Saturday, August 31, 2013

Should ed school accreditation standards be changed?

WSJ reports that the Council for Accreditation of Educator Preparation is planning to change their standards as part of a push to increasing teacher quality.  Incoming freshmen would need to have a 3.0 GPA in high school, as compared to the current 2.5.  Freshmen also would be expected to have SAT/ACT scores in the top 50% by 2017, rising to the top third by 2020.  Ed schools also would be required to track their graduates' performance in the classroom, which presumably means more emphasis on test scores. 

This all sounds very well-intentioned.  But unless teacher salaries adjust to the top third of the college graduate salary distribution, I am skeptical that ed schools will be able to meet these goals.  Also, I wonder if more attention should be paid to what actually happens in teacher ed programs, especially in terms of opportunities to get ed students classroom experience well before they graduate. 

Friday, August 30, 2013

Another threat to higher ed's business model

Universities all over the globe (except NC State, for whatever reason??) are rushing to develop MOOCs.  MOOCs are an effective means of disseminating knowledge and have the potential to be quite engaging.  But by themselves, MOOCs are no threat to the business model of the modern university unless they are accompanied by some means of credibly certifying to employers that the person who passed the MOOC actually has mastered the material. 

Enter certification exams.  These have long been available in such field as computer science, finance  and project management.  Now we have a certification exam for four year undergraduate degrees, according to WSJ.  The Collegiate Learning Assessment will be open to anyone willing to pay the $35 fee.  Employers are embracing the test as a more reliable signal of student knowledge than GPA or university selectivity. 

Some schools are jumping on the bandwagon as well, mainly because such tests help them meet assurance of learning standards for accreditation.  An exam for MBAs has been developed, but has not yet caught on.  Yet. 

Wednesday, August 28, 2013

Technological change and labor market opportunities

An age-old question in labor economics has been how technological change impacts the labor market.  The standard answer has always been that change has mixed effects, eliminating the mrket for some tasks but creating new market opportunities.  For instance computers have been deadly for typewriter repair people but have created great opportunities for software engineers. 

This week MIT economist David Autor has a NYT think piece with the misleading title "How Technology Wrecks the Middle Class."  Autor deflates what the economists call the "lump of labor" fallacy, which maintains there is only so much work to be done and any technological change reduces job opportunities.
Labor-saving technological change necessarily displaces workers performing certain tasks — that’s where the gains in productivity come from — but over the long run, it generates new products and services that raise national income and increase the overall demand for labor. In 1900, no one could foresee that a century later, health care, finance, information technology, consumer electronics, hospitality, leisure and entertainment would employ far more workers than agriculture.
But with computing costs steadily falling, will this time be different?  Autor argues that this is unlikely for the most and least skilled workers.  Computers are not ready to take over most abstract, problem-solving tasks, nor are they ready to do most service work.  Autor is worried about some middle class jobs that are routine and could be outsourced or taken over by software. But he still sees opportunity:
Middle-skill jobs that survive will combine routine technical tasks with abstract and manual tasks in which workers have a comparative advantage — interpersonal interaction, adaptability and problem-solving. Along with medical paraprofessionals, this category includes numerous jobs for people in the skilled trades and repair: plumbers; builders; electricians; heating, ventilation and air-conditioning installers; automotive technicians; customer-service representatives; and even clerical workers who are required to do more than type and file.

Friday, August 23, 2013

Can feds lower college costs?

President Obama announced a plan to lower college tuition yesterday.  The key elements are a new set of college performance rankings (done this time by the US Dept of Education, not US News) that will eventually be linked to federal financial aid.  As WP's Ezra Klein points out, the rankings piece can be done without Congressional approval, but Congress would have to approve any changes to the formulas regulating how federal aid is divvied up. 

I have long felt that informational asymmetries have been an issue that require some regulatory action by state or federal governments.  Colleges do not report in any accessible, systematic way their graduation rates or what happens to students when they graduate.  College is a huge investment, but there are no data on graduation rates, placement rates, and salaries by major at most institutions of higher learning.  Collecting such data is not an easy task and publishing it in a way that will inform decisions while protecting the privacy of individual students will be a challenge. 

But (as you might expect) there is much, much more to the Obama plan than a dictate to collect and publish more data.  I am skeptical of any pay-for-performance scheme the feds would cook up.  Suppose the feds include graduation rates as a key part of their performance measure -- what do you think colleges might do to make sure they have high graduation rates?  Any formula can be gamed and, trust me, if fed funds are at stake there would be a whole lot of gaming going on.  And do we really need another Race to the Top for colleges and universities????

Although college-bashing has become routine in the media, keep in mind two facts: (1) the rate of return to a completed college degree is much higher than anyone is likely to see in the financial markets and (2) the U.S. system despite its flaws remains the envy of the world and is one of the few sectors where we run a trade surplus. 

Thursday, August 22, 2013

Oregon rethinks college tuition

Today President Obama is announcing a new federal push to make college more affordable.  The Oregon state legislature is rethinking the very fundamentals of student loans -- should your loan payments be based on the current system (how much you borrowed times a given interest rate), or should they be a set percentage of your income after you graduate?  (See WSJ for details.)

The Oregon plan is called "Pay It Forward, Pay It Back" is modeled after comparable plans in Australia and the UK.  It deals effectively with one risk -- uncertainty about income after graduation.  Two students could have the same $50,000 debt but have vastly different capabilities of repaying it depending on whether they get good or not-so-good jobs after graduation. 

However, there are a bunch of catches -- will students who expect high earnings (e.g., engineering and business majors) participate or not? What does Oregon do between now and 20 years from now in terms of covering the loans? What impact would the repayment obligation have on work effort?  No easy answers here. 

Monday, August 19, 2013

Georgia Tech to offer masters degree for $6600

Many schools have developed MOOCs (Massive Open Online Courses) that have attracted vast followings.  But most students who start a MOOC never finish and those who finish rarely get academic credit. 

What would happen if a well-respected research university decided to offer an entire degree based on MOOCs?  We are about to find out, as Georgia Tech is launching an online masters in computer science in January.  They expect to attract up to 10,000 students annually, mostly from countries with low per capita income levels.   The tuition will be a very modest $6600 for the entire degree, well below the on-campus cost of $45000. 

NYT reports that the courses actually will be offered free to everyone.  Those who pay tuition will be able to "take proctored exams and have access to tutoring, online office hours and other support services." 

The key to success will be whether Georgia Tech can scale up from its regular academic faculty to a much larger team that can engage students.  My guess is that the online students will not have as rich an academic experience as the on campus students, but given the cost savings they will be fine with that. 

And no, although NC State's Jenkins MBA is looking to grow its online program, we have no immediate plans to launch any MOOCs. 

Tuesday, August 13, 2013

US DOJ sues to block American-US Airways merger

Imagine two airlines, one going through bankrupcy and the other having successfully reinvented itself after a series of acquisitions.  The airlines could economize on overhead expenses.  They would still face competition on virtually every route from airlines of comparable size.  Also they would still have to worry about market entry from low cost startups and corporate aviation. 

One would think that this is a case where a merger would serve both customers and shareholders.  But think again.  Today the Antitrust Division of the US Dept of Justice filed a suit to stop the proposed merger between American Airlines and US Airways.  DOJ claims that the merger would reduce competition in too many markets, increase fares and reduce availability. 

The irony is that the same Obama-administration DOJ has approved mergers between United and Continental and between AirTran and Southwest.  This is consistent with policy under the Bush administration DOJ which approved the Delta-Northwest merger.  Now customers, employees, and shareholders will have to wait and see what the courts have to say.  The stock market already has spoken -- US Airways is down 8%.

Tuesday, August 6, 2013

How do customers respond to calorie data in restaurants?

Suppose you walk into a Panera craving a salad on a hot summer day.  Suppose also you are either trying to lose weight or maintain your current weight.  You see that your choices range in calories between 375 (strawberry poppyseed with chicken) and 970 (chopped steak and blue cheese).  Which choice do you make?  The real low-cal option would be to take the strawberry poppyseed and drink water.  But maybe you adjust your order to include the chocolate chipper cookie as well (440 calories) since you saved so many calories on the entree.  Add a bag of chips or a smoothie and your calorie savings go poof!

Last week WSJ ran a piece summarizing recent research on how customers react to calorie information when dining out.  As a general rule, dishes you select in restaurants will have more calories than if you fixed comparable items at home because chefs add more oil and butter to make them taste better. 

Two recent studies find that calorie counts have modest effects on behavior.  One study found that only 1 in 6 customers paid any attention to the calorie data and that group consumed 96 fewer calories per visit.  Another found a 6% calorie drop overall. 

Some restaurants are starting to change their recipes as well.  Cheesecake Factory has reduced the sauce on each serving of Bistro Shrimp Pasta so that the calorie count drops from 2980 to 2440.  Applebee's now has an under 550 calorie menu with steak, chicken and pasta options.  But not everyone has jumped on the calorie moderation bandwagon; we still have Hardee's and the 2/3 pound Monster Thickburger (1290 calories). 

Bottom line: People eat more food away from home now than ever before.  I am convinced that this is contributing to the our obesity epidemic.  Calorie counts appear to give customers a small nudge toward moderation.