Bad pronouncements from fellow economists have historically caused lots of mischief, but there is something important on which most of them agree: people respond to positive incentives—money, material goods, power, even sexual attractions—and try to avoid negative incentives—losing large sums of money, freedom through imprisonment, etc. I have argued for decades that those incentive systems, both positive and negative, work less well in higher education than elsewhere—the real world. Let me give a couple of examples and then explain how changing incentives, both positive and negative, could improve educational outcomes.
This month’s biggest campus stories are the demonstrations growing out of the war between Hamas and Israel. Out of it have come some injuries, some reduction in academic services—e.g., at Columbia, where classes were put online and normal student-faculty interaction was severely disturbed—considerable despicable antisemitic behavior, etc. Any good parent knows how to deal with inappropriate behavior, but college administrators seem flummoxed. Why aren’t colleges enforcing campus rules on impermissible conduct and requesting police assistance when public laws are broken? More students should face dismissal, suspension, probation, etc.
The experience of the late 1960s and early 1970s is instructive: too many administrators failed to curb illegal and academically disruptive student exuberance protesting the Vietnam War, and college educations were inappropriately disrupted.
To be sure, campuses should also be intellectual sanctuaries where the free flow of ideas flourishes. Individuals should be able to say almost anything supporting an opinion. But when they block others from performing their daily academic tasks—attending class, going to the library, working in an administrative office, giving or attending a campus lecture—they should be punished and often severely punished. This is particularly true at selective universities like Columbia or Yale, where many applicants are denied admission. Let only those who will play by the rules attend—we call this the rule of law.
But collegiate incentives are perverse in other areas as well.
Professors work hard to get articles in the Journal of Last Resort that no one reads because tenure, promotion, and salary increases depend upon it. Teachers who spend much time advising students and engaging them in understanding important perspectives on life are also often punished by being denied tenure: publish or perish. Too many who plagiarize or otherwise distort research findings are not punished for their misdeeds. “Diversity, equity, and inclusion” (DEI) administrators—among others—sometimes work to increase mediocrity by allowing factors like race to trump decision-making based on academic merit.
Much of the output in academia is hard to measure, and some—both in teaching and research—becomes recognized only after long and variable lags. But part of the problem is universities deliberately avoiding measuring outcomes. For example, why don’t we test students on their general literacy and knowledge at the beginning and end of their collegiate careers to ascertain what the school added to it? The reason: the results may be embarrassing.
Moreover, colleges have deliberately reduced incentives for students to excel academically over time, as time-use surveys suggest they spend about 30 percent less time on academics than several decades ago. Why? A huge part of the answer is grade inflation. The grading system should incentivize good academic performance, but we have diluted its importance and meaning.
In the real world, taxes have an enormous impact on incentives. People are moving from high-income tax states like California, New York, and New Jersey to low or no-state income tax states like Texas, Florida, Tennessee, and Washington. We give subsidies—negative taxes—to universities because of their alleged “positive externalities” —good spillover effects. Perhaps we could also use the endowment, tuition, or enrollment taxes to punish “negative externalities” that weaken academia and reduce the quality of American life. I say this with some trepidation because I am not particularly enamored of the idea of politicians—legislators, governors, or presidents—setting university policies, but I can see why we might “tax” universities in some fashion when, for example, students largely fail to graduate or repay their student loans. And if we rely on politicians to provide financial support, we must concede their right to withdraw it when they perceive it serves the greater public good.
Ultimately, perhaps the real economic issue is not only incentives but property rights: who really owns the universities? The trustees? The administration? The faculty? The students? The taxpayers? Some on campus assert ownership rights that they do not have.
Photo by Garry — Adobe Stock — Asset ID#: 231434717
A very smart piece. If the goal is to reduce political meddling and funding, eliminating the Department of Education should be a priority.
It should be noted that mayors in DC and Baltimore (possibly elsewhere) are refusing college requests for police assistance.
As to DC, I’d like to see Congress repeal the self government act and have Congress run DC itself. Perhaps a committee of twelve — eight reps (four from each party) and four Senators (two from each party).
This last is a terrific idea. They might learn something. Question: would we risk DC becoming even more of a public works program funded by the rest of us?