An Industry in Search of Robber Barons

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The Commission on the Future of Higher Education, appointed by Secretary of Education Margaret Spellings, issued a draft report in June that comes down pretty hard on the state of college and university education today. Finding “equal parts meritocracy and mediocrity/’ the report says that higher education is “increasingly risk-averse, frequently self-satisfied, and unduly expensive.” Many of its graduates “are not prepared to work, lacking the critical thinking, writing, and problem-solving skills needed in today’s workplaces.” And a lot of students don’t even graduate.

In 1983, the Reagan administration issued a far more devastating report on the public school system, ”A Nation at Risk,” which evoked enormous controversy but did not improve our public school system. Its ultimate progeny, George Bush’s “No Child Left Behind Act,” managed to bring in even more federal intrusion.

Will this report do better — improve education and still allow freedom? It might. American higher education is far different from the government-run K-12 system.

True, accountability is poor; the majority of students go to government-run universities, and most of the other schools are nonprofits – there are no profit signals, and the price signals are distorted by federal aid, which¬∑fosters higher tuition and (like third-party payments in health care) blunts wise shopping. Colleges have an amazing ability to avoid scrutiny. The most powerful monitoring mechanism is the annual rankings of U.S. News and World Report, which are based on the caliber of students who attend (not on what they learn when they get there) and on schools’ reputations in the opinion of competing administrators!

Even so, the system has a saving grace: It is competitive. And competition is growing, thanks to profit-making universities like the University of Phoenix, online courses, and company training and certification of skills. Although the Commission report falls far short of libertarian recommendations, it does have some good ideas. Its message is that higher education could find itself a dying industry akin to railroads and steel manufacturers. Smart administrators will take the advice to heart.

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