Five Constructive Ways to Change American Higher Education

My thanks to Dartmouth for inviting me to participate in the Daniel Webster Project. I particularly love to come to Hanover. I teach American economic history, and forever am telling students two things about the extraordinary 1819 Supreme Court battle in Dartmouth College v. Woodward. First, it was one of the half dozen most important judicial decisions of the 19th century, one that enhanced the rule of law and expanded protections of private entities from governmental confiscation. Second, Webster’s statement “It is Sir…a small college. And yet there are those who love it” is the single best statement of the special ties that institutions of higher education have to the public, the quintessential statement of how colleges and universities can profoundly influence us for decades after passing through their ivied halls. Thank you for including me.

Why I was asked to speak is beyond me, as economists have three deserved bad raps: first, they are often wrong. Second, they are deadly boring. Lastly, they are often perceived as cold and heartless. Over the course of the lecture, I will illustrate each of those points. Regarding the much-deserved reputation for inaccuracy: The dean of American economists in October 1929, Irving Fisher of Yale, proclaimed that “the stock market is on a permanently high plateau,” whereupon it promptly began the largest decline in American history, bankrupting Fisher among others. In 1985, leading American Nobel Prize winning economist Paul Samuelson in his iconic textbook said “The Soviet Planning System is a powerful engine for economic growth.” Within 7 years, the Soviet Union had disappeared along with its planning system that no one today believes accelerated growth. Less than five years ago, the Chair of the President’s Council of Economic Advisers Christina Romer proclaimed that if the president’s stimulus package were adopted, the unemployment rate would not rise above 8 percent, which it promptly did — for 43 consecutive months. So in the interest of consumer protection, I readily admit I might be wrong.

I am going to suggest later in my lecture what the title suggests: five constructive ways to change American Higher Education. But first, I thought I should deal with the issue of why is even change necessary. So I will deal with several issues relating to higher education quality and costs first, and then move into suggestions for change.

I am frequently asked the question “is America in a higher education bubble?” If forced to give a straightforward one word answer, it would be “yes.” At the same time, the higher education bubble differs somewhat from other bubbles in history, such as the 2000 dot-com stock market bubble or the 2007 era housing bubble.

As in earlier bubbles, a rising demand for higher education led to sharp increases in prices, as manifested in tuition fees. The causes of those rising fees, however, are many, and some reflect very long term trends more than an episodic “bubble.” At some point, growing concerns arose that the price of higher education was getting high relative to the benefits or relative to the ability to pay for the service. This is similar to the dot.com and housing bubbles. Also, like the housing bubble, government subsidies, especially in the form of exploding student loan and Pell grants, aggravated the demand for higher education. Like the housing bubble, interest rates were pushed by public policy to low levels that provided artificial stimulus to the demand, stimulating the bubble. And while the housing bubble led to a time to foreclosures and vacant homes, the college bubble has led to loan defaults and increasing number of students who are underemployed, working in jobs paying less and requiring fewer skills than what the anticipated when they entered school.

Indeed, I will argue this afternoon that for a growing proportion of Americans, attending college is not a good proposition. Increasingly, high school guidance counselors, college admission officers, political leaders and foundations tell us that personal and national economic success requires our youth to receive a college degree. Students have responded to this message, but increasingly end up deep in debt with a job that pays little or no more than what would have been received with a high school diploma.

One of the most time honored concepts in economics is at work: the Law of Diminishing Returns. In a society of relatively uneducated persons, the provision of a college education to more students very well might be good both for the individuals involved and for society as a whole. But today, when nearly one-third of adults already have four year college degrees, the further exhortation of young Americans to complete a degree leads to much smaller gains to both the individual and society –gains, in fact, which often are less than the considerable and rising cost of college attendance.

Americans are beginning to grasp the just stated realities. Enrollments in American universities fell last year, and I suspect will show further decline this year. High cost problems with little reputation or endowment are in deep trouble. Several hundred of them are going to die in the next decade I believe –what Joseph Schumpeter called “creative destruction” –markets signaling to reallocate resources to alternative uses.

Let me give you what I believe are 10 stylized facts about American higher education that suggest we may well be overinvested, not underinvested, in it.

  1. The Bureau of Labor Statistics of the U.S. Department of Labor evaluates jobs on the educational attainment required to fill them; 48 percent of all U.S. college graduates with bachelor’s degrees or more are in jobs requiring less than a four year degree;
  2.  Over 40 percent of students entering four year schools fail to graduate within SIX years; excepting schools like Dartmouth and perhaps 100 other selective admission institutions, most institutions fail to graduate a majority of entering freshmen within the advertised four years;
  3. A major National Research Council study of collegiate learning found that seniors at American universities had only marginally better critical learning skills than freshmen;
  4. Multiple surveys of student work habits suggest that the typical undergraduate student spends less than 30 hours weekly on academics for perhaps 30 weeks a year, or 900 hours total, suggesting massive underutilization of these vital human resources;
  5. Student loan default rates measured after three years of starting payments are in excess of 13 percent, suggesting many of the nearly 40 million Americans holding over $1 trillion in student loan debt have very significant financial difficulties –a default rate that in a nonsubsidized market would be dangerously and unsustainable high;
  6. It is commonly argued that “investing” in higher education promotes economic growth, yet when I examine the issue empirically I observe actual negative relationships between, for example, what state governments spend on higher education appropriations and economic growth;
  7. As the proportion of Americans entering college increases, many colleges dumb down the curriculum, giving high grades for limited student effort; the Adult Literacy Survey and Intercollegiate Studies Institute Civic Literacy tests suggest either little fact-based learning occurs, or that literacy is declining amongst college graduates;
  8. Public support for colleges is often justified as a way of promoting greater income equality and the American Dream, yet rising college attainment has been accompanied by falling, not rising equality, and the proportion of recent college graduates from the bottom one-fourth of the income distribution is smaller today in 1970, before Pell grants and massive federal student loan programs;
  9. Even if in the past college education was a good investment, and even if it is today, which is increasingly doubtful, nevertheless the rise in real costs of attendance, along with a general sharp slowdown in American economic growth since 2000, suggests strongly that potential future gains from that attendance are likely to lag; and
  10. There is a growing gap between the perceived advantages of going to college among students and their parents on the one hand, and actual outcomes on the other, so not only are students often not getting particularly well paying jobs out of college, but they also are caught completely off-guard, sometimes leaving them in precarious financial shape and emotionally devastated from having unfilled expectations.

 

Let me elaborate on some of these points. We now have more janitors with bachelor’s degrees than we have degree holding architects or chemists. We have more college graduated retail sales clerks than we have soldiers in the United States Army. As on 2010, we had over 115,000 janitors with bachelor’s degrees. Over 15 percent of taxi drivers held such degrees, compared with a fraction of one percent in 1970. We have over a million persons with degrees who work as retail sales clerks –at places like Wal-Mart or Home Depot. This is a phenomenon that was once rare but now common-place. For all the talk about the STEM disciplines and a knowledge-based economy, the numerically most important areas of projected job growth for the most part are in occupations that the BLS tells us do not really require a college degree. The five jobs the BLS projects will have the greatest growth in this decade include Registered Nurse, retail salespersons, home health aides, personal care aides, and office clerks –none actually requires a bachelor’s degree.

The distinguished social scientist Charles Murray summed things up well recently: “The reality is that we have a piece of paper that for most students in most majors is close to meaningless. It is serving a gateway function that the majority of young Americans cannot reasonably aspire to attain. And it exists in the context of a culture—and a president—that says everyone should go to college.”

College is first and foremost a screening device – a way of separating the smart, the motivated, the disciplined, the hard-working and the honest –from those lacking those characteristics. College graduates have these qualities in greater abundance than high school diploma holders, and thus command sizable earnings premiums. As the proportion of college graduates grow, the bachelor’s degree itself is starting to become somewhat tarnished as a screening device. You not only have to graduate from college, but from a good college –a degree from Slippery Rock States isn’t what it used to be. Or, you have to get a master’s degree. Interestingly, the earnings differentials between college and high school graduates narrowed noticeably between 2008 and 2011, reversing a long-term trend upward.

Before proceeding, remember I told you economists were boring. Let me tell you a story related to me by the president of one of our Federal Reserve Banks. A women went to the doctor and got devastating news: she had an inoperable brain tumor and had six months to live. She said, “Doctor, isn’t there anything you can do?” He said, “Unfortunately, there is nothing I can do medically, but I have some good advice.” She eagerly asked, what is that? He replied, “Marry an economist and move to North Dakota.” She said, “Why would I want to do that?” He said, “You won’t live a day longer, but it sure will seem like a long, long time.”

Back on topic, there are a number of studies suggesting the rate of return on private investments in higher education average a rather good 10 percent or so. Yet these studies generally do not fully adjust for the risks associated with college attendance. If over 4 percent of college students fail to graduate in six years, and if close to another 20 percent of those attending graduate but take more than four years to do it, the rate of return on the college investment is grossly overstated if one looks at earnings and cost of education profiles of only those who graduate. Some recent studies suggest the risk-adjusted average rate of return on college investments may be substantially less than earlier studies have indicated. Moreover, what is important is at the margin: if college attendees in 1995 or even 2005 had a good return on their investment, it does not necessarily mean the graduates of 2015 will, particularly given the rapid growth in the number of graduates relative to the growth in high paying jobs.

Of course, a major reason why the rate of return on the college investment is becoming problematic is that the size of that investment has soared with rising college costs. Several economists, including myself, have written books several hundred pages on why college costs have risen so much. Today, I will can only superficially touch on that topic.

Let me critique three common explanations. The first is sometimes called Baumol’s Disease, after a Princeton economist, Bill Baumol, who argued that teaching is somewhat like theatre –a professor, the actor, gets up in front of an audience. It takes the same number of actors today to perform King Lear as it did when Shakespeare wrote it 400 years ago. In most fields, labor productivity advances over time as machines and tools substitute for labor –that is not possible in higher education, or so it has been argued. I sometimes jokingly say that, with the possible exception of prostitution, teaching is the only profession that has had absolutely no productivity advance in the 2,400 years since Socrates taught the youth of Athens.

While there is certainly some truth in the Baumol proposition, it is overrated as a major explanation of rising college costs for two reasons. First, with modern technology, a single “actor” or teacher can reach thousands of students whereas before she could only reach dozens or at most hundreds. Sebastin Thrun’s Stanford course on artificial intelligence drew an audience in the six digits, for example. We could make online education both exciting and low cost by using the best American professors to teach lots of good material well. Second, in reality, usually less than one-third of university budgets go for faculty salaries—much of the cost explosion is in non-instructional areas, especially the growth of administrative staffs, but secondarily such things a upscale recreational centers and dormitories and, at some schools, exorbitant explosion in intercollegiate athletic subsidies.

The second explanation is sometimes called Bowen’s Rule, after another Princeton economist and also former Princeton president Bill Bowen. Colleges spend whatever they earn. This idea strikes me as very true. Job security conscious college presidents raise buckets of money through gifts, subsidies and high tuition fees and then bribe vocal constituents by giving them what they want –the faculty get pretty good pay, good parking, and low teaching loads –the alumni get fancy alumni centers and good sports teams –the administrators get lots of assistants or what Johns Hopkins professor Benjamin Ginsburg calls “deanlets” to do their heavy lifting –and the students get light work loads, high grades, and access to booze and sex.

The problem is there is no real “bottom line” in higher education. Did Dartmouth has a good job last year? Who knows? Colleges try to maximize reputation, and feel spending money helps, so we have an academic arms race going on that is pushing up costs. You can improve your US News rankings by buying good professors and good students. You think you attract good students through attractive buildings so you have a college edifice complex of constructing expensive buildings.

The third explanation for the cost explosion is the Bennett Hypothesis, the view of former Education Secretary Bill Bennett that federal student financial assistance programs has enabled colleges to raise their fees more than they otherwise would. The scholarly evidence of the validity of this proposition is mixed, although the most recent studies are supportive of it. I think it is exceedingly unlikely that the federal government could engage in lending and grants of $200 billion or so a year in a $450 billion sector without impacting at least modestly on pricing. I believe the Bennett Hypothesis is correct.

Let me say a few words about collegiate education and income equality. When a college degree was reserved for a small portion of the adult population, say in 1970 or earlier, an ambitious, bright and hard working person from a family with limited income could, and often did, advance up the economic ladder. Higher education served the American Dream. When a degree becomes commonplace, however, it starts to lose its value as a certification device. In 1960, Slippery Rock State College was not one of America’s citadels of higher learning, but a degree from there put a person easily in the top one-tenth of the nation’s population in terms of educational attainment, and that motivated employers to offer him or her a good job. Today, with upwards of one-third of adults with a degree, employers might say the student graduating from Slippery Rock is merely average —not worthy of the 20 percent or so jobs available mostly in the managerial, technical and professional fields that generally pay well.

So today, you have a high probability of success you have to go to an Ivy League school, one of the other great elite private schools like Stanford, Duke, or Northwestern, or at the very minimum to one of the few public flagship universities that essentially act like a private school –say the University of Virginia. Universities today no longer promote equality—they reinforce inequality, sort of an academically-based aristocracy not dissimilar to the landed aristocracy of, say 18th century England. Interestingly, 8 of the top 25 schools on the US News list of top American universities in 1988 were public schools –today, only three are. Public universities were created primarily to offer low cost access to economic advancement for students of moderate means, but today these schools are increasingly perceived to be inferior, not to mention costly. The ones perceived to be the “best,” such as UVA, actually have a smaller proportion of Pell Grant recipients than many of the Ivy League schools –Mr. Jefferson’s university is an enclave of rich kids.

Advocates of the “college for all” movement like President Obama, or the Gates and Lumina Foundations, usually emphasize one statistic: college graduates on average earn far more than those with a high school diploma, and that the high school/college differential on average has risen over time. I don’t deny the accuracy of those numbers, but I think they are highly misleading for four reasons in speaking about the current generation of college students.

First, comparing high school graduates to college graduates is like comparing apples to oranges. The typical college graduate is pretty smart, probably with an IQ typically above 110, while the typical high school graduate is typically less smart, with an IQ perhaps averaging 95. The college graduate is typically more ambitious and disciplined, doing better in high school partly because of higher innate intelligence but partly because of a better work ethic. Indeed, employers looking for bright, disciplined and ambitious persons use the diploma as a screening device to separate potential workers with desirable attributes from those lacking those attributes.

Second, remember that over 40 percent of those entering college fail to graduate within six years –for high school graduates to plunge into higher education lured by the earnings differential statistics but simultaneously be only dimly aware of the risks of non-graduation is a national tragedy that has brought hardship to many college dropouts with mediocre jobs but sizable college debts.

Third, the statistics mentioned are averages of all college graduates, including, for example, me, who graduated a half century ago. It appears that those graduating before 1990 largely got high end, high paying jobs, but that the glut of college graduates is now such that recent graduates are almost certainly faring poorer relative to non-graduates than was the case in the past. Unfortunately, published government statistics do not provide adequate information to evaluate that assertion.

Fourth, not everyone earns the average. Earnings vary enormously for college graduates between majors, and with the quality of college attended. For example, an examination of PayScale.com data shows average mid-career earnings of electrical engineers and economists of over $100,000, while for social work, Spanish, music, or education majors, the average is under $55,000. Similarly, mid-career earnings at a sample of elite private universities averaged about $105,000 a year, compared with $67,000 at relatively unselective state universities.

I don’t want to convey the impression that I think college is a bad thing for all. The student graduating at the top of her class from a very high quality suburban high school or private boarding school who is accepted at Brown, Cornell, and Dartmouth is likely to graduate in four years and get a good job. However, the kid who is in the middle of his class at a high school of so-so reputation, who has mediocre SAT scores, and is accepted at a college and where the six year graduation rate is 40 percent is very likely going to have a bad experience in college. Unfortunately, there are as many or more students closer to the second example I gave rather than the first one where the student could go to Dartmouth.

I am finally getting to the topic of today’s lecture, but let me relate briefly a story about economists being insensitive and uncaring. Shortly after 9/11, a suburban New York country club honored four firemen who lose their eye sight while battling the blazes at the World Trade Center. They were playing golf. A threesome of a doctor, a priest, and an economist were playing behind them. The pro told the threesome, “things will be a little slow today since the heroes we are honoring today are blind.” The doctor said, “Oh, let me talk to them—I know of a new procedure that sometimes can partially restore eyesight.” The priest said, “I, too, can help. I have some thoughts that have previously comforted many in distress from physical disabilities.” The economist snapped at them “What’s with all of you! Why don’t you make them play at night!”

What can we do about higher education’s problems? Let me suggest five ideas. This list is not comprehensive, but if we did all or most of the things we suggest I suspect the problems would be substantially less.

FIRST, RADICALLY REFORM AND RESTRICT FEDERAL STUDENT FINANCIAL ASSISTANCE.

The federal government disburses about $175 billion in student assistance in the form of grants, work study awards, guaranteed student loans, and tuition tax credits. The system is Byzantine, costly, and ineffective. Its initial goal when created and expanded decades ago was to assist lower income persons gain college access, but the proportion of low income persons among recent college graduates is lower today than in 1970.

If the Bennett Hypothesis is even half right, students today pay more for college than they would have without these federal programs. A large part of the billions of federal payments have gone into higher tuition fees that the colleges then use to help fund the aforementioned academic arms race. Rising sticker prices have deterred some lower income students from applying for college –they are simply frightened by fees that in some cases exceed the household’s entire income.

There are no rewards for academic excellence or improvement in the federal programs. Indeed, I suspect on average poorer students get more help than better ones, since they hang around school longer and use more Pell Grants or loan money.

Colleges have no skin in the game. If college X accepts large number of academically marginal students who subsequently fail to graduate and thus disproportionately default on their student loans, the school faces no adverse consequences of their admissions decisions that imposed a burden on the American taxpayer.

The interest rates charged students bear no resemblance to economic reality –the move towards tying the interest rates to market rates will be a small direction towards sanity, but interest rates in general are depressed from their natural rates dictated by human preferences by our largely failed Federal Reserve expansionary monetary policies.

The fact that a single monopoly provider of loans exists introduces the problems always associated with a single provider of services –low quality, indifferent service, and so on. The people who brought us the U.S. Postal Service are not known for their efficiency and quality of service.

A new National Bureau of Economic Research studies confirms what many of us have suspected –many colleges have gamed the student financial aid program for their own purposes. Moreover, the state government reductions in subsidies to state schools are at least partly tied to the massive increase in federal programs.

What should be done? My preference would be to eliminate federal student financial aid completely over a period of a few years. In the decades before we had federal assistance, enrollments rose and a healthy proportion of lower income Americans attended colleges aid by much private philanthropic aid and state support.

Without federal aid, the ability of schools to raise fees would be sharply curtailed. Enrollments would fall some, which I would view as a good thing, as too many unqualified kids go to college, and too many who graduate end up underemployed with mediocre jobs. As Plato said in the Republic two dozen centuries ago, necessity is the mother of invention. Colleges facing reduce revenue inflows would do all sorts of things to cut costs –reduce bureaucracies, increase teaching loads, embrace technological innovations more, intensify building utilization, lower athletic subsidies, and so forth. My guess is that graduation rates would improve, and more would finish within more years. We would end up doing more with less.

What I desire is politically impossible in the short run. The current system if maintained can be seriously improved. Get rid of aid for students who could go to college without the assistance. Say goodbye to PLUS loans to middle class kids, to tuition tax credits that help the affluent more than the poor, and even to some Pell Grants. At present, over 17 percent of students from households with incomes from $60,000 to $80,000 a year get Pell Grants—a few years ago, it was near zero. These are kids from solidly middle class homes, with above average incomes. They would find a way to go to college without federal funds.

Also, make colleges have skin in the game. If they accept lots of kids who fail to graduate and subsequently default on loans, make them pay something towards the cost to society of this decision. Put stricter limits on the number of years for which federal aid can be extended. Cut all the aid programs down to two –a single student loan program and a grant program –not 15 or more programs as at present. Put strict limits on the amount that can be borrowed, and raise those limits over time only with the general rate of inflation. Change federal laws to make tenable purely private human capital equity contracts on the Pay Forward principle. In short, reduce, privatize, simplify, make more efficient.

SECOND, GIVE MONEY TO STUDENTS, NOT INSTITUTIONS

Related to the first point, instead of state governments making grants to schools, have them give vouchers to deserving students. Do the same with Pell Grants. Instead of sending funds to college financial aid offices, send payments to the homes of students. Make them progressive performance vouchers. By “progressive”, I mean give more money to lower income kids than those from affluent families. For example, a Pell Grant could range from several thousand dollars for those from families with incomes of, say, under $25,000 a year, to a few hundred dollars for those from families with $50,000 a year in income, to zero to those from families with $60,000 or more income. By “performance,” I mean give students who excel academically and graduate in three years a little bonus for their excellence and saving taxpayers money, and cut back or eliminate aid to students who consistently earn low grades and show little prospect of graduating.

With more money coming directly from students, colleges would have to be more attentive to their needs, and engage in less cross-subsidization where they downgrade undergraduate education to fund other priorities. Funds would be targeted to those where access is truly dependent on outside financing. With a growing proportion of students not getting support, colleges would be compelled to engage in a bit more price competition.

THIRD, DEVISE ALTERNATIVE WAYS OF CERTIFYING COMPETENCY

Polling shows that the single most important motive for college attendance is the investment motive. People go to college hoping to buy a ticket into a comfortable middle class life or above. It is clear college is a screening device, and that a large part of the earnings differential associated with a college diploma actually reflects attributes that have little or nothing to do with college itself. The fact that a large portion of college graduates take positions in areas far removed from the academic discipline they studied the most in school suggests colleges are not primarily vocational schools, even though some areas such as engineering and accounting involve coursework very useful to pursuit of those occupational areas. College graduates are on average smarter, harder working, more disciplined and more dependable than high school graduates, and the diploma for most merely is a screening device denoting the likely presence of these positive employment attributes.

Yet maybe we can denote to employers most of what a diploma indicates for a lot less money. For example, what if we had a College Equivalence Examination that in some what mimics what the GED does to denote high school equivalency. Essentially, many are paying $100,000 or $200,000 to buy a piece of paper denoting competency and gaining the possibility of obtaining a good paying job. The new exam might cost $100 or $200 and if it correlates reasonably well with the attributes that college graduates have, it would enormously lower the costs of becoming credentialed, ending the credential inflation whereby bars are now sometimes demanding college degrees of applicants.

What would such a test look like? Employers and even faculty claim they want students who can think critically. The Collegiate Learning Assessment, or CLA, is a good test of critical thinking skills as well as writing ability, with a new CLA+ variant designed for purposes similar to what I suggest here. Supplement the 90 minute CLA + test of critical thinking and writing skills with a knowledge laden test that evaluates the test takers knowledge about things an educated American should know about regarding basic skills and our civilization. Maybe have an 80 to 100 question 90 minute test that incorporates questions in mathematics, science, literature, history, civic institutions, and economics. The total three hour exam then would measure both the acquisition of knowledge and critical thinking skills.

A person could take the proposed test at any time –at age 16 or 60. Many would go to college for a year or two, take the test, and, if they did well, start applying for a job. Cooperation with business groups like the Chamber of Commerce or the National Federation of Independent Businesses would be essential in making this an option –offering a non-college or lesser college option to denote competency for employment.

This testing would not impact much on schools like Dartmouth. College is both an investment and consumption good, and many attend residential schools in part for enjoyment, partly to soak up intellectually stimulating ideas, in part to make new friends and network with those who could help with career advancement. The alternative credentialing route would be for those viewing college solely or primarily as an investment, not a consumption decision.

FOURTH, PACKAGE LEARNING DIFFERENTLY AND MORE EFFICIENTLY

Like other colleges, Dartmouth is an instructional packager. Students take roughly 40 courses here and Dartmouth certifies that they constitute a corpus of knowledge deserving of a bachelor’s degree. Occasionally, a student will be allowed to have a few courses from other schools or packagers included in the degree package.

But we could package courses into degrees different ways. A person could take 8 courses at Dartmouth, 4 at Amherst, 6 at the University of New Hampshire, 6 at the University of Phoenix, 8 at New York University, 4 from Coursea or EdX, and 4 from StraighterLine, a for profit course provider. The student , might well take the College Equivalence Exam as well to certify overall competency, and someone, may the College Board, maybe Underwriters Laboratories, maybe the Consumer Union, would certify that the student had both the quantity and the right mixture of colleges to be given a bachelor’s degree.

At the high end of the market, the Rolls Royce/Neiman Marcus segment, a company called the “Ivy League” could package courses from the eight Ivy League schools plus M.I.T. and offer an Ivy League degree. At the Honda Civic/Wal-Mart end of the market, a consortium of for-profit schools and small state universities and private schools could do the same thing. This would dramatically reduce the hassles and often the costs of taking courses from different providers –schools themselves would provide courses more than degrees. Students could get the advances of superstar professors from multiple providers. By mixing on-line with traditional learning, the time spent in expensive residential learning could be reduced, but a student wanting that great experience in smaller quantities could do so.

Similarly, as part of a reconfiguration of the way we offer instruction, we could incorporate MOOCs, massively open on line courses, and other innovative online ideas into the mix. And in rethinking ways to provide the bachelor’s degree, we might ask the question: why is it four years? Why not three or five? It is impossible to incorporate the total body of knowledge into a degree –as it is, we pick and chose what is important. Does the fourth year at the margin at to the student’s capabilities of functioning as a responsible adult as much as the second or third year? If a three year degree works at Oxford, Heidelberg or the Sorbonne, why not at, say, Dartmouth? The three years could be accomplished by asking students to work more than 900 hours annually on academics, including summer school. There are some real long term savings on capital costs implicit in this idea.

FIFTH, REFORM OR ABOLISH ACCREDITATION

A major obstacle to major forms of innovation such as those just suggested is accreditation. Accreditation in America is badly broken, a cost-enhancing device that does provides consumers and taxpayers little real information on educational quality. I am running out of time, but let me mention just a few problems briefly.

Accreditation is like pregnancy –you are or you are not. It is “you are good so we accredit you,” or, “you are bad so we will not accredit you and you will probably have to go out of business.” True, sometimes warnings are given to schools, and sometimes they are put on something resembling probation – but the consequences of being mediocre are few. Why not give schools scores from zero to 100, with a certain minimum required to meet minimum standards necessary to receive monies from governments or tax exempt philanthropic contributions?

Other problems –accreditation is riddled with conflicts of interest. This year people from college A accredit college B, and next year people at B accredit college A. The governing boards are dominated by those getting accredited. Another problem is a lack of transparency—accreditation reports are not routinely made available to the public, so criticism often found in those reports is hidden from public scrutiny. Why? Historically, another problem is that accreditation is input-based, not outcomes oriented. That is changing some, but arguably not enough.

Diminishing returns have set in –let me conclude before you tell your friends you attended the intellectual equivalent of a hemorrhoid operation. Should everyone go to college? Absolutely no. Should some go to college? Absolutely yes. We have forgotten the admonition of Aristotle to do things in moderation. We have ignored the Law of Diminishing Returns. And because of that, we have invested too much in college educations and led to hardship for millions of young Americans. Colleges are partly responsible, using a flood of federal financial aid to increase their tuition fees to finance an academic arms race that stresses country club like amenities more than learning. The colleges are complicit in leading millions of young Americans to a path not of financial salvation but one of despair.

Let us rethink our financial aid programs, rethink the way we certify workplace competency, think the way we provide services and also revitalize non-college forms of vocational training. Sometimes doing less or doing thing different is doing more –creating more happiness, less angst, less financial stress, and aligning labor market realities with educational outcomes