Ivory Towers in the Marketplace

...The conclusion is obvious: subsidies are ubiquitous within higher education, but their size is relative to an institution's wealth...

...But the subsidy is more than a sign of the unequal distribution of wealth within higher education...

...At these schools, the average cost is $8,419 and the average price is $5,799, the difference being a $2,620 subsidy...

...The crux of Winston's research is a ranking of the nation's 3,300 institutions by the size of their student subsidy...

...In the middle range, students pay only five cents more on the dollar: the average cost is $10,444 and the average price is $2,716, leaving a subsidy of $7,728...

...HIGHER EDUCATION is labor intensive, with some economists estimating that labor accounts for around 70 percent of an institution's operating costs...

...DISSENT / Summer 2001 n 73...

...Students prefer relationships with schools similar to those "they already enjoyed with their bank, their gas company, their supermarket," Levine explained...

...Critics assailed Phoenix for sacrificing the classics to commerce, for transforming the vale of soul-making into a vocational forcinghouse...

...Do we care any more whether it's mostly top-tier institutions that have the resources to be effective custodians...

...Phoenix is a very lean operation...

...After all, when Congress passed the Morrill Act in 1862, it instructed the states to establish institutions "to promote the liberal and practical education of the industrial classes...

...In one of the more boosterish moments of his essay, Levine writes, "There is an underlying belief that colleges and universities are making precisely the same mistake that the railroads made...

...Apollo began trading on NASDAQ in 1994 at a splitadjusted price of $2.06...

...Phoenix has very low overhead...

...In 1998, New York University decided to compete with Phoenix and commercial courseware companies like UNext and Pensare by building on its experience in continuing education...

...OK, go ahead and groan, but ignore the likes of the University of Phoenix, NYUonline, and other proprietary schools at your peril...

...In the top decile, the average cost of one year of college is $29,894 and the average price $5,782, leaving a subsidy of $24,112...

...For nearly thirty years, the University of Phoenix has been providing just such a stripped-down, convenient version of college...

...Do we care any more whether colleges and universities are custodians of collective, diverse cultures," Engell and Dangerfield ask, "whether they record, teach, and transmit traditions, and give us the linguistic and symbolic tools to express our veneration, criticism, and contribution to our culture, to make connections with its variety, to examine its checkered past and to imagine its possible future...

...colleges and universities sell higher education at a price substantially less than cost...

...A normal business sells its goods at a price greater than cost...

...With around ninety campuses in nineteen states, it currently enrolls more than seventy thousand students...

...In the bottom decile, however, students pay nearly 70 percent of their costs...

...Academic administrators like Levine now routinely echo the sentiments of people like Sally Silberman, whose motto is "either move with the times or die by the sword...

...Owned by the publicly traded Apollo Group, Phoenix is accredited by the North Central Association of Colleges and Schools...

...It is also a barrier to entry to the higher education market itself...

...For-profit universities, Levine reminds his readers, are not making that mistake...

...they focused on making bigger and better railroads...

...0 NE REASON has to do with the very unconventional economics of higher education...

...It employs a small cadre of full-time faculty to design and update its curriculum every few years...

...Consequently, they are very vulnerable to proprietary schools like the University of Phoenix...

...I love what I am doing," she confided to the Chronicle's reporter...

...It owns no library, but operates a Web site where its students can locate "content" germane to their studies...

...That is, the size of a subsidy is a measure of market vulnerability, with a high subsidy creating a steep barrier to entry for competitors like Phoenix and a low subsidy being a negligible hurdle...

...What can be attacked, however, is the pride of place granted vocational study by for-profits and their nonprofit imitators...

...Little will come from attacking for-profits on the grounds that vocational study has no place in higher education...

...A recent article in the Chronicle of Higher Education described a day in the life of one such instructor, Sally Silberman...

...in early June 2001, it was trading at $34...

...Despite their passion, these critics were wrong to pin the downsizing of the humanities on the rise of proprietary schools like Phoenix...

...One must also consider the highly vulnerable institutions as a percent of the types of schools in the study population...

...Winston's analysis of the 777 schools in the bottom three deciles tells the same story...

...The poverty of that mission should compel us to ask a fundamental question: What do we stand to lose if the distinction between education and training evaporates altogether...

...How much capital...

...And the poison can be something as simple as neglect...

...Phoenix certainly doesn't shrink from being the bad guy...

...Many a low-subsidy school has little choice but to compete with Phoenix once it opens a campus in its region...

...It's as if a Ford Taurus that cost the dealer $20,000 to put on the showroom floor were routinely sold for $6,700," Winston says...

...As Winston explains, "with a total of 120 private two-year colleges in our data, 32 percent of them are in the bottom subsidy decile, as are 28 percent of private doctoral and 27 percent of private comprehensive universities, 25 percent of private specialized schools, 10 percent of private liberal arts colleges and 3 percent of private research universities...

...I don't mean to suggest that proprietary schools don't pose serious threats to nonprofit schools...

...Work and family often overshadow it...

...Like many forprofit and nonprofit schools, Phoenix is increasingly using the Web to deliver parts of its curriculum to students...

...The mantra of "practical education" has only grown louder over the last century, as American universities have developed in a pragmatic, business-minded culture that justifies education primarily as a means to an end...

...With many schools now serving as personnel offices for corporations, it's not just students 70 n DISSENT I Summer 2001 MARKETIZATION AND UNIVERSITIES at the University of Phoenix whose education hasn't prepared them to notice the irony of the Apollo Group's moniker...

...As at Phoenix, course design and instruction are done in a piecemeal fashion...

...In fact, last October, Apollo raised seventy million dollars from a stock sale to fund its distance-education efforts...

...One option is to rely even more on part-time, untenured instructors who enjoy scant academic freedom, have little discretion over curriculum planning, and participate little, if at all, in institutional governance...

...For many, college is not even the most important of these activities...

...A subsidy, Winston explains, "shows how much an entering school would have to lower costs in order to compete with [an existing school] on cost and price, nose to nose, and still make a profit...

...Despite the rhetoric about the liberal arts that fills their brochures, these institutions, particularly small, regional religious and secular colleges, have survived the last few decades mainly by offering increasingly more vocational and continuing-education courses...

...And this is his characterization of the realm threatened by forprofits...

...Levine does get one fact right: colleges and universities exist in the marketplace, if only because they compete with each other for students, professors, donations, and research grants, among other things...

...These schools 72 DISSENT / Summer 2001 MARKETIZATION AND UNIVERSITIES signal the ascent of a very troubling set of beliefs: that universities, despite their unconventional economics, are best managed as a profitdriven business...

...An NYU professor creates the syllabus and chooses the readings, a technician puts the material on-line, and a part-time instructor interacts with students in on-line chat sessions...

...And don't assume that forprofits are without a chorus...

...It is becoming just one of many activities in which they engage in every day...

...Higher education is a sharply hierarchical industry in which cost, price, and subsidies vary dramatically among schools," Winston says...

...Of course, critics should not move out of the way, but they shouldn't fall on their swords, either...

...Students at these schools pay on average only twenty cents on the dollar for their education...

...Uniform courses are dispatched to an army of more than four thousand adjunct instructors, who are required to be employed in the field in which they teach...

...Phoenix is also tenure free, and it operates its classrooms like a franchise...

...Depending on their experience, adjuncts are paid a few thousand dollars per course, which means that the combined salary of two Phoenix adjuncts equals the entire student subsidy at a lower tier nonprofit...

...Of course, elite institutions are not without their own serious structural problems, a point brought home by the graduate-student unionization efforts at Yale University, New York University, and elsewhere...

...I love not only the teaching, but the selling of it...

...But these numbers don't tell the whole story...

...Winston groups low-subsidy schools according to university, college, or two-year and public or private status to create a picture of those most vulnerable to competition...

...that education is, inherently, a consumer good subject to the whims of the marketplace...

...During a hectic eight hours of pitching courses to corporate clients and supervising student chats, Silberman found a few moments to reflect on her job...

...Phoenix is choosy about those customers: one must be at least twenty-three years old and employed to enroll...

...As far as the curriculum is concerned, the rise of vocationoriented proprietary schools is but a symptom of a decades-long national trend...

...They failed to notice a broad trend in higher education, one documented by James Engell and Anthony Dangerfield...

...Before Phoenix can set up shop, it must be approved by a state's higher education commission...

...Oddly enough, it wasn't until the late 1990s that Phoenix caught the attention of the press...

...I think that one reason traditional universities want to emulate for-profits is simply because the latter have cast aside some of the most central— and ticklish—functions of higher education: Their purpose is not to promote innovative scholarship, academic freedom, individual reflection, or any number of other noble pursuits...

...It owns little land or buildings, with the bulk of its classrooms being rented office space...

...For the most part, they are willing to comparison shop, placing a premium on time and money...

...Among the 259 schools with the lowest subsidies, DISSENT / Summer 2001 71 MARKETIZATION AND UNIVERSITIES more than 80 percent are private...

...Do we care any more that, due to pressures to be more commercial and service-oriented, universities are shrinking from undertaking the kind of open-ended basic research that led to some of the most path-breaking discoveries of the previous century...

...Few private liberal arts colleges and research universities, and even fewer public institutions, appear to be highly vulnerable to competition...

...But that's no reason to think that, like for-profits, they should become slaves to the vocational marketplace or nothing but markets themselves...

...If a rhetoric and argumentation course is ever taught at the University of Phoenix, Levine's sentences could serve as a textbook example of false analogy and hasty generalization...

...The problem is that they were actually in the transportation industry and, as a result, were derailed by the airlines...

...Since its curriculum leaves it with little room for maneuvering, the only way a lowsubsidy institution can compete with Phoenix is by slashing its labor costs...

...Dangerfield and Engell note that students throng to subjects that make money, study money, or attract money—nursing, marketing, accounting, business administration...

...among those 217 schools, 66 are comprehensive universities, 51 are specialized institutions (religious, business, art, and tribal schools), and 49 are liberal arts colleges...

...JOHN PAL/al-ELLA writes for Dissent, Lingua Franca, Newsday, and other publications...

...That mandate chartered many of the nation's landgrant universities, such as those in California, Wisconsin, Maryland, and Illinois...

...Other stories were more circumspect, but they read like the musings of a feverish Rip Van Winkle who had awakened to find his hallowed marketplace of ideas turned into, well, a marketplace...

...that faculty are entrepreneurs, even salespeople...

...They "want their colleges nearby and open during the hours most useful to them, preferably, around the clock...

...But beyond the precincts of New Haven and Greenwich Village, there's another battle shaping up over the future of higher education, and it's taking place at the middle- and low-tier liberal arts colleges and universities forced to compete with proprietary schools like Phoenix...

...Some stories were nothing more than a big wet kiss from hacks whose love affair with the New Economy had led them to Phoenix's doorstep...

...If anything, Phoenix and its for-profit peers are more like a colony of termites quietly boring away at the economic and social framework of higher education...

...They want easy, accessible parking, no lines, and a polite, helpful, and efficient staff...

...They do not want to pay for activities and programs they do not use or can get elsewhere...

...Of course, an institution can attempt to outflank Phoenix, but that requires a large amount of capital, something in short supply at low-subsidy schools...

...The study was like a cold shower, one made all the more jarring by the fact that Levine published his findings in the pages of Daedalus, the cerebral quarterly of the American Academy of Arts and Sciences...

...The upshot for the low-subsidy schools is that although they have roughly the same labor costs as highsubsidy schools, their relative lack of wealth greatly reduces their ability to defray the cost of providing education...

...The railroads believed they were in the railroad business...

...Still, however much Phoenix's Street credibility might tempt Sperling to outswagger Gordon Gekko, it would be a mistake to perceive the institution as a Godzilla that will trample higher education...

...I worry less about the existence of the for-profit niche than about its market-driven, vocational ethos poisoning the intellectual values that surround it...

...Since the late 1960s, the humanities have been neglected and downgraded at colleges and universities nationwide, even at schools with tweedy faculty, pastoral campuses, and bookstores well-stocked with Norton anthologies...

...Notice, for instance, how he reduces the duration of an undergraduate's education to the notion of a service, "the campus business...

...Phoenix is just as choosy about when and where it offers classes: in the evenings and on weekends, and in classrooms located in malls and industrial parks with rows of accessible parking...

...To understand why, the Van Winkles must not only wipe the sleep from their eyes but also shift their gaze from the nation's elite institutions, whose billion-dollar endowments and hoary reputations as bastions of the liberal arts mostly insulate them from the for-profit threat...

...The difference between price (or the amount paid by a student) and cost is the subsidy, and it is covered by what Winston dubs a school's "donative resources"—gifts, endowment earnings, federal appropriations, and other assets...

...All the humanists should think twice before dismissing Silberman with a groan...

...In 1995, the average nonprofit college and university in the United States produced a $12,500 education that it sold to the student for a price of $3,700, the difference being a subsidy of $8,800, or nearly two-thirds of the total cost...

...It is simply to turn a profit by training students and awarding them with a credential...

...As Gordon Winston, head of the Project for the Economics of Higher Education at Williams College, has explained, this means that many students in the United States are subsidized by their colleges...

...It has earned millions of dollars, and it happily regards students as "customers" shopping for vocational training and professional credentials...

...At a price tag of $21.5 million, it launched NYUonline, a for-profit subsidiary that produces and markets Web-based vocational courses to corporations and working adults...

...Similarly, it can be said that higher education is making the mistake of thinking it is in the campus business, when in reality it is in the very lucrative education business...

...Its president, John Sperling, never tires of boasting that "Wall Street is our endowment...

...College "is not as central to the lives of many of today's undergraduates as it was to previous generations," Levine wrote...