[FRIAM] of straw and steel

Mon Jul 5 10:43:28 EDT 2021

College is a weird case, but I think it fits pretty well too, in much the
way you described.

In my experience, colleging from the late '90s forward, the story is a bit
different, I think, than what you presented. I was there during a dramatic
shift towards endowment-driven need-based aid, and inflated federal
need-based aid. Obviously, there is a "merit" question regarding who gets
admitted to top schools -- and that judgement is not blind of insidious
little things like legacy considerations, and personal connections -- but
once you are admitted most aid is NOT merit based.

This is part of what fed the dramatic rise in tuition prices. At, for
example, Bucknell, right now, the "Total Comprehensive Cost" for a year
(tuition, housing, meals, fees) is $75k, and the average need-based
financial aid package is $41k. Just over half the students receive
financial aid, and for them the effective price closer to $34k, which means
they are paying less that half the sticker price. It looks like Oberlin is
pretty similar.

For Clark University, drop the total costs to $59k, and give 62% of the
students an aid package averaging $28k. That makes the effective cost for a
scholarship student still pretty similar, at $31k, but you aren't getting
as high a premium on those paying full price, and there are fewer paying
full price.

UC Berkeley comes in at $64k for out of state total costs, $35k for in
state. Only 41% of students receive need based aid, with an average
need-based scholarship of $24k... so out of state students there are
actually paying more, on average, than the people at the elite private
schools... but, of course, in-state is about $20k less.

What about an HBCU like Howard University? Total costs $40k, and 87% of
students receive need based aid, but it is only $5k average. That takes us
back to an effective price for scholarship students of $35k, with almost no
premium for those paying full.

All of those colleges also ARE offering merit-based aid packages, but the
average amount is much smaller, and they go to a much smaller % of the
students.

To find something very different, you need to go to something like Trinity
Washington University, which has a very strong local social-empowerment
mission. Their total costs are around $35k (but most don't need room and
board, so really $25k), and 95% of students are on need based aid, covering
most of that.

And then, of course, there are the for-profit degree mills which price
themselves right around the federal loan amounts, and live almost entirely
off of the federal loan debt their students take on.

So, yes, the college sticker price IS something to discount off of, and
that scheme is inflating the prices similar to how it does in the other
examples, but I think the rise of need-based aid is the primary driver,
rather than merit aid, and it will look different depending on which type
of school you are looking at.

-----------
Eric P. Charles, Ph.D.
Senior Workforce Planner
Human Capital Management Office
Defense Counterintelligence and Security Agency (DCSA)
American University - Adjunct Instructor
<echarles at american.edu>

On Sat, Jul 3, 2021 at 1:01 AM David Eric Smith <desmith at santafe.edu> wrote:

> Thanks Nick,
>
> I do know of Wilkerson, though (not surprising in my case) I have read
> only some of her shorter-form essay and not the full book.  She was a topic
> of a thread some weeks or months ago here.
>
> Sandel I did not know of by name, so thank you for link.
>
> I think the thing I was responding to in Glen’s and EricC’s posts wasn’t
> deconstructing the social rhetoric of merit.  It happens that that term
> comes up in the university strategies, both as a tag (the alternative to
> “need”), and as part of the narrative bulwark that gets recruited to
> justify choice structures.  But I think equally well, the presence of
> 9-month “sales” at mattress warehouses, or of inflated drug and medical
> service costs, or even the pricing rackets of Elsevier and Springer, are
> not mainly driven by a program to disenfranchise black people or any
> particular social underclass.
>
> It does resonate that Wilkerson would enter this discussion, because I was
> arguing that caste is a good term, avoiding loading everything onto race,
> because caste emphasizes the fundamentally exploitative system we currently
> have, and gives a suggestion that this system would create racism even if
> it did not already exist, just because it is an efficient mechanism for
> exploitation.
>
> I think the thing I was after, though, was the mechanism-paradigm that
> makes the functioning of this system comprehensible and allows one to
> reason about dealing with it or changing it.  We live, socially and
> economically, I this children’s story about posted prices, nicely atomized
> exchanges, negotiated settlements, and prices optimized to maximize
> clearing and consumer’s surplus at the margin, in all of which one doesn’t
> need the term “power” except as a shadowy backstop that allows contracts to
> be enforced.
>
> In contrast, the system Glen and EricC describe is organized mainly by the
> power structure it creates, which seems to function by very narrowly
> canalizing the choice sets any individual ever faces in interacting with
> the “market”.  The nominal Adam-Smith-like elements, prices, voluntary
> exchange and such, all exist in the writing.  But the volume flows through
> these highly correlated systems of exchange, designed to be its
> almost-exclusive channel.  They may be bundles (as for journals purchased
> by libraries), they may be reciprocals (as in “scholarships” as fishhooks
> for tuition)  or they may be rackets as in medical products and services or
> grant budgets for scientific publishing (or the grants offices in
> universities, for that matter, without which few scientists could ever face
> an agency and survive).  What all those seem to have in common is that the
> conditions are so elaborate that, even in a big world, for most of what you
> want to do as an isolated decision, there are no options left at all.
> Effectively, markets are massively incomplete everywhere and all the time,
> which in economic-speak is the one condition under which the architecture
> of power does have to be acknowledge and its role reckoned with.
>
> Again, not inappropriate to cue those who talk about caste or merit.  It
> will be great if there can be chapters in one of these where they break
> away from their larger theme to do an analysis of this economic model just
> as a mode of organization.
>
> All this is also sort of Sam Bowles, Wendy Carlin, or Jon Komlos type of
> stuff; the Neo-Marxians.  What I don’t know is whether the little models
> they write down really help in analysis, the way we have wanted economics
> to do in other areas.
>
> It is interesting.
>
> Eric
>
>
>
>
> On Jul 3, 2021, at 10:33 AM, <thompnickson2 at gmail.com> <
> thompnickson2 at gmail.com> wrote:
>
> EricS,
>
> Have you looked at Sandel’s *Tyranny of Merit* or Wilkerson’s *Caste*?
>
> If on thinks hard enough about “merit” it becomes deeply confusing.  The
> idea of Merit is something that I got on my own, right?  So working back
> from now to birth whence exactly did I get that merit.  Even what I got
> from my genes was random right.  At what point do get to embrace my merit
> as of my own making?  So far as me, myself, is concerned, it’s all luck all
> the way down. That is what the declaration of independence means when it
> says that all [humans] are created equal.
>
> Nick
>
> Nick Thompson
> ThompNickSon2 at gmail.com
> https://wordpress.clarku.edu/nthompson/
> <https://linkprotect.cudasvc.com/url?a=https%3a%2f%2fwordpress.clarku.edu%2fnthompson%2f&c=E,1,a5JFyWgvKrzNn-1Zvgk-zmQNgrNqwgzD7fobyyZPgVP-YbOeCzVxnUFF7U9wWWmXf2aJcYuoruoJ6UHyyhrvm78b2IvZ1w6lVA9fiitUGbaztZgtDg,,&typo=1>
>
> *From:* Friam <friam-bounces at redfish.com> *On Behalf Of *David Eric Smith
> *Sent:* Friday, July 2, 2021 7:47 PM
> *To:* The Friday Morning Applied Complexity Coffee Group <
> friam at redfish.com>
> *Subject:* Re: [FRIAM] of straw and steel
>
> I think there is some version of this for college tuitions, too, though I
> am partly muddy-headed and what I say next will probably fail the logical
> map at some points.
>
> The general idea is some combination of what is in Ginsberg’s book
> https://www.amazon.com/Fall-Faculty-Benjamin-Ginsberg/dp/0199975434
> but even more so in some article I read in J. Higher Ed or something
> (which I have not succeeded in finding and I need now for other projects),
> to the effect that:
>
> 1. There is been a massive cumulative re-allocation of money out of
> need-based grants and to merit-based scholarships over the past 40 years or
> so.
> 2. Sounds good, of course: who could be against rewarding merit.
> 3. Except that, de facto, what one largely rewards is preparation, which
> is a proxy for parental wealth and membership in one of the culture’s
> preferred classes, races, regions, or what-have-you.  The part of this that
> I am pretty sure is in Ginsberg is also fishing for parental wealth by
> building snazzy student centers, on-campus water parks, etc.  All that at
> enormous cost.  The punchline of all this is that WHEN THE BUSINESSMEN TAKE
> OVER THE CONCEPT OF THE UNIVERSITY, THE UNIVERSITY BECOMES A BUSINESS.  So,
> monies spent, such as tuition deferment whether called grant or
> scholarships, is in their worldview VENTURE CAPITAL.  (That was what was in
> the JHE article.)  And the return that venture capital is seeking is
> parental tuition money.
>
> So how does this map to Glen’s EricC’s comments: The nominal tuition is
> very high (4x what it was in the 1970s, per faculty actually teaching or
> doing research).  That high tuition isn’t actually cost-received from most
> parents, because a significant fraction of it was spent either giving their
> kids scholarships, building water parks and student centers, or whatever.
> However: if they had given it in need-based grants, they wouldn’t be
> getting _anything_ from the parents.  So in the businessman’s world, the
> investment gathered a maximized monetary profit, which was the criterion
> for how to make it.
>
> As in EricC’s point below, there will be some very rich parents with kids
> so lazy or dull that they aren’t well-prepared even with opportunities, so
> one can’t give them scholarships, and those will pay the sticker price.
> Those are the ones who buy the article at $19, or medical products or
> services at list price.  High profit but small margin on them.
>
>
> In all the recent and ongoing conversations about tuition jubilee or free
> college in the US, I worry that everything real and solvable gets ruled out
> before we ever start, because the above characterization of the real
> business model isn’t front and center.  Not very different for medical
> products and services (I am trying not to use the completely bleached
> expression “health care”), though that has been around long enough that a
> fuller story is not so uncommon to find.
>
> It is right that we have mortgaged a whole generation of kids with
> unplayable tuition loans, and probably somebody should eat that cost.  Kind
> of like when German banks bought junk mortgage bonds in the US, they should
> actually have been allowed to fail for having not done due diligence,
> rather than being bailed out by a government that then had to get the money
> to float them by leaning on somebody else (the Irish, the Italians).  That
> of course doesn’t really work for the reasons correctly given in Minsky’s
> Ratchet
>
> https://www.amazon.com/Stabilizing-Unstable-Economy-Hyman-Minsky/dp/0071592997
> But the threat of it somehow should be used, while the problem is
> building, to keep the banks doing due diligence, and to stop the schools
> from hiking tuition and spending to profit on the margin, or medical
> products and services skyrocketing as a negotiating point against insurance
> companies, etc.  The system either gets fixed as a system, or not at all.
>
> There must be a really great book somewhere, which gets the data and the
> economics better than I can, and also explains this clearly enough that it
> can be an everyman’s book.  It’s messy and a bait indirect, but it’s not so
> hard as to be incomprehensible.  Does anybody know such a book?
>
> Eric
>
>
>
> On Jul 3, 2021, at 5:51 AM, Eric Charles <eric.phillip.charles at gmail.com>
> wrote:
>
> Something Glen's analysis,  there are MANY things in the modern economy
> that fit things model,  including healthcare.
>
> The insurance companies demand a steep discount in procedures.
> The hospital's have costs to cover.
> The only possible consequence is to dramatically increase the sticker
> price.  There hospital doesn't expect someone to pay that much for a major
> procedure,  they expect bulk buyers (i.e., insurance companies) to drive
> buisness at ther bulk price. (If some random person does pay sticker price
> every so often,  all the better, but that's not ther primary goal.)
>
> Mattress companies, clothing stores,  etc. that have massive sales 3/4th
> of the year are doing the same sort of thing.
>
> See also my continuous complaints about the "Big Mac Index". Only a small
> % of Big Macs in the U.S. are purchased at sicker price.  The sticker price
> is primarily intended as something to discount off of.
>
> On Wed, Jun 30, 2021, 10:56 AM uǝlƃ ☤>$ <gepropella at gmail.com> wrote:
>
> Maybe. But remember, despite the prescriptive linguists out there: a)
> "troll" is not an insult and b) it can be accidental.
>
> All 3 of Russ' "people with grants", Barry's "rent seeking", and Pieter's
> "publishing profits are bad for science" responses are a trawler's delight!
> Rather than talk about the Strawman fallacy and it's variations, we're
> talking ... [sigh] again ... about capitalism and money.
>
> Call it naivete if you want. But it was a very effective troll.
>
> On 6/30/21 7:47 AM, thompnickson2 at gmail.com wrote:
> > Oh, I see.  The point is to make getting the individual item so
> expensive that it just balances driving to the library (or doing ILL) with
> subscribing to the Journal.  It's pure manipulation; costs have nothing to
> do with it.
> >
> > Glen, I think you persistently confuse naivete with trolling.
>
> --
> ☤>$ uǝlƃ
>
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