The growth era in higher education is over?

I disagree with most of this argument (we can’t raise tuition anymore, and govt. money/fund-raising/endowment potential is now tapped out as well, meaning that a long period of higher education austerity is upon us), but I hear it more and more.

http://www.insidehighered.com/views/2008/09/29/burke

My response is that productivity rates in the economy and international trade continue to increase. That means that even if the economy grows only slowly over the next decade (and I'm more optimistic than that), the percentage of income dedicated to non-service areas will continue to decline, and the percentage of income allotted for things like health care and education will continue to go up. I’ve seen projections of a slowdown in these rates of increase, but absolutely no serious talk about a reversal of these trends toward more and more money being spent on health care and education.

What I do see as increasingly possible, however, is a number of bubble institutions failing in a recessionary economy. That’s what’s supposed to happen in a recession, right? The marginal institutions fail and the strong institutions get stronger. Since I believe us to be one of those strong institutions, I see this eventuality as an opportunity and not something to be overly worried about . . . yet.

Review of "Moneyball"

A great book and a fun read in which famed author Michael Lewis provides the inside story about the Oakland A's ability to outperform their low salaries and how their mercurial GM, Billy Beane, has developed their model for success. The basic story is the use of scientific thinking (starting with Bill James in this case) to find value in players that the market wasn't recognizing. In 2002, that meant an emphasis on offense, particularly by focusing on on-base percentages (walks are encouraged, steals and bunts are not).

As with many of these "social science for the masses" books that I've been reading lately, this one's well written and compelling. I'm just not sure how much it translates into the world I live in. Baseball has tons of performance-based information, huge amounts of money, and a real "market" in which things (in this case people) can be traded. Education has none of these.

But let's say you wanted to create something similar in the world of higher education to what Billy Beane has done with the A's. You'd need a highly centralized administrative system that generated a lot of data, much of it new (such as nationally comparable student evaluation information, nationally comparable student motivation information, nationally comparable pre and post tests, and so on). Then you'd have to charge a premium for a "premium" product to generate the additional revenue needed. Finally, you'd probably have to make all of the profs part-time adjuncts so that you'd have the freedom to let them go if they didn't meet the very high cutoffs that you're looking for.

All of that looks way too much like the University of Phoenix model for the comfort of most people. But I guess that's the point. If there were an acceptable way to do the Billy Beane approach, then there wouldn't be value to be gained in this particular marketplace, because lots of people would be doing it. Very few people in baseball think Billy Beane is on to anything substantive, which is why Billy Beane can continue to succeed.

How China got rich?

After much delay to deal with JBU budget issues, I've finally finished reading "The Undercover Economist." The last chapter, about how China got rich, was particularly intriguing. The crux of the argument is that China already had a lot of the necessary pieces (well educated people, access to world markets via Hong Kong & Taiwan, and huge labor and capital supplies), but they were missing the necessary incentive systems to develop. Deng put those in place, and voila, the most rapid economic expansion in the history of the world.

But how Deng put those incentives in place is fascinating. He didn't use "shock therapy" the way Russia and some of the E. European countries tried (and mostly failed). Instead, he insured that the state economy would continue with its current structures and quotas . . . but no more than that. Any extra production from the state businesses would go back to the businesses, not the state. Since it's the marginal production (the last unit) that matters, this allowance for profit on the margins revolutionized the economy while the assurance that the old system would not be (immediately) destroyed avoided most of the panic and revolutionary chaos that occurred elsewhere.

The basic argument here is an old one that revolutions do not happen because people are poor or miserable. They occur because people with a little (or a lot) fear that what they have will be taken away from them. But in order to produce more, people need to know that that "extra" production will go to them and not just back into "the system." Deng managed to address both ends of this change continuum, and the spectacular growth in the new areas (which, crucially, included new competitors at the local and international levels) soon dwarfed the old state economy.

What lessons then for JBU? One of my main arguments related to health care policy at JBU is that we need to move to a system where decisions "on the margin" redound to the benefit of the individuals making the decision instead of to JBU as a whole. An HSA system, for example, would do much more of that than our current structure does. But the second half of the equation is that the change is much easier to do if you can assure people that at least initially, they won't lose anything. You need to "buy out" the inertia and potential political opposition of the old system and allow the new resources to flow to those who are most "productive."

I've tried to apply this fairly straightforward thinking in a variety of areas (such as the ancillary budget system, the loads and caps documents, the various innovation funds, and our summer scholarships), but the big challenge in all of these cases, as was also true of the Chinese situation, is that redirecting "new" resources requires that you're actually generating new resources. Growth is the key to change. The new incentive system that China implemented probably would not have been enough if it didn't have to the other factors in its favor (as India has not, for example) to work from.

In JBU's case, the reason that we've been able to do any of the above "new" ideas is that we've had increasing student numbers, lots of money from fund-raising, discipline within our current spending to insure that the new money doesn't just do old sinkholes, and, most importantly, good people who can develop and implement these new ideas.

Externality pricing

I'm reading "The Undercover Economist" and reflecting on his chapter regarding externality pricing. The basic point is that markets are "perfect truth disseminators," so we're better off trying to price externalities and let people themselves figure things out (driving my car into a city causes congestion, so slap on a congestion tax and let me decide what to do instead of banning driving, raising the parking costs, and so on).

I guess that's what I've done with small classes at JBU. Instead of creating rules about which classes to close and/or trying to make those decisions for people, I've said that the externality of a small class (need for more class time, more profs, more offices, etc.) mean that we should reduce their number, so if divisions have smaller classes, they have to pay a "tax" on offering small classes. How programs want to handle that problem is now up to them.

I think the idea is working, but I recognize the problem the author notes that the "rich" people who have lots of students in their courses can bypass the tax, and the student-poor programs such as Music become even poorer because they have no other options except to pay the tax. Hmm . . .

Scenario planning

I've been doing some thinking about strategic planning options for our institution. Right now, we do that work primarily through conversations regarding budgets and student learning outcomes. But in many ways, those conversations are too precise for this sort of long range thinking. We've been pondering "theme of the year" strategic narrative discussions, educational philosophy white papers, and a vastly expanded workshop format. Here's another idea, scenario planning, that the business world has being doing a lot of in recent years. Perhaps this connects to the "Black Swan" idea that it's difficult to forecast the big events just by extrapolating from current circumstances, so here we have a "non-rational" way of trying to ge at major trends and issues of importance.

http://www.economist.com/displayStory.cfm?source=hptextfeature&story_id=12000755