The Old College Buy

Hundreds of students rallied at the University of Washington last week in opposition of a proposed tuition increase. Had he been around, you can bet that Peter Drucker would have grabbed a megaphone and joined in.

For decades, Drucker decried the escalating cost of going to college in this country. "The financing of higher education affects everybody's pocketbook," he wrote in Harper's Magazine in 1956. "It is the central problem of American education."

Some 40 years later, Drucker was voicing the very same concern. "Such totally uncontrollable expenditures," he told Forbes in 1997, "means that the system is rapidly becoming untenable. Higher education is in deep crisis."

By all rights, most universities should have priced themselves out of existence long ago. That they haven't points to something else that Drucker recognized and also worried about: the unparalleled clout they wield as "gatekeepers" to people's futures. It is a role that has allowed many a school to get away with the kinds of sins that would sink almost any other organization.

The cost of a college diploma has been soaring at about twice the rate of inflation for years; that's a faster pace than what we're shelling out for medical care. Middle-income families now pay 25% of their earnings to send a kid to a four-year state school, according to the National Center for Public Policy & Higher Education. And that's after taking into account any financial aid the student receives.

Education Quality Not Climbing Like Tuition

Meanwhile, it's hard to argue that the customer is getting a lot of additional benefit for the extra dough. There are, to be sure, many wonderful programs and professors out there. But "all in all, it is difficult to say if, in any meaningful sense, the quality of the undergraduate experience has improved all that much" as prices have skyrocketed, economist Richard Vedder asserts in his book Going Broke by Degree. It "certainly has not done so any more than goods and services generally."

Drucker, who started teaching at Sarah Lawrence College in the 1930s and commanded a classroom at Claremont Graduate University as late as 2002, suggested that, if anything, today's colleges were slipping badly by turning out "highly schooled and very poorly educated" young adults.

Toward the end of the 19th century, "when my father graduated…he was as non-technical, non-scientific a person as you could imagine," Drucker recalled. "And yet he and educated people of his generation were expected not to understand the contents of physics, but what physics is, what physics deals with.…It didn't mean being able to do surgery, but it meant being able to understand medicine. It didn't mean to be able to do linguistics, but it meant to be able to understand what linguists are up to. And in the last 100 years we have lost that faculty.

"It isn't only that our kids don't learn to read and write," Drucker added. "It is that our engineers know designing and machine tools, but they don't know anything about the world in which they live in. They don't know anything about the areas of information outside of their own."

Innovative University Model Awaits

But despite these huge flaws—break-the-bank pricing and a questionable-at-best value proposition—it's hard to get past two facts: Most universities continue to deliver their product pretty much the same way that they have for centuries, on sprawling campuses with students sitting in lecture halls. And despite all the grumbling about the cost and the real hardships faced by a growing number of families, there is no shortage of people clamoring for what's being sold.

"The old model persists not only because it's time-tested but because there's little relationship between price and demand," says Zach First, my colleague at the Drucker Institute, who is serving as the principal investigator for a study of innovation in higher education funded by the Spencer Foundation.

A handful of entrepreneurial ventures, such as Capella University with its online curriculum, have burst on the scene. But these efforts remain, in the scheme of things, largely at the fringes.

One can imagine, First says, that should a major research university figure out how to "deliver high quality with half the faculty or through some other big breakthrough—so that it can shed costs and reduce tuition—it's going to be in a very strong position." But for now, he explains, there is little incentive to even try. This year, despite the deep recession, school after school will spurn two-thirds or more of their applicants. How many other businesses get to do that?

Knowledge Economy

The reason for this, of course, is that we're living in the very age that Drucker, beginning in the late 1950s, foresaw and helped define: one built on knowledge. It isn't news that a college degree is absolutely essential now for advancement in the workplace—no matter the failings of the system that produces the sheepskin.

All of this has left our institutions of higher education with what Drucker described as a "social monopoly." "Few organizations in history have been granted the amount of power that today's university has," he wrote in his 1993 book Post-Capitalist Society. "Refusal to admit or grant the diploma is tantamount to debarring a person from access to a career."

As long as this is the case—and I say this as the weary parent of an 11th-grader who has just started looking at colleges—it's tough to see anything changing. We'll keep on complaining and arguing, as we have for 50 years, that the mounting cost of an education is unsustainable. And those of us who are lucky enough to find a way will keep on paying regardless.

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