Quality? It’s All in a School’s Reputation

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The College Cost Disease: Higher Cost and Lower Quality
Robert E. Martin
Edward Elgar Pub, $99.95

Numerous books have been written lately suggesting that a college education is no longer a good investment. But few of those books are nearly as comprehensive or persuasive as The College Cost Disease by Robert E. Martin.

An emeritus economics professor at Centre College in Kentucky, Martin explains in economic terms why costs are going up while quality is deteriorating. He does a particularly good job of arguing against the current popular theory advanced by scholars such as former Harvard University President Derek Bok that the tradeoff between price and quality is the result of the “commercialization” of higher education. In fact, he says, the uninterrupted rise in prices is caused by a lack of genuine economic competition among the schools.

Martin explains that higher education perfectly fits the economic category of “experience goods,” in which the sellers have far more information than the buyers. The buyers are usually parents and not the actual consumers, the students. The buyers may never learn the exact quality of the education they purchased for their children, and the students may not be able to assess the quality of their education until decades after they graduate.  In the field of experience goods, purchasing decisions are made based almost entirely on reputation, which often does not have to reflect actual quality.

Martin’s book is perhaps not as fun to read as some of the other books published on this topic in the past year. Debt-Free U was written by a student who found the cheapest way to get a good college education. In the Basement of the Ivory Tower was written by an anonymous adjunct professor who explains how his disadvantaged students cannot relate to the curriculum he is teaching. And Academically Adrift, perhaps the most talked-about of these books, was based on testing data of graduates that was examined by the authors.

Martin notes that college costs have risen unchecked, despite a blunt warning more than 20 years ago from the National Commission on the Cost of Higher Education, which predicted “continued inattention to issues of cost and price threaten to create a gulf of ill will between institutions of higher education and the larger society.”

No one could possibly dispute the three-decade rush by colleges and universities to raise prices. The cost per student rose 33 percent at public institutions between 1971 and 2007, while the per-student price at private schools climbed 72 percent during the same period. Meanwhile, there has been a dramatic decline in the results shown by the schools, based on the verbal exam scores on Graduate Record Exams and on graduation rates.

Of course, colleges and universities would never admit to any decline in quality. The only marker of quality that parents and prospective students have, other than reputation, is a higher price, which signals higher quality. “Under the current circumstances,” Martin writes, “quality reputation becomes a race to spend as much as possible per student and that race has no end … the more the institution spends per student, the higher is its reputation for quality.”

Most colleges and universities do not publish any data on which a consumer can measure the quality of the education that graduates received. The only measures available are the credentials of the students before they start taking classes at the schools, such as SAT scores, high school class ranking and grade average. Although most colleges quarrel with rankings published by U.S. News & World Report using credentials of the incoming freshmen, they do not offer the public any better data to use.

Martin’s study does not consider the newer for-profit colleges, but he notes it is virtually impossible for a new school to compete on reputation with the old, elite institutions. “Building a reputation for very high quality takes multiple generations,” he writes. The reputation for high quality lasts longer in this field than in any other sector of the economy, because most people only seek an education once in their lives, and they are not inclined to disparage the reputation of a school that adds to the value of their diplomas.

Perhaps the worst element of U.S. higher education is that it is heavily rigged to favor students from wealthy and middle-class families. In the early 1990s, many colleges began offering discounts for good students in an attempt to drive up the apparent quality of entering freshmen, as measured by U.S. News and publishers of similar college guides. As Martin notes, this practice tends to create competition among schools for students from well-funded public school districts, and to exclude low-income kids from lesser high schools.

Once students are admitted to a highly selective school, according to Martin, they do not necessarily need to do their best, because they have already won the approval of the market by getting into a school with a good reputation. And the schools are reluctant to expel a poorly performing student because it means a cut in the revenue needed to fund the growing list of amenities offered by a selective college, such as apartment living and fancy fitness centers.

The system as it is designed virtually eliminates opportunities for children of low-income families to get into selective colleges, even if they have good grades in high school. There is plenty of data available that shows only a small percentage of students with Pell grants from the government are admitted to top colleges and universities. Pell grants are awarded only to low-income students.

Like many other writers in this field, Martin urges colleges and universities to make available the data necessary for students and parents to make comparisons among colleges on both price and quality. He notes that most colleges have avoided participation in efforts to create benchmarks such as the National Survey of Student Achievement.