One University That Isn't Cutting Costs

A Washington Post profile of Liberty University, founded in 1971 by Jerry Falwell, says that Liberty has doubled its enrollment in the last six years:

The surging enrollment for a bastion of Christian conservatism in the central Virginia foothills highlights the school as a market leader at the crossroads of religion and higher education. Liberty figured out how to recruit masses of students via the Internet years before elite universities began ballyhooed experiments with free online courses.

Turbocharged growth inevitably raises questions about quality, and Liberty’s academic reputation has not risen as fast as its enrollment. About 47 percent of its first-time, full-time students graduate within six years, federal data show, below the national average of 58 percent. Liberty officials say such statistics reflect an admissions policy geared more toward opportunity than exclusivity.

And Liberty is doing well on the finance front too: "The university ended 2012 with more than $1 billion in net assets for the first time, counting cash, property, investments and other holdings. That is 10 times what the school had in 2006."

(HT: Marginal Revolution)

What Will the Sequester Do to Education Spending in Your State?

With the sequester looming large, Business Insider has created a  set of interactive maps to demonstrate which states will be hit the hardest by cuts to the education budget. "The report [from the National Education Association] claims that, if the cuts kick in, 7.4 million students would be affected — which means that either the quality of education they receive will go down or be eliminated entirely. The funding cuts could also lead to 49,365 potential job losses," writes Lisa Mahapatra. "But not all states will feel the hit equally. With more than $100 million cuts to their education budget, the states that will be most affected by the sequester are California, Texas, Illinois, New York and Florida."

A Better Way to Rank Colleges?

Amidst another scandal surrounding U.S. News and World Report's college rankings, economists Christopher N. Avery, Mark E. Glickman, Caroline M. Hoxby, and Andrew Metrick have proposed another option: rankings based on students' revealed preferences. Here's the abstract:

We present a method of ranking U.S. undergraduate programs based on students’ revealed preferences. When a student chooses a college among those that have admitted him, that college “wins” his “tournament.” Our method efficiently integrates the information from thousands of such tournaments. We implement the method using data from a national sample of high-achieving students. We demonstrate that this ranking method has strong theoretical properties, eliminating incentives for colleges to adopt strategic, inefficient admissions policies to improve their rankings. We also show empirically that our ranking is (1) not vulnerable to strategic manipulation; (2) similar regardless of whether we control for variables, such as net cost, that vary among a college’s admits; (3) similar regardless of whether we account for students selecting where to apply, including Early Decision. We exemplify multiple rankings for different types of students who have preferences that vary systematically.

College as Country Club?

We've made periodic attempts to explain the massive spike in college tuition in recent decades. There are many viable explanations: rising labor costs (more non-faculty staff and professors who cannot be cloned), shrinking federal and state funding, increased demand, etc.

On that last point -- the demand side -- we should especially consider "consumption amenities," as Brian Jacob, Brian McCall, and Kevin M. Stange label them in a new working paper called "College as Country Club: Do Colleges Cater to Students' Preferences for Consumption?" (abstract; pdf). I find the passage that I've bolded, below, to be especially fascinating:

This paper investigates whether demand-side market pressure explains colleges' decisions to provide consumption amenities to their students. We estimate a discrete choice model of college demand using micro data from the high school classes of 1992 and 2004, matched to extensive information on all four-year colleges in the U.S. We find that most students do appear to value college consumption amenities, including spending on student activities, sports, and dormitories. While this taste for amenities is broad-based, the taste for academic quality is confined to high-achieving students. The heterogeneity in student preferences implies that colleges face very different incentives depending on their current student body and the students who the institution hopes to attract. We estimate that the elasticities implied by our demand model can account for 16 percent of the total variation across colleges in the ratio of amenity to academic spending, and including them on top of key observable characteristics (sector, state, size, selectivity) increases the explained variation by twenty percent.

It would be great news if this meant that high-achieving students craving high academic quality will be rewarded with cheaper tuition in the future, but somehow I don't see that happening. Do you?

How to Get More Out of College

We've blogged and podcasted about the value (or lack thereof?) of a college education.  A new paper (summarized here) by sociologist Laura Hamilton suggests one way parents can help their kids get more out of college: help them a little less -- with tuition, at least.  Here's the abstract:

Evidence shows that parental financial investments increase college attendance, but we know little about how these investments shape postsecondary achievement. Two theoretical frameworks suggest diametric conclusions. Some studies operate from amore-is-more perspective in which children use calculated parental allocations to make academic progress. In contrast, a more-is-less perspective, rooted in a different model of rational behavior, suggests that parental investments create a disincentive for student achievement. I adjudicate between these frameworks, using data from nationally representative postsecondary datasets to determine what effect financial parental investments have on student GPA and degree completion. The findings suggest seemingly contradictory processes. Parental aid decreases student GPA, but it increases the odds of graduating—net of explanatory variables and accounting for alternative funding. Rather than strategically using resources in accordance with parental goals, or maximizing on their ability to avoid academic work, students are satisficing: they meet the criteria for adequacy on multiple fronts, rather than optimizing their chances for a particular outcome. As a result, students with parental funding often perform well enough to stay in school but dial down their academic efforts. I conclude by highlighting the importance of life stage and institutional context for parental investment.

How Is Early-Childhood Intervention Like Compound Interest?

Jason Fletcher, who teaches public health at Yale, has written earlier on the connection between ADHD and crime. (The gist: "children who experience ADHD symptoms face a substantially increased likelihood of engaging in many types of criminal activities.") He now has a new working paper called "The Effects of Childhood ADHD on Adult Labor Market Outcomes" (abstract, PDF):

While several types of mental illness, including substance abuse disorders, have been linked with poor labor market outcomes, no current research has been able to examine the effects of childhood ADHD.  As ADHD has become one of the most prevalent childhood mental conditions, it is useful to understand the full set of consequences of the illness.  This paper uses a longitudinal national sample, including sibling pairs, to show important labor market outcome consequences of ADHD.  The employment reduction is between 10-14 percentage points, the earnings reduction is approximately 33%, and the increase in social assistance is 15 points, which are larger than many estimates of the black-white earnings gap and the gender earnings gap.  A small share of the link is explained by education attainments and co-morbid health conditions and behaviors.  The results also show important differences in labor market consequences by family background and age of onset. These findings, along with similar research showing that ADHD is linked with poor education outcomes and adult crime, suggest that treating childhood ADHD can substantially increase the acquisition of human capital.

The more research of this sort that we see, the easier it is to believe the following: compound interest may indeed be the eighth wonder of the world, but early-childhood investment and intervention is probably Wonder 7.5.

How a Microfinance Program Encouraged School Dropouts

A new working paper (abstractPDF) by Britta Augsburg, Ralph De Haas, Heike Harmgart, and Costas Meghir uses a randomized trial to assess a microcredit program in Bosnia:

[W]e randomly allocated loans to a subset of applicants considered too risky and “unreliable” to be offered loans as regular borrowers of a well established MFI [micro-finance institution] in Bosnia. Our group is poorer and generally more disadvantaged than regular borrowers. What is particularly interesting is that they have applied for the loan and thus believe they have a profitable investment opportunity; however, they were turned down. This is exactly the group we need to analyze if we are to understand whether alleviating liquidity constraints in this way can be an effective anti-poverty tool.

What Happens When You Get Rid of Affirmative Action?

A new working paper (abstract; PDF) by economists Peter Arcidiacono, Esteban Aucejo, Patrick Coate, and V. Joseph Hotz looks at the effects of California's Proposition 209 on university matching:

Proposition 209 banned using racial preferences in admissions at California's public colleges. We analyze unique data for all applicants and enrollees within the University of California (UC) system before and after Prop 209. After Prop 209, graduation rates of minorities increased by 4.4%. We characterize conditions required for better matching of students to campuses to account for this increase. We find that Prop 209 did improve matching and this improvement was important for the graduation gains experienced by less-prepared students. At the same time, better matching only explains about 20% of the overall graduation rate increase. Changes after Prop 209 in the selectivity of enrolled students explains 34-50% of the increase. Finally, it appears UC campuses responded to Prop 209 by doing more to help retain and graduate its students, which explains between 30-46% of the post-Prop 209 improvement in the graduation rate of minorities.

One caveat: the study doesn't address outcomes for students who didn't attend University of California schools as a result of the change.

Is Tuition by Major a Good Idea?

A Florida state task force on education has just released a recommendation to adjust tuition, by major.

"Tuition would be lower for students pursuing degrees most needed for Florida's job market, including ones in science, technology, engineering and math, collectively known as the STEM fields," writes Scott Travis of the South Florida Sun-Sentinel.  Students in other majors -- psychology and the performing arts, for example -- would pay more.  "The purpose would not be to exterminate programs or keep students from pursuing them. There will always be a need for them," Dale Brill, the task force chair, told Travis. "But you better really want to do it, because you may have to pay more."

Here's how Alex Taborrak (of Marginal Revolution) sees the plan:

Announcing a New (Online Economics) University

Wowie kazowie! The Marginal Revolution blog, whose excellence is routinely noted on this blog, is launching a free, online Marginal Revolution University (MRU). From the announcement:

We think education should be better, cheaper, and easier to access.  So we decided to take matters into our own hands and create a new online education platform toward those ends. We have decided to do more to communicate our personal vision of economics to you and to the broader world. ...

Here are a few of the principles behind MR University: