 This is a this is a talk. I've not given Before here or anywhere else. So you'll you're my Guinea pigs on this you'll have to give me some feedback afterward and let me know what I need to change But it's an area that I've obviously got a personal professional interest in This is what I do. I do higher education and I've watched a lot of things change over the years I was informed by a colleague of mine at Wofford College where I teach In South Carolina that I'm now considered a senior faculty member and I I'm not sure how well I took that I'm used to being the the younger faculty member and and With all the the privileges that go with that and and so I've been around higher education for about 25 years now and went to graduate school here at Auburn and Did my undergrad and my master's at Clemson and now I teach at a small liberal arts college So I've seen a variety things I've seen private education large private universities that I've taught in a large private university I've taught in a small private college. I went to school at large state institutions and Again, a lot of a lot of stuff has changed here Maybe I should have said crises because I'm going to talk about three different Crises here in this talk. I'm going to get through as much of this as I as I can the first crisis is I think that college does not do what it advertises. Maybe it hasn't for some time, but people seem to be Recognizing this so we might want to ask what is it exactly that we expect higher education to do Do we expect it to transfer skills? to the students I Think that's the most common view of higher education you go to college so that you can learn something so that you come out with Greater abilities in some area you learn something about business or you learn something about language or you learn about a Science you learn something While you're there and then you come out better able to do whatever it is that you've set your sights on But there's been some work done in recent years Looking at the so-called signalling hypothesis that is that higher education is not so much transferring abilities to the students as it is performing a kind of a sorting function and Allowing those who pass a certain number of tests and other hurdles to demonstrate to the Potential employers out there that they have a certain Skill or characteristic about them that is desirable Maybe it's that you've got a disposition toward higher higher-order thinking and Going through four years or more of higher education is a way to prove that Some Invisible characteristic that you could only get through college and you would only stick through it for four years if you actually had that Characteristic but it's not that college actually confers that on you. It's that it it allows you to create a Kind of a billboard that says you know I am X whatever the characteristic is that you'd like to demonstrate Another possibility is that college is simply a consumption good for higher income individuals that it's just if you've got enough resources available to you then you get to go and and Stay at a place for four years and Partaking all the social activities and maybe it's a kind of a chance to meet up with with people That are similar to you and some character in some way and you you can enjoy your four years on your parents dime maybe it's your parents dime, but It's just something that is a consumption good So you'll see different takes on college You have probably seen something like this or heard about something like this that if you go to college Your income will be higher After you graduate and it would have been if you had stayed with your high school diploma and and Simply entered the workforce as a high school graduate And so there is a correlation between higher education attainment and higher income so on this Graph here. This is the probability of being in an educational group for a given income level The data are a little bit old, but I think that the point remains true if you're in the $150,000 a year income level and up there's about an 80% chance that you have a college degree If not that then you there's about a 10% or so chance that you've got some college Whereas if you are in a lower income group like let's say 20 to $30,000 a year There is only about a 15 to 17% chance that you have a four-year college degree So there is a correlation pretty strong when it appears between Attaining a four-year degree or maybe more and and having a higher income You'll also see Data like this. This is a college the return on college education compared to alternative investments So this is the internal rate of return here on the vertical axis and you see about a 20% Rate of return to a an associate's degree a two-year degree about a 15% rate of return to a bachelor's degree and that Beats it appears things like the stock market AAA bonds gold long-term treasuries and housing So this is the kind of thing your parents tell you when they say you need to go to college Right, so what are you going to do if you don't go to college? You're you're not going to learn anything and your income will be low Well, again, there is a correlation here, but exactly what is what is going on? The Signaling idea I think is worth some consideration So let's let's think about how this works because the outcome of the signaling Hypothesis may look very similar to the outcome of the college as Conferring skills idea the human capital Idea because you end up with college graduates that have Higher incomes in both cases, but maybe for very different reasons So I don't know how effective this would be I came up with this a few days ago As I was working on refining this this talk and I thought you know a diagram is always nice so here you have the population made up of reds and blues and That's not Democrats and Republicans that I've sort of divided the population into people who do not have Some desirable characteristic in the workplace like let's let's say cognitive skills Okay, cognitive skills. Let's say so the reds do not have those skills and the blues do Okay, and I've put over here Motivated persevering intelligent. That's that's kind of the characteristics. We're looking for you want employers tend to want people who are motivated persevering and intelligent a Let's suppose. All right, so there's a population made up of this This mixture of people so college serves as a kind of a filter and It's a filter for motivation perseverance and intelligence and If you pass then you get into this box here with your sheepskin says I am a certified motivated persevering an intelligent person Okay, then there are people that attend college, but they don't complete the program and they either they either fail or they drop out I'll remind you Bill Gates was a college dropout. So this is not necessarily a Problem it has a lot to do with opportunity costs, but so some people fail or drop out and they get dumped into this box Which is people who are perhaps motivated persevering and intelligent, but they're not certified as such and There are people who Chose for one reason or another not to go through the filtering process either because they didn't think that their chances of passing would be very great or Because they thought the cost was too high or because they had some better opportunities than spending four years sitting at desks listening to people try to convert them to Marxism so they So you have some blues that bypass the filter, but also some reds that bypass the filter save themselves however many thousands of dollars Tens of that hundreds of thousands of dollars on on education and they wind up in the same box So you have people with a signal and people without a signal and if you're an employer and You value perseverance motivation intelligence Then you might go shopping for employees among college graduates. This may explain why employers often require a college degree Now that's changing and we'll talk about that a little bit this is the way that that a Higher education might function as an effective signal, but what's happened is The government especially since World War two has become increasingly involved in higher education Partly through the GI bill and later through more and more subsidies and you can go back before World War two And you find land-grant universities that were that were subsidized by government and other state institutions that that are That are beneficiaries of taxpayer dollars, so you can find this going back a long way But it seems that in recent years the level of subsidization of higher education has increased. So what's that done? That changes the situation a bit. So here you have your population and You have now tax dollars extracted by force from the population and They are turned into subsidies to distort the decision that a person makes between going to college or not going to college and So you now have more people going to this filter process Notice the arrow is larger. It's not nice. So So then you have more people in going through this filter Some of whom pass some of whom fail as as before and then perhaps fewer people people choosing to bypass the The filter because if somebody else is paying your your costs, then your your decisions might might change There are some scholars who've argued that this is this is a wasteful process. I tend to agree if you encourage people to Go to college through either subsidizing the institution which then starts shopping around for more students to justify the Per-student subsidies they're receiving or you subsidize the student directly You're encouraging more students to go to school. So you're encouraging more people to try to Gain this this signal this this billboard that says I am Motivated intelligent persevering and so forth And you'll notice the way I've created this in The first diagram we have only blues that made it through the filter now you've got people who are motivated persevering intelligent early certified as such and You've also got people who are certified motivating intelligent motivated intelligent persevering who are not Motivated intelligent or persevering But they've got the degree anyway Okay, there are a lot of universities that are Accepting students with lower and lower admissions requirements Because the subsidies from the government are tied to the number of students they have So their incentives are Open the door wider take students collect their subsidies Certify them even if they don't in fact have the characteristics That employers happen to have been used Happen to be looking for Brian Kaplan has a Recent book Think it came out in January or February Arguing that This this subsidization of higher education is socially wasteful He says what we're doing is we're not just ranking people We're ranking people and then we're encouraging them to go into more and more education higher education Which is useless from the point of view of creating this the signal He says since the status quo is supported by hundreds of billions of dollars of subsidies were probably Underusing alternative certification methods like apprenticeships testing Boot camps and and so on So there are other ways to certify yourself as having desirable Employment characteristics So he goes on to say that signaling explains why students are far more concerned about grades and actual learning They want easy a's not professors who teach lots of job skills Signaling explains why cheating pays a successful cheater profits by impersonating a good student Signaling explains why students readily forget course material the day after the final exam Once you've got the good signal in your transcript. You can usually safely forget whatever you learned Now most of you probably are in an institution of higher education. I'm sure that's not true of you you retain Everything that you've learned right So it doesn't it has a very long half-life for you All right Kaplan goes on to say that we need far less Education meaning schooling. Okay, there are other ways to get education Murray Rothbard wrote a book back in the 1970s Called Education free and compulsory and I think he was mostly talking about Secondary education primary and secondary education not so much higher education But he he made this point that education is not just schooling you can gain an education in other ways outside of formal Processes anyway Kaplan goes on to say that 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 You'll once again be able to get low and middle skill jobs with a high school degree or less There's no point in having a Four-year college degree if you're in if you're going to be working at a coffee place And we we actually have a lot of people with four-year degrees who are working in skill and working in jobs that have no call for The skills that are allegedly obtained in that four-year period Isn't that you've just wasted four years and racked up some student loans for what? There's no point So Kaplan says there's little sign that education causes much enlightenment or civic understanding This is in response to the argument that well, you know, maybe this is not just for the workplace Maybe this is because college allows people to be more enlightened individuals and they become better citizens whatever that means and They they become more knowledgeable about how to interact with each other and so they become, you know, better people But he says even at top schools most students are intellectually and culturally apathetic and most professors are uninspiring I Recommend that you take a look at this article published about a year ago by Jonathan Newman Jonathan here There he is Great great piece on Mises wire About why college degrees are becoming useless He says in that piece that graduates are displaying little to no improvement in critical thinking skills He says that 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 this degree signal as Well, Google doesn't care if potential hires have a college degree They look past academic credentials for other characteristics that predict job performance for example. They had a billboard I think in maybe San Francisco or something that had a Quantitative kind of problem or a mathematical problem and they said if you can solve this call us essentially and So they're they're filtering, but they're not doing it through a college or university and So that that that may become more widespread we may see Employers looking past your credentials recognizing that these credentials don't mean as much as they used to There's also a substantial amount of grade inflation Marcella bombardieri think I'm pronouncing that correctly says that at Yale 62 percent of the grades are in a range Arthur Levine found in a National survey that 41 percent of students had grade point averages of a minus or higher in 2009 compared to just seven percent in 1969 Everybody gets an A So what does an A mean anymore? What is? Graduating with honors magna cum laude or summa cum laude or what does that mean anymore? If you're if you're If you have these honors you and everybody else so what it's not a signal as much So there's another argument that education higher education maybe apart from whatever it does to allow you better opportunities in the workforce There are some that say well it it it lowers up. That's mainly for humor There's some to say it's It's it'll reduce crime Because people who are college graduates don't commit crimes as much as people who are not college graduates Randall Holcomb says This is wrong-headed it he says this is Inefficient people who are not going to turn into criminals anyway are enticed into gaining a higher education certification when they wouldn't have turned into criminals had they just Kept their high school diploma and gone into the workforce with just that So he says a more efficient policy would target criminal activity about punishing the criminal activity rather than trying to get people to Have a college degree on the on the idea that this is going to increase their incomes And and make them not become criminals So there was a study There have been a number of studies on this obviously, but Andrew Norton from Australia Looked at this recently and he said you know graduates are Likely college graduates are likely to have quite low conviction rates He says in 2009 only 14 percent of 25 to 34 year old prisoners had completed year 12 Compared to 63 percent of the general population But he says it seems more plausible that graduates are people who are always At relatively low risk of offending regardless of whether whether or not they pursued higher education This low risk would be a function of better socialization And the ability to earn a reasonable income without breaking the law Education is likely to have whatever Preventive effects is going to have well before higher education You heard that of that book whatever I needed to know I learned in kindergarten Well, maybe not quite kindergarten, but a lot of what you need for Becoming a productive person is is gained well before higher education My grandfather on my mother's side quit school after eighth grade That was not as uncommon in his generation as it may be now, but he did he did fine, you know, he Did he was very productive person very hard worker and he did very well for himself with just his eighth grade education That was for what he needed to do. That was sufficient Norton goes on to say that if you look at the connections in Australia at least between Education and crime you see this Okay, so up until about 2001 if you were trying to make the argument that more higher education means less crime You'd have a Bit of a problem Because we see that the blue here is crimes per hundred thousand people and then the Kind of purplish line here is the higher education attainment rate so We see the the correlation going in both directions. There's a positive correlation and a negative correlation. So It it there are some other factors Involved in crime rates, you can't just point to higher education and say well, you know All we need to do is get people and we're better educated and then we'll solve our problem So he says a third factor at least partly explains both trends He says the collapsing labor market Opportunities for men with little education over the past 30 or 40 years made both crime and higher Education more profitable relative to the alternative of welfare and insecure jobs So crime and higher education both increased It's not it's not as simple as just throwing dollars at higher education and expecting crime to to decline He says there's no direct relationship between crime and higher education if you increase higher education You're not going to get a reduction in crime a Second crisis is that government subsidies are backfiring Intuition is increasing future earnings are decreasing. This is again from Jonathan Newman's piece on Mises dot org According to Doug French College tuition and fees have increased 1,120 percent since records began in 1978 and the rate of increase in college costs have been has been four times Faster than the increase in the CPI you see that here The red is public four-year institutions the blue is the consumer price index. We're seeing a huge increase in tuition relative to prices in general and If you look at this This is the ratio of average tuition and required fees for all four-year degree granting institutions relative to median household income from 1969 to 2012 and 1969 up until the early 1980s tuition and fees was about eight or nine percent of your median household income and Then we got a Steady increase So that in 2012 it was consuming over a quarter of the median households income So it's become less and less affordable and we can see this also if we look at the Delinquencies on student loans So these are student loan or not just student loans, but all kinds of loans. They're balances that are three months or more delinquent in 2004 going through about first quarter of last year and You can see the you know credit cards are this dark blue line here kind of an increase here due to the last recession and Then a decrease as we had some economic recovery The student loans are this this darker red line here and we can see that They've become a real problem, especially after about 2012 The Delinquencies on student loan balances have increased and these are particularly problematic for borrowers because you cannot discharge these debts with bankruptcy Unlike some other kinds of debt the people who are most Adversely affected by these are people who went to college for a while and Then they quit Before they finished so they don't have their degree so they don't have that signal Doesn't matter if you went to three point nine years of college and then left your employer is not going to assume that you have You know almost all of your education and they're not going to treat that the same way they do somebody that actually finished Okay, that doesn't show that perseverance That they are looking for Yes, actually a little more than 10% maybe 11 or 12, but yeah, that's that's That's my understanding yes This is from the Federal Reserve Bank of New York We can investigate see if maybe there's some more recent numbers on this for the last year, but But yeah, I mean so if you quit Partway through your education. You still got to pay those loans back, but you don't have the higher income necessary to Make that more possible for you William Bennett in 1987 Said that increases in financial aid Have enabled colleges and universities to raise their tuitions So this has become known as the Bennett hypothesis and there have been some studies Fairly recent studies looking at whether or not this is true now. I don't have a lot of time left So I'm going to go through this Fairly quickly if you are interested in the details of the studies I can talk with you afterward and maybe send you my slides or something you can get these these papers So there's the 2007 study here Looking at the response of university tuition to federal grants and aid like the Pell grants This one says Little evidence of the Bennett hypothesis for in-state tuition for public universities, but for private universities a nearly one-for-one Relationship between increases in Pell grants and increases in tuition and Out of state tuition seems to behave this in a way similar to in-state tuition Nicholas Turner 2012 Intended cost reductions of tax-based federal student aid are substantially offset by institutional price increases For a sample of four-year colleges and universities Tax-based aid crowds out institutional aid roughly dollar for dollar In other words the out-of-pocket cost for students is not Improving simply because the government is throwing more money into higher education. We'll talk about where the money is going in a minute Selene and golden 2013 does federal student aid raise tuition new evidence on for-profit colleges Basically the answer is yes about 78 percent higher Tuition in places that are eligible to participate in federal student aid programs 2017 Luca Nadal and Shin Passed through effective tuition on changes of student loan maximums about 60 cents on the dollar smaller But positive effects for unsubsidized federal loans Gordon and Hedlund 2017 Accounting for the rise in college tuition. This is a chapter in an NBER book saying basically the demand side shocks Which are subsidized student loan availability caused tuition to jump by 91 percent All other changes Except those we see increases in tuition by only about 14 percent So we basically saying look that the main thing that's driving tuition Up is that we're getting subsidized student loan availability. There are other things that might drive up tuition, but That seems to be a very important one. Now where is that money going? Okay? Well If you walked around the campus over here, you probably saw some of the construction there's been construction that My college and most colleges and universities you'll see this kind of thing Perhaps some of you have seen that how many of you who are in college right now Have seen construction on your campus in the last year Okay all right, so Dormitories campus amenities administration buildings administration salaries Princeton we've got somebody from Princeton here. Is that student here in the room? There we go $136 million on a student dorm with leaded glass windows and a cavernous oak dining hall you live in that dorm No, it's really nice. You see It should be $300,000 per bed per bed. I Expect a butler if I'm going to stay in that building Since 2000 NYU has provided 90 million dollars in loans many of them zero interest and forgivable to Administrators and faculty why to buy houses and summer on homes on fire island in the Hamptons very nice Ohio State President Gordon Gee earned nearly two million dollars in compensation last year living in a nearly 10,000 square foot tutor mansion On a 1.3 acre estate $673,000 my house would be $673 in art decor and $532 shower curtain in a guest bathroom Private jet all the rest the University of California employs about 2,400 people just in its president's office Richard Vetter Says No, we have 30% of the adult population with college degrees and according to the Department of Labor only 20% of so or so of jobs require college degrees We have a hundred and fifteen thousand five hundred janitors in the United States with bachelor's degrees or more Why are we encouraging more people to go to college under these circumstances? He says basically, you know in the housing market we through the Federal Reserve created these lower Interest rates so that people could go out and buy houses and now we're creating similar incentives for people to go to school and Why do we expect different results? Let me talk a little bit about for-profit education This is not new some people act like it is it's not In 1897, which was not the first time we saw For-profit education on the scene more than 92% of college college students were enrolled at for-profit institutions Some of these were good some of those were bad Same kind of situation I think today except that today There has been this gusher of Federal money made available to for-profit schools and they like the banks during the housing bubble have acted and In accord with the incentives created for them So in 2016 while 15% of for-profit student borrowers on a federal loan have defaulted since 2013 7% of students at private schools and 11.3% of borrowers at public universities defaulted in the same time period for-profit education giants and some of them are Truly large or Were large some of them like University of Phoenix have Shriveled up and and I don't know if University of Phoenix. I it is still around I saw an ad for them recently so they're still around but a Ghost of its former self as I understand so So what happened I mean they grew fat on a steady diet of government credit My cleverly maneuvering their way through a vast field of regulatory landmines to take advantage of federal aid programs aimed at helping those they ultimately hurt students so Here is the percentage defaulting of student loans within three years is the dark green bar there 21% for for-profit institutions compared to say 16% for non-profit two years and 6% for non-profit four years Now Many people have looked at this and they've said oh well obviously the problem is their for-profit See what happens when the market gets involved in higher education? Evil profit-seeking people. I mean what so they say well, you know, that's that's the problem so AG Smith and another Mises dot org article that you can take a look at I encourage you to Said as expected many have ignorantly aimed their weaponry at the profit motive Instead of unleashing their fury on the root cause government interference in the market so We've we do see that for-profit institutions seem to have generated more Graduates that have trouble repaying their student loans or maybe just former students who have who have not been able to repay their their student loans as quickly part of the Reason for this is that they're reaching a different kind of student Typically They're reaching people who are often part-time Because they've got a lot of other things going on in their life. They've got Employment full-time employment. They've got families. They've got maybe health problems. They've got a lot of things going on and Those things by themselves are going to compromise their ability to pay any kind of debt But maybe especially student loan debt and so we if you get students that are Already kind of financially compromised Coming in the door. Why would we be surprised to see them financially compromised once they Leave the institution and yet what's happening is we're blaming the institution itself rather than Looking at the student loan availability that is encouraging them to take that route in the first place so You know you look back at the housing market crisis and I talked to students today who? weren't really thinking about finance when the housing market bubble occurred there they were you know eight years old or something when it happened and Yet their their impression of it is well the banks just got greedy and That's why we had the housing market crisis and I say look I Greed is probably not the best explanation of this I point them to Tom Woods book meltdown and some other resources and I say look Banks are responding to Not that the banks are not without not that they are without guilt But they are responding to incentives created by the Federal Reserve Annie Mae Freddie Mac and all the other kind of interventions The government had provided to shove people or at least induce people to take out loans Who were not good credit risks? I think the same thing has happened here and the for-profit institutions have Have more than the other kinds of colleges and universities Received those applications from those credit compromised individuals So Smith says a market has natural mechanisms for punishing credit abusers Unfortunately much the dismay of the American taxpayer such mechanisms are not intrinsic in federal financial aid Where everyone enjoys equal status regardless of their ability to satisfy debt related obligations? Doesn't matter. I mean what your previous Situation is or what your degree choice is or anything else that might indicate something about your future ability to repay Federal financial aid is intentionally blind to that kind of thing and it ends up creating some real problems I'm going to skip over some of this since I only have a couple of minutes left You like that Let me just move on to my third crisis very very quickly some of you have seen this stuff already Colleges and universities turning into Shouting matches and so forth students occupying administrative buildings and making demands that certain people not speak on campus There's a lot of this If you haven't heard about this then Feel free to talk with me afterward. I'll fill you in on some of the examples of this the sort of thing but So a 2017 study of college students said some students say shouting down speakers and using violence is sometimes acceptable Not a majority, but it doesn't take a majority to really create a problem 90% students of college students say it is never acceptable to use violence to prevent some from speaking but 10% say it is sometimes acceptable Wow 37% believe it is sometimes acceptable to shout down speakers. This is disturbing Is it it's Now again, I don't have a lot of time so I'm going to cut to the chase here and Skip through some of this stuff here Yeah, Murray Rothbard in ethics of liberty One of his more influential works I think said let's look at this human right of free speech Freedom of speech is supposed to mean the right of everyone to say whatever he likes, but the neglected question is where? Where does a man have this right? He certainly does not have it on property on which he is trespassing In short, he has this right only either on his own property or on the property of someone who has agreed To allow him on the premises in fact then there is no such thing as a separate right to free speech There is only a man's property right The right to do is he wills with his own or to make voluntary agreements with other property owners in short a Person does not have a right to freedom of speech What he does have is the right to hire a haul and address the people who enter the premises He does not have a right to freedom of the press What he does have is the right to write or publish a pamphlet and to sell that pamphlet to those who are willing to buy it Or give it away to those who are willing to accept it Thus what he has in each of these cases is property rights There is no extra right of free speech or free press beyond the property rights that a person may have in any given case so What about this fire in a crowded theater, you know, I have the right to free speech that allows me to shout fire in a crowded theater No, because the theater owner did not grant me that right to falsely I should qualify Shout fire in a crowded theater It's the theater owners theater and the theater owner is there to project a movie and all the other people Have the right to enjoy that movie because that's what they paid for So if I go to an event and there's some controversial speaker and I want to hear what the speaker has to say People who come in and shout down the speaker violating my property right which I obtained By gift or purchase from the owner of the venue that's the real problem with some of these things and I'll leave you with that since I'm out of time. Thank you very much