 Welcome to the Mises Academy podcast. I'm Danny Sanchez, Director of Online Learning at the Mises Institute. For this episode, I interviewed Peter Klein, Executive Director and Carl Manger Research Fellow at the Mises Institute. About his Lou Rockwell.com article, Universities to MOOCs. We will assimilate you. Now MOOCs stands for Massively Open Online Course. We reprinted the article at the Mises Academy blog at academy.mesis.org. Peter and I discussed the history of higher education and the prospects for online and market-based education. Hi, Peter Klein. Thank you for joining us. You wrote an article on the rise of the MOOCs and how the state will want to assimilate them and how universities are terrified of them. In that article, you talked about how higher education hasn't really changed much since the Middle Ages. Could you elaborate on that? Sure. Universities are interesting creatures because on the one hand, they're supposed to promote innovation in terms of ideas. This is where great theories come from and new research methods and so forth, centers of higher learning, not to mention centers of diversity and so forth. But in many ways, universities themselves are very conservative organizations, not politically conservative, but conservative in terms of how they do things and what they do. As you said, universities haven't changed that much in their basic structure since the medieval days. You have a professor sitting in front of a group of students giving a lecture. The students maybe do some readings. There's some kind of examination. There are some discussions among the students and so forth. That basic teaching model has changed very little in centuries. It's interesting that we have all these new technologies that have been introduced. Of course, the internet itself as a way of communicating and disseminating information and specific educational versions of that like online courses or so-called massively open online courses. As these have been introduced, it's been interesting to watch how universities have reacted because this is really a pretty radical technological shock and universities typically have not responded very well to those kind of shocks. It'll be interesting to see going forward what universities, how they'll manage to handle new competition and the possibility of new delivery methods for what they do. Whenever you see that kind of ossification and lack of dynamism, you tend to look for the stifling hand of the state. Where is that hand in this situation? Right. Well, in the higher education space, the better question might be where isn't the hand of the state? I mean, it's everywhere, of course. There are only a few other industries, banking and finance and of course corrections and defense and so forth that are more sort of state-centered than higher education. In all developed countries today, various federal, state, local government entities provide the lion's share of the resources for both research and teaching. Again, superficially, you might not think so, especially because in the last few years, universities, public or private, public or nominally private, are all complaining about cutbacks in public support, even just in the last year, complaints about the sequester and this amendment that was introduced by Senator Coburn of Oklahoma to defund social science research from the National Science Foundation. If you listen to those things, it sounds like, oh my gosh, the state has totally stepped back in some people's minds, shirking its responsibility to provide the public good of higher education. That's all just on the surface. If you look below the surface, the state continues to be the dominant funder just through different mechanisms through student loans, of course, through direct outlays from state governments and from the federal government, research grants, I mean in the sciences, almost all of the research funding comes from NSF, NIH and so forth. So in today's climate, the state provides the lion's share of the resources, even for the nominally private universities, MIT, Harvard, Stanford, whatever. They get a larger share of their total budget from government sources than the so-called public universities like Auburn University or University of Wisconsin or whatever. Now if you go way back, of course, to medieval days, the universities were, they were directly funded by the monarch. Sometimes they were directly supported by the church, the state funded church and so forth. So it's always been considered the prerogative of the state to be in charge of education at a number of levels, including, of course, higher education. Now Murray Rothbard had an interesting perspective on this. It's a little bit different, right? Rothbard talked about the intellectual class more generally, having this particular kind of relationship with the state. And I think he was exactly right to point this out that in a free society, in a market society without government intervention, there probably wouldn't be that much demand for the services of so-called intellectuals. Of course, by intellectuals, I don't mean people with a high IQ. I mean teachers, writers, researchers, scholars more generally. Of course, any advanced society is going to have some demand for scholarly activity in this broad sense. But a lot of so-called scholarly activity today is stuff that doesn't have much of value. Academics, intellectuals, scholars, they want to be paid. They want a nice, easy life where they can think deep thoughts and write and argue and so forth and get a paycheck. And, you know, in a market-based society that may not be very easy to use technical economics jargon, the marginal revenue product of that kind of activity may be pretty low, or at least not high enough to satisfy the scholar's demand for a nice house and a nice car. So, academics, scholars, intellectuals have always looked for patronage. Right now, in a free society, patrons can be wealthy individuals, private foundations, any person of means who wishes to support the activity of the scholar just as with artists. And of course, that's great. That's something we should condone. That's all for the good. But usually the supply of intellectuals wanting such patronage vastly exceeds the demand for their services. So, historically, they've turned, of course, to the state for support and for protection. And so Rothbard described this kind of unholy alliance, if you like, where the state provides the resources, the job security, the funding and so forth for the intellectuals in exchange for a usually implicit, though maybe sometimes explicit promise that the intellectuals will devote a lot of their energy toward defending the state. Weaving apologia for the state. Rothbard talked about the intellectual bodyguard of the Hohenzollern, which is what the Prussian professors refer to themselves as. And in his article World War I as fulfillment, he talks about how that culture in Germany, especially cultivated by Bismarck, was exported to the United States and had a big role in the progressive movement. Yes. No, that's exactly right. That's an interesting case because it's so explicit there. I mean, where the professors are saying our job is to defend the specific state in which we're living. Usually it's a little bit more subtle than that, although one interesting case, as I just sort of mentioned before, is I've been reading some popular writings by political scientists who have been lobbying very hard to block this co-burn proposal. And it's very funny what they say. Basically, they argue that political science research has huge social benefits and therefore we should get more government funding because what we do helps to explain how the state works and illuminate the state and of course a lot of it is there to justify the state. I mean, it's a pretty blatant money grab. We demand resources because what we do is important. It's very hard to find examples of other members of society who are not the direct beneficiaries. Clamoring for this kind of work to be done. But most of the time, Danny, it's not that blatant. It's as we know that most members of the intellectual class, so-called disproportionately favor state intervention, you know, socialist forms of organization over capitalist ones, etc. And so I've always thought it's funny that if a researcher receives any sort of funding from a private party, it's very important that those funding sources be disclosed as a potential conflict of interest. You know, if I were doing a study on lung cancer and I was getting a grant from R.J. Reynolds, of course I would have to disclose that in the paper and everyone would dismiss my research as being unreliable and biased. But if I'm a political scientist doing research on, you know, the benefits of democracy in the developing world and I'm funded by the National Science Foundation or some other government grant, typically no one would think that's a big deal at all. Of course you don't have to disclose that because the government is only trying to benefit the public at large. Of course that, if you think about it for just two, you know, a nanosecond, you realize that if getting funding from R.J. Reynolds is problematic, why isn't getting funding from the government equally problematic? Recently in a podcast, Lou Rockwell mentioned how almost every monetary economist in the country is funded to eat, whether through perks or through outright money by the Fed. That's right. There's a great article on this by Lawrence White in Econ Journal Watch. Another similar industry is the field of agricultural science and agricultural economics in particular. Similar relationship with the U.S. Department of Agriculture that almost all of the research is funded directly or indirectly by the USDA. Not surprisingly, the consensus view seems to be that the USDA is doing a really great job. Thank you for listening to the Mises Academy podcast. To enroll in online courses, to access other episodes of this podcast, or for more information, visit academy.mesis.org.