Adam Smith U is good for poor kids

In the comments to my post on Adam Smith U, Andromeda said:

Mind you the financing issue and the callous disregard which many people in this thread seem to have for the financial situation of most people vis-a-vis paying for college, and the enormous psychological barrier presented by high tuition prices even when scholarships are available, horrifies me.

To me, Adam Smith U is a fabulous way to make tuition cheaper, and I'd like to talk about what I see as its enormous benefits to poor students. Right now, its as if every vacation is a package. We have vacations to Europe, which include first class airfare over, a EuroAir pass that lets you take any flight in the EU for free, stay in 5-star hotels in the city centers, free meals, including a 6-course dinner every night with an open bar. The hotels have a doctor on call 24/7, and you can cut the line at any museum for no extra charge. Then there are vacations to Tijuana, which include a Greyhound ticket, all the cheap tequila you can drink, and a dingy Mexican hotel room. There is a cop on call 24/7 to come extort money from you if you do anything wrong.

In this world, a poor person can never go see Europe because they can't afford all the frills that go with it. They are stuck with TJ or nothing. Its not like today, where they can choose the minimum: coach flight over, dorm-style hostels, and a bus pass, if that's all they can afford. Furthermore, lets think about the goals of a 5-star european hotel. What matters most to them is being a part of the package, keeping their rating, or their approval from the package company or whatever. They are going to spend way more time on making sure they keep getting their cut, than on making their customers happy. Because they get their reward, not from attracting customers, but from being on the tour.

Rather than paying high tuition, a student at Adam Smith U would pay one fee for his residence, another for his computer, another for his supplies, another for each class he took, another for each textbook, etc. In every case, he would have the opportunity to choose just how to spend his limited funds - and perhaps choose not to. He could choose, for example, to pay for high-quality professors in important classes in his major, but low-quality professors in other classes, to save money. The equivalent of taking your major classes at Stanford and your minors at SJSU, while living in East Palo Alto.

It seems to me that if you unbundle the college experience, that is a huge benefit to students with less money. They can pay for only the premium services they actually need. Right now, students pay for whatever premium items the school feels like bundling - not such a good deal. A poor student wouldn't have to pay for free access to the college pool hall and ping pong table, for theaters and movies, for all the extra things. Or rather, for only the extra things that are worth it.

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One important component

One important component that's missing here is the role of government student loans in jacking up the price of college. With practically unlimited money available for students to borrow, there's no pressure on colleges to make their tuition prices affordable. This is what creates "the financial situation of most people vis-a-vis paying for college." In a true free market for education, colleges would not stay in business very long peddling a product that most people couldn't afford. Colleges would probably spring up to serve all kinds of markets, from the Ivy leagues we have now to no-frills colleges that catered to working people who can't pay a huge price tag for a degree. Government subsidies of education are the problem, not the answer. And by the way, unless you're using your own money at this very moment to send people who can't afford it to college, don't call the rest of us "callous". Wanting to use other people's money to send everyone to college because you think they should go does not compassion make.

Adam Smith U may or may not

Adam Smith U may or may not be the best way of running a university in a free-market, but there's a distinct possibility that that will be the only way for what we now call "colleges" and "universities" to exist at all. To people like myself who already believe in markets this isn't really a big deal, since whatever the outcome I already know it will be better than the quasi-statist once we have now.

This illustrates an interesting distinction between a libertarian like myself and Joe Miller. When faced with the possibility of instituting markets where previously there were none, my reaction is to ask "How well will the market succeed?". Joe's reaction is to ask "What if people don't pay for the 'right' services?".

I've often wondered how much

I've often wondered how much money could be saved on tuition if schools werent set up on the current "summer camp" model. Huge lawns in the middle of urban areas, extensive collections of rare 17th century children's books, and gothic-inspired architecture are all nice enough but they have very little to do with the quality of the education I'm recieving. If you cut away the extra stuff I think prices would drop quite significantly.

Stefan, This illustrates an

Stefan,

This illustrates an interesting distinction between a libertarian like myself and Joe Miller. When faced with the possibility of instituting markets where previously there were none, my reaction is to ask “How well will the market succeed?". Joe’s reaction is to ask “What if people don’t pay for the ‘right’ services?".

Who peed in your cheerios this evening? :wink: I'd say that this is rather an unfair--or at least an uncharitable--interpretation of my arguments. It's also a pretty strange position to take. Why, after all, should we care if a market succeeds at giving people what they don't actually want? Or to put the point another way, perhaps this illustrates an interesting distinction between me and a libertarian like Stefan. When faced with the possibility that markets might fail to provide something that we all agree is a genuine good, my reaction is to ask how we might provide incentives to correct for market failures. Stefan's reaction is to say, "If market's don't provide it, it must not be good."

I don't actually recall having argued for the status quo in higher education. My objection is that Adam Smith U provides incentives for some things, but not for all the parts of a university degree. And the part of the degree that ASU doesn't properly incentivize (is that a word?) is the most important part. You know, the actual education. Because no matter how much faith you have in markets, the fact is that it will _always_ be in a student's interest to take gut classes at a university with a good academic reputation. But since _everyone_ has exactly the same interests, it's pretty hard to see where the university with the good academic reputation is going to come from.

It's all fine and good to say that since there is a genuine interest in having such things, the market will correct for it and such things will just magically appear. No matter how much we genuinely would like to have such things in existence, they will exist only if someone is willing to pay for them. That means that you'll need to have some critical mass of students who are willing to take rigorous classes in which they may well get (relatively) poor grades. And they will somehow have to hope that lots of other students won't then show up to free-ride off of their hard work by gaining a degree from a rigorous institution while taking gut courses.

Think about it this way. If suddenly every school became Adam Smith U, how would _professors_ reason? Me, I'm going to pack up shop and head up to Princeton. Then I'm going to put up some ads showing all my good evaluations. And I'm going to promise that students who sign up for my intro course will all get A's. Students can still get their Princeton degree with all the prestige that goes with it, but they get one course that's a free pass. I, on the other hand, get to charge Princeton rates (or at least something close) and will have a ton of takers. Or I would have a ton of takers at Princeton rates were it not for the fact that half the philosophers in the country would decamp for Princeton.

If I'm going to sign on to ASU, then I would need to have some sort of argument that explains why this sort of thing isn't going to happen constantly. Good students will pick a place to gather and get a rigorous degree, at which point the free riders immediately descend on the institution.

All this is not to say that universities cannot be _more_ market-oriented. It's just not clear that ASU is the correct market approach to take. Though I have to confess that I'm not exactly sure why we need to change approaches. Several of the comments on the other thread suggest that what would happen is that there would end up being lots of different types of institutions, some providing networking and prestige, some providing a rigorous education, and some providing certification. But that's pretty much what we already have. We have places like West Point that provide the networking and presige, places like Johns Hopkins that provide great education, and regional state universities that mostly provide certification.

If all you want is better teaching at universities, then merit pay will accomplish that. Tenure is a red herring. True tenured professors can say 'screw you' to students and be bad teachers, but that's only because pay is in now way tied to teaching effectiveness. It's not so clear, though, why _students_ should be the ones to determine pay rates.

Joe - you seem to be missing

Joe - you seem to be missing the entire idea of ASU. You aren't thinking in a true anarchic fashion - which isn't surprising, because its very nonintuitive for most people. This whole idea of free-riding on a school's reputation is much more of a worry with the current system. You see, at ASU, the people who award degrees are totally different from the people who provide housing, sell books, and teach classes. The degrees are awarded by an organization which exists only to award degrees. Its whole raison d' etre is to accurately evaluate the quality and quantity of classes a student has taken, and decide whether they should get a degree.

Its as if "Princeton" was instead "Princeton Degree Services". You can get a Princeton degree by taking classes at Stanford, Harvard, or even Penn State if you take the tough classes. And if Princeton starts giving out degrees loosely, then the people who consume those degrees - grad schools and employers, mostly - will lose their respect for the brand. And if the consumers don't want a Princeton degree, the students won't want one either. And then the students stop paying the application fees, and PDS goes out of business.

The problem you describe is a great argument for ASU (thanks :) ). Current univesities care somewhat about the quality of their graduates, but they certainly don't monitor that quality closely. You can scrape by at Princeton to get a prestigious degree, because the administrators are off fundraising from alums. At PDS, the administrators sole job is to evaluate the academic records of applicants as cheaply and accurately as possible.

When faced with the

When faced with the possibility that markets might fail to provide something that we all agree is a genuine good, my reaction is to ask how we might provide incentives to correct for market failures. Stefan’s reaction is to say, “If market’s don’t provide it, it must not be good.”

I never said that; I said I possessed an optimisim about the functioning of markets which you lack, and this can be seen in the contrast in the way you and Patri reason about ASU. Further, it may not necessarily be that a so-called market failure means the good in question is not valuable; it may simply mean people aren't smart enough, or don't have the right tools, to provide that good. But in general I think it's pretty clear the alternative of intervening through violence vis a vis the state is almost always an even worse option than the 'market failure', putting the moral questions aside.

On the question of teacher quality, I don't think you've provided a good rebuttal to Patri's point about ordinary skill-oriented teachers like martial artists or music teachers. I don't see people paying martial artists to give them a bogus black-belt. You have to keep in mind (vis a vis Roderick Long) that markets tend to provide uniformity when it's desired, and tend to provide diversity when that is desired (which is why you never see triangular ATM cards). Same thing applies to the value of a certification; if people decide that all these "degree factories" are outputting people without the right knowledge then the teachers will have an incentive to adhere to some common standard of quality which they can then advertise to their customers.

If on the other hand customers in a free market really don't value knowledge, or don't value learning, or don't value hard work, then that's tough. I realize that in such a worst-case scenario you, Joe Miller, might be disappointed that the youth of society are not as hard-working as you would like, or as knowledgeable about their various areas of expertise as you would like, etc. In that case you'd be certainly allowed to try and change the minds of youth, say by writing or speaking (charging higher prices for your more rigorous classes?). However, as in all markets, those are the choices that people freely make with their own property, and ultimately (externalities of various sorts aside) their responsibility as well.

Two important considerations

Two important considerations for the current system.

1) Tuition is going up faster than inflation.

2) Most of the increase is being eaten by administrators (not professors or buildings).

You don't even need to pay

You don't even need to pay off a martial artist - you could just buy the black belt directly and cut out the middleman!

Martial arts schools keep prices down by renting the bare minimum in acceptable facilities, by carefully scheduling to get the best use out of those facilities, and by having students teach other students so that the ability to teach is one of the things being taught. Regular grade schools, high schools, and universities could learn a lot from that example.

One of the problems with ASU

One of the problems with ASU and other idealized libertarian models for markets is that there's no easy way to get there from here. In a brand new, empty market for education, people might be able to correctly value an education given by different colleges. Getting people to re-evaluate all their preconceived notions of how good an education involves too many changes at too many levels to be feasible. It reminds me of the companies promoting anonymous cyber cash at the beginning of the dotcom era. It would be ideal for everyone, users would have anonymous cash, institutions would have strong digital security, merchants could accept currency without fear of counterfeits. But it never took off because it requires everyone to change their whole mode of thinking for very little tangible benefits. Are there practical ways to get to the ASU model?

Hube - you have a good

Hube - you have a good point, unfortunately. It would be tough to found ASU now. But some of my less radical proposals for reforming higher education are possible incrementally. For example, the less money that is given to endowments, and the more that comes from tuition, the better a school will perform. A shift in thinking that caused charitable giving to higher education to be in the form of any-school scholarships would improve the system. Studies like those which show that a top-tier MBA is a net loss to your lifetime earning potential help too, by convincing some not to get wasteful degrees.

I was going to say that an entrepreneur could try starting a cheap, no-frills, high-quality college, and perhaps demonstrate the new model. But government-funded schools like Berkeley have that niche filled. It seems impossible for a private enterprise to compete - a typical case where the government doing things badly keeps other people from doing them well.

But while it is certainly a valid criticism of some libertarian models that "you can't get there from here", there are plenty of libertarian proposals for incremental reform. ie consider Milton Friedman and vouchers, which he has picked as the issue to focus his wealth on. The hard-core libertarians are uninterested in such compromises, which is why they are unlikely to ever accomplish anything :).

Joe, If when you ask people,

Joe,
If when you ask people, they claim they value something (education, whatever), but when presented with a choice they won't actually pay for it, doesn't that suggest that most people don't actually value it? I'm not sure I agree that it would be common for "markets to fail to provide what we all agree is a genuine good." If that happens, it suggests to me that we're all paying lip service to the idea that education (or whatever other thing we're talking about) is a wonderful thing, but we don't truly want it enough to place it above other alternative ends we could pursue.

not to mentioned they

not to mentioned they wouldn't have to pay for the tenured commies that infest those places. NO logical person would actually pay for thier socialist prattle and it would dry up and blow away. very useful concept on many levels.