Cross-posted from Alevei.
In a recent post, I set out to discuss a proposal by the University of Chicago economist Luigi Zingales that advocated equity financing of higher education, which he outlined in a June 2012 New York Times op-ed, but reconsidered that project when I realized that Zingales’s political connections, including his close association with GOP vice presidential candidate Paul Ryan, made for a more interesting story, especially in light of the author’s coyness with respect to his political motivations, about which the Times article and accompanying author bio are silent. In making his pitch for equity funding of higher education, he presents himself strictly as a professor and an economist, situating his authority and credibility on the topic entirely in that context. He is of course a professor of economics, but there is no question that his position is also very much informed by his political affiliations, which he does not disclose. As my own position is also political, I have no objection to hearing out the positions of others who come to their beliefs by way of their politics, including when theirs are different from mine. But I think it is important to be forthright about political orientation and values if we intend a healthy debate, and Zingales was not at all forthright in those respects in his presentation to readers.
In this post, I revisit the op-ed, but not because I think his idea deserves to be taken seriously. It doesn’t. Zingales has established precisely zero credibility for one of his central claims, in which he attributes the decreasing affordability of higher education to “crony capitalism,” which he further claims enriches professors at the expense of “everyone else.” As I discussed previously, his unwillingness or inability to acknowledge that the overwhelming majority of professors in the U.S. are not pulling down anywhere near as much bank as he is seems disingenuous. As I also observed, his credibility is further challenged by an impressive tolerance for cognitive dissonance that enables him to give bestie Paul Ryan and his family a pass despite their extensive record of self-enrichment via federal generosity, which I guess is somehow not “crony capitalism” but rather just good old-fashioned free-market capitalism the way God intended.
Rather, I have reconsidered because that article was taken seriously by a lot of people, meaning that it has become part of mainstream public discourse on the very real problem of college affordability for American students, and especially because it is a fine example of what is so incredibly wrong with the assumptions that inform a lot of that discourse.
Zingales proposes that “Investors could finance students’ education with equity rather than debt. In exchange for their capital, the investors would receive a fraction of a student’s future income — or, even better, a fraction of the increase in her income that derives from college attendance.” According to the author, “Equity contracts would diversify the risk of failure, with highly compensated superstars helping to finance the educations of less successful college graduates,” although it is not at all clear how that would work.
He further claims that the contracts will somehow “avoid pushing graduates into lucrative jobs just to pay off debt,” which sounds great in theory, but I don’t think it could possibly be true in practice. I don’t see how such an arrangement wouldn’t push graduates toward “lucrative jobs,” including by initially pushing them towards undergraduate majors that are considered more likely to lead to such jobs. I doubt Dr. Zingales is naive enough to believe otherwise, and since he provides no evidence to support his claim, I suspect that he is being disingenuous, especially when he adds this part:
Most important, these contracts would provide financiers with an incentive to counsel students wisely, as financiers would profit from good educational investments and lose from bad ones. This would create more informed demand for the schools, exerting pressure on them to contain costs and improve quality.
Leaving aside for now the suggestion that improved quality is somehow a logical result to expect from budget cuts, I am wondering what “good educational investments” that would result in “profit” for the “financiers” might look like. The specifics are left to our collective imagination.
But the focus of media attention to the topic suggests that the operative definition of “good educational investment“ is one that maximizes future earnings in relation to tuition investment, on the assumption that a “good investment” is definable in exclusively economic – and exclusively individual – terms.
One influential study of “return on investment” (ROI) conducted by PayScale (a company that collects and analyzes salary and other career-related data) ranked 853 U.S. colleges and universities according to the extent to which “what you pay to attend” is worth “what you get back in lifetime earnings.” You probably won’t be surprised to find that of the top 20 schools with the highest ROIs, all but two are private, six are Ivies, and the total tuition at all but three tops $200K. Apparently even that astronomical tuition investment is totally worth it because of the “projected net return on investment” over 30 years: $800K for the #20 college on the list (Rensselaer Polytechnic) and over $1M for the institutions ranked 1-9.
Thankfully, as of course we all know, the playing field for admission even to elite universities is completely level, and so there is no object whatsoever for any student who would like to attend a high-ROI institution. (Alevei!) 
There is also the role of undergraduate major in calculating ROI. U.S. News recommends “College Majors with the Best Return on Investment,” and Fortune reveals “The 15 College Majors with the Biggest Payoffs.” Kiplinger offers a helpful list of the “Worst College Majors for Your Career” and Time outlines the “20 Best- and Worst-Paid College Majors.” The “best ROI” majors include (pre-)medicine, engineering (looks like any kind will do), economics, finance, or anything that leads to a career in the pharmaceutical industry. Selecting one of these financially promising majors, according one expert, will “justify going to a more expensive school” because “there’s more job opportunities” and these jobs “pay better.”
So, is majoring in philosophy (Kiplinger‘s 4th “worst major”) at Stanford (4th highest institutional ROI) a good educational investment or a bad one? Can a high-ROI school compensate for a low-ROI major, or vice versa? Is it still a good investment to pursue a high-ROI major, like electrical engineering (5th “best major”), even if it’s at a low-ROI institution?
And which is the better investment: $200K in tuition for an anthropology major (#1 ”worst major”) at a high-ROI institution or at a lower-ROI university at half or even a third of the cost? Will equity financiers want to invest in anthropology majors at all? Might their “wise counsel” include discouraging students from pursuing low-ROI majors? Should anthropology and all other low-ROI majors then be reserved exclusively for those students who can pay their own way?
Will financiers support students who want to attend higher-cost high-ROI institutions if they pursue low-ROI majors? Will they support students at low-ROI colleges at all? Is a low-ROI major and/or attendance at a low-ROI institution a bad investment? Is it a better investment not to go to school at all?
Zingales doesn’t address these issues, not a surprise since he never even gets around to defining “good educational investments” beyond announcing that “financiers would profit” from them and “lose from bad ones.” But it does seem like a free-market guy like him would be totally down with the ROI-rankings game. By the way, his own institution offers “far above median” faculty salaries and enjoys considerable renown, despite its less-than-stellar institutional ROI ranking (#78).
And while Zingales offers no evidence for his claim that somehow equity financing will “avoid pushing graduates into lucrative jobs just to pay off debt,” the framing of his proposal in relation to the investor’s incentive for profit suggests that in the system he envisions, the “wise counsel” of the “financiers who would profit from good educational investments” may well steer students toward high-ROI majors if not compel high-ROI major selection as a condition of funding.
I would love for this to be nothing more than some slippery-slope paranoia on my part, but I don’t think it is. For one thing, there is just no evidence that Zingales’s formulation assumes any kind of educational or cultural value beyond the individual ROI model for the student and “profit” for the “financier.” For another, the ubiquity of ROI as the central assumption of recent public discourse on the topic of the value of higher education suggests that it is not. And for yet another, programs that tie eligibility to very specific kinds of “educational investments” are already part of the discussion. For example, the Amazon Career Choice Program for warehouse employees of the behemoth online bookseller (and everything-else seller) is, according to its FAQ page, “unlike traditional tuition reimbursement programs” in that they “exclusively fund education only in areas that are well-paying and in high demand.” (Those are my italics, but it was not my idea to use “exclusively” and “only” redundantly. Thanks to my low-ROI undergraduate major, today I can easily recognize such graceless syntactic constructions, and the satisfaction I take in doing so is what they pay me with instead of money.)
But none of this quite gets at the real problems with the discourse in general and the Zingales proposal in particular, one of which is this: There is no cultural consensus that students will make the best educational decisions when they base those decisions primarily (if not solely) on the basis of expected individual financial ROI. Should we accept that assumption as a logical guiding principle for any serious discussion of higher education? The case has not been made convincingly or really at all that this kind of thinking is the wisest course for our society, and I have a pretty strong suspicion that it is not. 
And speaking of unconvincing arguments, Zingales insists that despite how all this looks, what he is advocating “is not a modern form of indentured servitude.” In his pre-emptive defense against the charge, which he is right to anticipate, he reveals another problematic ideological stance that has gone mostly (but not entirely) unchallenged in the wider public debate of whether college is “worth it.” Zingales says that what he is proposing is not indentured servitude but rather
a voluntary form of taxation, one that would make only the beneficiaries of a college education — not all taxpayers — pay for the costs of it.
I could not agree more that the beneficiaries of a college education should absolutely be paying for it. Where Zingales and I disagree is in our respective understandings of who the beneficiaries really are.
The problem is not that we have a system in which those who are not “the beneficiaries” of higher education are somehow the ones paying for it. The problem is that too many of the beneficiaries are not paying anywhere near enough for it, too many of them resent what little they do pay, and too many of them would like to pay even less.
This is at least in part because a lot of people honestly don’t see themselves as beneficiaries of the education of other people, which I have to agree is a logical conclusion in the context of the dominant ideology that informs popular opinion on the topic of higher ed, which is (say it with me) that it is all about individual financial ROI. In that context, why would people see themselves as beneficiaries of any education but their own?
But they are. We all are. That a whole lot more people benefit from the education of a single individual than merely the individual and that these benefits are cumulative and span generations is indisputable. We are incredibly fortunate to live in a mostly safe, mostly civilized, and relatively prosperous society with extraordinary rights and resources that are foundational for anyone who wants to build anything. That Americans have achieved so much that is truly extraordinary – think moon-landing extraordinary, Internet extraordinary – is a direct result of the high cultural value that we the people have placed on education in general and higher education in particular, in which we have invested accordingly. In this sense, and I want to make clear that I think this is the sense that matters most, higher education is not merely or even primarily an investment in an individual.
But somehow the idea that it is has become a powerful cultural assumption. Of course the individual benefits of a college education are undeniable, but it makes no sense to assume (or to try to dictate) that it is valuable only in terms of the financial return to the individual (and to the “financier” who pays for it). What an incredibly cynical, short-sighted, and unimaginative view that is.
Imagine what our society might look like if Americans had always thought that way. Imagine a United States with no G.I. bill, no Claiborne Pell, no cultural tradition of education as a public good. How many valuable advances and innovations in the sciences, technology, medicine, and yes, the arts and the humanities, would never have happened if only affluent people could access a quality university education, if the only higher education open to most Americans was training to be good little worker bees in jobs that are some billionaire’s idea of what is best for us?
The debt that a student takes on is all too individual, but the benefit of that individual’s education is collective. And until we can find a better way to make higher education more affordable and more accessible, we ought to be working harder to support individuals for whom student loans are the only option, even the ones who don’t opt for high-ROI majors and those for whom high-ROI institutions are out of reach. Students who choose alternatives to financial self-enrichment, who choose to pursue work in areas that make life worth living not only for themselves but also for others — and that includes pre-school teachers, artists, anthropologists, and philosophers, as well as doctors and engineers — are good educational investments even if “financiers” don’t ever recoup a dime of “profit” off them.
I guess it’s easy to blame the student debt crisis on college students and graduates and professors and administrators, or to propose a funding scheme like Zingales’s that does nothing to address the real causes of increasing college unaffordability, starting with the national disgrace that is the systematic public divestment from state universities. I guess that’s easier than taking on the devastating consequences of student-loan debt on individuals and on the U.S. economy in any meaningful way.
It is hard not to be discouraged at the moment, especially given the possibility that the nation might elect a smirking, dishonest presidential candidate whose idea of fiscal responsibility is disparaging poor people and stashing millions in overseas accounts to avoid paying his taxes. And never mind his equally dishonest, free-marketeer, I-built-that running mate, whose own accumulation of wealth via government subsidies entitles him to a description so many times stronger than hypocrite that even this low-ROI English major can’t think of one that rises to the occasion.
But I hope that the cynical ideology that an educational investment is (and ought to be) an individual thing, that the point of education is an exclusively individual benefit, that the benefit can only be measured as a return on investment that can be counted only in dollars, and that any notion of a “greater good” is socialism and therefore bad does not discourage and even prevent people from pursuing educational goals that aren’t an obvious fast track to generating big revenue for themselves (and “profit” for their “financiers”). The last thing we need in this country is to continue to celebrate and reward the ideology of greed that has gotten us into so many of the messes that we are collectively in today. If we allow that ideology to continue to define our education policy, it is not going to be a win for most of us.
 Of course it is not at all clear that factors that have nothing to do with quality of education, such as the socioeconomic privilege and social advantages that many high-institutional-ROI students and alumni enjoy, can be ruled out as significant influences on a high-ranking institution’s ROI. That is, such a return may not be a function of the institution itself but rather reflective of the relative privilege of the students most likely to be admitted. On a related note, see “The Reproduction of Privilege,” by Thomas Edsall, in which the author identifies “anti-democratic trends” in the admissions policies of the “most competitive” colleges, many of which are of course also high-ROI institutions.
 And don’t even get me started on how all this institutional ROI business does absolutely nothing to address the highly problematic role of elite colleges and universities in perpetuating social inequality. In discussions of ROI, that function goes completely unremarked even though it a key feature of what makes a high-ROI institution such a “good educational investment” in the first place. These institutions actually exacerbate the class divide, as Thomas Edsall observes in “The Reproduction of Privilege,” cited in Note 1 and linked again here.