1. education

SPECIAL R E P O R T
U N IV E R S IT IE S
Excellence v equity
The American model of higher education is spreading. It is good at
producing excellence, but needs to get better at providing access
to decent education at a reasonable cost, says Emma Duncan
AC K N O W L E D G M E N T S
Many people helped th e a u th or w ith
th is rep o rt. As w ell as those quoted,
she w ould like to th a n k Javier Botero
Alvarez, Doug Becker, Daniel Bell,
Roger Benjam in, Frances Cairncross,
M atthew Chingos, Ryan Craig, John
C rist, Ron Daniels. Andrew Delbanco,
Don Graham, David Greenaway, Kevin
G uthrie, Steven H ill, Colin Hughes,
Barbara Kehm, David Kelly, B ill
Kirby, Jane K night, Hongbin Li, Lexa
Logue, Wanhua Ma, Francisco
M arm olejo, Jam ie M erisotis, Pratap
M ehta, Tang Min, Ben Nelson, Mary
Nolan, Driss Ouaouicha, Helen
Perkins, Steven Pinker, Stevan Rolls,
Alan Sm ithers, Josh Taylor, M arijk
van der Wende, Russ W hitehurst,
Ben Wildavsky, David W ille tts, M att
Yale, Rao Yi, Shamoon Zam ir and
David Zweig.
The Economist March 28th 20 15
IF YO U LEARNED that the top dogs in a particular market w ere the sam e
as lo o years ago, you w o u ld probably surm ise that the business con­
cerned had suffered a century o f stagnation. In the case o f higher educa­
tion, w hich has been dom inated by Am erican universities since the early
20th century, you w ou ld be quite w rong. It grew slo w ly for the first quarter-century, gathered pace in the m iddle h a lf and took o ff in the fourth
quarter. You might then conclude that the top dogs w ere truly outstand­
ing, or that there w as som ething ve ry odd about the market. In the case o f
higher education, you w o u ld be right on both counts.
A m erica gave the w orld the m odern research university. The A m er­
ican elite im ported the m odel o f the O xbridge college in the 17th century
to give its rough sons a polish. In
1876 the trustees o f the estate o f
Johns Hopkins, a banker and rail­
road magnate, decided to use
w h at w as then the largest be­
quest in history to m arry up the
O xbridge college w ith the re­
search university, an institution
the G erm ans had develop ed at
the beginning o f the 19th century.
Both private and public universi­
ties adopted the m odel, and Har­
vard, Yale, Princeton, Caltech and
the rest o f A m erica’s top rank
em erged as the prim e m overs o f
the w orld ’s intellectual and scien­
tific life shortly afterwards.
These institutions have pro­
duced a startling num ber o f the
inventions that have m ade the
w orld safer, more com fortable
and more interesting. “ Im agine
life w ithout polio vaccines and
heart pacem akers...or m unicipal
water-purification system s. Or
space-based w eath er forecasting.
Or advanced cancer therapies. O r jet airliners,” w rote a bunch o f A m eri­
ca’s business leaders to Congress in 1995, pleading w ith the governm ent
not to cut research funding to universities. Since then, those institutions
have also pow ered the digital revolution that has im proved life in every
corner o f the planet.
A m erica led the w orld, too, in creating mass higher education. That
transform ation w as driven in part by the econ o m y’s need for higher
skills and in part by so ciety’s desire to give the m en w h o fought in the sec­
ond w orld w ar a chance to better them selves. Am erica thus becam e the
first country in the w orld in w h ich the children o f the m iddle classes
w en t to college, and college becam e a passport to prosperity.
G iven its success, it is hardly surprising that the A m erican approach
to higher education is spreading. Mass education has taken o ff all over
the w orld. The Am erican-style research university is the gold standard,
and com petition am ong nations to create w orld-class research universi­
ties as good as A m erica’s is intensifying. Spending on higher education is
rising: across the o e c d , from 1.3% o f g d p in 2000 to 1.6 % in 2011. Provi­
sion, financing and control eve ry w h ere is m oving a w a y from the Euro-
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CONTENTS
6 Rankings
Top of the class
11 NYU's Abu Dhabi campus
A pearl in the desert
12 Privatisation
Mix and match
14 America
A flagging model
18 Technology
Not classy enough
19 Policy options
Having it all
A lis t o f sources is at
E co n o m ist.co m /sp e cia lre p o rts
►►
An audio in te rv ie w w ith
th e a u th o r is at
E c o n o m is t.c o m /a u d io v id e o /
s p e cia lre p o rts
3
SPECIAL R E P O R T
U N IV E R S IT IE S
►pean m odel, w here everything is done by the state, towards the
A m erican one, in w hich the private sector provides a large part
o f the education and individuals pay for m ost o f their tuition.
But just as the A m erican m odel is spreading around the
w orld, it is struggling at hom e. A m erica’s best universities still do
more top-class research than any other coun try’s; the problem
lies in getting value for m o n ey on the teaching side. Tests suggest
that m any students do not learn enough these days. They w ork
less than they used to. The average perform ance o f A m erica’s
graduates, com pared w ith those o f other countries, is lo w and
slipping. Higher education does not increase social m obility but
reinforces existing barriers. At the sam e time costs have nearly
doubled in real terms in the past 20 years. The enrolm ent rate is
falling. T echnology offers the prom ise o f m aking education both
cheaper and m ore effective, but universities resist adopting it.
This special report w ill argue that the problem s spring in
part from the tensions at the heart o f higher education betw een
research and teaching, and betw een excellence and equity; but
that tech nology and better inform ation can help m ake the teach­
ing side o f the business more effective. A m erica, havin g exported
its m odel to the w orld, could learn som e lessons from other
countries about h o w to im prove its o w n system .
How much is too much?
“ E verybody’s gettin’ so goddam educated in this country
there’ll be n o b o d y to take aw ay the garbage...You stand on the
street today and spit, y o u ’re gonna hit a college m an,” says Keller
in A rthur M iller’s play, “All M y Sons”, w ritten in 1946. Higher edu­
cation in A m erica started to spread from the elite to the m asses as
early as the 19th century, w ith the establishm ent o f the land-grant
universities, but got its biggest boost w ith the 1944 g i bill that
paid servicem en to go to college.
W hat h ap pen ed in A m erica then h ap pen ed in Europe and
Japan in the 1960s and 1970s, in South Korea in the 1980s, and is
n o w happenin g the w orld over. Student n um bers are grow ing
faster than global g d p . So hungry is the w orld for higher ed u ca­
tion that enrolm ent is grow ing faster than purchases o f that ulti­
m ate consum er good, the car (see chart 1). The global tertiary en ­
rolm ent ra tio -th e proportion o f the respective age cohort
enrolled in u n iversity-in crea sed from 14% to 32% in the tw o de­
cades to 2012; the n um ber o f countries w ith an enrolm ent ratio
o f m ore than h a lf w en t up from five to 54 over the period. Sub-Saharan Africa is the only part o f the w orld w here “ m assification”
is not m uch in evidence yet.
Som e countries, such as South Korea, w here pretty m uch
e ve ry b o d y goes to university, have probably reached saturation
point. O thers are still seeing p henom enal grow th. In China, stu-
I
Never mind the car, get the degree
G lo b a l, 1 9 9 5 -1 0 0
................. ..................................... - .............................................................................................. 300
— Tertiary enrolm ents
1995
97
99
2001
03
05
Sources: UNESCO: Economist Intelligence Unit; The Economist
07
09
11 12
'At 2005 $
dent num bers grew from lm to 7m in 1998-2010. In the decade to
2009, Chinese universities hired nearly 900,000 n ew full-time
faculty m em bers. The country n o w produces more graduates
than Am erica and India com bined, and by 2020 aim s to enroll
40% o f its youn g people in universities.
All over the w orld labour-m arket changes, urbanisation
and dem ography have fuelled the boom . The “ kn ow ledge econ ­
o m y ” has increased the dem and for w orkers w ith w ell-fur­
nished minds. W h en p eople go to live in cities, universities be­
com e more accessible so more people attend them. Rising
num bers o f youn g people have fuelled the boom , a n d -esp ecia lly in Arab co u n tries-com bu stible politics increase the need to
offer opportunities to teenagers.
In most countries the num ber o f 18- to 24-year-olds w ill
shrink in the next half-century, but the dem and for higher educa­
tion seem s likely to more than counteract that dem ographic e f­
fect. Sim on M arginson o f U niversity College London’s Institute
o f Education reckons that “ the ten dency to grow th o f participa­
tion in higher education appears to have no natural lim it” once a
co u n try’s g d p per person rises above $3,000.
The law s o f sup ply and dem and suggest that this vast in­
crease in the n um ber o f graduates should reduce the return on in­
vestm ent in a degree, and to som e extent that seem s to have h ap ­
pened. By and large, the return to higher education is higher in
poor countries than in rich ones (see chart 2, next page), except in
the M iddle East, w here high enrolm ent com bin ed w ith lo w
grow th has led to high graduate un em ploym en t. Harry Patrinos,
the lead education econom ist at the W orld Bank, reckons that
globalisation has increased the chances for w ell-qualified p eo ­
ple in poor countries o f getting a good job.
In the rich w orld, even though nearly h a lf o f young adults
are graduates and n um bers are continuing to rise, the graduate
prem ium (the w age difference b etw een those w ith and those
w ith ou t degrees) has rem ained high enough for it to be w orth go­
ing to university. Part o f the explanation m ay be credentialism in
som e rich countries. The m ore people have degrees, the more
em ployers w ill insist on recruiting graduates. In m any countries
jo b s such as teaching and nursing, w h ich did not require a degree
30 years ago, are n o w reserved for graduates. W hen just a small
elite w en t to university, p len ty o f decent jo b s w ere available to
those w ith only secon dary schooling. That is no longer true.
But changes in the labour market also help to explain the
ever-grow ing pressure to get a degree. A utom ation has created
w h at Claudia G oldin and Law rence Katz, tw o Harvard academ ­
ics, have called “a race b etw een education and tech n o lo gy”
w h ich only those w ith p len ty o f education w ill w in. As autom a­
tion depresses w ages at the bottom o f the pile, in equality grows,
and the m ore un equ al society becom es, the riskier it is not to
have a degree. For all the stories o f university dropouts w h o be­
cam e softw are billionaires, non-graduates have little chance o f
jo in in g the ranks o f the prosperous few.
A s first degrees becom e standard, m ore people are getting
postgraduate qualifications to stand out from the crowd. In both
A m erica and Britain, 14% o f the adult w orkforce have a postgrad­
uate degree; and despite the increase in supply, the postgraduate
prem ium has increased in both Am erica and Britain, especially
since 2000. There w as a time, points out Stephen M achin, profes­
sor o f econom ics at U niversity College London, w hen a post­
graduate degree depressed wages; but that w as w hen m aths
P h D s w orked m ain ly in academ ia, not in the financial sector.
Although individuals enjoy decent returns to their invest­
m ent in higher education, it is less clear that society as a w h o le
does. The big question is w h eth er the graduate prem ium is the
consequence o f higher productivity or o f establishing a pecking
order. If universities increase p eo p le’s productivity, then society
The Econom ist March 28th 2015
SPECIAL R E P O R T
U N IV E R S IT IE S
f
Poorer countries, richer returns
A verage in crea se in e a rn in g s fo r e ve ry a d d itio n a l ye a r o f te r tia r y e d u ca tio n
1 9 70- 2 0 1 3 , %
8
10
12
14
16
18
20
22
Sub-Saharan Africa
South Asia
Latin America
East Asia
W orld
High income
Middle East/North Africa
Europe/Central Asia
Source: World Bank
►should invest in having more graduates, but if they are m erely a
m echanism for signalling to em ployers that graduates are clev­
erer than non-graduates, then it should not. A n d since little effort
goes into m easuring w hether universities actually educate peop le - a matter to w h ich this special report w ill return—society
does not k n o w w h eth er investing in education is w orthw hile.
Even if the social returns on investm ent in higher education
w ere poor, there w o u ld be a strong political argum ent for the
state to provide access to it. If people need a degree to get ahead,
then dem ocratic governm ents must offer everyb o d y w ith suffi­
cient brains a chance o f getting one. The market alone w ill not
lend m on ey at a reasonable rate to students w h o can provide no
security, so even governm ents that rely heavily on private fi­
nance tend to offer loans to students.
But access to higher education is not binary. Som e p rovi­
sion is excellent and som e is not, and the returns to low -quality
higher education are poor. So the am bition expressed by pretty
m uch all governm ents everyw h ere to w id en access to goodquality higher education conflicts w ith another global force:
com petition to create the best universities. ■
Rankings
Top of the class
Competition among universities has become intense
and international
AS JAMIL SALMI leaves the stage at a Times Higher Educa­
tion conference in Qatar, he is m obbed by people pressing
their cards on him. As a form er co-ordinator o f the World Bank’s
tertiary-education program m e and author o f a book entitled
“The Challenge o f Establishing World-Class U niversities”, he is
the white-haired sage o f the w orld-class university contest. And
he is greatly in dem and, for the com petition to climb the interna­
tional rankings has becom e intense.
Higher education in A m erica has long been a strongly com ­
petitive business. Students and university presidents alike keen ­
ly w atch the rankings produced by the US N ews and World Re­
port. Such rankings encourage stratification. O ne o f the metrics is
the proportion o f students a university turns away, w hich en ­
courages selectivity. That in turn encourages differentiation b e­
tw een better and w orse universities. The A m erican m odel is
thus quite different from the continental European one, w hich
(aside from France’s grandes ecoles) is a lot less selective and more
hom ogeneous.
N o w com petition and stratification are spreading. Accord­
ing to Ellen Hazelkorn, author o f “ Rankings and the Reshaping o f
Higher Education”, there are around 150 national rankings
around the w orld. But thanks to globalisation and the grow th in
international student flow s, attention has shifted from national
to international rankings.
G overnm ents w an t top-class universities because the m o d ­
ern econ om y is driven by hum an capital. The goal is to nurture
people w h o w ill create intellectual property and clusters o f hightech com panies sim ilar to those around Stanford and C a m ­
bridge. A great research university is not a sufficient condition for
creating such a cluster, says Jean-Lou C ham eau, form er president
o f Caltech and n o w president o f Saudi A rabia’s King A bdullah
U niversity o f Science and Technology (к a u s t ); but “ you can’t do
it w ith ou t having m ore than one great university around.”
Increasing reliance on tuition fees is another reason for
more com petition. Students “ w ant to be sure that they have got a
big global brand on their certificate that’s going to be a passport
to their future”, says Phil Baty, editor-at-large o f Times Higher Edu­
cation. A m erica’s state universities, he says, used to sh o w little in ­
terest in the international market. N o w that their budgets have
been cut, he sees a lot more o f their presidents.
The qualities that matter
Nian Cai Liu o f Shanghai Jiao Tong U niversity started the
international race in 2003. “ M y university w as one o f the first
that the governm ent picked to becom e a world-class university. I
decided to benchm ark us against those in the West,” he says. He
cam e up w ith six indicators o f research excellence, used them to
rank the w orld ’s top universities and published the result. It
caused uproar in countries that did b a d ly-p a rticu la rly G er­
many, birthplace o f the research university. Times Higher Educa­
tion and another com pany, q s , fo llo w ed w ith their o w n rank­
ings. Shanghai focuses purely on research; t h e and q s also look
at things like staff-student ratios and reputation.
Am erican institutions take the top slots in the Shanghai
rankings (see chart 3, next page), w ith Britain as the runner-up.
Private universities dom inate, though som e state universities
(such as C alifornia’s) are also excellent. But in relation to their
population size, the Nordic countries, Sw itzerland and the N eth­
erlands do best, and there is m ovem ent in the rankings. Emerg­
ing markets are on the rise; A m erica’s state universities and Brit­
ain ’s second tier are slipping.
The rankings m atter because o f their im pact not just on the
amour propre o f politicians and university presidents, but also
on h o w universities are run. “ Rankings force institutions and
governm ents to question their standards. T hey are a driver o f b e­
havio u r and o f change,” says Professor Hazelkorn.
O ne w ay o f im proving your rankings is to set up a top-class
research outfit from scratch and hire a form er head o f Caltech to
run it, as Saudi Arabia has done w ith k a u s t . But not m any coun ­
tries can afford the $20 billion en d o w m en t that k a u s t is said to
have received from the late King A bdullah. A n alternative luxury
m odel is to get a top-class foreign university to set up on your soil.
The United Arab Emirates has got n y u (see box at the end o f this
section), w hich has also set up a cam pus in Shanghai, w h ile Yale
has a partnership w ith the National U niversity o f Singapore.
Q atar is doing som ething different again. Education City is
a collection o f eight foreign universities in grand n ew buildings
on the outskirts o f D oha, each o f w h ich teaches a subject the go v­
ernm ent considers useful to the country. Texas a & m does engi­
neering (for the gas industry); N orthw estern does journ alism (for ►
►
The Economist March 28th 2015
U N IV E R S IT IE S
C o tT W e titio n
^
locals, but the schem e w as not designed
to m ake m o n ey out o f them . Singaporean
talent scouts roam the region, generous
scholarships are offered to the brightest,
and tuition fees are cut for those w h o stay
to w ork w h en they have finished their deg ree s-in sharp contrast to Britain, w hich
chucks out m ost international students
the m om ent they have graduated. The
has
intensified
n ot JUSt J O T
e x cellen t
,
QCCldemiCS
b u t also for
►Al Jazeera, Q atar’s n ew s outfit); G eorgetow n does foreign studies
(for Q atar’s regional foreign policy); and so on. N azarbayev U ni­
versity in Kazakhstan and Songdo U niversity in Incheon, South
Korea, have adopted the sam e m odel.
Most countries, though, w ork w ith the universities they
have got and try to im prove the quality o f their top institutions.
C h ina has a project called “ 985”, launched in M ay 1998, to w h ich
the Shanghai rankings w ere a response. G erm an y launched its
Exzellenzinitiative in 2005. In 2011 Nicolas Sarkozy, then France’s
president, ann oun ced a program m e to create a “ Sorbonne
league”-clu sters o f universities and organisations affiliated to its
Centre N ational de la Recherche Scien tifiq u e-to com pete w ith
A m erica’s Ivy League. Russia has started a project called “ 5-100”
to get five universities into the Times Higher Education top 100. Ja­
pan, under its Super G lobal Universities Programme, w ill give se­
lected universities extra funds, w ith the bulk going to 13 research
universities. Britain has tw eaked its system to hand more re­
search m o n ey to the top tier and less to the m iddle-rankers (the
bottom layer never got any anyw ay).
Excellent universities need excellent faculty, so com petition
for them has increased. A m ong the big markets, Australia, A m er­
ica and C an ada universities are (on average) the best payers, but
som e o f the n e w G u lf em ployers offer tw ice as much.
Pay for the best is rising in China, too. The co u n try’s un iver­
sities w ere destroyed during the Cultural Revolution. As part o f
Deng X iaoping’s m odern isation program m e, Chinese students
w ere sent abroad to study, and m any did not return. In 2008 the
country launched a program m e, “T housand Talents”, to entice
m ore o f them back. Scholars get a lm yu a n ($160,000) “ resettle­
m ent grant” , and universities use research funds from the g o v ­
ernm ent and industry to raise salaries. O ne o f its successes is Shi
Yigong, a form er Princeton professor w h o is n o w professor o f life
sciences at Tsinghua University. He has (som ew hat) narrow ed
the gap betw een salaries in his departm ent and those in Western
universities. W h en he returned in 2008, a full professor earned
around 100,000 yu a n ($14,400) a year; n o w the figure is more
like 300,000-500,000 ($50,000-80,000) a year. Professor Shi is
particularly proud o f having recruited a scientist w h o had a jo b
offer from Cam bridge, though he says that he still has difficulty
attracting talented yo un g scientists w ith faculty positions from
Harvard, Stanford or Princeton.
C om petition has intensified not ju st for excellent acad em ­
ics but also for excellent students. Singapore’s “global schoolh o u se” strategy, launched in 2002, set a target o f attracting
150,000 students by 2015. International students pay more than
10
^ ea’ accordin g to Lee Hsien Loong, Singapore’s prim e minister, w as to “attract tale X C e lle n t
ent from all over the w orld to add sparkle
to our diam on d”.
students
Germ any, too, is keen to w elcom e
foreign students. Again, this is not to make
money, since the universities do not
charge tuition fees. C hinese students are
prom inent, as they are everyw h ere else.
“ O ur dem ographics m ean w e are in need
o f foreign talent,” says Georg Krucken, di­
rector o f the international centre for higher-education research at
Kassel university. “These students are n od es in a global netw ork
o f talent.”
There are p len ty o f w orries about the effects o f rankings.
Bahram Bekhradnia, president o f Britain’s Higher Education
Policy Institute, reckons that “ th ey’re w orse than useless. T h ey’re
positively dangerous. I’ve heard presidents say this all over the
w orld: I’ll do anything to increase m y ranking, and nothing to
harm it.” That is hardly surprising, since universities’ boards
com m on ly use rankings as a perform ance indicator for deter­
m ining presidents’ bonuses.
O ne concern is that these m etrics m easure inputs rather
than outputs. “The indicators are resource-intensive. T hey’re
about w ealth ,” says Professor Hazelkorn. Som e are also unreli­
able. A staff-student ratio is easily m anipulated and says nothing
about the quality o f the teaching. But the m ain objection is that
m ost o f the metrics, directly or indirectly, concern research. There
are no good internationally com parable m easures o f teaching
quality. So one o f Mr Salm i’s favourite universities, the Franklin
W. O lin College o f Engineering in M assachusetts, w hich he says
“ provides a superb learning experience to its students”, does not
feature in international rankings because it does no research.
Justin Lin, a form er ch ief econom ist at the World Bank and
currently director o f the China Centre for Econom ic Research at
Peking University, has a habit o f sw im m in g against the tide. In
1979 he defected from the Taiw anese arm y to China, sw im m in g ►
►
Mighty minds
N u m be r o f u n iv e rs itie s * in S ha n g ha i ra n k in g to p 100, 2 0 1 4 -15
0
10
20
30
40
50
U n ite d States
Britain
Switzerland
Netherlands
Australia
Canada
France
Germany
Sweden
Japan
Sources: ShanghaiRanking.com; UN. The
The Economist March 28th 2015
SPECIAL R E P O R T
U N IV E R S IT IE S
►across the narrow strait from Taiwanese-adm inistered Kinm en
to the m ainland. These days his contrarian nature has tamer out­
lets: he doubts that China should be in the race to create worldclass universities if the concept is defined by the num ber o f its
facu lty’s publications in journ als dom inated by the West’s re­
search agenda. “ W h o cares about world-class research if it
d oesn ’t apply to the conditions that you are in?” he asks.
The tallest poppies
Higher salaries for academ ics returning hom e are causing
rancour. W hen Professor Shi circulated a proposal for offering
generous salaries and am ple research funds to top-flight scien­
tists from abroad, he w as criticised. “ Som e people said that they
contributed to C h ina’s past developm ent w h ile these recent re­
turnees stayed aw ay in the West, but n o w these guys w ant lu x u ­
ry.” In Singapore the shortage o f places for locals has caused an ­
ger. Incentives for clever foreign students have been cut back.
In G erm any the idea o f prom oting a few universities above
the rest has met w ith resistance. “The m yth o f the G erm an u n i­
versity is that all universities are equal. There has been a lot o f
criticism o f [the excellence initiative],” says Professor Kriicken.
The governm ent has responded by setting up a n ew initiative, fo­
cused on teaching, not research, and covering m ore universities.
Europeans, cross that they did so badly in rankings de­
signed by the C hinese and the Anglo-Saxons, have started their
o w n systems. France’s Ecole des M ines has produced the “ Profes­
sional Ranking o f W orld U niversities”- t h e n um ber o f graduates
from an institution w h o are running Fortune 500 co m p a n ies-in
w hich the French do nearly as w ell as the A m ericans and better
than the British. The European U nion has created the u-Multirank, a ratings system w h ich gives different answ ers depending
on the search criteria, to get aw ay from the zero-sum com petition
o f rankings. There is a virtue in that: a single indicator is rarely a
good m easure o f quality.
But since the u-M ultirank offers students little inform ation
on British or Am erican universities, it is o f lim ited use to those
w ith global horizons. A nyw ay, politicians and university presi­
dents, like the rest o f hum anity, are com petitive creatures: noth­
ing w ill stop them m easuring them selves against each other. The
m ain constraint on the race is not aversion to com petition but the
scarcity o f funds. That is one reason w h y higher education is, in ­
creasingly, turning to the private sector for money. ■
A pearl in the desert
JOE JEAN, A 25-year-old Haitian, cannot
believe his luck. In the aftermath of the
earthquake of 2010, University of the People,
an American online university, offered
scholarships to Haitians. Mr Jean took one of
them up to study computer science and, as
one of UoPeople's top students, was offered
a place at New York University's Abu Dhabi
campus. He gets his tuition and living ex­
penses paid, plus a stipend of $500 a quarter
and two flights home a year.
NYU Abu Dhabi started up in 2008. In
2014 it moved to a new campus on Saadiyat
Island, which, in contrast to the rest of the
emirate, is intended as a haven of culture
and beauty. The path that snakes past its
minimalist white buildings is bordered by
neat lawns, water features and shaded
benches; an elevated walkway recalls New
York's Hi-Line park. For now, most of Saadiyat Island is a building site, but n y u ' s
neighbours will soon be local outposts of the
Guggenheim, the Louvre and the Sorbonne,
housed in equally elegant buildings.
Abu Dhabi's rulers want to turn the
emirate into "one of the world's true cultural
capitals" and to improve its education sys­
tem, according to Khaldoon al Mubarak, an
aide to Abu Dhabi's crown prince, who is on
n y u ' s board of trustees. The country's ambi­
tions may have been piqued by the extraor­
dinary flourishing of culture in neighbour­
ing Qatar, capped by I.M. Pei's stunning
Museum of Islamic Art. Forthe privilege of
hosting NYU, Abu Dhabi has forked out an
The Economist March 28th 2015
initial donation of $50m and paid forthe
campus. It also covers most students' tuition
and living costs. When itis full, there will be
2,000 of them, the great majority of them
non-Emiratis. If they costas much to edu­
cate as do students at top American universi­
ties, the bill must be over $100m a year.
The Abu Dhabi campus, along with one
in Shanghai, fulfils the dream of John Sex­
ton, n y u ' s president, to create a "global
networked university". It has, he says, led to
"an extraordinary elevation of brand", as
well as more concrete benefits, including
contributions to overheads (including his
salary), newjobs and the ability to hire
people who would not have come otherwise.
"For 15 years I had been trying to get Antho­
ny Appiah [a British philosopher, formerly at
Princeton] to come to n y u . One trip to Abu
Dhabi, and he came."
Some faculty are hired directly to the
Abu Dhabi campus; some come from New
York for stints of a few weeks to a few years.
The money is good— up to twice as much as
at home— and conditions are exceedingly
comfortable, with pleasant apartments on
campus and drivers on tap. One academic
describes it as "like living in business class".
The material rewards are notthe only attrac­
tion. "The teaching is amazing here," says
Justin Blau,a professorofbiologyatthe
campus. "The classes are really small, the
students more motivated." And everything is
so new that "it allows us to do things differ­
ently." The experimental research building,
for instance, brings together biology, engi­
neering and chemistry, enabling scientists
to work across departmental boundaries.
Not everybody is happy. MrSexton has
rubbed the faculty in New York up the wrong
way over pay and property development, and
the Abu Dhabi venture is another mani­
festation of his "imperial presidency",
according to Andrew Ross, president of the
local chapter of the American Association of
University Professors in New York. There have
been allegations of abuses of the workers
who built the campus, and questions about
whether an institution that depends on
freedom of speech can flourish in an auto­
cracy. "It'sa monarchy, notan autocracy,"
says Mr Sexton, describing the crown prince,
Mohammed bin Zayed al Nahyan, as a "philosopher-king".
Mr Al Mubarak has described Abu
Dhabi's commitment to n y u as "a Catholic
marriage. It's forever." Butthe campus is,
inevitably, vulnerable to the vagaries of the
oil price and Middle Eastern politics. A visit
to it in a sandstorm, with clouds of dust
blowing into the pristine buildings, makes
an Ozymandianfate easy to imagine. For
now, though, it provides a first-class educa­
tion to young people from all over the world
who would not otherwise be able to afford
one. Back on the mainland, the Emirates
Palace Hotel, with its Las Vegas-style decor
and a vending machine that sells gold bars,
serves as a useful reminder that there are
worse ways to use surplus wealth.
SPECIAL R E P O R T
U N IV E R S IT IE S
Privatisation
Mix and match
Both provision and funding of higher education is
shifting towards the private sector
THE STUDENT STRIKE in Q uebec in 2012 did not just bring
do w n the p rovin ce’s governm ent; it also revealed deep cul­
tural differences in ideas about university funding. French C an a­
dian students, influenced by European thinking, w ere outraged
that their governm ent had proposed raising tuition fees from
C$2,168 ($2468) a year to C$3,793; the rest o f C an ada, u s e d A m erican-style—to m uch higher fees, w as baffled by their fury.
In m ost European countries the state pays 80-100% o f the
costs o f tuition. The m ain advantages o f this m odel are equ ity
and cost control. W here it w orks w e ll- in northern Europe—grad­
uate education levels are uniform ly high. W here it w orks badly - in southern E u ro p e-th ey are uniform ly low.
Am erican uses m ixed funding, w ith individuals paying
m ost o f the costs o f tuition and the governm ent helping out w ith
loans and grants. In som e countries w ith sim ilar m odels, such as
Japan and South Korea, individuals and fam ilies pick up the tab.
These system s tend to be better funded and m ore expensive than
the European ones (see chart 4, next page) because people fork
out readily, and costs are harder to control.
The m ixed-funding m odel is spreading. That’s partly b e­
cause rising dem an d has increased the burden that higher educa­
tion places on governm ent budgets. So has “ BaumoPs disease”,
w h ich increases the relative cost o f labour-intensive industries,
such as health and education, as technological change lifts the
productivity o f capital. Ageing p opulations are pushing up
health bills, so e d u ca tio n -a n o th e r huge chunk o f governm ent
sp en d in g -lo se s out; and since the social benefits o f p rim ary and
secon dary education are clearer than those o f tertiary education,
universities tend to suffer the most.
O ne option is to a llo w quality to de­
teriorate. That has hap pened in m any
European countries. In G erm an y stu­
dents com m on ly pack lecture halls in
their hundreds. “ We have more and more
students,” says G eorg Krucken o f Kassel
university, “ but the n um ber o f professors
do esn ’t grow at the sam e pace.”
A nother option is to m ake in d ivid ­
uals p ay more. In A m erica, retrenchment
in state budgets has pushed up tuition
fees. In California, for instance, they have
tripled over 15 years, and a further 28% rise
is proposed. O utside A m erica, the first big
shift towards private funding happened
in Australia, w here tuition fees w ere
jacked up in the late 1980s. A host o f other
countries fo llo w ed , including N ew Zea­
land, Chile, South Africa, som e o f the for­
m er Soviet republics, Britain and Thai­
land. China used to im p ose no fees at all;
n o w it charges 5,000-10,000 yuan ($8001,600) a year, not m uch for an urban fam ­
ily but a lot for a rural one. Countries w ith
good universities increasingly rely on for­
eign s tu d e n ts -w h o tend to p ay m ore
12
than dom estic o n e s -a s a source o f revenue. In Britain, for in­
stance, nearly a fifth o f students are foreigners. International
flow s o f students are up from 1.8m in 2000 to 3.5m in 2012.
A nother source o f private funds for universities is p hilan ­
thropy. Endow m ents at som e A m erican universities d w arf in­
com e from fees. Institutions elsew here are scouring the globe for
w ealth y alum ni. Cam bridge, w h ich has done best out o f the Brit­
ish universities, had collected £4.9 billion ($7.6 billion) by 2012.
Som etim es philanthropy extends across borders: in 2013 Ste­
phen Schwarzm an, chief executive o f Blackstone, a private-equity company, handed over $ioom to establish a scholarship pro­
gram m e atTsinghua University.
Horses for courses
The biggest provider o f higher education that n ob o d y has
ever heard o f is Laureate, an A m erican for-profit education com ­
p an y w ith revenues o f $4 billion, nearly 1m students and 70,000
staff. It does not prom ote its brand because it prefers to be kn ow n
through the n am es o f the 80-plus universities and colleges it
o w n s all over the w orld.
Private provision is growing. In som e system s, private col­
leges (usually non-profit ones) provide a first-class education.
That is true in A m erica and is beginning to happen elsew here, in­
cluding India. Philip Altbach, director o f the Centre for Interna­
tional Higher Education at Boston College, describes India’s
higher-education system as “ a sea o f m ediocrity in w h ich islands
o f excellence can be fo un d”. But those isla n d s-su ch as the Indi­
an Institutes o f T ech n o lo gy-a re accessible o n ly to a lucky few.
N ew private non-profit institutions are helping to broaden the
provision, including A zim Premji U niversity in Bangalore
(w hose ep o n ym o u s founder m ade his fortune from Wipro, an i t
com pany) and Shiv N adar U niversity near D elhi (the m o n ey for
w h ich cam e from h c l , another i t com pany). These n ew n on ­
profits are too few and far betw een to transform India’s system,
but they m ay w ell create a w id er choice o f high-quality islands.
In m uch o f Latin Am erica, governm ents have handed over
the jo b o f providing m ass higher education to the private sector.
The results are patchy. In som e countries, such as Brazil and C o ­
lom bia, the state does a decent jo b o f providing quality assur- ►
►
The Economist March 28th 2015
SPECIAL R E P O R T
U N IV E R S IT IE S
America
Where private cash counts
A flagging model
S pe n d in g on te r tia r y e d u c a tio n a l in s titu tio n s , % o f GDP, 2011
0.5
1.0
1.5
2.0
2.5
3.0
United States
South Korea
Chile
America's higher-education system is no longer
delivering all it should
Netherlands
Australia
Japan
Spain
Germany
Britain
Italy
I Public
I Private
Source: OECD
►ance, and there are m an y good private-sector outfits, both local
and foreign-owned. Laureate has 11 colleges and universities in
Brazil; nine have seen their scores im prove since Laureate took
them over, one has deteriorated and the rem aining one has been
bought too recently for the effects to have becom e clear.
In most o f the w orld the private sector is active at the m ar­
gins o f higher education. Private for-profit com panies, such as
Kaplan and Apollo, both Am erican com panies serving the glo­
bal market, tend to supply the more vocational end, like courses
in law and accountancy. They cater to older students, often w o rk ­
ing people or parents, for w h o m the standard cam pus-based
three- or four-year degree is not suitable. They also bring interna­
tional students up to the level o f the rich-country universities in
w h ich they have enrolled. The num bers in both categories are
large and growing, so these are healthy markets.
As the protests in Q uebec show ed, raising tuition fees can
be politically explosive. Several G erm an states introduced such
fees a decade ago and all have since aban doned them. “Tuition
fees didn ’t fit w ell into the G erm an tradition,” says Professor
Kriicken. “Here higher education is seen as a public good.” In
Chile, student protests against the cost o f higher education
helped oust the governm ent in 2013; the n ew governm ent is com ­
m itted to elim inating tuition fees. A nd Britain’s Labour Party
prom ises that if it w in s the general election in May, it w ill bring
d o w n the m axim um fee from £9,000 to £6,000 a year.
He who pays the piper
A dvocates o f private funding say that it m akes students
m ore dem anding and universities m ore responsive (though they
often forget to add that it m ay also increase the pressure to inflate
grades). Sir Steve Smith, vice-chancellor o f Britain’s Exeter U ni­
versity, says his un iversity spent £470m in 2 0 0 9 -14, raised from
donations, borrow ing, the governm ent and its o w n cash, on get­
ting the cam pus up to scratch: students paying fat fees expect de­
cent facilities. The university is also m aking extra academ ic e f­
forts: it has, for instance, prom ised that students w ill get essays
marked and returned w ith in three w eeks o f subm itting them.
A decade ago Exeter had 11,000 students. N o w it has 19,000
and plans to expand to 22,000. As better universities get bigger,
w orse ones w ill com e under pressure. More reliance on p h ilan ­
thropy w ill m ean that rich universities, w h ich tend to produce
rich alum ni, w ill get richer still. Greater independence from g o v ­
ernm ent tends to m ake higher education system s m ore stratified,
and thus more A m erica n -ju st w h en A m erica itself is increasing­
ly w orried about its o w n system. ■
IN HIS PROPOSAL for reform ing the curriculum at W illiam
and M ary College in Virginia, T hom as Jefferson w rote that
it should nurture “those talents w h ich nature has so w n as liber­
ally am ong the poor as the rich, but w h ich perish w ith ou t use, if
not sought for and cultivated”. Inspired by Jefferson, A m ericans
expect higher education to boost the chances o f disadvantaged
people, but it seem s to be failing in that ta sk -a n d in som e o f the
other jo b s its custom ers w an t it to do.
Higher education has tw o sets o f customers: students and
the governm ent. Students w ant all sorts o f things from it-to
m ake friends, sharpen their m inds and get aw ay from hom e. But
m ost o f all they w an t it to im prove their econom ic prospects.
Despite rising costs, college still does that. An investm ent in
a four-year degree offers a return o f around 15% a year for so m e­
bo d y w orking until the age o f 65, a figure that has been steady
since 2000. But the returns have held up not because graduates
have done so w ell but because those w ith only high-school de­
grees have done so badly (see chart 5, next page). A nd although
average returns rem ain decent, the range is vast. According to
Payscale, a pay consultancy, it varies from *22% to -21%. Rising in­
equ ality increases the range o f possible outcom es, and hence the
risk o f taking on student debt.
G overnm ents w an t three things from higher education: re­
search, hum an capital and equity. O n the research side, A m eri­
ca’s governm ent has little to com plain of. A lthough several Euro­
pean countries have m ore Shanghai top 100 universities in
relation to their population than the United States does, Am erica
still dom inates the sum m it o f research: 19 o f the w orld ’s top 20
universities in Leiden U n iversity’s ranking o f most-cited scien tif­
ic papers in 2014 w ere Am erican.
O n the hum an-capital side, things look less good. In 1995
Am erica had the highest graduation rate in the o e c d . N o w it lags
behind seven other countries. President Barack O bam a has set a
target for his country to return to the top o f the graduation league
by 2 0 2 0 , but it is unlikely to be met. Young A m erican graduates
are b e lo w the o e c d average in n um eracy (see chart 5, next page)
and literacy, and are doing relatively w orse than older ones.
Som e o f the explanation lies w ith the poor perform ance o f
A m erica’s schools, but the most expensive tertiary-education
system in the o e c d might be expected to help students catch up.
Recent w ork by A m erican academ ics suggests that it does
not. Richard A rum o f N ew York U niversity and Josipa Roksa o f
the U niversity o f Virginia, authors o f “A cadem ically Adrift”,
looked at the results o f 2,300 students w h o took the Collegiate
Learning A ssessm ent ( c l a ) , a test o f critical thinking, com plex
reasoning and w riting, and found that 45% o f the sam ple show ed
no significant gains b etw een their first and third years.
O n equity, the results also look bleak. Graduation rates be­
tw een rich and poor are diverging (see chart 5, next page). Given
the difference in spending on those at the top and at the bottom ,
that is perhaps not surprising. “ C o m m u n ity colleges”, says Derek
Bok, a form er president o f Harvard, “spend roughly $10 ,0 0 0 per
student. Harvard probably spends over $10 0 ,0 0 0 . A nd our stu­
dents are m uch easier to teach.” The com bination o f state spend- ►
The Economist March 28th 2015
SPECIAL R E P O R T
U N IV E R S IT IE S
►ing cuts, w h ich have led som e com m unity colleges to restrict en. try, and en d o w m en ts lifted by boom ing stockmarkets is
increasing the gap further.
In real terms, tuition fees have nearly doubled over 20
years. Big bills m ean big debts (see chart 5). Nearly a third o f stu­
dents are in default, and the rate is rising. Student loans can rarely
be discharged, even by bankruptcy, so default dam ages p eo p le’s
credit history, m akes it hard to get mortgages and thus both
harm s p eo p le’s w elfare and acts as a drag on the econom y. Given
unprecedented default rates, there are w orries that the federal
governm ent w ill be stuck w ith a lot o f the debt.
Not what it seems
In m ost markets, the com bination o f technological progress
and com petition pushes price d o w n and quality up. But the tech­
nological revolution that has upended other parts o f the infor­
m ation industry (see box, next page) has left m ost o f the highereducation business un m oved. W hy?
For one thing, w h ile research im pact is easy to gauge, edu­
cational im pact is not. There are no reliable national m easures o f
w h at different universities’ graduates have learned, nor data on
w h at they earn, so there is no w a y o f assessing w h ich universi­
ties are doing the educational side o f their jo b w ell. Universities
are paid on the basis o f research, not educational, output.
Students, m ean w h ile, are not buyin g education any more
than the governm ent is. They are buyin g degrees, w h o se m ain
purpose is to signal to em ployers that an in dividual w en t to a preferably highly selective-un iversity. Harvard degrees are valu ­
able because there are so few o f them. Harvard therefore has no
incentive to m ake them cheaper, nor to produce more o f them:
that w o u ld m ake them less precious.
This helps explain w h y A m erica’s universities are failing to
deliver equity. People are prepared to pay through the nose to
b u y advantage for their children, so top institutions charge ever
higher prices and acquire ever m ore resources, w h ile those at the
bottom get less. That does not serve the Jeffersonian ideal o f nur­
turing the talents o f the poor as w e ll as the rich for the greater
good o f society. So higher education has a divided soul: it is both
a great collective enterprise to increase the n ation ’s w elfare and a
fight to the death b etw een status-hungry parents.
Em ployers are not m uch interested in the education un iver­
sities provide either. Lauren Rivera o f N orthw estern U n iversity’s
Kellogg School o f M anagem ent in terview ed 120 recruiters from
A m erican la w firms, m anagem ent consultancies and invest­
m ent banks. Their principal filter w as the app licant’s university.
U nless he had attended one o f the top institutions, he w as not
even considered. “ Evaluators relied so intensely on ‘sch o o l’ as a
criterion o f evaluation not because they believed that the con ­
tent o f elite curricula better prepared students for life in their
firm s...but because o f the perceived rigour o f the adm issions
process,” Ms Rivera w rote. After the status o f the institution, re­
cruiters looked not at students’ grades but at their extracurricular
activities, preferring the team sp orts-lacrosse, field-hockey and
ro w in g -fav o u re d by w ell-off w hite m en.
If em ployers are not interested in grades, students might as
w ell take it easy. That is, indeed, w h at they seem to be doing.
Time-use studies sh o w that the time students spend in class or
studying has dropped from 40 hours a w ee k in the 1920s to the
1960s to 27 hours a w eek n o w . A nd since academ ics are p rom ot­
ed largely on the basis o f their research, they might as w ell give
up teaching. That is, indeed, w h at they seem to be doing. Tenured
fa cu lty -th e ones w ith the w ell-paid, secure jo b s -s p e n d less and
less time w ith undergraduates. Increasingly, teaching is done by
“non-tenure-track” faculty on short contracts. Mr A rum and Ms
Roksa conclude that “ n o actors in the system are prim arily inter­
ested in undergraduate student academ ic grow th.”
The peculiar w a y in w h ich universities are m anaged con ­
tributes to their failure to respond to m arket pressures. “Shared
governance”, w h ich gives p o w er to faculty, limits m anagers’ abil­
ity to manage. “It w as thought an affront to academ ic freedom
w h en I suggested all departm ents should have the sam e com ­
puter vendor,” says Larry Sum m ers, a form er Harvard president.
Universities “ have the characteristics o f a w orkers’ co-op. They
expand slowly, they are not esp ecially focused on those they
serve, and they are run for the com fort o f the faculty.”
Cost control is esp ecially hard. As Clark Kerr, w h o designed
the Californian higher-education system in the 1960s, wrote:
“The call for effectiveness in the use o f resources w ill be per­
ceived by m any inside the university w orld as the best current
definition o f evil.” Bringing about change is also tough. Change is
rarely w elcom e, but in m ost organisations com petition m akes it
inevitable. Mr Kerr doubted that university faculty “can agree on
m ore than the preservation o f the status q u o ”. A cadem ics’ resis­
tance to change gains added strength from their b elief that ed u ­
cation is not an occupation but a calling; and that to defend it
against barbarians is not self-interest but m oral duty.
But the pressure for change is grow ing. Som e o f it com es
from the federal governm ent, w h ich is trying to m ake higher
education m ore equitable and to get m ore value for money. On
the equity side, Mr O b am a ann oun ced in his state-of-the-union
address in January that attending com m u nity college w o u ld be
free for most people. But since the least w ell-o ff already get grants
to cover their living expenses as w ell as tuition costs, it is not clear
h o w m uch difference that w ill make.
►
►
О
Need to know
United States:
% of graduates at age 24
average annual pay
average numeracy score*
By educational level, 2 0 1 3 prices, $ '0 0 0
25-34-year-olds with tertiary education, 2 0 1 2
Bachelor's degree
225
80
250
275 300
non-mortgage debt, $trn
325
Netherlands
Japan
Germany
France
OECD average :
Australia
United States
1970
80
90
2000
13
B ritain*
Sources: Federal Reserve Bank of New York/Equifax; 0EC0: Pell Institute; US Census Bureau
* Range: 0-50 0
'E ngla nd & N. Ireland
’Home equity line of credit
The Economist March 28th 2015
SPECIAL R E P O R T
U N IV E R S IT IE S
Not classy enough
ШШ шш *
->т *, -гм v . versities are resisting it
WHEN MASSIVE OPEN online courses ( m o o c s )
took off three years ago, there was much
concern that they would destroy traditional
universities. That isn't happening. "We're
doing a better job of improving job skills
than of transforming the university sector,"
says Rick Levin, a former president of Yale,
who runs Coursera, the biggest of the m o o c s .
At the margins, technology is making
education cheaper, more convenient and
more effective. University of the People, a
non-profit American-accredited online
university, offers degrees to students all over
the world at a total cost of $4,000; if they are
poor, they can get scholarships. Itstarted
teaching in 2009, was accredited last year,
has produced 65 graduates so far and now
has 1,500 students. The faculty is made up of
academics who volunteer their services.
The convenience of online study makes
it especially suitable for working people.
According to Phil Regier, dean of Arizona
State University ( a s u ) Online, the market for
online degrees in America is the 30m or so
25- to 40-year-olds who dropped out of
college first time round. Mr Levin says that
8 5 % of Coursera's students are over 22. The
for-profit companies are also big providers of
education to older people, and they increas­
ingly rely on the internet. Of Kaplan Univer­
sity's 42,000 students, 9 4 % study online. A
handful of state universities are also in the
online market: a s u has 13,000 online stu­
dents as well as 70,000 on campus.
Derek Bok, the former Harvard presi­
dent, is optimistic that computers can make
teaching more effective: "Technology is
gradually causing a number of professors to
re-examine the way they teach, away from a
passive form of learning to a more interest­
ing and active form." Carnegie Mellon Uni­
versity developed an introductory statistics
course in which professors teach for less
than half the time they do in the traditional
model, and students spend more than half
their time on a computer programmed to
help them when they get stuck. Only when a
student has gotthe hang of that part of the
course will he move on to the next.
William G. Bowen, a former president
of Princeton University, tested such courses
at several universities and found that stu­
dents learned as much as with conventional
teaching in three-quarters of the time, with
cost reductions of 19-57%. CarolTwigg,
president of the National Centre for Academ­
ic Transformation, tested similar methods in
156 projects, with similar results.
Established companies such as Kaplan,
Apollo and Pearson (which owns 5 0% of The
Economist) are allinvesting in "edtech", and
a host of startups are piling in too. Kevin
Carey, author of "The End of College", be­
lieves that electronic "badges" now being
►
O n value for money, the governm ent has launched an at­
tack on for-profit colleges. A report by a congressional com m ittee
published in 2012 found that for-profits had a 64% drop-out rate
and spent 22% o f revenues on marketing, advertising, recruiting
and adm issions, against 18% on teaching. The governm ent is ask­
ing colleges to ensure that average debt repaym ent o f graduates
on their program m es is b e lo w a set percentage o f graduates’ in­
com es. For-profits point out that they d o n ’t control students’ bor­
row ing, nor can they control incom es, w h ich depend on the eco­
nom ic cycle. They m aintain that the m easu re-cu rren tly stuck in
the co u rts -w o u ld dam age equity: since poorer students are
m ore likely to get into financial trouble, “the p o w erful incentive”,
says A n drew Rosen, chairm an o f Kaplan, “ is to jettison the leastprepared students.”
Better inform ation about the returns to education w o u ld
m ake heavy-handed regulation unnecessary. There is a bit m ore
around, these days, but it is patchy. The c l a has been used by
around 700 colleges to test w h at students have learned; som e in ­
stitutions are taking it up because, at a time o f grade inflation, it
offers em ployers an externally verified assessm ent o f students’
brainpow er. Payscale publishes data on graduates’ average in ­
com e levels, but they are based on self-reporting and lim ited
sam ples. Several states have applied to the i r s to get data on
earnings, but have been turned do w n . The governm ent is devel­
• ‘’
t' •»>. .' ;
created by a number of startups, proving
that the holder has earned a particular
qualification (at a relatively low cost), will
eventually undermine traditional high-cost
university education. But so far edtech has
not made much of a dentin it.
One reason is that universities are wary
of undermining the value of their degrees.
So the certificates that students get for
completing m o o c s do not, by and large,
count towards degrees, and are therefore
unlikely to make much difference to their
earnings. And online degrees tend to be
priced so that they do not undercut the
traditional, campus-based sort: at a s u they
cost $60,000, compared with $40,000 for
ca mpus- ba sed deg rees fo r i n-state stu de nts
and $80,000 for out-of-state students. Thus
they have not helped hold down costs.
Resistance by faculty also slows down
the adoption of new technology. When
academics at San Jose State University were
asked to teach a course on socialjustice
created for Edx, a m o o c , by Michael Sandel, a
Harvard professor, they refused, telling Mr
Sandel that such developments threatened
to "replace professors, dismantle depart­
ments and provide a diminished education
for students in public universities". Similar
protests have been echoing around the
country. For now, the interests of academics
generally prevail over those of students.
oping a “scorecard” o f universities, but it seem s unlikely to in­
clude earnings data. “A com bined effort by the W hite House, the
C oun cil o f Econom ic A dvisers and the Office o f M anagem ent
and Budget is needed,” says Mark Schneider, a form er com m is­
sioner o f the National Centre for Education Statistics. It is un like­
ly to be forthcom ing. Republicans object on privacy grounds
(even though no personal inform ation w o u ld be published);
Dem ocrats, w h o rely on the educational establishm ent for sup ­
port, resist publication o f the data because the universities do.
There is pressure on the sector from the market as w ell as
from the governm ent. After years o f big increases in tuition fees,
universities are facing resistance from the custom ers, and finan­
cial prospects for the sector are looking gloom y. M o o d y’s has a
negative outlook: universities are “expecting the w eakest net tu­
ition revenue in a decade in fiscal year 2015”. It expects tuition
fees at public universities to rise by an average o f only 1.9%,
though at private universities the increase is likely to be a more
com fortable 2.7%. In the past five years college enrolm ent am ong
those finishing high school has fallen, as cash-strapped com m u­
n ity colleges turn applicants aw ay and for-profits restrict recruit­
m ent o f m arginal students.
“Am erica seem s to have hit a w all,” says Sim on M arginson.
The country that has given the w orld so m any ideas about h o w
to run higher education could do w ith som e n e w ones itself. ■
The Econom ist March 28th 2015
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to go to university and w h at to
can be taken to mitigate them.
Future special reports
study. Such rich inform ation o b ­
Finance can m ake it easier to access higher education. In
Family companies A pril 18th
viates the need for the h eavy
A m erica, the governm ent provides loans for all, w h ich students
In tern ation al banking May 9th
regulation that the Am erican
have to repay irrespective o f their earnings, and grants for the
In d ia under Modi May 23rd
governm ent is currently ap p ly­
poor. The O bam a adm inistration has increased grants and eased
Nigeria June 20th
ing to for-profit universities.
loans to reduce the burden on the least well-off, but the com bin a­
Previous special reports and a list of
The o e c d is trying to es­
tion o f high costs and a fundam entally unforgiving loan system
forthcoming ones can be found online:
tablish
a
system
for
assessing
is discouraging the squeezed middle.
economist.com/specialreports
w h at students all over the w orld
Australia’s system o f incom e-contingent loans lets students
have learned at tertiary institu­
o ff m aking repaym ents unless and until their earnings reach a
tions, sim ilar to its w id ely
certain threshold. W hile leaving individuals to bear the bulk o f
w atched p i s a assessm ent o f secon dary-level achievem ent.
the costs o f tuition, they have not deterred the less w ell-off from
a h e l o , the proposed tertiary system, w o u ld start w ith econ o m ­
going to university. There is a danger that the state m ay end up
ics and engineering, testing students both on their subjects and
w ith a large bill, if the threshold is set too high or the econ om y
on their reasoning abilities. This w o u ld help youn g people de­
underperform s; to keep the bill do w n ,
cide w here to study and em ployers to understand the value o f
Australia’s governm ent charges higher
their qualifications; it w o u ld encourage com placent universities
earners more. Eight other countries have
to sharpen up their act and governm ents to put pressure on them
adopted sim ilar system s. A m erica should
to do so. “ N o b o d y is telling young p eople the truth,” says A n ­
do the same.
dreas Schleicher, director o f education and skills at the o e c d .
Greater efforts need to be m ade to
“They w ork hard to get a degree, but often w h en they get into the
control the costs o f higher education. Tech­
labou r market they find it’s not w orth w h at they thought.”
n olo g y can help. Universities should be
The o e c d has been trying to get a h e l o o ff the ground for
m ore adventurous in giving people access
eight years. A successful pilot convinced
Mr Schleicher that the problem s w ere not
m ethodological or operational but politi­
The question is how higher education can deliver both
cal. The Japanese, C hinese and South Ko­
equity and excellence without breaking the bank
reans are keen, he says: “They kn o w that if
th ey’re going to com pete in a global m ar­
ket they need proper m etrics.” The A m eri­
cans are not. “ It’s difficult to get buy-in from elite institutions that
to their offerings online and in using tech nology to make ed u ca­
have a lot to lose.” There is no public opposition, but not m uch
tion m ore effective. They might think that controlling costs is not
progress either. A form er A m erican official describes their ap ­
im portant to them , but they w o u ld be wrong: in A m erica the u n i­
proach as “foot-dragging”. That is a sham e: governm ents and stu­
versities’ custom ers are fed up w ith high fees and have started to
dents both need to k n o w w hat they get for the m o n ey they pour
vote w ith their feet.
into universities.
Higher education needs to do m ore to prove its w orth. At
The A m erican m odel o f higher education has brought im ­
present, although it is clear that individuals, on average, benefit
m ense benefits to the w orld, and its global spread is to be ap ­
from a college education, it is not clear w h eth er this is because
plauded. But for all its virtues, it is expen sive and inequitable.
their degree certificate signals to em ployers that they w ere clever
Costs are hard to control and value for m o n ey is hard to m easure.
enough to go to un iversity or because their studies added to their
Resolving these problem s is partly up to governm ents, the un i­
hum an capital.
versities’ m ost pow erful custom ers, but also up to the universi­
Latin A m erican countries are leading the w ay in trying to
ties. The institutions that have done so m uch to change the w orld
find out. Their reliance on the private sector m akes them esp e­
need to em brace change them selves. ■
cially conscious o f the need to get value for money. In Brazil a fed­
Policy options
Having it all
The Econom ist March 28th 2015
19