A numbers game.
Let’s play a round numbers game to get us started. I wasn’t sure if the joke I made above was obnoxious, but I am positive the example I am about to give is.
Harvard’s 2020 operating budget was $5.4 billion
, which paid for all kinds of things beyond education as we typically think about it. For the sake of an example, let’s divide that total operating budget by the number of students (undergraduate and graduate) enrolled, which is about 24,000
. We are talking about a university that operates on a budget of about $220,800 per student. How does that figure play out on a national scale? With roughly 16.6 million higher education students in the United States, $220,800 x 16,600,000 = $3,665,280,000,000. Providing everyone currently enrolled in the US with a Harvard education would cost $3.37 trillion dollars.
If US GDP is about $22.7 trillion, we are talking about 15% of the economy dedicated to Harvard for all. Of course, this is a silly example to make a dramatic point. No society is going to provide a $220,000 education per student at scale. Let’s look at more realistic but still big numbers.
In 2017-18 the US spent about $604 billion
on higher education. According to Preston Cooper
, a conservative education analyst, the US spent about $27,000 per higher education students, a figure that is the second highest in the world. Second only to Luxembourg which really doesn’t cont (sorry Luxembourg). Just about everyone already thinks the US higher education costs too much, so we are not going to get anywhere close to that number.
We face tradeoffs. Societies should decide what kind of higher education system they want, and how they want to pay for it. I think the question works in that order. First, what kind of system do you want? Second, how do you want to pay for it? You might have to revisit the first question once you start the work out the second question.
One way to think about the type of system a society wants to to lay out the tradeoffs as “trilemma” as Ben Ansel
did in this 2008 article
The basic idea is that policy goals related to higher education come with trade-offs and the result is that the most popular choice set is impossible. Assume three policy choices on a continuum:
- Enrollment, low - high (the share of the population with access to higher education).
- Subsidy, low - high (the share of the cost of education paid for using public funds).
- Public costs, contained - un-contained (limits on the total public obligations to higher education).
A quick note here on a topic that I know some people find obnoxious (obnoxious is the theme of the week): Price vs. cost. Price is what a student pays. Cost is how any resources it takes to provide an education. These differences matter when thinking about different types of systems.
Let’s consider some basic system types:
The Plutocratic system: Low enrollment, high subsidy, contained public costs: Possible.
In this sort of system social elites tend to dominate higher education, which has restrictive access. Public funding levels are high but also highly regressive.
The Luxary System: Low enrollment, low subsidy, contained public costs: Possible.
This system is for the few who pay. Demand for higher education might be low, as are public outlays.
The whatever it takes public system: The High enrollment, high subsidy, un-contained public costs: Possible, within limits.
In this sort of system, just about everyone has access to higher education, and the price to individuals is low because of generous public subsidies. Costs increase monotonically with enrollments, and higher education will make a larger and larger claim on the public budget over time.
The whatever it takes private system: High enrollment, low subsidy, contained public costs: Possible.
In this sort of system, access is abundant but subsidies are low. Students from high-income backgrounds pay out of pocket, those from low income backgrounds either borrow heavily to participate or seek out low-cost providers
The dream system: High enrollment, high subsidy, contained public costs: Impossible.
This is the dream, high enrollment, prices low for students, and it doesn’t burden the tax payers much. The only problem is that it’s not possible.
The trilemma is too simple.
Ansel’s trilemma model assumes clear tradeoffs made by government. I find it useful as a foundation for thinking about systems but too simple for the real world.
It is not 100% obvious that the tradeoffs are always zero-sum. Here are some other possibilities.
Targeted subsides: Subsidies don’t need to be universally high or universally low. Lots of systems try do make subsides targeted. The idea would be to direct aid (or a subsidy) to those who need it and not to those who don’t. Theoretically, this would allow systems to expand enrollment while at least partially containing public costs. The challenges of this approach are (a it may be politically unpopular among the upper and middle classes who often have lots of influence over government, (b it might be technically quite difficult to direct subsidies efficiently and effectively, and (c if the cost of providing education increases faster than incomes, either the subsidies will have to grow or process will grow, eroding subsidy value.
Lower the cost of providing an education: The trilemma idea assumes that costs are essentially static and grow only with enrollment growth. There are good reasons for this assumption. Major theories of college cost predict rising costs of production, and that seems to be the observed reality in most countries. But it could be possible to lower costs by efficiency gains (scaling cost saving technology, for example) or by reducing the scope of higher education (that is by doing less). The question, I suppose, is how bare-bones can higher education get before it is no longer higher education?
Stratifying the system into higher and lower cost segments: Another possibility that we see in the real world is system stratification. Planned stratification is pretty common. Consider the California Master Plan, that segmented public higher education into three systems: the high cost University of California, the middle-cost California State University System, and the lower-cost California Community College system. Initially, each of the tree systems were subsidized at a high rate, so that student prices were universally low. But not everyone count access the crown jewel University of California, which is of course stratified itself. A big question here is who gets access to the high resource strata of a system? Unplanned stratification is even tricker to deal with. Both competition and the self-organization of higher education result in a tendency towards system stratification even when it is not planned. The consequences can be pernicious.
The government doesn’t alone determine enrollment levels.
It is true that in some systems the government set’s the number of “places” available in a national higher education system. But that number often reflects social demand. And, anyway, in many systems the government does not set enrollment capacity. Since the 1970s, higher education enrollments have skyrocketed. Check out change in the ratio of the number of higher education students enrolled worldwide, over the size of the global population in the 18 - 24 age cohort. The image below is form the World Bank
. I can’t get over it.