Why Higher Education is Too Important to be Free



Here, I walk into a hornet’s nest.  I preface my comments with these five core thoughts:

  1. My life has been in large part dedicated to education. Each of the six companies I have started or tried to start in the last 34 years has had education – making the world better informed – as a core value and mission.  I gave more money than I kept for myself to my alma mater.  I teach all over the world.  Nothing is more important than education to the future of the people of the United States and the world.
  2. Higher education is too expensive. Price inflation has been among the highest of any part of “consumer spending,” and much of that increase has come from administrative and other costs, rather than paying teachers and financing curriculum.
  3. There is a “disconnect” between what “the market needs” and higher education. Millions of American jobs go unfilled because people do not have the right skills.  At the same time, college teachers and education critics continually complain that our system does not create citizens and leaders who “know how to think,” a primary goal of classical liberal arts education.   Groupthink results.
  4. Our system for financing higher education is out of kilter and needs to be fixed.
  5. Nothing I say below rules out using taxpayer monies to help those who could not otherwise afford the higher education they desire.

With those points in mind, I believe that taxpayer-funded across-the board funding – “free college” – would be a very harmful idea for our society and our future.

Sure, I understand that if you are going to college or paying for college “free” sounds great.  But our world would be better off if we occasionally put what’s best for society ahead of our own self-interest.

The ideas most widely in circulation propose that every American get taxpayer-funded (nothing is truly free) tuition to state or local government-operated colleges.  Some propose those funds only go to those schools and programs which produce graduates with needed practical skill sets.

These are the ideas that worry me.  Why?

Unalterable Laws of Economics

My first concern comes from the damage done to education from the disruption of the price system, mankind’s most important and useful tool for deciding what to produce and how much to produce.

One of the worst things a government or its leaders can do is to fix prices and wages.  While this has occasionally worked in times of war, the long history of price controls – dating back to Hammurabi of Babylon and the Roman Emperor Diocletian – demonstrates that they wreak havoc on people’s lives.  Artificially setting high prices, as American does for sugar and other agricultural products, results in overproduction – sometimes, the crops are then destroyed to keep prices up and large agribusinesses subsidized.  Artificially setting low prices, such as rent-controlled-apartments, creates shortages, with too few new units being built (or mass conversion to condominiums which are exempt).

Take the price of gasoline.  In many nations, governments which want to please voters at any cost subsidize the price of gasoline.  People then use much more than they otherwise would, and travel more miles and worry less about their “carbon footprint.”  Venezuela, rich in oil, does this, and as a result there is a large business in the black market, with “criminals” selling the cheap oil in neighboring countries.

I continually see references to “affordable housing” which are often in fact subsidized housing, a very different thing.  In fact, this reduces any incentive for developers, builders, and zoning and building authorities to reduce the real cost of housing – it just gives them an “out” to continue to increase costs and therefore prices, the opposite of the intended effect.

In this context, the worst form of price control, of artificially low prices, is to make something “free.”  Producers of the product or service have zero incentive to work to keep costs and prices down.  Users have little reason to conserve their use of these valuable resources, to give serious consideration to the cost to society of using these resources.  Even modest cost-sharing – “co-pays” – mean that consumers have some “skin in the game.”  We tend to attach less value and care to what is free compared to something we have an investment in.

But worst of all, particularly in this context, is that consumers have dramatically reduced incentives to consider alternatives, and often those alternatives may be driven out of the market.

Progress in our society comes from innovation, and innovation comes from experimentation from diverse sources.

Consider this hypothetical:

Many things – food, clothing, housing, transportation, electricity, education – could be considered “requirements” in modern life.  High among these are our communications needs.  In the 1920s, a politician willing to sacrifice logic for votes might have proposed that taxpayers (the government) provide all of us with “free” telephones and telephone service.  If such a policy had been implemented, then we likely would all still be using government-provided black telephones wired to the wall.  There would not have been a market, except perhaps among the rich, for “cordless” home phones (remember them?), let alone today’s Apple and other smartphones.

Consider a similar policy for electricity – a basic necessity in today’s world.  But “free electricity” would have resulted in massive overconsumption, and no incentive to find alternative power sources.

Both ideas were pervasive in the Soviet Union, which did not turn out well.  I imagine they live on in North Korea.

Such policies turn our society toward “one size fits all” and away from experimentation and customization.  I have met tens of thousands of students and entrepreneurs in over 40 countries, and everything I see tells me this would be going backwards, not forwards.

Innovation in Education

Returning to education, some random thoughts:

  • I have told some high school graduates that they might be best off taking 2-3 years of college to get a broad based education – a liberal arts education, which I believe is required of successful leaders – followed by travelling the world. At minimum, take a gap year!
  • I have students for whom a $3000 Barnes & Noble or Amazon gift certificate would do much more to further their education than the same amount spent on a college of any type. For example, if you want to deeply understand business management, I suggest you bury yourself in the works of Peter Drucker for a year.  For others, spending more time in science or history museums, a key part of our educational system, might be most useful.
  • Most of us, throughout history, have learned our professions on the job rather than in the classroom. While formal vocational education continues to play a vital role for truck drivers, doctors, lawyers, and many others, we need more “on the job training.”  But today unpaid or modestly paid internships and apprenticeships can be hard to achieve with laws that place floors on wages.  If instead of spending $3000 on community college tuition, I wanted to pay some expert or professional $3000 to follow them around and learn from them for a “semester,” shouldn’t I be free to do so?  In many cases, I would learn more, less expensively and faster.
  • One of my recent entrepreneurship students was a local animator who is starting a school for animators. Another friend is working on a school for inventors.  These are independent, for-profit schools, which likely will give great short, useful educations.  But if one of their major “competitors” is “free,” what hope do they have?  The main way Americans learned how to use that world-changing new technology, the typewriter, was through independent for-profit “business schools.”  I suspect today’s great MBA programs are no more effective in achieving their goals than those were.
  • In recent years, the United States and the world have seen an explosion in educational choices. Some like the Khan Academy are “free,” but not by taking money from one taxpayer and giving it to another.  Udemy and many other “online learning platforms” expand daily by leaps and bounds.  My best students get great education from TED Talks and YouTube videos.  Conversations from Reddit to Quora have great power to educate.  Innovative schools from Waldorf to Montessori to Acton Academy arise daily.

I believe that the world needs more of this experimentation, innovation, and diversity in education.

To artificially promote one form of education, such as state and local colleges, would only inhibit this trend.  In any open, competitive market, the best of those would rise to the top.  Our Austin Community College and Ivy Tech in my home state of Indiana would prosper.  But so would the best church and parochial schools, as well as the experiments of my friends who are educational innovators.

One of my fellow college teachers and friends responded to my ideas by saying something along the lines of, “But we know that the students coming out of high school today have not been prepared for the world, they don’t know how to think on their own, and their knowledge of history is awful.  They definitely need more education.”  He is absolutely right.  But isn’t his observation in large part a result of “leaving no child behind,” teaching to tests, and uniformity of education?  Do we really want to forcefully extend that another 2-4 years?  We have in large part replaced education in America with credentialization – just give us that piece of paper; that is all we need.

My friend Brett Hurt founded a company in Austin which today has over 1,000 employees.  Under his leadership, employees were each given a $1000 annual educational allowance.  Many used it to buy books, other took courses.  I am sure there was some waste and abuse, but the program was not hard to police.  I am confident his company achieved one of his goals, to be the job where people learned the most.  Giant United Technologies had a program where the company would pitch in on any degree, even if it was not specific to their jobs.  I bet those credits could be used at Harvard – or St. Edward’s University!

Combining all those thoughts, I arrive at my conclusion.  “Free” taxpayer-funded college for all who want it would be one of the worst things we could do in this country.

If you go online and search for reactions to the idea of “free college,” you will find arguments against it from all parts of the political spectrum.  Some say it is a transfer of wealth to the middle class, as the poor still pay plenty of sales and other taxes, but would get less benefit from it.  Others say it would cause impossible strains on the existing community college system, reducing quality.  Those who espouse free college give little real evidence, appealing only to emotion.  They know they can get many votes from those who are presently in the market for college or who are dealing with the mess that is higher education finance.  But there are other, more reasonable ways to deal with these issues without wrecking our future.  Higher education is just too important to all of us.

Gary Hoover

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