Why higher ed is like the Northern Pacific Railroad.

I’ve been reading Richard White’s new book, Railroaded: The Transcontinentals and the Making of Modern America. It’s probably about a hundred pages too long, but it’s definitely path breaking. I swear I’ll never be able to look at a railroad the same way agin. His argument breaks the usual dichotomy between Robber Barons and empire builders by arguing that the railroad tycoons of the late nineteenth century were simply incompetent, that they had to rely on price-gouging and corruption because they knew absolutely nothing about how to run railroads.

There’s also another really interesting point about railroads that runs throughout the book. Just because you can build a railroad that reaches the Pacific doesn’t mean that you should build a railroad that reaches the Pacific. The Northern Pacific is an excellent example of this phenomenon. When Jay Cooke started building the Northern Pacific from Duluth to the coast during the 1870s, there were not enough people in Montana and beyond in order to generate the traffic needed to pay for the debt that got the railroad built in the first place. That’s why they had to resort to the kind of ridiculous promotion above. By the way, they didn’t work. “If you build it, they will come,” only works for Kevin Costner.

White mentions somewhere in this giant tome that he was inspired by the dot.com bubble and living in Silicon Valley to write this book the way he did. Reading it, and blogging about what I tend to blog about, I couldn’t help but thinking about higher ed. No, I’m not going back on my pronouncement about what other people have taken to calling “the education bubble.” No matter how expensive higher education gets, students still have a reasonable expectation of getting a good return on their investment over the course of their lifetime. [Just because you’re unemployed when you leave college doesn’t mean that state will be permanent. The recession will end some day. Really!] I couldn’t help but think there are parallels between duping farmers onto bad land in anticipation of future riches, and duping students into online and for-profit colleges for the short-term gains of dubious investors.

I’ll skip the for-profit parallels for now because with what they spend on advertising the comparison is way too easy. I’ll go in the other direction because I found this great example of online education charlatanism through my Twitter feed this morning:

The bubble is financial: tuitions rising significantly each year despite economic conditions and students taking on student loan debt they then cannot pay off. It is practical: the degree no longer guaranteeing a job and a majority of employers saying that college graduates lack the skills for today’s marketplace. It is cultural: college professors in four-year colleges traditionally educating “for life, not for a specific job” even though today’s college students need job-related education. It is economic: the nature of work in a knowledge economy requiring skills unlike those of graduates of just 15 years ago. It is institutional: a professoriate confronted with so many changes and demands with insufficient background or support to make changes beyond their ken or abilities. The question, “Is college worth it?” has gained a currency that should be troubling to college and university administrators.

It strikes me that there’s some confusion here about what exactly is bubbling: Are students investing in college the same way that flippers used to buy up Las Vegas real estate or is it the colleges themselves with unreasonable expectations of an infinite supply of students in order to keep their books balanced? The railroad comparison takes care of that confusion. Only the for-profits are looking for a quick buck. The colleges are simply looking for easy answers and those answers don’t get much easier than sending every course you can online.

Begin by claiming that the sky is falling:

“The learning theory that fit so well in our culture and with the dominant technology pre-1995 (print-based and paper-based technologies), now is not working very well for any of us, so we have to change. Each of you on campus has sincerely and devotedly committed yourselves fully to learning, but now we know that our learning epistemology is less and less appropriate. This is not your fault; it is simply a time of incredible human growth; it is a time of rapid evolution in our culture; a time of re-shaping our economy. We must transform or become irrelevant.”

Add something about rain following the plow and minus the pre-1995 part, and I bet the people who ran the Northern Pacific thought pretty much the same thing. Just because the future might be now does not necessarily mean that you can make a huge profit from it (unless perhaps you’re Amazon.com, but that’s another story).

I’ve already explained why I think online education is an inferior good in the economic sense. This ties back to what I take away from White’s point about railroads: Just because you can do something doesn’t mean that you should do something. There will always be a market for quality face-to-face education because it has a proven track record of improving job prospects and setting students up for a bright future. Dilute that product with an inferior good (especially an inferior good that can be four times as expensive as the original) and you will eventually go into receivership.

Higher education is still a bargain. Turn it into the 21st century equivalent of a farm in Montana* and it won’t be for long.

* Anybody read Collapse? Anybody?