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For-Profit, Non-Profit & Education

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For-Profit Education
For-Profit Education (Photo credit: Truthout.org)

As a professor, I have some interest in the increasing trend to turn education into a profit focused industry. One example of this is the push for schools to partner with for-profit companies that provide MOOCs. Another example is the relentless push for assessment that involves instruments provided by for-profit companies. There are many other specific examples, but it is clear that education is being regarded as a new frontier for economic exploitation.

Being a reasonable person, I do favor things that can increase the availability or quality of education (or both) while doing so at a lower cost. As such, I was rather intrigued by the idea of MOOCs and their promise to provide quality education to the masses at a low cost. Likewise, I was interested by the idea of for-profit colleges that were touted as providing quality education at a low cost—all driven by the invisible hand of market forces. As someone who has served on assessment committees since 2004, I am always eager to hear about effective methods of assessment that take as much workload off the faculty as possible.

Unfortunately, I have been rather disappointed by the reality of MOOCs, for-profit colleges and assessment. Since I have written numerous essays on these specific topics already, my focus will be on the generic problem that seems to arise from the for-profit model relative to the non-profit model of traditional education.

On the face of it, the problem with the for-profit approach is obvious: a for-profit must charge to a degree that covers the costs and also provides for a profit. In contrast, a non-profit needs to only cover its costs. To use an analogy, a for-profit is like a vehicle that is loaded with extra weight—it has to burn fuel to move itself, but also to move that weight. In contrast, the non-profit does not need to move that extra weight.

To take a specific example, consider a university that is considering contracting a for-profit company to provide instruments of assessment or online courses. The for-profit will need to charge the University for the cost (including paychecks for workers) of the instruments or courses, plus extra for the profit. That is, the university is effectively giving the company some of the money in return for nothing. After all, the university could simply create the assessments or courses itself and pay just the cost, thus saving money that could be used on other things, like student scholarships or updating obsolete classroom technology.

The obvious reply is to argue that a for-profit can provide goods and services at a lower cost than the university and, even with the profit tacked onto the bill, the cost to the university would be lower than it would be for the university to do it itself. For example, consider the development and operation of an online course. The university would need to pay faculty and staff their usual salaries to do this while a for-profit could hire cheaper labor to do the work (perhaps even outsourcing it to countries with very low wages). Also, the university would need to create the online infrastructure to  run the classes and this could cost considerably more than having a for-profit company provide infrastructure it already has in place (perhaps in another country).

The obvious counter to this reply is that university could simply do what the for-profit does and thus bypass the middleman. That is, if a for-profit company has lower costs because it will hire people in low-wage countries to do the work, the university could simply hire people in low-wage companies to do the work. There is, after all, no special for-profit magic that allows a for-profit company to do things that cannot be done by a non-profit. The university could thus save money or, alternatively, pay the low-wage workers a better wage.

It can be objected that while there is no special for-profit magic, for-profits have the advantage of the profit motive. That is, to steal a bit from Adam Smith, they will work hard to provide a better product at a lower price so that they can make that profit. Since non-profits do not make profits, they lack that motivation and hence will deliver inferior products at a higher cost.

The easy reply to that, as I have shown in my essays on for-profit MOOCs and for-profit colleges, is that the for-profits in education consistently deliver inferior products at higher prices than the non-profit colleges and universities.  This is not to say that a for-profit education company cannot deliver high quality at a lower cost than a non-profit. After all, just as there is no for-profit magic, there is no special for-profit curse that precludes this. However, universities should be cautious before turning to for-profit companies—assuming their goals are to provide quality education at a reasonable cost (as opposed to more corrupt goals).

 

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“Democrats & Republicans: The Philosophy of the State”

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I was asked to contribute a piece on political philosophy to Florida A&M University’s Living Well series and here is what I wrote:

Election Day is almost here and every U.S. citizen must reflect on the similarities and differences between each presidential candidate before casting a vote. This requires more than a quick scan of party platforms. Instead, a deeper focus on the philosophy behind Democratic and Republican party rhetoric will help the average citizen make a more informed decision on Nov. 6. While many believe philosophy has little impact outside of academics, the campaign trail has shown the importance of really knowing the core philosophical values that guide each candidate and will ultimately determine America’s fate for the next four years.

Similarities

Lost in the heat of partisan politics is the truth that most of us share the same values as a people.  In fact, both parties share core philosophical views traceable to the European and American thinkers of the Enlightenment Period (about 1600-1800) such as Thomas Hobbes, Adam Smith, John Locke, Thomas Jefferson, Alexander Hamilton, and Jean-Jacques Rousseau. The English philosopher John Locke is probably the philosopher who most influenced American politics in his case for the right to life, liberty and property. In addition to these cherished ideals, Locke also believed legitimate government relies on the consent of the citizenry through majority rule. Interestingly, Democrats and Republicans are united in the once radical view that government exists for the good of the people.

Differences

Self-Interest vs. the Common Good

Many of their differences, however, stem from deciding what role the government should play in serving this good. Republicans tend to take a more conservative approach and accept the philosophy of Adam Smith, the author of The Wealth of Nations. Smith’s view, commonly known as laissez-faire capitalism, encourages individuals to act on the basis of self-interest in a free and competitive market that best serves the good of all.  Furthermore, Republican views on the role of government are best attributed to the American philosopher Henry David Thoreau: “that government is best which governs least.” Rather than have the state direct the market, Smith spoke of the market’s “invisible hand” as a metaphor to describe the self-regulating behavior of the marketplace.

While Democrats also embrace capitalism, the philosophy of the current Democratic Party was shaped by the Great Depression and the New Deal. From their standpoint, this economic disaster was caused by allowing the invisible hand of the market to act with little restraint or regulation.

As such, Democrats tend to favor having the state play a prominent role in regulating the economy. This allows the state to serve the good of the people by checking the excesses of self-interest in favor of the common good.  Republicans contend checking of excesses can harm the public good by choking the economy. Thus, Republicans generally favor less state influence over the economy.

The Democrats, as exemplified in the New Deal, generally take the view that the state has a positive, active and significant role to play in securing the good of the people. Specifically, the Democratic Party believes the state should be altruistic in its support of programs like federal student aid, welfare, and healthcare.

While the Republican Party also holds to the idea of the state having an active role in the public good and in caring for citizens during times of need, they generally embrace the idea that the role of the state should be more limited and it is preferable for people to rely on personal success than private charity.

A very strong version of this view is put forth by the Tea Party. Interestingly, they explicitly acknowledge the influence of philosopher Ayn Rand. In her collection of essays titled The Virtue of Selfishness, argued that we are morally obligated to achieve happiness. As she saw it, ethics based on altruism (the moral view that we should act for the benefit of others) would prevent people from achieving happiness. This is because altruists would be wasting their resources on other people rather than using them to achieve their own happiness. Her solution was that people should embrace what philosophers call ethical egoism—the moral view that a people should exclusively act in their own self-interest. While this might sound harsh, the justification is that this creates a better society in which people can succeed by their own efforts without being dragged down by supporting others and without being trapped in dependence.

Thus, some of the key philosophical distinctions between the Democrats and the Republicans involve their views of what role the state should play in securing the general good. The Democrats advocate a more extensive role for the state in securing this good while the Republicans claim the general good is better served by a more limited state. This disagreement is often dramatically exaggerated in political rhetoric, which makes it all the more important to remember that far more unites us as Americans than divides us as Democrats or Republicans (or independents).

I’ll be doing a Twitter live chat as well:

Join LaBossiere on Twitter for a live chat on Nov. 1 at 6 p.m. to answer your questions about political philosophy. Follow FAMU_1887 via hashtag #LivingWell101.

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Toyota & The Invisible Hand

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Profile of Adam Smith
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In an interesting coincidence I happened to be teaching about ethical egoism about the time that the Toyota problems were hitting a peak. Ethical egoism is, crudely put, the moral theory that people ought to maximize their own self interest. So, I should maximize my self interest and so should you. Famous theorists in this camp include Thomas Hobbes, Adam Smith, and Ayn Rand.

Interestingly, Hobbes argued that out of self-interest we should cooperate and obey the laws of the state. This was, of course, to avoid the horrors of the state of nature (a “war of all against all”). As such, our self interest is supposed to motivate us to keep our self-interest in check.

Adam Smith, the theorist who gave us the “invisible hand“, argued that market forces would sort things out between individuals who were acting on the basis of self-interest. What is often overlooked in Smith’s theory is his view that the end is to create social utility via the free market. Of course, the motivation to act well is based in self-interest.

Altruistic views, which are typically presented as the opposing views to the various forms of ethical egoism, enjoin us to take into account the interests of others and not just our own. In the case of altruism, it is often claimed that people should act well because it is the right thing to do and not merely a matter of self interest.

One obvious concern about taking the self-interest approach is that a person will (and should) act against the interest of others when doing so is in his interest. Put rather crudely, if a person can gain more by doing what might seem to be wrong, then that is what the person should do. Naturally, this takes profit to be the measure of right.

In the case of Toyota, there is evidence that the company might have taken deliberate action to avoid having to recall vehicles so as to keep their profits. While this certainly seems to have put people at risk (and perhaps even killed and wounded some people), it would be a prudent act on the part of the folks at Toyota, provided that their gain exceeds their losses. In fact, this seems to be a rather standard practice in numerous fields. For example, a drug might turn out to cause heart attacks, but this might simply be covered up (perhaps with the collusion of regulatory folks) so as to keep profits high.  Obviously, individuals use the same approach in their own lives, doing less than upstanding things so as to gain or to avoid a loss.

Getting back to Smith’s invisible hand, what is supposed to happen is that the misdeeds of businesses are supposed to create a loss for them. As such, they have an incentive to act well so as to maintain their profits. Toyota seems to have gambled that by avoiding recalls they could keep substantial profits. Currently, of course, Toyota is reaping what it has sown and is taking a massive PR hit. Of course, Toyota might still come out ahead. If so, delaying the recalls might turn out to have been a good decision.

One factor that allowed Toyota to do what it did (and perhaps helped motivate the action) is the fact that the folks responsible for making such misdeeds costly seems to have been under the sway of Toyota. This seems to be a general problem-all too often the regulatory agencies are very cozy with the companies they are supposed to regulate. Then again, if the goal in life is to maximize self interest, then the companies and the regulatory folks are acting as they should-they are all trying to get the biggest slice of money pie that they can. Naturally, the public is suffering because of this, but that is because the public seems unable to ensure that it is in the best interest of the regulators t0 make sure that it is in the best interest of companies to not act against the interests of the public.

When company decisions makers are acting prudentially in regards to profits, they elect to take the actions they believe will maximize profits. Naturally, the actions that maximize profits might be regarded as rather immoral (such as marketing a risky drug or not fixing defective vehicles). Since appealing to what is right seems to have little impact on people (this is why police carry guns rather than handbooks on moral philosophy) what needs to be done is to ensure that actions that are wrong will come with a high cost. For example, rather than allowing the regulatory folks to let Toyota get away with their alleged misdeeds, the cost of not fixing such problems needs to be increased until it is not prudent to allow them to persist.

Of course, it is reasonable to be worried that people are not prudent. After all, there are harsh penalties for crimes and for doing stupid things, yet people persist in doing both. So, maybe corporate folks would continue to do such things even when the cost outweighs the profit. It is also reasonable to be worried that the regulatory agencies will always slide into cozy relations with the industries they are supposed to regulate.

I won’t even argue that we should hope that people will do the right thing because it is right.

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Free Markets

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Since at least the time of Adam Smith, people have been debating the matter of free markets. Grossly oversimplying matters, the idea is that if the folks who are involved in economic exchanges are left unregulated, the interplay of the “market forces” will result in an overall positive result. Competition, it is claimed, will lead to better and cheaper products and this means that via the power of the invisible hand, everyone will win.

Of course, the free market of this sort tends to not need to a better world for all. Rather, the result tends to be the creation of monopolies as the most ruthless, cunning, and lucky assimilate or destroy the competition. The stock example of this is, of course, the robber baron era of the United States. Folks also point to the fact that the United States economy was in a constant turmoil of surges and recessions during the halycon days of yore. Naturally, people also point to the deregulation of the 1990s and early 2000s as contributing factors to the ecomonic mess we are in these days.

Since at least the time of Marx, people have also been critical of the free market and have instead urged for a controlled market. The more extreme folks have even pushed for real socialism (state ownership of business and industry). These folks usually claim that this will be better for everyone by eliminating the evils of the free market.

Of course, when we look at many of the socialist and allegedly communist countries, we tend to see rather poor economies. While folks often point to Europe as an example of the success of socialism, these countries are not (despite the cries of the right) true socialist states.

The fact that totally free markets and totally controlled markets are recipes for disaster should hardly be surprising. After all, looking outside of economics reveals that total freedom and total control always seem to spell disaster.

For example, consider the matter of law. If there was no law  and no enforcement of law, we’d be in what thinkers like Hobbes and Locke called the state of nature. While Locke painted a pleasant picture of this state and Hobbes cast it as a nightmare, both men agreed that a state without laws would be undesirable. Empirical evidence also reveals that if we consider what occurs when law and authority fail. Somalia is, of course, one modern example.

On the opposite end of the spectrum, states that attempt to repress and oppress their citizens, create horrific states. North Korea is an excellent example of this.

Most folks need, as thinkers such as Aristotle and Hobbes have argued, to be kept in check by laws and punishments. This is because most people are not ruled by ethics or reason, but are ruled by desires.  To think that the economic realm is magically exempt from this is a delusion of extraordinary magnitude. This is especially true when you consider the obvious: people really like wealth and will often do awful things to get it. So, leaving people unregulated as they try to get rich is an alarmingly stupid idea.  As such, people need to be regulated in their economic activities as well.

That said, what makes life valuable is freedom.  Mill argues quite eloquently for this in his writings on the subject of liberty. Freedom is also important in allowing people to be their best.  As the free market folks and any athlete will tell you, competition does lead to improvement. Of course, as any athlete will tell you, the competition has to governed by rules. Being a runner, I think that the sports analogy is quite a good one.

In a race, everyone is free to compete to the limits of their abilities. This competition drives people to do their best. Likewise, economic freedom provides people with the motivation and operating room they need to excel. Races are, of course, governed by rules. You cannot kill other runners, use a car, make use of illegal drugs and so on. This keeps the race from degrading into something nasty. Likewise, economic activity needs to be governed to keep it from going from a progressive activity to a destructive nightmare.

As in general law, the challenge is to find that right balance: enough freedom so that people are not repressed, oppressed and unable to be their best. But, enough regulation so that people cannot get away with doing wick and destructive things. That ideal balance is crucial to having a healthy society and a healthy economy.

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