Sunday, December 20, 2015

Harvard Economist N. Gregory Mankiw Provides a Lazy and Self-Serving Answer to Why College Costs So Much

Harvard Professor N. Gregory Mankiw wrote a lazy and self-serving op ed essay in the New York Times today, in which he purported to explain why college costs so much.

Like most of higher education's shills (Sandy Baum, Susan Dynarski, Catharine Hill, etc.), Professor Mankiw began his pitch by assuring us that college is still a good investment. The median wage for a college graduate, Mankiw reminds his readers, is about twice as much as the median wage for a worker with only a high school education.

Of course it is true that college graduates generally make more money than people with only a high school education, but that fact doesn't justify skyrocketing costs across almost all sectors of higher education. Nor does it justify the ever-increasing amount of money people are borrowing in order to attend college.

Mankiw then goes on to give three explanations for why college costs are going up--all bogus:

First, Professor Mankiw instructs us, we have "Baumol's cost disease."  According to Mankiw, Baumol recognized that as wages rise across all sectors of society, salaries rise even for services that have seen no increase in productivity.

Of course everyone knows that. It costs more for a haircut today than it did a generation ago, even though barbers haven't grown more efficient. Likewise, the cost of higher education has gone up. We used to call that phenomenon inflation, but Professor Mankiw prefers to call it Baumol's cost disease.

But of course this blather does not explain why the cost of higher education has gone up three times the rate of inflation over the past 30 years.

Second, Mankiw argues, higher education seems more expensive due to rising inequalities in society as a whole.  Here I'll let Mankiw explain this argument in his own words:
Educational institutions hire a lot of skilled workers: It takes educated people to produce the next generation of educated people. Thus, rising inequality has increased not only the benefit of education but also the cost of it.
OK, Professor Mankiw, what you say may be true. But again, how does that argument explain why college costs have risen much faster than inflation?

Finally, Mankiw explains, college costs haven't gone up as much as the public thinks because most students aren't paying the sticker price.  Colleges engage in "price discrimination," with only the suckers paying full price. And of course this is true. On average, private liberal art colleges are only collecting about 60 percent of the sticker price because they give discounts in the forms of grants and scholarships to preferred students.

In other words, Professor Mankiw is trying to assure Mr. and Mrs. America that when their children go to college, they'll probably get some sort of brother-in-law deal and won't be paying full price.

All this is pure horse manure. At bottom, Professor Mankiw is merely defending the status quo in higher education, just as Vassar's Catharine Hill did a couple of weeks ago in the Times when she argued against free college education. In fact, when you read Professor Mankiw's essay closely, which he hopes you won't do, he really isn't saying anything at all.

The reality is this: the cost of higher education has gone up for a variety of reasons, and many of those reasons are tied to greed and laziness.  At the elite universities, tenured professors are teaching fewer classes--ostensibly to have more time to do more important things.  College costs could go down if every professor taught the typical teaching load of 30 years ago.  I would be surprised, for example, if Professor Mankiw teaches more than three courses a year.

Moreover, the cost of attending for-profit colleges is especially high, much higher than a comparable educational experience at a community college or public university.  Students who attend these rapacious institutions borrow more money than students who go to public schools. and their student-loan default rates are shocking. According to the Brookings Institution, the five-year loan default rate in the for-profit sector is nearly 50 percent.  But of course, Professor Mankiw didn't even mention the for-profit colleges.

College costs have also gone up because the number of ancillary employees has increased. For example, Harvard was recently ridiculed for printing special placemats that contained instructions to students about how to answer their parents' embarrassing questions when they went home for the holidays.  As if Harvard students are too stupid to know how to talk to their parents or to have their own opinions.

How much, do you suppose, Harvard is paying the person who dreamed up and printed those embarrassing placemats? Well--whatever it is, that amount adds to the cost of Harvard's tuition.

In truth, the cost of postsecondary education is out of control for multiple reasons, and the problem varies in its seriousness across higher education's many sectors. For-profit colleges charge too much; almost all objective commentators agree. Professional education is far too expensive. In particular, the law schools have jacked up tuition prices and are producing about twice as many lawyers as the nation needs. Administrators' salaries have gone up faster than professors' salaries, and numerous frills--fitness centers, luxury student housing, recreational facilities like LSU's "Lazy River"--all this has contributed to the spiraling cost of higher education.

About all these issues, Professor Mankiw had nothing to say.

Personally, I found Professor Mankiw's essay offensive. Millions of people can't pay back their student loans, and most can't discharge those loans in bankruptcy.  Meanwhile, the Department of Education and the policy wonks are urging the expansion of long-term repayment plans that will force Americans to pay on their student loans for 20 or 25 years. In short, the student loan program is a mess, and Professor Mankiw prattles on about Baumol's cost disease!

Professor Mankiw's op essay in the Times was nothing  more than a lazy and self-serving defense of the status quo--a status quo than benefits people like Professor Mankiw.
Professor N. Gregory Mankiw: He likes the status quo.


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