Synergies

by Henry on August 24, 2010

Inside Higher Ed has a good article on the Washington Post’s interesting editorial stance on colleges that make their money through hoovering up the proceeds of student loans rather than, like, actually trying to graduate students with useful degrees.

On Sunday, policy makers, higher education watchers and ordinary readers opened their newspapers and Web browsers to an editorial endorsed by the Post’s staff board that took a stance that could’ve come right out of Kaplan’s playbook. After disclosing the corporate link—noting that the paper is owned by the same company that “owns Kaplan University and other for-profit schools of higher education that, according to company officials, could be harmed by the proposed regulations”—the editorial bashed the U.S. Department of Education’s proposed rules, voicing concerns about access for low-income and working students, and worrying more broadly about how the country could meet President Obama’s higher education goals without for-profit colleges. … The editorial’s disclosure and others like it in the Post’s news coverage of for-profit colleges—touted by the Post’s ombudsman in a column this weekend—don’t go far enough, Asher argued. It’s one thing to acknowledge that Kaplan is owned by the same company, “it’s another to acknowledge the financial dependencies that the Post has on Kaplan, which they don’t do.” Close to 60 percent of the company’s revenues in the most recent fiscal year came from Kaplan. .. Today’s Post features another op-ed denouncing the proposed rules on for-profit higher education. The author is the chairman and chief executive of Strayer Education Inc.

At least this time they are providing some kind of disclosure. I used to wonder why the Post regularly trotted out editorials against broadband regulation, basing arguments on flagrantly bullshit statistics about rural access to broadband. When I found out that the Washington Post Company is the owner of a cable company specializing in service provision to small rural areas my wonderment evaporated. As news publishing becomes ever less profitable in its own right, we can expect ever more attention to the possible side benefits of owning a substantial share of the public debate. The Washington Post has already been a pioneer in exploiting these synergies, and can, I suspect, be relied upon to do more as time goes on.

{ 18 comments }

1

y81 08.24.10 at 7:58 pm

Isn’t the passage from Inside Higher Ed a little deceptive? I am pretty sure that it is the entire Kaplan enterprise, which includes, most prominently, the Stanley Kaplan test preparation empire, that supplies 60% of the Post’s revenues. I don’t believe that the test preparation empire depends heavily–or at all, really–on federal subsidies.

2

Warren Terra 08.24.10 at 8:35 pm

y81, Kaplan depends quite heavily on the idea that everyone can, should, and probably must go to college, and that to fulfill this goal each student should buy as many Kaplan services and products as possible, so as to test well and get into college or into a better one. The subsidies for college education are therefore a critical part of Kaplan’s business model: even if none of the money goes directly to Kaplan, by making the goal of college seem accessible to people who could otherwise go they create more customers for Kaplan’s products and services. Mind you, I also think that college should be available to all (so long as the colleges are providing a good education, and ideally with provision of other opportunities for those who don’t want to go to college), but I don’t have any conflict of interest when I say that.

But once you start examining the conflict of interest, it actually gets worse. Kaplan has no institutional reason to care what happens to those students who aren’t likely to take the GRE or other pre-grad-school standardized tests once they’re actually at college and done spending money on Kaplan’s efforts to help them get into college – and those students who will invest in more Kaplan products as they apply to graduate or professional schools probably went to a decent college anyway. Indeed, fear of bad colleges – the so-called “dropout factories” – might actually spur people to invest more in Kaplan, so they can get into better schools.

3

Bloix 08.25.10 at 1:10 am

It always seemed obvious to me that the reason the newspapers missed the real estate bubble is that they are dependent on real estate advertising. And since the newspapers missed it, it didn’t exist for broadcast and cable news, which never have anything that’s not in the NYT unless it came from Drudge.

4

alex 08.25.10 at 7:30 am

Does anyone ever read anything about the history of the press any more? If they did, none of this would seem even slightly surprising. All the President’s Men casts a bizarrely long shadow…

5

John Quiggin 08.25.10 at 9:45 am

This is nice – it combines more evidence that the Washington Post should do with an explanation of the fact that it shows no obvious signs of doing so.

6

Sebastian 08.25.10 at 3:31 pm

“the Washington Post’s interesting editorial stance on colleges that make their money through hoovering up the proceeds of student loans rather than, like, actually trying to graduate students with useful degrees.”

The Kaplan case is indeed a very nasty case of exploiting government loans for a useless degree. But isn’t your generalizing summary just a little bit dangerous and non-reflective? Arguably quite a bit of the function of legitimate colleges is to hoover up the proceeds of student loans while leaving their students with useless degrees.

An excellent argument could be made along these lines:

A) Noticeable fact–the cost of attending university in the US has been going up at a fantastic clip. 1978 to 2008, inflation costs would suggest a 2.5x cost of living adjustment. High cost problem areas like health care went up at about 6x. College costs went up 10x.

B) College degrees have a noticeable element of positional good about them–people will bid them up as a status differentiator somewhat above their strict non-status utility.

D) For a positional good, if government loans aren’t very carefully employed, they can tend to fuel a price war much more than they actually make things more affordable. (This would happen if colleges can use the loans to jack up the price). This is especially seen at the higher cost universities (which have the largest element of status seeking about them).

E) It seems possible that colleges in general have hoovered up government loans to increase their prices rather than increase overall availability.

Note that statistics used to show the utility of financial aid by the colleges are usually expressed as “X large % of our students receive some form of financial aid [often government supported loans or Pell grants]”. This is used to support the idea that the financial aid is making things more affordable, but in fact it may just be using the financial aid to jack up the price such that the government subsidy is going almost entirely to the university, rather than to the student.

I’m not sure that the above is an entirely convincing case. But it is at least a bit suggestive. (And BTW well in line with quite a bit of leftist thought corporate strategy vis-a-via subsidies of home loans before the crisis, and well in line with quite a bit of public choice theory on regulatory capture.)

7

Kenny Easwaran 08.25.10 at 5:31 pm

Sebastian – I was under the impression that most private universities have comparable tuitions, so that it’s not true that the highest cost universities are the ones with the most status seeking about them. Both the elite and the not-so-elite have been raising costs by similar amounts.

8

Lemuel Pitkin 08.25.10 at 6:09 pm

Sebastian is right, I think.

In general, the more inelastic is the supply a of a good, the larger will be the proportion of taxes/subsidies that fall on producers rather than consumers. in the extreme case, where the supply of a good is perfectly fixed, so will be the final price to consumers; all taxes will be paid, and all subsidies received, by producers. And while the supply of seats at elite colleges isn;t perfectly fixed, i’ts pretty close to it.

Now obviously college education is not a normal commodity, so it’s not quite that simple. For one thing, unlike most producers in the market, elite colleges ration by more than price. So they might use some part of a tuition subsidy to increase their applicant pool and the quality of their students, rather than to raise prices.

But overall, it seems a safe bet that most demand-side subsidies to higher education (i.e. payments to consumers) are simply going to increase the income of higher-ed providers. To increase access, you would need direct spending on expanding supply, which of course we are doing less and less of.

In other words, it’s probably true that spending on higher education in this country mainly benefits a concentrated, politically active group with substantial resources (higher ed institutions, especially for-profit and elite ones) and not the resourceless, disorganized mass of potential students. Is this surprising?

9

Lemuel Pitkin 08.25.10 at 6:40 pm

Just to be clear here: As a simple matter of logic, subsidies for higher education can only increase overall access by increasing the total number of seats.

Yet, discussions of support for higher ed are almost never framed in this way. And the specific form of support higher ed has steadily moved from subsidies to institutions, to subsidies to students, i.e. from a form more likely to increase the total number of seats to one less likely to. So it’s hard to avoid the conclusion that policy driven by some goal other than increasing access.

10

JMG 08.25.10 at 10:17 pm

Dear Folks: I worked in American newspapers for 30 years. All of them, from the Times on down, have ALWAYS run editorials arguing for and slanted news reports regarding their owners’ business interests. Car dealers get away with consumer fraud on an ongoing basis largely because without car dealer ads, newspapers would vanish overnight.
The idea that the American press is some sort of arbiter of fair play and a tribune of the people is a myth created by some 1930s movies and “All the President’s Men.” And I should note you never see a publisher in any of those films.

11

Sebastian 08.25.10 at 10:32 pm

“Both the elite and the not-so-elite have been raising costs by similar amounts.”

Yes, and I’m suggesting this is fueled at least in large part by access to government loans which are available for college education (both at elite and non-elite institutions).

12

Sargon 08.26.10 at 4:38 pm

So, the rise in collegiate costs is mostly about government loans and grants, and institution’s ability to capture same?

No mention of how public subsidies, state and federal, for higher education have gone down over the past 30 years or so?

Most public institutions get their money from 3 sources:

government support (state +federal)
tuition and fees
donations and other endowments

government support has been going down as a proportion of the overall income of public insitutions of higher education for almost 30 years. So, naturally, they must increase their proportion of income from the other two sources.

that’s why senior college administrators, especially presidents and chancellors, are now more and more consumed with fundraising. And why tuition and fees keep going up. If the state won’t pay, someone else must.

13

Lemuel Pitkin 08.26.10 at 7:34 pm

No mention of how public subsidies, state and federal, for higher education have gone down over the past 30 years or so?

I mentioned it.

But the point is, the total number of dollars spent tells you little or nothing about the effect. The form of the subsidies makes all the difference. Payments to public institutions will lower costs, and increase supply. Payments to individuals attending college will raise costs, and may or may not increase supply.

14

John Protevi 08.26.10 at 8:10 pm

But the point is, the total number of dollars spent tells you little or nothing about the effect. The form of the subsidies makes all the difference. Payments to public institutions will lower costs, and increase supply. Payments to individuals attending college will raise costs, and may or may not increase supply.

Plus payments to individuals reinforce the idea that higher education is not a public good, since, on neoliberal logic, the only beneficiaries of higher education are those holding degrees. Whether individuals get loans to help pay fees, or, heaven forfend, grants, using individuals as the unit of analysis in higher ed economics is all part of the destruction of the idea of public goods.

15

Lemuel Pitkin 08.26.10 at 8:31 pm

Yes, absolutely. The discussion here has been about the economics but you’re right, it’s just as important to point out that support for public institutions reinforces the idea of higher education as a kind of public good or commons, while subsidies to students imply that it’s a commodity like any other.

16

John Protevi 08.26.10 at 9:46 pm

The discussion here has been about the economics but you’re right, it’s just as important to point out that support for public institutions reinforces the idea of higher education as a kind of public good or commons, while subsidies to students imply that it’s a commodity like any other.

I know we’re on the same side here, and I also know that you know this better than I do, and I’m not playing “gotcha” about wording in a blog comment, but, saying that “the economics” is different from a discussion of public goods shows the way “economics” has become the term for the academic discipline (or “discursive field” or “ideological formation” or whatever), that is based on individualist assumptions , and something else, maybe “political economy” (or “lefty nostalgia”) talks about public goods.

17

Lemuel Pitkin 08.26.10 at 11:09 pm

Fair point, John. Altho one could argue the other side too, that it’s precisely the broadening of the term economics that’s symptomatic of the hegemony of individualist assumptions. I’m not sure the terms we use matter so much, so long as we remember that economics-in-the-narrow-sense describes only a small part of social reality.

18

John Protevi 08.26.10 at 11:57 pm

Yes, it’s the imperialism of the neoliberal view that we have to fight. University profs have more and more occasions for such fights, as the managers at almost all universities [1] now are conscious or unconscious neoliberals who manage by pitting department against department and faculty member against faculty member, all in the name of spurring productivity by installing conditions of competition, which is assumed to be the only way to incentivize people (cf internal vs external motivation, as we discussed on the other thread).

1. I prefer the UK use of “managers” to the US use of “administrators” because the former makes faculty more clearly employees or “knowledge workers” or whatever, whereas with the latter we can delude ourselves with tales of “shared governance” or what have you.

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