Sunday, April 06, 2014

Prof. Fritz McDonald, Meet David Lereah

David Lereah, if you don't know, was the chief economist of the National Association of Realtors and his claim to fame was swearing up and down that there was no housing bubble until it invariably popped.  His outlandishly optimistic and naive predictions and arguments showed how an association like the NAAR was a biased entity and should have been hiring real economists like me instead.

However, there is a new bubble about and it is the education bubble.  And while there is no forefront media spokesperson type of guy like David Lereah for academia, an agent in the field sent me this article written by one Fritz McDonald.  An excerpt:

 I understand that many of you work full time, sometime many jobs. Here is my advice to you: do as little work as you possibly can outside of college. College is a full-time job. It might be the best full-time job you ever have. Go ask your parents for more money, if they have it. Spend less money on your car or clothes. Don't waste your time working at Abercrombie and Fitch or Taco Bell. Spend more time at OU.

The entire article is not so much the standard propaganda of "follow your heart and the money will follow" or "you can't put a price on education," but has taken a new twist of highlighting the social and cultural benefits of attending Oakland University.  This is a new twist to the strategy of getting naive children to part with their (or their parents') money in that it suggests that you cannot have a social life nor be cultured outside of that precious and necessary academia.

You know that college experience of drinking at an underage party?

Nope, can't enjoy that unless you're in college.

Road tripping out west?

Nope, can't do that unless you're in college.

See a play at the local theater?

Nope, can't do that unless you're in college.

My agent in the field wrote a response to Prof. McDonald here, but I'm going to be a bit more succinct:

Fritz is nothing more than one of thousands of academians, unionized workers, support staff, TA's, and all the other people that make up the nearly trillion dollar per year education industry.  And like most of his peers, he realizes there's a bubble and it's about to burst. 

However, this would force him, and nearly everybody else in academia to live their worst nightmare:


This is what's behind the increasing number of academian-originated pieces out there advocating the "benefits" of a college education.

And just like it was wise to know David Lereah was biased, so too should you know all academians and professors are biased too.


Hamsta said...

This university/college bubble is going to burst big time in the next ten years.

The method of "doing" university is still based on a model from the middle ages. In those days, you would get rich kids sitting in dreary rooms listening to some professor literally rereading his notes from 20 years ago.

Fast forward to the modern age. The success of western society produced an incredible increase in demand for complex information flow. Think of the sheer amount of data and background people involved in getting a car loan. WWII demonstrated that knowledge is power and that started the really big kick in higher education.

The trouble is that the low hanging fruit of knowledge has all been harvested. The easy stuff has been knocked off in the last 100 years. Most of the "researchers" grinding away these days in colleges and universities are nice and very bright and seem to be working hard pushing the frontiers. But, really - most of them could go fishing and the scientific "enterprise" would hardly notice. They are wasting time and money doing shit and applying for grant after grant.

What floats all the staff, researchers, infrastructure, etc. is the bubble of student loans. Just like blowing up the stock market and real estate market, the student loans fiasco wrote a blank cheque for the needless expansion of higher education.

The internet is changing all that. Why have 10,000 "nobody' sociology or chemistry lecturers playing "sage on the stage" at 100K plus a year? Take th top 5 guys in economics (all noble winners maybe) and put together one whopper of an economics 101 course (with supporting assignments, sidebars etc.) and distribute world wide?

What will enable this transition is the acknowledgement of the legitimacy of this approach in a few accredited programs that are recognized by industry. Once that happens, there will be amazon style universities instead of bricks, mortar, pub crawls and rah rah. The hardest adjustment might be assortative mating where university is seen as a mating and social connection opportunity.

Red Knight said...

Capn, a point for consideration, not related to this blog post in particular but to your entire beef with American academia, one of the recurring topics on your blog.

I do maintain that a large share of all liberal arts degrees are, if not quite "worthless", still of little economic value to their holders due to oversupply of such graduates. And you blame leftist academia for having let such a situation occur.

However, is it not rather a failure of free market capitalism? Most American universities are private, for-profit institutions, or funded in a way similar enough to make no difference with regards to the incentives that follow.

The universities are merely acting on their own profit motive, just like proponents of laissez-faire capitalism expect them to do and make no apologies for them doing. Their profits come from convincing young people to get degrees and pay for tuition, not from the actual value of those degrees. They are marketing crap as gold since doing so has a higher profit margin than procuring actual gold to sell. What we are seeing is the sum total of individuals and institutions in the education-industrial complex acting in their own rational self-interest, not some grand leftist conspiracy.

Thus, to me, this looks like a clear case of market failure, not failure of leftist ideology, and I don't see how it matters that the snake-oil salesmen doing it have pretensions of being leftist do-gooders. If you disagree, can you actually think of a viable free market solution to the issue? Arguably Worthless is a small part of such a solution, and while such products might mitigate the damage done by misleading marketing, they don't remove the underlying incentive that education-providers have to overstate the value of the service they're selling.

Anonymous said...

I miss college, but none of those reasons required I pay the money to be there. Seriously, just get an apartment in town with some roommates, work a crappy job, and drink yourself into oblivion on the weekends and when you don't have a shift. Also, be sure to wear school colors and bitch about your asshole professors.

There kids, I just saved your parents thousands.

DrTorch said...

The only thing that would make this better was if he taught ethics.

Eric Mueller said...

I am blown away at how pervasive the "college myth" is in society. I have a lot of peers that trip over themselves to start college plans for their children. As soon as baby has an SSN, baby has a 529. Baby hasn't even graduated to a new size diaper yet, and the college savings have already started.

One of the lies the education industry manages to perpetuate is that school is the only place to learn anything. Go to school, and learn how to be socialized (two meanings; learn how to be a socialist, and learn how to sit in a room with 25 peers your own age and a single authority figure).

They want you to believe there is no other way. Want to work in IT? OK, go to college and get a degree. Oh, now you want to learn business? Boy, do we have a plan for you... Two more years of school and 60k+. Now you know business. Oh, you can't get hired because you have no experience? Not our problem. We gave you the education. Experience is extra.

DJF said...

National Association of Realtors are salesmen. It does not matter if we are in a recession, depression, bubble, etc, the NAR always thinks its a good day to buy and sell houses since the NAR members make money from commissions and if there are no buying and selling of houses they don’t make money. And the loans that you take out are your responsibility so the NAR does not care how deep into debt you go

The same thing for anyone in the Education business. They don’t make money unless they can get someone to pay for class time. Especially with the student loan system where the debt ends up on the student not the school. So its always a good time to go to college since that’s when the people who run and work for colleges get paid

Always look to see how someone gets paid, if they get paid by selling something to you then guess what, they will try to sell something to you. Its not always directly paid, but people who work for colleges know that if the colleges get paid then they will get a cut and if the colleges don’t get paid then they will not get paid.

Its not to say that salesmen can’t be useful, just remember whose interest they are serving.

RobertW said...

Re: getting a "real" job.

Aye, there's the rub. Most academicians and government bureaucrats who have spent more than a few years in the system are essentially unemployable in the private sector. Certainly not at even a small fraction of what they make now.

You are right: their greatest fear is that they might have to live in the world they helped create for us.

Tom the Impaler said...

It occurred to me some time ago that the modern colleges and universities were all based on the medieval theory that Books Are Rare. This theory is so obsolete that books are nearly obsolete as well. The research library is about as out of date a concept as you can ask for in the modern world. They've jumped the shark.

Phil Galt said... experience...

Underage drinking? Check. Got old fast.

Plays? Saw a couple. Not bad.

clubs? Was part of the fencing club, until classes & homework put an end to that.

Marketable skills? Got most of those outside of college either in an internship or just maintaining my '66 car (most 'engineers' cant diagnose an issue, much less tighten a screw).

Dating? After the girl I was flirting with took up with a fat grunger (marine biology-to-theatre major, who had been kicked out of the dorm for his orgy club), I re-dedicated myself to my classes and started making the honor roll.

The college 'experience'? I'll pass like a kidney stone.

Anonymous said...

Red Knight,

The reason the Captain is Correct in calling this a leftist phenomenon lies in a simple economic principle: if you want more of something, subsidize it.

Your analysis would be correct except that the federal government subsidizes the universities both directly and indirectly. While it's true the direct contributions to the instituitions are in many cases shrinking, what's really happening is a shell game.

I don't know how familiar you are with how the US of A works so I'll try not to assume things. In the USA, student loans are subject to a complex set of special laws and regulations that give lenders strong incentive to, well, make the loans, and the government itself uses tax dollars to give students loans and grants.

It gets complicated in a hurry but one key provision of student loans is that they are impossible to discharge in a bankruptcy proceeding. That doesn't sound too outrageous unless one looks at the history of the English Common Law that US law descends from, and realize how contrary and odd the notion is in that greater context.

I mention this because it's one of the best examples of how the government creates perverse incentives to loan young people with no collateral and no guranteed ability to repay the loan large amounts of money for the purpose of attending university.

There are other tricks they pull too, like complicated deferral rules for repayment, which sounds reasonable until you realize many of these measures just let interest owed accumulate (I understand some don't, again, it's complex).

What's actually happening is the government is using policy to create massive student loan debts to prop up the universities, but it's the students who are on the hook for the debt, as oppposed to the more honest alternative of the government being directly responsible for it, which isn't politically tenable, hence the elaborate shell game using the inflated availability of student loans to keep the universities raking in cash.

This isn't a failure of the market because in a private market where special rules didn't exist, student loans would carry a risk more similar to other kinds of debt and the unique risks of student loans wouldn't be assuaged for the lender either.

In other words, no rational party would lend you money to major in Lesbian Feminist Rhetorical Poetry Studies in a normal, free market environment unless you had some collateral to put up.

For most students their only "collateral" would be their future earnings. Lenders would be carefully screening in such an environment, meaning people going to school to become mechanical engineers would probably be getting approved, and people wanting to major in worthless fields wouldn't, or at least not at a low interest rate.

In fact student loans in general would drop off sharply. The universities would have to either close down economically worthless departments, or offer their products/classes at a non-inflated price point people could actually afford. It'd be like the private sector, where there's constant pressure to drive prices down.

In short, leftists believe in government manipulation of prices and markets toward an end. In this case it's the pipe dream of everyone having a college education because they "deserve" it.

You also have to consider that there's a bigger agenda here that comes into play before students are university. Our public schools are built around the assumption everyone goes to college or wants to go and should go, which is demonstrably false.