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Posted at 10:33 AM ET, 02/25/2011

Where's the competition in higher education?

By Ezra Klein

Interesting point from David Leonhardt:

If someone asked your grandparents 50 years ago to name the country’s best colleges, they would have come up with a list that looks very much like the list you’d come up with today. Can you think of any other industry in which that’s the case?

Or go back only to 1983, the year the U.S. News college rankings began, and compare the stability in that ranking with the turnover in the Fortune 500 since then. The top of the 1983 Fortune 500 is filled with companies that don’t exist today (Texaco, Nabisco, Beatrice, United Technologies) or that have been humbled (General Motors, Ford, Chrysler, Xerox). See Tyler Cowen for more on this point.

It’s hard to look at this picture and conclude that higher education is a bastion of intense competition.

I can't decide whether I think that comparison is fair or not. The Fortune 500 list spans the economy, and the changes in it are measuring, at least in part, the relative changes in the size and importance of industries. The college list, of course, is specific to colleges. Perhaps a more apt comparison would be asking whether the companies that show up on the list in 1983 still dominate their sectors today.

And there, the answer is largely yes: You'll see Ford and GM and Chevron and Exxon on the 1983 Fortune 500 list, and they all remain major players in their fields. Same for AT&T, GE, and Mobil. But there are exceptions. Toyota wasn't there, and nor was Wal-Mart. And both of them brought revolutionary new practices to their sectors, so though they didn't wipe out all the incumbents, they certainly transformed them.

In general, I think the bigger problem here is the one Leonhardt points out later in his post: We have very little reliable data measuring how good a job colleges are doing educating their students, and so it's very hard to say what, exactly, we should be worrying about, or trying to fix. Maybe the top 50 universities are doing a great job, and the problem is in the lower tiers, which is where most of the students are, anyway.

By Ezra Klein  | February 25, 2011; 10:33 AM ET
 
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Comments

The AT&T listed today is not, in fact, the same COMPANY that was listed in 1983, although it has the same name. The company that currently uses the AT&T name was, in 1983, a brand spanking new AT&T spinoff known as Southwestern Bell. The company known today as Verizon was another spinoff known as Bell Atlantic.

And while GE was then and is now a very large holding company, the industries in which it operates are VERY different today than they were then. GE used to be one of the world's largest insurance companies. It doesn't do that anymore. Its sold off its NBC/Universal division. Heck, it doesn't even make lightbulbs anymore.

Posted by: raylehmann | February 25, 2011 10:48 AM | Report abuse

Most universities teach the same things and undergrads basically learn the same stuff. Now for exceptional undergrads having access to the top people in their academic fields is a great thing. For most undergrads it doesn't matter. Universities are a selection and signalling device.

Posted by: endaround | February 25, 2011 10:52 AM | Report abuse

Correct me if I'm wrong, but I'm pretty sure United Technologies still exists.

Posted by: ratnerstar | February 25, 2011 11:12 AM | Report abuse

It is a little misleading to say that the 1983 Fortune 500 names from 1983 "don't exist today." The period since 1983 has seen corporations increasingly engaging in mergers, acquisitions, and spinning off entire divisions. Those missing names are not failed businesses, they ended up under other names. Obvious the corporate merger model does not transfer over to the university model.

Given the very different nature and mission of universities compared to corporations, it is not especially surprising that schools in the top tier have the talent and resources to stay at the top of the game. There is more opportunity for upward/downward mobility of reputation in the lower tiers, and the current funding crisis for public universities is likely to add further "volatility" to the rankings of many colleges and universities across the nation over the next several years.

Posted by: Patrick_M | February 25, 2011 11:13 AM | Report abuse

As a father of high school senior, looking at the colleges that sent him mailers led me to broaden my research and in the process found that the performance of many 2nd tier and lower colleges(public and private)is a cause for concern.Even the most sincere student will find it difficult to benefit from a setting where most students don't graduate-and think of the individual and institutional resources and human potential being wasted.

It's time we gave this topic the same attention that we are now giving schools and not think that the job is over once students have been admitted to college.

Posted by: jtadetroit | February 25, 2011 11:16 AM | Report abuse

Education confers benefits on society as a whole, one might say, on humanity as a whole, and cannot be measured solely as it affects individual students.

Posted by: harold3 | February 25, 2011 11:54 AM | Report abuse

Colleges specialize in knowledge. What does competition have to do with knowledge? Was Princeton #1 because they had Einstein for a while? I think not. The knowledge was shared and added to the body of knowledge.
http://en.wikipedia.org/wiki/Competition#Hypercompetitiveness

Posted by: denim39 | February 25, 2011 12:05 PM | Report abuse

"And there, the answer is largely yes: You'll see Ford and GM and Chevron and Exxon on the 1983 Fortune 500 list, and they all remain major players in their fields. Same for AT&T, GE, and Mobil."

Even the companies you name above, bear only superficial resemblance to the companies they were 30 years ago. Exxon is either a bank or a hedge fund, depending on how you measure these things. GE went from a major producer of consumer goods, to a financial services company, and now is mostly a manufacturing company again, but only of big ticket items, and increasingly becoming a natural resources company. GM used to be a bank dragging around a car company behind it, but is now a car company pushed around by hedge funds and the Federal goverment. AT&T is out of the landline business essentially and is a major wireless tech company.

Chevron and Mobil are still huge oil companies, but they're getting that oil from very different places than they did 30 years ago by investment percentage. Only Ford may truly be said to be doing the same thing in the same way it was 30 years ago.

Posted by: johnmarshall5446 | February 25, 2011 12:14 PM | Report abuse

denim wrote:

"Colleges specialize in knowledge. What does competition have to do with knowledge? Was Princeton #1 because they had Einstein for a while?"

What?????

Posted by: johnmarshall5446 | February 25, 2011 12:16 PM | Report abuse

harold wrote:

"Education confers benefits on society as a whole, one might say, on humanity as a whole, and cannot be measured solely as it affects individual students"

Then why do we have a grading system?

Posted by: johnmarshall5446 | February 25, 2011 12:17 PM | Report abuse

raylehman:

Sorry missed your post at the top and so essentially duplicated your work.

You must be a very intelligent person! LOL

Posted by: johnmarshall5446 | February 25, 2011 12:20 PM | Report abuse

There's lots of different types of colleges. They are selling a differentiated product. Do we really want all colleges to be selling the same thing in order to meet a national standard?

Right now a potential student can choose from small colleges, large universities, teaching colleges, research institutions, technical schools, and great books programs. Isn't that a good thing?

Posted by: ideallydc | February 25, 2011 12:22 PM | Report abuse

There's something else unsettling going on in the comparison. The US News rankings measure reputation, while the Fortune rankings measure size. Clearly, the largest Universities by *size* has changed in the last 30 years. I'm not so sure how reputation rankings have shifted in private industry in that time. Again, this goes to Ezra's bottom line point that we're not sure how best to measure university quality.

As a further aside, I think people are very much of three minds about the purpose of Universities: do they exist to 1) increase the general knowledge pool (research), 2) educate students, or 3) credential / signal / segregate students by aptitude (or other criteria)? The answer to this question has implications for how we should measure their performance.

Posted by: AronB | February 25, 2011 12:27 PM | Report abuse

Good points made in the comments. Ezra, I agree, *if* you're going to compare, the only way is to compare universities to companies in still viable industries.

Still, the model for a university and the model for a private business, while they have some things in common, have so many differences that it's hard to make too much of a comparison.

For just one example, as AronB says, the US News is not ranking the profitability of universities, it's ranking reputation.

One more point: I'm not sure if I like the idea of universities being as variable as Leonhardt imagines.

What if the reputations of universities did vary wildly from decade to decade? What value would there be in a degree from Harvard? How would it compare to, say, U. of Montana-Billings? Would we be judging degrees on the schools and years, like wine? (On top of that, this would add another layer of subjectivity to what already is a subjective assessment.)

Posted by: dpurp | February 25, 2011 1:22 PM | Report abuse

The fundamental factor in a colleges and universities success in the marketplace is to validate an provide a credential. (see What's a Harvard degree worth?). Its impossible to evaluate a graduates true potential and past accomplishments so the marketplace weigh's the the institution's validation and credential as a valid metric. The value of a degree is strictly a function of "reputation".

All of these institutions know this of course and their primary goal is to protect that reputation. Creating new knowledge (the primary goal of a university) serves to enhance that institutions "academic" reputation but this is a very different job then training undergraduate students and accrediting their accomplishments. Counting the number of PHD faculty and assessing where these faculty were trained are just surrogate measures from what really should be measured. How well does this institution do in growing the performance of a specific student?

Sadly, unlike K through 12 education... College outcomes for students are not assessed much less evaluated. US News actually created an industry to fill this enormous hole and ostensibly help students evaluate the product. Unfortunately the metrics they tabulate and assess don't really get to the key issue of outcomes assessment and evaluation. Consequently, the value added by an institution can not be objectively measured. In this environment, perception, opinions and tradition STILL trump all of the quantitative metrics tabulated by US New and their competitors. Perception will be the key determinants of "quality" and simply not change over time.

This is fundamentally different then how major corporations are evaluated. The market continually evaluates corporate performance and these institutions have changed their business and business success over time. The PERCEPTION of their quality is closely matched to their performance.

The nation will only be able to grow the performance of college graduates if they actually measure student outcomes and each institution uses this information to improve their training. Ranking institutions using a valid outcome metric would likely lead to real changes in the perception of educational institutional quality.

Posted by: mschneid1 | February 25, 2011 1:23 PM | Report abuse

"As a further aside, I think people are very much of three minds about the purpose of Universities: do they exist to 1) increase the general knowledge pool (research), 2) educate students, or 3) credential / signal / segregate students by aptitude (or other criteria)? The answer to this question has implications for how we should measure their performance."

This is very true.

Also, going to the mission #2 (educating students), there are many "niches" in education and some schools really excel in particular niches, which make direct comparisons complex.

Comparisons become easier when you begin with the educational objectives of particular student. A small school that is particularly strong for students who want to go on to graduate school in the sciences will not necessarily be equally strong for students who want to become architects or doctors.

Thinking of California, for example, a little school like Harvey Mudd and a big university like Stanford both have excellent reputations, but since they are so different in their scale and approach, it is difficult to compare them against each other, except when you begin with an individual student's particular educational objectives in mind.

Posted by: Patrick_M | February 25, 2011 1:30 PM | Report abuse

To add:

In industry, reputation seems to have much less variability than financial health.

Brands like Tiffany & Co. or Rolex or Rolls-Royce might one day fail, but it's doubtful that it would be due to a poor reputation.

Same goes for Wal-Mart and McDonald's at the other end of the spectrum. (I'm not blasting them, just pointing out where they position themselves in the market.)

Posted by: dpurp | February 25, 2011 1:50 PM | Report abuse

Most of the problem with identifying the "top colleges" is that this task has been left to old media,and old media uses old methods of rankings -- number of books in library, size of endowment, number of Nobel laureates on tenure.

These ranking measures were created by academic and elite insiders themselves and these old school measures have not themselves changed in decades.

In business the analogy would be the Dow Jones (the old index that was developed to measure factory based and industrial businesses) VS the new NASDAQ that was opened to better measure technology and new business. The Dow is still there, but the NASDAQ needed to be created to measure new types of business.

If you want different college rankings you need to use different -- and more relevant and modern -- measures.

For rankings to be relevant they have to measure some specific aspect that students and the public agree are "important."

New ranking systems, such as the National Survey of Student Engagement (NSSE), are moving away from measuring colleges based on old factory style static measures and toward measuring output or items that are more relevant to real students and what they "take away" from higher education.

In the world of online colleges, which is very new school, for example, our firm, GetEducated.com uses and ranks real estimated sticker price for online degrees to tell people which online degrees are the most and least affordable right up front.

We rank for the affordability of online degrees bcs. real prospective students want to see these types of rankings in an effort to more accurately gauge cost, which is usually hidden to them by colleges themselves and an outdated system of financial aid that was designed to help dependent college age students (who now comprise only about 25% of the student population).

Ask new questions, measure new and more relevant things -- such as student learning outcomes and real cost to consumers -- and you'll see new and more relevant rankings.

Truth: there is no such thing as one top university.

Ask yourself top on what criteria and you'll get better and more fluid rankings that will mean more to real people.


Posted by: VickyPhillips | February 25, 2011 3:35 PM | Report abuse

Most of the problem with identifying the "top colleges" is that this task has been left to old media,and old media uses old methods of rankings -- number of books in library, size of endowment, number of Nobel laureates on tenure.

These ranking measures were created by academic and elite insiders themselves and these old school measures have not themselves changed in decades.

In business the analogy would be the Dow Jones (the old index that was developed to measure factory based and industrial businesses) VS the new NASDAQ that was opened to better measure technology and new business. The Dow is still there, but the NASDAQ needed to be created to measure new types of business.

If you want different college rankings you need to use different -- and more relevant and modern -- measures.

For rankings to be relevant they have to measure some specific aspect that students and the public agree are "important."

New ranking systems, such as the National Survey of Student Engagement (NSSE), are moving away from measuring colleges based on old factory style static measures and toward measuring output or items that are more relevant to real students and what they "take away" from higher education.

In the world of online colleges, which is very new school, for example, our firm, GetEducated.com uses and ranks real estimated sticker price for online degrees to tell people which online degrees are the most and least affordable right up front.

We rank for the affordability of online degrees bcs. real prospective students want to see these types of rankings in an effort to more accurately gauge cost, which is usually hidden to them by colleges themselves and an outdated system of financial aid that was designed to help dependent college age students (who now comprise only about 25% of the student population).

Ask new questions, measure new and more relevant things -- such as student learning outcomes and real cost to consumers -- and you'll see new and more relevant rankings.

Truth: there is no such thing as one top university.

Ask yourself top on what criteria and you'll get better and more fluid rankings that will mean more to real people.


Posted by: VickyPhillips | February 25, 2011 3:36 PM | Report abuse

Three things determine success (however you define that) in life:

-circumstances of birth

-luck

-drive.

Education is farther down on the list notwithstanding those cases were it is exceptional in one direction or another.

The primary reason to go to the Ivy League schools is the people you meet who will be running the world, (and may give you a good job in it) not because the education is so much different than at a state school.

Posted by: johnmarshall5446 | February 25, 2011 4:06 PM | Report abuse

Education is a poor industry to try to measure for productivity because the biggest influences on eventual success of college graduates are factors already present before they apply to college.

Harvard looks great because really smart and highly ambitious and driven people apply to go to school there. If a freshman class at Harvard got diverted to Podunk U they'd still end up doing very well in life. The added value of teaching is small in most cases.

Posted by: rgparker | February 26, 2011 9:24 PM | Report abuse

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