Freakonomics Goes to College, Part 1

Stephen J. DUBNER: Hello, Mr. Ezell?

Allen EZELL: Yes.

DUBNER: Hi, Stephen Dubner, nice to meet you.

EZELL: Stephen, nice to meet you. And you won’t believe what I’m holding in my hand.

DUBNER: Let me guess because I just got a degree in psychic work, so —.

EZELL: I’m impressed, over the Internet?

DUBNER: Of course, where else? I’m going to say that you have a diploma in your hand: a college diploma from maybe Appalachian State University.

EZELL: Yes, founded in the year 1899. I like their logo down at the bottom.

DUBNER: And what did I get my degree in?

EZELL: Oh, I have no idea; this is a blank.

DUBNER: Oh so it can be whatever I —.

EZELL: Sure.

DUBNER: You know, I’ve always wanted to be a vet.

EZELL: Well, if that turns you on, then that’s fine. And I’m sure that the animals would have fun with your children.

DUBNER: And do you maybe also have a graduate degree from Columbia University as well?

EZELL: “The trustees of Columbia University and the City of New York to all persons to whom these represent may come greeting, be it known that having completed the studies and satisfied the requirements for the degree of —” and it’s a blank also.

DUBNER: Hot diggity. You know, because I did get a degree in writing there, but I really thought I should have become a doctor instead. So —.

EZELL: Hey, you can be whatever you want to be. Remember, I’ve got two M.D.s.

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On today’s show, we’re talking about the value of a college degree. Now for the record, I really did go to college. I got my undergraduate degree — in broadcast journalism, actually — at Appalachian State University, and I got an M.F.A. in writing from Columbia.  Which is why Allen Ezell brought those particular diplomas to the radio studio. Now, you may be asking: who is Allen Ezell, and why how did he get hold of these blank diplomas? Well, he used to work for the F.B.I.

EZELL: I retired in late 1991, and for 12 years I handled what was called Operation DipScam: Diploma Scam. And it was a series of investigations on degree mills, diploma mills, throughout the United States, and some were abroad.

DUBNER: Now it should be said, you say that you handled this investigation, but you’re being a little modest here. You created this investigation, didn’t you?

EZELL: Well that’s true too.

Here’s how it started. One day in 1980, an informant came into Ezell’s F.B.I. office in Charlotte, North Carolina, and laid a couple of fake college diplomas on his desk. He told Ezell about a man in Greenville, South Carolina, who was selling them. So Ezell made a phone call. He didn’t say he was with the F.B.I. He said he was an accountant, hoping to get a promotion.

DUBNER: That first day when you got on the phone with the president of the university in Greenville, South Carolina — what was the name of that university?

EZELL: Southeastern.

DUBNER: Southeastern, and was it a real college at all?

EZELL: That word real…yes it was. Well, it’s a relative term. There was a point in time, probably 11 years before that, that it did have a building. There later came a point in time when they had a fire or something, when it stopped being real in that sense. And then the proprietor started operating the school out of three rooms of his house.

DUBNER: What was this fellow’s name?

EZELL: Dr. Alfred Jarrette.

DUBNER: Okay, so you called him up that day. You called up Dr. Jarrette at Southeastern University, and what did you say to him?

EZELL: We negotiated the price for my bachelor’s, master’s, and doctorate with no work whatsoever.

DUBNER: Wait— you bought a bachelor’s, master’s and a doctorate all at once?

EZELL: Sure, triple combo. Have it backdated, you know, with transcript.

DUBNER: During that conversation, Ezell made it sound as if he and a colleague might be helpful to Jarrette in growing his diploma business. So Jarrette invited them for a visit.

EZELL: He took us on a tour of his house and the three rooms involved. He showed us the school filing cabinet. He showed us our student files, and the other student files. He showed us blank diplomas, transcripts, seals, ribbons, all the trappings that it would take. Now, all of this information we used in our affidavit for the federal search warrant.

Ezell and some other F.B.I. agents put together their case, and then went back to see Jarrette, this time with a search warrant.

EZELL: I tried to explain to him that life is not over. That this is just a search warrant. So we spent two or three hours there. We did what we were supposed to. And then we left town and went back to Charlotte. But we later learned the following day when the phone rang, that after we had gone, Dr. Jarrette went out with a lady friend of his for dinner, started giving away some of his possessions, and then went into the bathroom and took a .38, and put it up to his head, and committed suicide. We did not see that coming. I did not see that coming at all. We had not even read all the boxes of stuff that we had. When we did read it, we saw that he had approximately 600-plus graduates over 11 years. We had federal, state and county employees. We had law enforcement. You name the profession, we had it.

And that was Allen Ezell’s introduction to the world of fake diplomas. Over the next decade, he helped uncover a huge counterfeit market: companies all over the country, doing millions of dollars worth of business.

EZELL: We bought 40 degrees, we had 16 federal search warrants, 19 federal grand jury indictments, about 21 convictions. We dismantled 40 schools and/or counterfeit operations. The highest gross revenue that I saw then — and this is pre-Internet — was $2 million. Now, after the Internet came about, $2 million that I was seeing for a gross revenue is not even pocket change. We’re now seeing $36 million, $7 million, $5 million. And the lollapalooza, the biggest one that we’ve ever seen, called University Degree Program — and they operated from ’98 through about ’03— by our calculations, they grossed $453 million. And the paper that they sold will pollute the market for years to come. And what makes it even worse — they sold degrees in anesthesiology, cardiology, dermatology, endocrinology, gastroenterology, neurology, obstetrics, oncology, ophthalmology, pediatrics, psychiatry, radiology, surgery, urology, and I would ask you where do you think the people who are employed that bought degrees in those majors?

DUBNER: Well that’s what I want to know, Allen, because if you’re saying this one firm grossed $450-some million over what, a five-year period — the average price let’s say was $1,000, let’s say.

EZELL: No, it was more. It was about $2,400 and you had a $500 discount. So let’s go in at $2,000.

DUBNER: Two-thousand. Even so, that’s more than 200,000 totally fake degrees.

EZELL: I told you, they were the lollapalooza. They were the biggest we’d ever seen.

DUBNER: And that’s one firm. So I have two questions for you. One is: where the hell are all these fake doctors, and how do I stay away from them? And two is: if there are 200,000, roughly, from one firm, how many fakes are we talking about in toto?

EZELL: We have no idea. Let me put it this way — the United States, all the colleges and universities in our country, award about 1.3 million degrees a year. Approximately 1 percent of that, we believe, is the amount of phony degrees that are sold in our country each year. As to where these people are that bought those degrees, we don’t have a clue. And I say that because no one in law enforcement, federal law enforcement, chased them. We don’t know who they are. We don’t know where they’re employed. Only occasionally will a graduate flush up. He could be practicing in a hospital. He could have something go awry in a medical procedure, and then they start looking at his credentials, and then find out that he’s a phony. You would be shocked at the number of people that buy this garbage, and then put it on their resume, and then post this online.

When Ezell retired in 1991, Operation DipScam ended, and, he says, the F.B.I. pretty much stopped investigating fake degrees. The industry has exploded since then. Today, you can buy just about any kind of degree online. There are two basic kinds of operations. One is simply a counterfeiting company, which sells fake versions of real degrees, from the university of your choice. The other is a diploma mill, essentially a fake university that issues its own degree, like Southeastern University and Dr. Jarrette. Sometimes a diploma mill will ask you for a resume and award course credits based on your work history. Occasionally, you’ll have to do some actual work.

EZELL: I mean, the most I’ve ever done is five pages on a master’s, okay.

DUBNER: But a lot of the time, you just pay the fee.

EZELL: Smash and grab; here’s my check, give me my degree.

DUBNER: So, imagine you’ve got a low-level job and you want a promotion that requires additional schooling, but you don’t want to go back to school. You tell your boss you’re working on a degree at night. And then, a year or two later, you give your boss your new fake diploma. Hey thanks, diploma mill!

EZELL: As of today there’s no federal criminal legislation regarding using diploma mill paper in this regard.

DUBNER: You sound as though you’re not happy that there is no law against that.

EZELL: Oh no, I’ve never been happy. The way you get somebody’s attention is with some handcuffs. The threat of a civil fine or embarrassment will not do it. We need a federal law that forbids diploma mills, non-accredited institutions, institutions that don’t have regional or national acceptable accreditation. It should not be this easy.

DUBNER: Does it still burn you, after all these years of pursuing these guys, to know that people are cheating so baldly?

EZELL: Oh, it always has. I mean, I have two daughters; one that graduated from University of North Carolina at Chapel Hill, one that graduated from the University of Florida. I have bought counterfeits of both of their school diplomas with transcripts. And I probably paid less than $800 for both. And you can imagine the thousands of dollars to send them to school. No, I cannot take away their level of learning that they had by going to school. But by buying a counterfeit, I can devalue the piece of paper that they walked out with at the end. Because it undermines all of our legitimate education, every one of us that have spent time, money, effort, sweat, all nighters — it devalues the degrees that we have.

If Ezell’s ballpark guess is true, that roughly 1 percent of college degrees are fake, just think about that. If you work in government, or health care, or maybe in public radio, for every one hundred coworkers, one of them is a fraud. You’ve got to wonder if there’s something about how we look at real college degrees that makes a fake one so attractive and so easy to get.

EZELL: You can be whatever you want to be.

You can be whatever you want to be. We say that a lot—parents to kids especially. But what we really mean is: you can be whatever you want to be, but first you need a college degree. Now, degree mills exploit our collective college anxiety, and they tell people: don’t worry about the education, it’s the piece of paper that gets you the job. Plus, a real degree is expensive, not only the money itself, but four years of your life. And, especially when the economy is crummy, it’s unclear if that investment is paying off. Coming up, we’ll talk about how much a college degree matters when you work in the White House.

Karl ROVE: I think I was in the last generation that could be stupid enough not to get a college degree.

*      *      *

Here’s the thing: when you look around at a variety of fields, you can find some really, really successful people who did not finish college. And not just in sports and entertainment. I’m talking about people at the top of knowledge fields, where smarts are key: so Bill Gates, Mark Zuckerberg, Richard Branson. Even in politics, you can find a few.

ROVE: Hey Stephen, how are ya?

DUBNER: That’s Karl Rove, former senior advisor and deputy chief of staff for President George W. Bush. Rove is currently a commentator for Fox News and a contributor to the Wall Street Journal. And at first glance, Rove’s academic credentials seem to be commensurate with his achievement.

DUBNER: So, here’s what I read from your bio: that you were a Colorado native who attended the University of Utah, the University of Maryland, College Park, George Mason University and the University of Texas at Austin. But what I can’t tell from that is if you actually graduated college. So tell me if you did or not.

ROVE: No, I never did, otherwise I would say I was a graduate of one of those colleges.

DUBNER: So I’m curious to the degree to which you were leaving college because you were working. It wasn’t you were leaving college to eat Cheetos on the couch, right?

ROVE: Well, yeah, no. I left college because I had a greater economic opportunity. I mean, I went to the University of Utah, only was able to attend college because I had a $1,500-a-year scholarship from the William Randolph Hearst Foundation. And I had, you know, to wait tables, and run a cash register in a hippie shop that sold patchouli oil, and work in an industrial kitchen at a hospital in order to make ends meet. And even then, I didn’t have very many ends. But, you know, I left the University of Utah where I’d been for two years in order to accept a job at the Republican National Committee. At the height of the Vietnam War, went to the University of Maryland, lost my student deferment, was almost drafted, went to George Mason in order to keep trying to get the college degree, and same at the University of Texas. And you know, I was cobbling together courses here and there, but each time, the chance to get a college degree was stymied by, you know, having sort of an unusual opportunity.

DUBNER: In each case, in each of these universities when you were enrolled, were you a political science major?

ROVE: Yes, probably the most useless degree that one can seek, but I’m sort of stuck.

DUBNER: Rove is widely considered to be a political genius. He was the architect of President Bush’s two electoral campaigns, and he had a lot of policy influence in the White House. And he’s a guy who left college because—well, because it just wasn’t worth it to him. He found he could learn more in the field than in a classroom. Listening to him, you start to think if you can learn so much by doing, why bother getting a degree?

ROVE: But mine’s an atypical experience. I mean, I think I was in the last generation that could be stupid enough not to get a college degree. We live in a society in which credentials matter. I mean, the Bill Gates of the world who go on to found Microsoft after, you know, dropping out of Harvard, are few and far between. The Karl Roves who go on to be, you know, Senior Advisor to the President after, you know, never completing your degree, are few and far between.

Rove points out that he did learn a lot in college, but not the kind of things you might expect:

ROVE: The best course that I ever took in college was in my sophomore year, and it was a course in Shakespearean literature. I learned more about political communications in that one semester from a Catholic nun than I learned in any political science course. It made me aware of the power of language, and how telling a story — a political campaign is about big issues, but you have describe a narrative. You have to create a storyline. You know: what is this all about?

DUBNER: So, as of today, how close are you to getting your undergraduate degree? How many credit hours shy are you?

ROVE: I think I’m about — my language requirement and about, I think, about six hours or nine hours beyond that. Math course, science course and language is what I think. Now, the language is going to kill me.

DUBNER: And realistically, how old are you now, Karl?

ROVE: Sixty-one.

DUBNER: Realistically, do you think you’re ever going to get your college degree?

ROVE: Let’s keep it out there as a goal. You know, life is about, you know, upward, upward vision, about moving towards ever higher plateaus and mountain peaks. So let’s keep it out there.

David CARD: We don’t really know why different people choose different levels of education.

That’s David Card. He’s an economist at the University of California, Berkeley.

CARD: Some people think it’s all parental background. Some people think it’s other attributes.

If you ask an economist a simple question about college like: is it worth it? He’ll tend to focus on the most tangible outcome, what economists call the “returns to education.” Which pretty much boils down to how much more money you’ll make if you go to college.

CARD: In my family we have all five possible levels of education. We have somebody who didn’t finish high school, someone who just finished high school, somebody who has kind of three years of college, vocational college, somebody who has a bachelor’s degree with a teaching certificate, and then me who has a Ph.D. And if you just were to look at our family every step of the way, the returns to education are enormous. I mean, totally enormous.

DUBNER: So the one who did not finish high school does what for a living?

CARD: Basically cleans houses.

DUBNER: Yeah, and is the level of educational attainment kind of a conversation in the family, or is it something that is just known, acknowledged and, you know, that’s the way it is?

CARD: Well, I think like many families, the next generations’ people say, “Well, should we try and convince this kid to go to college or not?” And it’s easy to say, “Well look, if you go to college you’re going to have a little bit easier choices to make. Once you get through that, things are going to be a lot easier for you.” If you don’t, going forward, you know — I think anybody who has kids who can possibly make it through a bachelor’s degree should really think of some way to get them through. Because I don’t see much of a future, 20 years from now, for the kid who doesn’t have that.

It’s always tempting to cast about for the anomalies; the billionaire who dropped out of college or, on the other hand, the Ph.D. who’s driving a taxi. But let’s not get distracted by the anomalies. If you want to measure the value of education, you have to think in the aggregate. And that’s what economists like to do. Here’s my Freakonomics friend and co-author Steve Levitt, an economist at the University of Chicago.

Steven LEVITT: The best way I think an economist thinks about the value of education is, tries to figure out how the market rewards it and what other benefits come with it. And one thing is clear, is that the market puts a tremendous reward on education. So the best estimates that the economists have are that each extra year of education that you get is worth about, maybe, an 8-percent increment to your earnings each year for the rest of your life. So it turns out, for most people, buying a lot of education — or at least for the average person let me say — buying a lot of education is a really good deal.

And here’s David Card again.

CARD: In addition to that, the one who went to college will probably work for five years longer at the end of their life. They’ll probably have less months of unemployment. They’ll probably have longer hours of work while they’re working. So all and all, their total earnings will be even higher than their kind of standard wage.

DUBNER: I mean, we’re talking about — economically at least — we’re talking about black and white, over the course of a lifetime.

CARD: Massive returns.

DUBNER: Massive, massive. How does this shake out, historically? In other words, was this advantage — what did that advantage look like 20 years ago, 30 years ago, do we know?

CARD: It looks like where we are today is as high as it’s ever been in the U.S. The low point was about 1975 to ’80, actually when I graduated from college. And ironically, a very well known labor economist — a friend of mine, Richard Freeman — wrote a book in the late ’70s called The Over-Educated American, in which he argued that trends were suggesting that too many people were going to college. Now, if anybody had followed that advice it would have been the worst possible choice they could have made, because starting around 1978, ’79, the return has just marched up steadily.

DUBNER: Okay, but what about now? I mean, we’ve had a few years of pretty crappy economy, employment-wise. Is it time to start thinking about the over-educated American problem?

CARD: I would say that returns are even higher now because of the recession. People aren’t thinking about it right. So they notice that somebody who graduates from college is having a bit of hard time getting a job, or they notice that the unemployment rate for college grads has gone up a little bit. But if you do the right counterfactual and say, “Well, what if I didn’t have a college degree?” It’s much worse. The rise in unemployment was much higher for people with just a high school diploma. As has always been true in every recession; the recession is always worse for less educated people.

DUBNER: So, is it safe to say then that returns to college education in the United States are historically at a high?

CARD: Yes.

DUBNER: Okay, so if that’s the case, I guess that’s great news for colleges, great news for college professors like yourself. It’s great news for people who plan to go to college.

CARD: Well there is a problem. That’s the kind of the benefits side of the calculation, and we haven’t really talked about the cost.

DUBNER: Ah yes: the cost. As former F.B.I. man Allen Ezell told us, you can get a fake diploma for a few hundred dollars. But the real deal? Much, much more expensive. On our next episode, we’ll try to figure out: why does college cost so much?

Betsey STEVENSON: I went to Wellesley College. I think it was a great place, and I saw the other day their tuition for the incoming class and almost spit out my drink.

DUBNER: And, what exactly happens in the classroom to give graduates such an advantage later in life?

LEVITT: I teach my students — I teach them very specific things. But I know that when I talk to them years later, they don’t remember anything that I taught them. I mean, I can ask them the most simple questions about the material we covered and they have no recollections whatsoever, the typical student.

DUBNER: That’s all coming next time on “Freakonomics Goes to College, Part 2.”

DUBNER: Yeah, come on in. Hey, Katherine.

Katherine WELLS: Hey, can I come in for a second?

DUBNER: Sure, what’d we do wrong? This is Katherine Wells, everybody, she produced this program.

WELLS: Sorry to interrupt here, but this has just made me wonder. I’m curious: is there anything you wish you could do but you just don’t have the education for it?

DUBNER: I’d like to do surgery, just casually.

WELLS: Casual surgery.

DUBNER: No, but I don’t really have the appetite to get that much education. No, I’d like to be able to operate on people and animals.

WELLS: Well, I was thinking, because when you talked to Allen Ezell you said, you know, you’d always wanted to be a vet.

DUBNER: Yeah, a vet.

WELLS: So the radio staff and I were thinking — we don’t want you to be held back anymore, so we have a little present for you here.

DUBNER: This is too good to be true. So it’s a brown mailing envelope, that says “Congrats,” handwritten, not an official stamp, no wax seal. “Appalachian State University, the board of regents for the university upon the recommendation of the faculty has conferred on Stephen J. Dubner, doctor of philosophy in Animal Health.” Summa cum laude.

WELLS: Congratulations!

DUBNER: Oh my god, thank you so much. This, to my untrained eye, looks like a legit diploma. Looks real. Where’d you get it?

WELLS: Yeah, it’s very professional. Online, the company I think was called DiplomaMakers.com. $190, any degree you want.

DUBNER: Now that I think about it, I don’t think I’m one of those people that have my diplomas hanging on a wall. I have no idea where my diplomas are, but—.

WELLS: Frame that one.

DUBNER: My Ph.D. in Animal Health is definitely going on the wall. Thank you very much.

WELLS: Anyway, congratulations.

DUBNER: Very thoughtful.