Is Business Education “Academically Adrift?” Not at Illinois …

Filed Under (Other Topics) by Jeffrey Brown on Apr 25, 2011

Business schools are coming under fire.  Recent articles published in the Chronicle of Higher Education and the New York Times cite a number of alarming statistics and paint business education as highly troubled, lacking in intellectual rigor, and – to use the title of a controversial book – “Academically Adrift.”

After seeing the headlines and skimming the articles, even I was alarmed.  As a business professor myself, I had reason to be.  I wondered: “How much of what they had to say applied to the College of Business at Illinois?”  “How much applies to me as an individual professor?”

After reading the articles more closely, and after having some email exchanges with our Dean, Larry DeBrock, I decided that this article needed a response because it seems totally off-the-mark when applied to business education at places like Illinois.  While I cannot say much about business education the University of North Florida, the College of St. Benedict, Radford University, or most of the other institutions named in the article, I can say a lot about the program here at Illinois.

It is worth noting that much of the Chronicle/NYT piece is anecdotal, and there are good reasons that serious researchers do not depend on anecdotes when making reasoned arguments.  But in other places, they do provide more systematic evidence, such as results from the “National Survey of Student Engagement.”  The article states that “nearly half of seniors majoring in business say they spend fewer than 11 hours a week studying outside of class.”  The article cites the book “Academically Adrift” in which the authors note that business majors had the “weakest gains during the first two years of college on a national test of writing and reasoning skills.”  The article also notes that when it comes to the GMAT, “business majors … score lower than students in every other major.”

Those are pretty alarming numbers.  But how should we interpret this?  Well, let us start with what it does NOT mean.  It does NOT mean that business is an inept field, or that it attracts only poor students, or that it has no intellectual rigor.  Rather, it means that too many universities have not bothered to invest in bringing their business schools up to standard.  The majority of “business students” in these surveys are not coming from the high quality programs like Illinois (or, for that matter, from my undergraduate alma mater, Miami University, which also provides a phenomenal undergraduate business education).  Rather, the institutions that get most of the weight in these surveys are places that admit large numbers of low-performing students.  As alluded to in the article, at many of these schools, the business major is a “major of last resort” for students – the place where people go when they don’t know what else to do.  That is certainly NOT the case at Illinois or any other of the top business schools in the country.  Indeed, here at Illinois, the average ACT score for incoming freshman in the business school is right around 30. For those of you who do not know the ACT scale, that is a stratospherically high average ACT score!  Indeed, here on the Illinois campus, the only other College that has comparable averages is our Engineering College (which is itself one of the best in the world).

The article and the “Academically Adrift” book also take a very negative view on group learning.  They portray it as a way to allow poor performers to free ride, and as a way for faculty to spend less time with students.  Again, this may or may not be true at bad business schools, but at high quality business schools, group projects are essential.  Those of us who have work experience outside of academia know just how important it is to learn how to work, manage, motivate and operate on team projects.  Team projects can be used to increase small group interactions with faculty.  And free-riding is easily discerned if the project is well-structured. From my experience (yes, it is anecdotal, but I have taught many students over the years!), students who work in groups to solve a complex problem learn and retain far more than when they work only independently.  They also learn that “real” problems are messy, complex, and don’t always have clear inputs, let alone easy answers, and that part of being effective in a corporate environment is knowing how to find information, make appropriate assumptions (and then test those assumptions), and pull it together to solve difficult problems.  And, importantly, in discovering that other people with whom you must collaborate may not share your views!

I would also point out that – at least as I understand the data – the College of Business at Illinois has among the highest graduation rates and freshman retention rates on the Illinois campus.  These have long been recognized as important metrics (perhaps imperfect, but still useful) in evaluating the quality of any academic program.

Finally, recruiters love our students.  Illinois Business grads are highly sought after, and, on average, highly successful.  Some of the best companies in America return year after year to compete for our students.

So is there a problem with business education in America?  From the information in the article, it sounds like that answer may be “Yes.”  But, if so, is it because business is a soft field, lacks rigor, and does not have an adequate intellectual under-pinning?  Absolutely not!  Rather, it is because at too many institutions, someone has chosen to let business be the dumping ground for the students who can’t make it elsewhere.  But at those institutions who understand that the fields that make up a business education – accountancy, economics, finance, consumer psychology, marketing, management science, strategy, operations research, and so forth – are serious academic fields, and who have invested in top quality faculty, and who have structured a curriculum that balances the intellectual rigor with meaningful business applications, “business” is alive and well as a serious academic discipline.

We’ve clearly done this at Illinois and have evidence to support this claim.  Naturally, we are not perfect, and we are constantly seeking to improve.  But before writers at the Chronicle and the NYT paint the “business major” with such a broad brush, they may wish to look at the many success stories that point the way to providing a highly effective business education.  In short, the problem is not with “business” as a major per se, it is with the way it business has been implemented at a number of institutions.  That is an important distinction.  Maybe if the writers had received a high quality business education, they would be better trained to think about the appropriate interpretation of what they found!

In Writing this Blog, I Have a Conflict of Interest

Filed Under (Environmental Policy, Finance, Health Care, Retirement Policy, U.S. Fiscal Policy) by Don Fullerton on Jan 14, 2011

In his documentary movie about the financial crisis called “Inside Job”, and in his article in “The Chronicle of Higher Education,” Charles Ferguson talks about “the hugely damaging conflicts of interest of the senior academic economists who move among universities, government, and banking.”   Indeed, he says that these conflicts of interest are “what is wrong with economics, with academe, and indeed with the American economy.”

Before going any further, let me note that I am a senior academic economist, and I am a former Deputy Assistant Secretary of the U.S. Treasury (for Tax Analysis).  I’m mostly interested in trying to do good research, and trying to help make good economic policy that will increase general economic well-being.  For this reason, I do very little if any consulting, and I’m not on any corporate boards.  However, I will NOT claim to have no conflicts of interest.

Indeed, that’s the point.  We ALL have conflicts of interest.  When a student asks me a question, I may respond “please work it out on your own.”  But we have no way to know how much of that response is intended to save me the time and effort of explaining, or to help the student learn the material.  It’s both.  But the student will certainly remember it better by active problem solving than by passive listening. 

I do have my own political views, and I don’t doubt that some of them seep into my economics research.  It would be incredibly naïve to think that such research is void of personal biases.  All we can do is try to state findings as objectively as possible, and let others pick it apart or use their own models and data to find competing results.  Then we’ll discuss it!

Thus, I think Ferguson is beyond hyperbole when he says that this “revolving door … is the result of an extraordinary and underappreciated scandal in American society: the convergence of academic economics, Wall Street, and political power.”   Scandal?   Really?   A scandal is something previously kept hidden.   Did anybody not know that academic economists often take a leave-of-absence to work for the government, or that they often do consulting for business?  It’s really not news when he says: “Prominent academic economists (and sometimes also professors of law and public policy) are paid by companies and interest groups to testify before Congress, to write papers, to give speeches, to participate in conferences, to serve on boards of directors, to write briefs in regulatory proceedings, to defend companies in antitrust cases, and, of course, to lobby.”

That is not to say his article has no validity, however.  Despite the hyperbole, his points are basically right, and it’s worthwhile to remind readers and the public to be aware of potential conflicts of interest.  Indeed, you should already be aware of HIS conflict of interest: he is writing a somewhat sensationalized story, in order to draw attention to himself and his movie, in hopes you’ll pay money to see it.  He’s not wrong to do that; it’s just an inherent and unavoidable conflict of interest.

To be clear, I’m not trying to claim that all is right with academia.  Much more relevant and bothersome is when professors don’t disclose specific financial conflicts of interest.  That part of Ferguson’s story may point to potential scandals that somebody is trying to hide.  That’s the part of the story that Ferguson should have focused upon.  And yet, if professors are not revealing financial conflicts of interest, then that’s the part of the story most difficult to document.

Ferguson’s overstatements may induce some to dismiss his story, and not hear the important and correct point he makes. It’s not wrong to have conflicts of interest; it’s wrong not to disclose them.

I would hope to think that most professors do routinely reveal financial conflicts of interest, and that we can use their resulting research to learn something useful – as I said above:  “let others pick it apart or use their own models and data to find competing results.  Then we’ll discuss it!”

As long as it is revealed, we can USE inherent conflict of interest to help students learn about how to interpret such results. Consider the following two published articles in refereed academic journals about the costs of the oil spill from the Exxon Valdez in 1989:

Hausman, Jerry A., Gregory K. Leonard, and Daniel McFadden (1995), “A Utility-Consistent, Combined Discrete Choice and Count Data Model: Assessing Recreational Use Losses Due to Natural Resource Damage,” Journal of Public Economics 56: 1-30. 

Carson, Richard T., Robert C. Mitchell, Michael Hanemann, Raymond J. Kopp, Stanley Presser, and Paul A. Ruud (2003), “Contingent Valuation and Lost Passive Use: Damages from the Exxon Valdez Oil Spill,” Environmental and Resource Economics 25: 257-86

Hausman et al find that the cost is about $3 million.  That’s a lot of money, if it arrived in my own personal bank account.  But that’s million, with an “m”.  Carson et al find that the cost is about $3 billion.  That’s billion with a “b”.  Is somebody joking here?  No, and in fact, they both are correct!  They are just measuring different things.  Hausman et al measure the lost “use” values of the few thousand Alaskans who will not be able to use that area for recreational hunting, fishing, hiking, and boating.  In contrast, Carson et al measure the lost “NON-use” values of 300,000,000 Americans who likely never visit Alaska but who nonetheless feel badly for the damaged ecosystem and wildlife, and who would be willing to help pay for protection of that natural environment.

The example is an opportunity to teach students about how properly to interpret academic research and to understand the different perspectives of different researchers.  And although it shouldn’t really surprise anybody, here are the quotes from those two papers’ acknowledgement footnotes, with proper revelation of financial interests:

Hausman et al, finding that the cost is $3 million: “This paper reports on research funded by Exxon Company, USA. It should not be interpreted as representing the views of any parties other than the authors.”

Carson et al, finding that the cost is $3 billion:  “The State of Alaska provided funding for this study. … All opinions expressed in this paper are those of the authors and should not be attributed to the State of Alaska, the Alfred P. Sloan Foundation, or the authors’ home institutions. The authors bear sole responsibility for any errors or omissions.”