borrowed $100,000 for undergraduate education and have been unemployed since graduating, they tend to believe that this will happen to them (and that it will last forever). Likewise, people put lots of stock in the recurring (and misleading) warnings that college is a bubble or that it isn’t worth the money in the long run.

These stories make for captivating headlines, but all the evidence is that college pays off better than ever.

To be sure, McPherson and Baum emphasize that college decisions must be made based on individual situations, and note that cognitive biases can lead to decisions that overestimate earnings potential and underestimate debt loads as well.  But underpinning their analysis is both the last statement: “that college pays off better than ever,” and the suggestion that the “best fit” is more important than the “best price.”  That may be true if your “best fit” is Williams College, or a handful of other top-brand institutions, but it’s increasingly dubious as you work your way down the ladder.  This is particularly true because “fit” often has little to do with the educational dimensions – formal or informal – and more to do with whether it was raining on the day you visited the campus, and what drink you ordered at the coffee bar in the fitness center.

The debate over educational choices, costs, and benefits has continued in the four years since McPherson and Baum wrote this article, and unfortunately, EphBlog’s hiatus has kept us out of that discussion.  But on this Decision Day and the next one, I encourage skepticism when eloquent writers and speakers — even those with deep Eph connections — from traditional academic backgrounds urge “Ignore the Cost, Go With the Fit.”

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Longer Education

On human capital and education
.

Human capital means the mental toolkit a person has—the stock of knowledge and skills that enable him to produce and solve problems. We benefit from accumulating human capital just as we benefit from accumulating physical capital (tools); both increase our productivity.

We augment our human capital through learning. That fact leads many people to jump to the conclusion that schooling necessarily adds to human capital. After all, when students take classes in grade school, then high school, then college, they’re engaged in learning. So the more time people spend in education, the more human capital they acquire.

Could anything be so obvious?

Many writers assume that this direct connection between schooling and human capital holds true, but few ever question it. An excellent example is the new book Crossing the Finish Line by William Bowen, Matthew Chingos, and Michael McPherson (Princeton University Press). It raises a number of important issues that I plan to address later, but for now, I’ll focus on the book’s keystone.

The authors want to convince readers that the country would be a lot better off if we could somehow get many more young people to graduate from college. But how do they know that would be good? Unfortunately, they’re so certain college adds to human capital that they glide past the key question.

Right at the beginning, the authors inform us that “academics, policy decision-makers, and journalists are united in bemoaning the failure of the United States in recent years to continue building the human capital it needs to satisfy economic, social, and political needs.” Then they quote Federal Reserve Chairman Ben Bernanke who says that “the best way to improve economic opportunity… is to increase the educational attainment and skills of American workers.”

But why believe that more “educational attainment” (more time in formal schooling) necessarily leads to better skills? Bernanke points to the great economic growth in the U.S. after World War II that corresponded to rising education levels. He and the authors assume that the rising education levels caused that economic surge. Given the poor state of our economy now, we badly need another boost in educational attainment.

How could anyone doubt that more education would be good? Bowen, Chingos, and McPherson briefly acknowledge that there are a few skeptics, but immediately brush them away: “To be sure, some commentators have suggested that the perception that there are superior economic returns to investments in higher education is mistaken; however, careful statistical work by several leading economists strongly suggests that these worries are misplaced.” They refer to a paper by Professor David Card who maintains that students who might be added “at the margin” would enjoy gains at least as high as college students generally. A footnote adverting to one essay by one critic (Charles Murray) finishes the matter off.

Unfortunately, the authors never engage with the considerable body of work arguing that we have already oversold higher education, including Who’s Not Working and Why by Frederick Pryor and David Shaffer, Does Education Matter? by Alison Wolf, Going Broke by Degree by Richard Vedder, and Real Education by Charles Murray, among others.

The critics don’t deny that increases in human capital are beneficial, but question whether going through college necessarily does much to increase it.

Correct. The thought experiment is to take 100 students of average intelligence (math/verbal combined SAT of 1000) and randomly assign 50 of them to attend, say, the Massachusetts College of Liberal Arts and 50 of them to get job. In 20 years, which 50 are, on average, better off? (Hat tip to Laura at Apartment 11d).

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