Noah Smith on Higher Education Policy

He writes,

As long as the number of available college spots remains roughly fixed, reducing the price of college will have only a very modest effect in creating broad-based economic opportunity.

My recommended solution is to focus on increasing the number of college spots available. Those could be four-year university slots, or vocational education — a mix of both would probably be best. But the key is that supply should go up.

Pointer from Mark Thoma.

Of course, from an economic point of view, Smith’s point is spot on. However, the Kling Theory of Public Choice is that public policy will always choose to subsidize demand and restrict supply. That is what is most in the interest of incumbent suppliers, who are the drivers of public policy.

20 thoughts on “Noah Smith on Higher Education Policy

  1. How is the number of ‘college slots’ fixed? Yes, slots in elite institutions are, indeed, limited (if they weren’t those institutions wouldn’t be elite), but there are plenty of lower-tier colleges and universities and community colleges that welcome all comers. College ‘slots’ in the U.S. are no more limited than are ‘grocery store shopping opportunities’.

    • Exactly, there are over 3,000 institutions in this country, each on average can hold at least 1,000 to 3,000 students, or even 10,000 and more. Plus, many can do overflow things like renting space easily (short term) and building shuttle campuses (long term). That’s probably ten million people. The real problem is that only 30 of those institutions are the top 1%, and the market for students is not the 300 million americans, it’s the children of the 80 million members of the CCCP, the 18 million Indian households that are in their countries top 1%, etc.

    • “limited (if they weren’t those institutions wouldn’t be elite)”

      That is signaling. I know everyone here knows this, but are not some implications obvious and yet unrecognized?

    • Agreed. Smith’s premise is completely wrong. Tons of mid to lower tier colleges are eager for more students and have plenty of unused capacity.

      Elite college slots are fixed and that’s a large part of what makes them elite.

  2. The basic flaw in this analysis is the idea that going to college is somehow the same thing across multiple people, institutions, and time. The suitability of the education for enhancing a variety of life processes (including but not limited to employment) is highly variable.

  3. It’s the supply of high-value credentials that’s limited more so than the supply of “degrees.” This is the result of a winner-take-all economic system in my opinion. Much harder to fix. One idea would be for strong brands (e.g., Apple, Amazon) to get into the higher-education business.

  4. I do not think Smith is spot on, either from a traditional or political economic point of view. There’s no way sending more people to college is going to actually drive down average costs. We have 40 years of experience with this and the result is the opposite: the cost has skyrocketed.

    His plan to revitalize rural areas by building research universities there isn’t exactly sound, either, as the competition for funding is a zero sum game, and even if it weren’t, I strongly suspect that a lot of university-sponsored research is well past the point of diminishing marginal returns. That is, outside of MIT, CMU, Cal Tech, and some other places like that, most universities are not spending the research dollars they take in very effectively.

  5. It also happens that drastic increase in higher ed is probably required to break the signaling paradigm.

    • Isn’t it funny that we use the term “slots” instead of thinking in terms of marginal costs?

  6. The slots at the top 1-5% institutions are where there should be expansion; there’s already plenty of ‘other 95%’ slots.

    What is really missing is the fixed number of slots as CEO of Fortune 500 companies. There’s only … 500.
    Because of both capital intensification and gov’t regulation helping the bigger companies, there has been a decrease in the number of CEOs of companies with more than 50 employees. The USA, and the world, would be better off with more CEO slots, by having more smaller and medium companies.

    On universities, the Reps should be pushing for National Open Online Universities, including low-real estate cost area campuses, for low cost college study by MOOCs and teachers, who teach, rather than professors (who do research, to publish publish publish, despite the lower marginal utility of more publishing for most of it). We need graduates who know stuff and can think more critically.

    The Reps need to be heavily involved with what “common knowledge” is. There seems a lot more “fake social knowledge” available in college now, including Marxist economics that is taught as if it’s possibly not false.

    MOOCs & badges for the poor who want to learn, are willing to work, and able to learn how to demonstrate their knowledge to computer/ bot rectored tests.

  7. One place we really DO need more slots is in med schools, there are only 141. Why not 241? There have long been too few doctors; and it has long been known that as Boomers retire, the need for medical care will be increasing.

    Both Reps & Dems have been failing to increase the supply of doctors thru more Med schools.

    • I’ll second that. I tried to get into a pretty new doctor’s office and the nurse at the desk said “we aren’t taking new patients” and she had a look on her face like she was expecting me to say “congratulations.” However, I don’t necessarily think the answer is more doctors but a redefinition of “doctor.”

    • It wouldn’t help to increase medical school seats without more residency slots. Even better would be to allow foreign MDs to practice without repeating residency in the US — that alone would be the single biggest thing we could do to increase the MD supply.

  8. There is some evidence that elite colleges have room to expand without diluting talent.

    Outside of the elite too many people are going to college. There are far too many mediocre schools with high drop out rates. You could close half of the T3/T4 schools and it would be a net good, especially if you focused on the “liberal arts” heavy ones.

    The problem is that the job market is being emptied of mid-skill positions. The kind that people in that 0-1SD range we are shoving into college are. Re-tooling those schools to be more vocational would help, but the real issue is the lack of a mid-skill job market. That can’t be solved by giving out four year degrees.

    Of course Noah’s main problem is the dreaded “high school grad job market”. When life sucks for average people, trying to get some “above average” credential market to “make it” becomes a life or death struggle.

    • Is the job market really being “emptied” of mid-skill positions, or are mid-skill jobs going to immigrants? At the same time, are public schools deliberately channeling non-academically-inclined kids into the lower reaches of “higher education”?

      The idea that everyone should go to college – even a junior college – is just insane, IMHO. But this idea is relentlessly pressed upon the public from every direction.

    • I suspect the solution is more hierarchy, and to me that is capital formation: Smaller houses, bigger factories.

  9. So does anything not happen in the world because of one too few elite graduates?

    Or is it all positional good?

    • It’s not really even much of a positional good. Kruger and Dale showed that Ivy-qualified students who chose state schools instead did as well as those who attended the Ivies. So not only aren’t elite colleges providing greater value add to students, they’re apparently not even providing a more valuable signal. They’re really just coasting on their reputations and admissions committees. Of course, on average their graduates do very well, but it’s only because they’re able to enroll only elite students.

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