Should Students Pay for the Creation of Knowledge?

Filed Under (Other Topics, U.S. Fiscal Policy) by Jeffrey Brown on Jun 20, 2011

To briefly summarize this long post: the creation of knowledge through fundamental research is a public good.  Economic theory is clear that public goods will be under-provided without government funding.  And as government funding for higher education continues to shrink, it is increasingly the students and their families who are paying for the provision of a good that benefits everyone.  Is that really what we want? 

First, some background.  When economists speak of “public goods,” we have something specific in mind: goods that, once produced, are “non-rival” and “non-excludable.”  In plain English, “non-rival” simply means that one person’s consumption of the good does not diminish other people’s ability to use the good.  For example, the fact that I get to enjoy a fireworks show or the protection of a missile defense system does not prohibit my neighbor from also enjoying benefits from these goods.  This is in contrast to most usual consumption goods – for example, if eat a candy bar, it is impossible for someone else to then eat the same candy bar.  “Non-excludable” means, roughly, that once the good is made available, it is available to everyone.  A classic example of a public good is clean air in a city: my breathing the clean air does not prevent you from also enjoying it, and it is also difficult to exclude people from breathing the clean air when they are in the city.

A many-decades old and quite famous result in economic theory is that public goods are under-provided in a private market.  In essence, I might be able to contribute a little bit to the creation of clean air insofar as the net benefits to me of my efforts are positive.  But in making that calculation, I will fail to take into account the benefits on everyone else.  They will do the same.  So we will effectively end up with too little clean air.  It is a special case of market failure where – (tea partiers should cover your ears) – government intervention can actually do a better job of approximating the efficient market solution than free markets.     

Universities are in the business of creating several goods that are, at least partially, public goods.  The most obvious of these is the creation of knowledge.  Indeed, the mission statement here at the University of Illinois lists “creating knowledge” as one of the three central tenants for our existence.  In contrast to applied research – such as pharmaceutical company investing in R&D for a new drug – most of the knowledge created in our universities is “fundamental research” – sometimes called “basic research” (although basic is meant to mean fundamental, not easy!)  What distinguishes this type of research is that the ultimate goal is not a marketable product, but rather the advancement of knowledge itself.  While this knowledge often leads to tangible benefits that can be commercially viable down the line (e.g., two famous Illinois examples include the MRI and web-browser technology), much of the cutting edge research does not have commercial applications.  But it is extremely valuable nonetheless.    

A great competitive advantage of the U.S. over the past century has been its system of public and private research universities.  Indeed, this is one of the “secret sauces” that launched the United States into a world economic powerhouse over the past century.  Universities have been responsible for much of the technological and intellectual innovation that has shaped the world in which we live.  The fact that our standard-of-living is many times higher today than it was a century ago is due – in part – to our outstanding research universities.

Historically, much of this research has been supported by public dollars.  At public and private research institutions, much direct research funding has come from federal agencies such as the National Science Foundation, the National Institute of Health, as well as research funding from other cabinet agencies (e.g., Department of Energy, Department of Defense).  At public institutions, support has also traditionally come from state appropriations to support both the teaching and research missions of public universities.  For example, state funding has long been an important source of funds to pay faculty salaries, and it is those faculty who are, in turn, creating knowledge.

That model, however, is coming under increasing strain.  Thanks to enormous fiscal imbalances at the federal and state levels, many traditional sources of public support for higher education are declining.  Perhaps the most notable of these is the decline in state appropriations that support public research institutions.  Here at Illinois, our Chief Financial Officer, Walter Knorr, remarked in March that the,  “the state’s direct appropriation to the university is 26 percent below what it was 40 years ago, when adjusted for inflation.”

One of the leading experts on the economics of higher education, Ron Ehrenberg of Cornell University, has written extensively on changing nature of higher ed funding over the decades.  In a 2003 paper titled, “Who Bears the Growing Cost of Science at Universities,” he notes that ”while undergraduate students may benefit from being in close proximity to great researchers, they also bear part of the growing costs of research in the form of larger class sizes, fewer full-time professorial rank faculty members and higher tuition levels.”

 Since his paper was written, tuition rates have continued to climb, largely in an attempt to offset declining public sector support. In essence, students and their families are footing a larger share of the bill for the creation of knowledge. 

To be clear, I am not saying that students are getting a bad deal for their tuition dollars.  Indeed, every study of the returns to a college education reinforce that – at least on average – a college degree continues to be one of the best investments an individual can ever make.  This remains true even as tuition rates climb.  And it is also the case that students enrolled at research institutions benefit from interacting with faculty who excel at knowledge creation.  Clearly, students and their families agree that an Illinois degree is still a phenomenal investment, as indicated by the fact that applications to the University continue to jump, even in the face of tuition hikes.

Nonetheless, these are troubling trends.  If knowledge creation is central to our national well-being and economic growth, then we need to ensure it is supplied at the optimal level.  It should not be limited by the willingness and ability of students and their families to pay to for a university education.

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!