 Thanks everybody for showing up to a talk that I always have some mixed feelings about because I feel like I'm biting the hand that feeds me. I teach at a small liberal arts college in South Carolina and have been in higher education for I guess I taught my first college level course almost a quarter century ago and I've taught a variety of places including Auburn as a grad student before I took my first full-time position and I've watched some changes in higher ed that are concerning and I'm sure that you see this from most of you from the student perspective and I think that higher ed is going through a crisis there are several aspects to this crisis I hope to address several of them here I'm gonna talk about how college doesn't do what it advertises the government subsidies are backfiring no surprise to most people in this room and then also the problem of politicized academic discourse which I think is having a stifling effect on the kind of communication and conversation that we want to have in in higher education what the Academy was originally intended to do is is being damaged by by some of these things so let's first look at the problem of college not doing what it's advertised to do some of you have figured this out already if you've been in college for a little while you realize that maybe you weren't learning what you thought you would learn or you feel like maybe you're paying more than college is worth and and maybe some of you are having a kind of a crisis of your own what am I doing here why am I still in in these taking these classes am I in the right place am I taking the right classes is this really the right course of action for me to spend four or more years in the college environment so let's think a little bit about what college does what is it supposed to do what does it actually do and so there's several ideas on this one is the kind of straightforward this is what your parents say that college does for you is just transfer human skills or human capital skills to you that you're building up a repository of information and experience that you can then transfer into the workplace and be a more productive person maybe be more fulfilled in your in your career track because of what you've learned what you've stuffed into your brain over a course of study another possibility is that higher education is is a signal that it doesn't matter so much what you're studying what matters is that you're demonstrating some characteristics about yourself that might be attractive to future employers and if you pursue some difficult course of study then that's communicating to them that you're a hard worker that you're intelligent or something we'll talk about that in a bit another possibility is that college is simply a consumption good that you go to college because you get to be around a lot of other people your age and you have some fun and you colleges that started building all of these kind of recreational facilities and your parents are sort of duped into supporting you for an additional four years and you're sort of on your own you're away from your house and your parents aren't right in your face all the time but at the same time you're you're still kind of on the parental faucet so that's that's another possibility this is a consumption good and you're kind of pretending to do something productive while you're really having a lot of fun and and maybe it's a mixture of all three of these these kinds of things and and that's certainly possible as well this is a preview of the first page of a book review that I have coming out in the quarterly Journal of Austrian Economics in the next few days the first people to see this outside the editorial staff not like this is a great publication or anything it's just a book review but it's on Richard Vedder's new book well it came out last year I think called Restoring the Promise Higher Education in America and a lot of what I am doing in this talk is is drawing from some insights in his in his book this is not the first work that Vedder has written on higher education he's a longtime observer of these kinds of problems and I think his his Restoring the Promise book is a great read for anybody who's really concerned about the trajectory of higher education in the United States and probably insightful for some other countries as well although his data and so forth are really focused on the US so the traditional argument for college is that it makes you better prepared for the workplace by stuffing your head with various knowledge that you'll need to do what your employer will want you to do and in fact if you look at the historical incomes of people who have various levels of education it's pretty clear that people who have a college degree and hand earn more than people who do not and this is this is the kind of thing that that you're told by your high school guidance counselors like you need to go to college because you'll earn more money look at all the income that people are getting that people are earning when they when they have this the sheepskin in their hands and see you don't want to be one of those people that just quit after high school and you don't want to drop out of college you want to finish this and really do well for yourself and one of the problems with this is that it is looking at the incomes of people who went through college maybe in the 1950s or 60s or 70s and it's not really good at determining whether college is worthwhile for someone right now we have seen college costs go up and if you're trying to make that decision about the do the costs justify the or the benefits justify the costs then you're you're this is not going to help very much because it's got all these people who went to college for like they paid a thousand dollars a semester or something and now they're making whatever they're making at age at age 60 at their peak earning years and that that's that's can be misleading this is from vetter's book it's it's drawn from the from the census but you can see the mean of workers over age 25 if you have a bachelor's degree the mean and your male you're earning about 84 thousand dollars a year as of 2016 females with bachelor's degree earning about 54 thousand dollars a year i'm not going to get into the gender gap discussion here that's an interesting discussion but not not one i'm tackling today and then of course you know master's degree doctor's degree professional degree it just seems to be more education equals higher incomes now of course people may go to college for different reasons not just to earn more cash there may be other things that you gain from a college education besides higher future income and you may feel like you are a better person because of what you know and having that kind of context for whatever it is that you choose to do in life might be enjoyable for you you feel like you're more well-rounded or literate or you're able to understand the world around you better even if it doesn't translate into higher salaries i don't want to dismiss those considerations if you look at the again the kind of traditional argument for going to college and doing the four-year thing it does look like there are some advantages the rate of return is is apparently not bad again though we're looking at historical numbers on what people have earned who maybe went to college when it was a lot cheaper so the the internal rate of return for an associate's degree is around 20 percent for a bachelor's degree around 15 percent that's that's pretty good but again looking forward which is what most people in this room have to do because of where you are in your in your in your life it's not necessarily going to be that high of a rate of return in the future sort of like looking at social security and saying hey well you know the first person who received social security benefits was this woman in vermont named adam a fuller and she collected more than 20 000 dollars over her life from social security and she had paid in something like 22 bucks well that's a fantastic rate of return right but um you are not in that generation and the math is not necessarily going to work out so well for for you so if you look at the education requirements of occupations held by college graduates um 52 percent are in jobs where they require a bachelor's degree um 37 percent are in a job where only a high school education would be required so they're over educated over school I should say for the kind of job they're in in in many cases um so you have around half of people who are matched well to the kind of job that required the education that they that they received in college we have this is the the kind of um you know person that graduated from college and ended up working in a coffee shop doing something that is it didn't require a four-year degree in in in sociology so I'm picking on sociology which which I like to do so if you and this is from the Federal Reserve so I guess take that with a grain of salt but um the data indicate that again you've got people who are over schooled for the kinds of jobs that they have and this this tends to support the idea that college might have been a consumption activity for these individuals they went to school for four years they majored in something that they liked that they thought might be not require too much effort that was their friends majored in this and they've got something to talk about with their friends and that they then graduated it's like okay now I I I have this degree but the job market is not demanding people with the kind of education that I just obtained for myself so what do I do well I guess I'll go work for Starbucks so we have a shift in in this kind of thing over many decades so if you look at this chart again from Vedder's book the black columns there the black bars that you see are from 1970 and it shows that this is the employees and these occupations that have a bachelor's degree or more in 1970 you had a tiny fraction of taxi drivers and chauffeurs that had a four-year bachelor's degree again and shipping and receiving clerks salesmen and sales clerks firefighters carpenters bank tellers what what do we see in 2010 40 years later we've got about 15 percent of taxi drivers that have a four-year degree we've got about 25 percent of salesmen and sales clerks people working retail who have a four-year degree you really need four years of education in anything like the kind of thing you get in formal schooling to be able to be a success at that my grandfather had an eighth grade education he went on to do quite well and in his in his life doing a variety of things which included being kind of a salesman for a while for a candy company and he he did all right with an eighth grade education are we wasting time sending people or encouraging people to go to school for four years to do something which in many cases is not it's not necessary to have that kind of schooling for now another possibility is that as I said earlier that students may be going to colleges and universities so that they can signal something to employers so they go to college and they go through this four-year project basically and they graduate what do they have to show for it well they can show that look I persevered I have some level of literacy and competency to be able to make it through these these classes with a decent GPA and I'm hard working so I'm motivated to some extent I didn't drop out I stuck to it and I finished this project well those are characteristics that a lot of employers find attractive they want employees who will stick to the job will finish the project will show up on time day after day after day like you're expected to do in classes that know how to read you know those are those are desirable characteristics and maybe college is simply a filter to kind of filter out those that don't have those characteristics so let's suppose you've got look at it this like sort of a pipeline here you've got the population over here on the on the left and the red indicates people who are kind of unmotivated not very persevering maybe not very intelligent and not in other words having the characteristics that employers tend to want the blue indicates people who are and by the way this is not supposed to be red and blue like republican democrats I don't take it that way anyway so the blue would be people who are motivated persevering intelligent and and so I've divided people and of course we know people aren't it's it's not like that but for simplicity some people in the population decide hey I'm going to go try to get this signal I'm going to get this this sign that says hey I'm motivated persevering and intelligent and so they go to college which is the filter and they either pass the filter and the college says yeah we put our stamp of approval on you and you you've got this diploma or degree that says you are motivated intelligent and persevering or maybe you maybe you you fail or drop out and you're not certified as being motivated persevering and intelligent and so you're in the same box here with people that didn't bother to go to the filter in the first place some of whom are motivated intelligent and persevering they just decided not to spend four years trying to get the get the little stamp of approval that says that they're that way so you end up you end up in a box here that says either a person who bypassed the filter bypassed the college university process or I didn't I tried the filter and and and it kicked me out it didn't let me through now this is not a foolproof filter so you do get a few people that kind of pass through and they get their degree and maybe they maybe they are not very motivated persevering and intelligent somehow they they managed to to get through the filter anyway all right so this this is the filter it's not it's not that college is is not necessarily the case of college can't be conveying some knowledge along the way but scholars lately have argued that maybe this is the this is one of the key functions I'll talk about one of those one of those arguments in a minute but what happens to this process when the government comes along and says hey we think more people ought to go to college we're going to subsidize college we're going to make loans cheap or easy to get and we're going to we're going to subsidize the colleges themselves we're going to encourage people financially to put themselves through this process if that happens here you get taxes extracted from the population that then are inserted into the higher education institutions and encouraging people through these subsidies to put themselves through this higher education process which means that you get colleges and universities that have an incentive to attract more students because the students come along with money bags that are handed to them by the taxpayers well by the government money from the taxpayers via the government so the the colleges and universities say well hey this is great we've got lots of money the more students we have the more money we get we can grow in size and we we want to have more students going through our process and and in fact this may lead to a problem i'll talk about a little bit later called great inflation where colleges and universities realize implicitly they may not state this but they realize that we don't give students grades that are above a certain threshold they might lose that subsidy and then we lose the student and we lose all the taxpayer dollars that came along riding on that student's back and we don't want that to happen so maybe there would be maybe we should go easy on the requirements and and pass students so we might end up with students that end up being certified they've got their degree that says hey i'm certified motivated intelligent persevering but they're not really they just pass the system because the higher education institution had this incentive to to um uh to keep them in classes for four years um and then you get you know you still get people that bypass the filter but maybe not so many you got a lot of people that that decide because this is subsidized this is what i'm going to do with the next four years five years six years of my life um brian kaplan wrote a book recently on this he called it uh the title of the case against education um and he too is a is a professor and uh she could say this is kind of a biting the hand that feeds him as well um but he says look we're we're we're wasting we're wasting resources doing this and the subsidies that are going to higher education are fostering this this kind of of um uh this the social waste people are spending their time engaged in uh recreation or um struggling through classes that really aren't going to help them in their old what they're going to end up doing in their careers so he says once workers have been ranked giving everyone extra years of education is socially wasteful furthermore since the status quo is supported by hundreds of billions of dollars of subsidies we are probably underusing alternative certification methods like apprenticeships testing boot camps and so on you're here mises you you're you're learning something you're here for the human capital um i don't know a lot of employers that are going to say oh you went to mises you um and so therefore um you're motivated persevering and intelligent that may be the case but you're here to gather the the human capital what we see with mainstream higher education is is quite possibly more of a signaling than it is actually the the knowledge that you're that you're gaining i mean i'm i'm i was a mises you student one time i came for the knowledge i did not come because i thought that this was somehow going to boost my um my employment prospects um although again it it it may um so if if mainstream higher education is being heavily subsidized and therefore more people are entering this kind of signaling process uh this may explain why students tend to be more concerned about grades than actual learning i mean it's a constant frustration of of faculty it's like students say well i have a question about um uh about something i say yes and he says well is is such and such going to be on the test and i my heart just sinks a little bit when i hear that because i think well don't you want to know this because you want to know this i mean is there more to this than just getting the number that i attached to your name at the end of the into the class and and i should know by now this is why am i still being disappointed i should be kind of hardened to that by now but i'm i still just die a little bit inside when students ask me is this going to be on the test i mean rather than saying you know what is wrong with kanesianism which i can answer that um but you know they're not as concerned about understanding acceptance so far as the understanding gets them a good grade and i you know i was a student once too i understand that to some extent but um what students want is an easy grade or easy a so that they can get that certificate that says i'm motivated certified um intelligent and so forth but i'm i don't necessarily know these things but i look like someone who does and that is they they got the signal no i'm certified so um this explains a kaplan says why students readily forget course material the day after the final exam which which does happen uh so he says we we need far less education and the cleanest way to get far less education is to sharply cut government education spending employers will no longer expect you to have the education you can no longer afford in other words spending cuts will cause credential deflation those that have the credentials will have something much more valuable um uh you'll once again be able to get low and middle school jobs with a high school degree or less like my grandfather did he says there's little sign that education causes much enlightenment or civic understanding even at top schools most students are intellectually and culturally apathetic and most professors are uninspiring um and and that's true a lot of professors have gotten so cynical about this process that's like well they just want the a i don't want to spend a lot of time developing interesting lectures i don't want to spend a lot of time grading so it's just going to be an easy multiple choice test and uh gets you out the door give you the a you're not going to complain if i give you an a if you get a b maybe you're going to complain so i'll just give you an a and that way i don't have to deal with you i mean that's kind of a cynical view that that faculty sometimes develop and and it's a it's a constant struggle when we're in this system to have to fight against that kind of temptation to be lazy and to be uninspiring because students often want the grade more than they want the inspiration so um a great piece on this is um jonathan human's piece on mesis wire from from several years ago where he says students are running out of reasons to pursue higher education they're not really developing critical thinking skills and in fact we're we're we're developing a kind of a university environment in which critical thinking is um stifled and and we're seeing less of this over time um graduates he says have little to no improvement in critical thinking skills at some of the most prestigious flagship universities test results indicate the average graduate shows little or no improvement in critical thinking over four years employers are beginning to discount the degree signal as well google for example doesn't care if potential hires have a college degree they look past academic credentials for other characteristics to predict job performance you know google at least is saying we're interested in what you know we don't care if you've got the little certificate that shows that you know it we we've got other means of kind of sussing out whether you've got those skills or not i mentioned grade inflation a little while ago and um uh in a boston globe article from several years ago uh yale one of the ivy league prestigious top universities in the united states by reputation anyway 62 percent of the grades are in the a range um one national survey found that 41 percent have had grade point averages of a minus or higher compared to just seven percent in 1969 and again if you look at it from the like a faculty standpoint there's this i know i i i i just want to minimize the um the trouble and the harassment that students give me right that's the typical faculty member is going to say i just just take take the a what so what is the cost to a faculty member in giving a student an a versus a b i mean the my my boss is not going to call me and say why did you give the student an a uh an a instead of a b so i i'm not going to get that kind of complaint if i give students a lot of a's even if they're not really justified or or indicative of the knowledge that that student has on exiting my class so the institutional environment is such that it incentivizes faculty to give more and more a's and i would say there's been a shift in this this is um from 1940 to about 2012 or so the red line there is um the percentage of a's and you can see after the late 1960s which around that time we saw a lot more people going to college and getting and bringing their government subsidies student loan programs and so forth that we're encouraging people to go to college and the percentage of a's has been rising a lot of the money that rides in with students is tied to a gpa if your gpa falls below a certain amount then you lose your your eligibility for the the money so faculty get pressured um not just by the students right not just by the students but of course the students don't want to lose their eligibility for financial aid so they're going to put pressure in there you know i i've had students come to me and say look if i don't get a c in your class then i'm going to lose my financial aid now i'll i'll i'll have to leave well what faculty member wants to be the person that's responsible for the student leaving the institution and they just sort of tug on your heart on on this um and and again given that there's no limit on the number of a's i can give the incentive is to just a's for everybody right um you notice how mises you does this with the um with the testing at the end of the week the optional testing that you have the moondalica proofing where um we not everybody will will pass the written exam not everybody will pass the will will get the award at the end of the week um there's it's rationed and uh perhaps colleges and universities should think about doing something like this where they say all right each professor can assign a's to the top 10 of their class that's it and if you do more than that you're going to wind up in the provost's office so and you can assign as many f's as you want but you can only assign um a's to 10 percent of your students you know that that might but again the institutions don't have an incentive to do this either because the money rides in on the back of the students and the students lose their gpa then they they drop out and the money goes away for the institution as well so um college is becoming less demanding for students over time um believe it or not i know some of you study very very hard and it's hard to believe and i i'm sure most of you in this room are really hardworking students uh you're you're signaling in fact by being at me says you that that you're hardworking and interested in learning um uh that may not translate to any kind of points with your college or university but you know i i see you here and and for what it's worth i think more highly of you um so what what's happening over time is that students are spending less and less time studying again from richard vetter's book in 1961 students were spending about 40 hours a week if they were full-time college students in the united states they were spending about 40 hours a week on academic work in 2003 that had dropped to under 30 hours a week on academic work um i don't have data and vetter didn't provide the data on what's happened since 2003 uh the last 18 years i i don't know what's what that looks like but the trend is definitely uh less demanding work second crisis government subsidies are backfiring this is the student loan debt clock as of yesterday i was on that web page and i was watching this number just tick up by the second as students are are borrowing more and more money 1.8 trillion dollars as of yesterday um last year when i gave this talk it was somewhere around 1.7 trillion um and it just keeps keeps going up so tuition is going up students are borrowing more to pay the tuition and there is uh some evidence that the um that the colleges and universities are raising their tuition as students become more and more eligible for student loan debt so it's not like students out of pocket expenditures are really declining it's that the government says we're going to subsidize higher education rather than pass those subsidies on to students in the form of lower lower tuition colleges and universities have simply said well uh great you have more money to spend uh we're going to raise our tuition so you can see um the blue line there is the consumer price index um we know that there problems with the consumer price index is a measure but we'll we'll turn grandma's picture of the wall and just look at it for for now uh the red line there is the is the tuition cost at a public four-year institution and notice what's happened in the last 20 years i mean that's just accelerated um if you look at the ratio of average tuition and required fees for all four-year degree granting institutions relative to median household income that too has been rising so you could say well college has gotten more expensive but households are earning more money so it's it's not any less affordable well no it it is actually less affordable than it it was for households and of course households are borrowing much more to pay for um a higher education than they than they once were and we're seeing that um student loans have become a real burden on recent graduates the uh red line that you see here that was about the third largest source of delinquencies on on loans uh is is now um higher than all the rest the percentage of the balances this is as of 2017 but the percentage of balances 90 plus days delinquent is it has increased sharply for student loans so students are borrowing more money but they're not necessarily able to pay it back part of the problem is students that borrow money they go to college they borrow more money but they don't finish and uh i didn't mention this earlier but one of the arguments for this kind of signaling hypothesis for higher education is that a student that goes seven semesters to college and drops out right before finishing has a much lower income potential than a student that finishes the program out and has that sheepskin in fact it's called the sheepskin effect almost finishing college is not nearly as good as finishing because it it doesn't carry the same signal even though theoretically you've got seven eighths of the knowledge that you would have had if you'd stayed the final semester in fact arguably you've got more than seven eighths of the knowledge and yet you don't get seven eighths of the income boost that a person who has the degree would have um and so you see these people that go to college and for whatever reason personal circumstances or money runs out or whatever happens and they drop out and they're stuck with seven eighths of the debt but only a tiny fraction of the income boost and they run into real financial trouble a market has natural mechanisms for punishing credit abusers mechanisms that decrease the likelihood that these individuals will be the beneficiaries of credit in the future in in future transactions unfortunately such mechanisms are not intrinsic in federal financial aid where everyone enjoys equal status regardless of their ability to satisfy debt related obligations this is from ag smith's article on mesis.org the bubble in for-profit schooling and i i cut out a lot of the stuff i was going to say about for-profit schooling but there are a lot of people mainly a few years ago when we saw this kind of attack on for-profit schooling and they they began to associate the profit motive with the problem that we were seeing in a lot of for-profit institutions it's not the profit motive that's the problem here but for-profit institutions of higher education we're tending to provide education to groups that were very different from what your typical 18 to 22 year full-time college student was so they were they were providing education to people that might be you know working adults and they've got a lot of they've got busy lives a lot of stuff going on life happens to people they might have to compromise a little bit on their academic time because they've got kids and jobs and all kinds of stuff going on and so um the for-profit higher education got i think an undeserved bad reputation because it was serving a group that had difficulties that the the mainstream colleges and universities didn't have to deal with so that that's uh that's my short take on on that um i'm going to skip over some of the studies here that i had referenced so where does this money go i mean colleges are raising their tuition they're getting all this money riding in on the back of students and what what's happening i mean what i've observed is that it's not really going to academics it's not really going to you know expanding either the number of faculty or the competency of the faculty or other academic kind of inputs it's going to things that make students more comfortable and and contributes to their recreation and their enjoyment of of their four years so dormitory improvements you can see this in Auburn i mean i i went to graduate school here and i every time i come back i'm just shocked at the the growth of what appeared to be i haven't been inside but appeared to be really luxury accommodations for students and uh you know i remember the student housing that i was in when i was here and it was um not luxury and uh so Princeton for example spent 136 million dollars on a student dorm that had leaded glass windows a cavernous oak dining hall uh it was 300 thousand dollars per bed i mean this is incredible and uh taxpayers largely are funding this um since 2000 new york university has provided 90 million dollars in loans many of them zero interest and forgivable to administrators and faculty to buy houses and summer homes and fire island and the hamptons former ohio state president gordon ghi earned nearly two million dollars in compensation this would have been 2012 while living in a 9600 square foot tutor mansion on a 1.3 acre estate 673 thousand dollars in art decor a 532 dollar shower curtain in a guest bathroom uh 23 thousand dollars a month for uh basically parties and travel on a private jet um administrator bloat is well known now in colleges and universities so we see um if you look at the number of employees at colleges and universities it's not that the number of faculties increased that much i mean it has maybe somewhat with the increase in enrollment but where you really see the the highest percentage growth is in various um administrates and deanlets and uh the the the kind of middle management of of higher education uh i i i love the place where i teach i don't want to say anything negative about the place where i teach but uh when i when i arrived at that institution um about 20 years ago there was um um there was a dean of students and there was an academic dean and there was maybe one other dean i can't remember that was it um and we're just like every every other place that i know of where we've just expanded the number of deans and associate deans and assistant deans and various other people that work in their offices university of california system has 2400 approximately administrative staff just in the president's office this is massive right vetter says 30 of the adult population has college degrees the college the department of labor tells us that only 20 or so jobs require college degrees we have 116 000 janitors in the united states with bachelor's degrees or more why are we encouraging more kids to go to college with with this money ultimately if you want college to be more affordable disinvest taxpayer dollars in higher education and try to to remove all of these all of these subsidies i did not get to the last crisis which is probably for the best on politicized academic discourse we had a talk earlier this week on kind of cancel culture so we you know some of this already from personal experience perhaps but i'll stop there and thank you very much for