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n+1: Bad Education – hyperinflation in universities

April 29, 2011 1 comment

n+1: Bad Education.

This is isn’t good:

Since 1978, the price of tuition at US colleges has increased over 900 percent, 650 points above inflation. To put that number in perspective, housing prices, the bubble that nearly burst the US economy,  then the global one, increased only fifty points above the Consumer Price Index during those years. But while college applicants’ faith in the value of higher education has only increased, employers’ has declined. According to Richard Rothstein at The Economic Policy Institute, wages for college-educated workers outside of the inflated finance industry have stagnated or diminished. Unemployment has hit recent graduates especially hard, nearly doubling in the post-2007 recession. The result is that the most indebted generation in history is without the dependable jobs it needs to escape debt.

What kind of incentives motivate lenders to continue awarding six-figure sums to teenagers facing both the worst youth unemployment rate in decades and an increasingly competitive global workforce?

During the expansion of the housing bubble, lenders felt protected because they could repackage risky loans as mortgage-backed securities, which sold briskly to a pious market that believed housing prices could only increase. By combining slices of regionally diverse loans and theoretically spreading the risk of default, lenders were able to convince independent rating agencies that the resulting financial products were safe bets. They weren’t. But since this wouldn’t be America if you couldn’t monetize your children’s futures, the education sector still has its equivalent: the Student Loan Asset-Backed Security (or, as they’re known in the industry, SLABS).

SLABS were invented by then-semi-public Sallie Mae in the early ’90s, and their trading grew as part of the larger asset-backed security wave that peaked in 2007. In 1990, there were $75.6 million of these securities in circulation; at their apex, the total stood at $2.67 trillion. The number of SLABS traded on the market grew from $200,000  in 1991 to near $250 billion by the fourth quarter of 2010. But while trading in securities backed by credit cards, auto loans, and home equity is down 50 percent or more across the board, SLABS have not suffered the same sort of drop. SLABS are still considered safe investments—the kind financial advisors market to pension funds and the elderly.

(more via link above)

While full, economic fees will have to return in some form – student loans as the mechanism are on this evidence not a good option…

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On Facebook, the Employment Control Framework and root gardening | An eye on science and what makes it going

On Facebook, the Employment Control Framework and root gardening | An eye on science and what makes it going.

 

In 2003 Mark Zuckerberg created Facebook, an idea now worth 65 billions dollars that has changed the way people communicate. This is probably the most successful venture in the history of capitalism, hence in the history of modern economy.

 

#ECF11: Not doing more with less, but doing more of what we tell you | Stephen Kinsella

March 23, 2011 Leave a comment

#ECF11: Not doing more with less, but doing more of what we tell you | Stephen Kinsella.

#ECF11: Not doing more with less, but doing more of what we tell you

Imagine this:

Times are hard. A business gets into trouble, and begins to scale back its costs by telling its various departments to do more with less. Where last year, you had X for your budget, now you have 75% of X. No bother, the departments say, and off they go, doing more with less.
Now let’s say the CEO of the business says ‘actually lads, in addition to the doing more with less stuff, we won’t let you go out and get funds from elsewhere–certainly not the head division–which might actually make the business some money and take some of the pressure off others.  Not only that, we’ll make sure any incentive you had to do more with less is taken away. In fact, the
Sorry, what? That’s insane. Why wouldn’t they want a situation where the best people in the business did what they did best and brought in funds to allow it to grow? Why wouldn’t they incentivise non-core expansion with promotions, bonuses, and back slapping opportunities? Why wouldn’t the business accept that you can’t cut too much too quickly, especially at the bottom otherwise the business will die at its roots?
That’s exactly what is proposed in the revised and expanded Higher Education Authority’s Employment Control Framework (ECF), signed by the last Minister for Finance as he was cleaning out his desk.  Ireland’s universities receive a block grant from the Higher Education Authority on behalf of the government. The HEA has the purse strings, and the ECF is its way of tightening them.
More via link above.

Science and Innovation Policy in the ‘Towards Recovery: Programme for a National Government 2011-2016’

The Programme is available here.

The major section dealing with science and innovation policy reads as follows (pp 9 – 10):

Innovation and Commercialisation
We will implement innovation and commercialisation policies as outlined below subject to cost benefit analysis.
• We will progressively implement the recommendations in the Trading and Investing in the Smart Economy Report
• We will support our indigenous digital game industry by reforming R&D supports available to the industry, setting aside funding from Innovation Fund Ireland for a seed capital scheme for Irish digital gaming start-ups, introduce a digital media component to Transition Year programmes and promote Ireland as digital gaming hub.
• We will develop Ireland as a ‘digital island’ and first-mover when it comes to information technology by ensuring more progress on e-Government and moving Government services online, investing in ICT in schools, and investing in information technology in the healthcare sector.
• We will make Ireland a leader in the emerging I.T. market of cloud computing by promoting greater use of cloud computing in the public sector, organising existing State supports for cloud computing into a package to promote Ireland as a progressive place for I.T. investment, establishing an expert group to address new security and
privacy issues arising from the use of cloud computing and reviewing the adequacy of current legislation and identify what steps need to be taken to ensure a supportive regulatory environment.
• We will develop a National Intellectual Property (IP) protocol to give predictability about the terms on which business can access IP created in Higher Education Institutions and the wider digital sector.

• We will promote and support investment in technology research, development and commercialisation beyond basic research supported by Science Foundation Ireland, as well as removing barriers to innovation and accelerate exploitation of new technologies.
• We will target key technology areas and sectors where innovation can be applied including but not limited to high value manufacturing, advanced materials, nanotechnology, bioscience, electronics, photonics and electrical systems and information and communication technology. We will also focus on the application of technological innovation in established sectors of the economy like energy generation and supply, transport, creative industries, high-value services and architecture and construction by identifying challenges, establishing priorities and developing strategies which specify necessary actions to transition to more innovative approach.
• We will promote Ireland’s full engagement with the ‘Innovative Union’ proposals issued by the European Commission in October 2010 as one of the seven flagship initiatives under EU2020 Strategy, with the specific aim of refocusing R&D and innovation policy on major challenges and at turning inventions into products.
• The critical gap between basic research promoted and funded by Science Foundation Ireland and third level institutions and its subsequent development into commercial opportunity for investors can only be closed by making new technologies ‘investment ready’. We will establish a network of Technology Research Centres focused on
applied technological research in specific areas, to be linked to appropriate highereducation institutions. The centres will accelerate exploitation of new technologies by providing infrastructure that bridges gap between research and technology commercialisation. We will initially establish 3 additional centres foccussing on
biotechnology, nanotechnology and high value manufacturing. Further centres from a number of other areas will be selected at a later time.
• We will support the development of an International Content Services Centre to make Ireland world leader in managing intellectual property.
• We will pioneer within the EU a model of ‘fair use’ in European Copyright Law, like in the USA, which effectively permits the use of portions of a copyrighted work so long as the normal economic exploitation of the originating work is not undermined. This will allow internet companies and other digital innovators to bring their services
to market.

Subject to a cost benefit analysis, we will amend the R&D tax credit regime to make it more attractive and accessible to smaller businesses, in the following ways:
• Companies with R&D expenditures of under €100,000 will be entitled to full tax credit on those entire expenditures as opposed to just the increment over the base year, with marginal relief for companies with expenditure just over €100,000.
• We will allow companies to offset the R&D credit against employers. PRSI as an alternative to corporation tax.
• To cut down on red tape in the applications process, companies in receipt of a Research, Technology and Innovation (RTI) grant from one of the development agencies will be automatically deemed as entitled to the R&D tax credit.

Other relevant pieces:

Investment priorities will include education, health and science and technology (p. 16)

Undertake a full review of the Hunt and OECD reports into third level funding before end of 2011. Our goal is to introduce a funding system that will provide third level institutions with reliable funding but does not impact access for students (p 17)

Maths and science teaching at second level will be reformed, including making science a compulsory Junior Cert subject by 2014. Professional development for maths and science teachers will be prioritised. (p 40)

Third Level Reform (p 43)
We will review the recommendations of Hunt report on higher education. A reform of third level will be driven by the need to improve learning outcomes of undergraduate degree students, as well as providing high quality research.
We will initiate a time-limited audit of level 8 qualifications on offer and learning outcomes for graduates of these courses.
We will introduce radical reform in third level institutions to maximise existing funding, in particular reform of academic contracts and will encourage greater specialisation by educational institutions.
We support the relocation of DIT to Grangegorman as resources permit.
We will explore the establishment of a multi campus Technical University in the South East.
We will extend the remit of Ombudsman to third level institutions.
We will merge the existing accreditation authorities; National Qualifications Authority, FETAC and HETAC to increase transparency.

From The Economist: The best universities now have worldwide reach (More Hunt Report thoughts)

January 21, 2011 Leave a comment

The Economist has a fascinating article on where the World’s leading universities are headed.

The best American universities are nothing like the stereotype of isolated ivory towers. Take the Massachusetts Institute of Technology (MIT), founded in 1861 to accelerate the industrialisation of America. Its ties with business are now intimate and global. Companies fund much of its research. Staff and students collaborate with established firms and set up a prodigious number of their own. A study in 2009 by the Kauffman Foundation, a think-tank in Missouri, estimated that MIT alumni had founded 25,800 companies that were still active, employing 3.3m people and generating annual sales of $2 trillion. “It’s a very entrepreneurial culture,” says Susan Hockfield, MIT’s president.

Will the Hunt Report deliver institutions of this type here in Ireland? (Me too).

The Hunt Report is now available – A few comments on centralisation

January 7, 2011 2 comments

The Hunt Report (National Strategy for Higher Education) is now available. There’s been lots of commentary on it: e.g. from Eoin O’Dell, Ferdinand von Prondzynski and various newspapers (see Ninth Level Ireland for an aggregation of many of the stories).

Here, I just want to draw attention to a conflict between a recommendation of the Hunt Report and Bord Snip Nua (Report of the Special Group on Public Service Numbers and Expenditure Programmes). The two reports have very different recommendations for the Higher Education Authority, with Snip recommending abolition, and Hunt recommending beefing it up. This conflict has not attracted any attention that I have noticed yet.

Hunt comments:

‘The multiple role for and expectations of the higher education system will require a strong central driving mechanism. Since the Higher Education Authority Act of 1971, funding and policy advisory responsibility have been vested in the HEA. This responsibility was widened to include the Institute of Technology sector in 2006. The Report of the Special Group on Public Service Numbers and Expenditure Programmes (2009) recommended that the HEA be abolished and its staff and functions be merged back into the Department of Education & Skills.’

Instead, Hunt recommends: ‘The Strategy Group, taking account of the more specialised role involved in future system governance, took the view that the best approach to take is to retain a Higher Education Authority.’

The McCarthy group stated:

D. 3 Merge HEA with D/E&S

There is duplication in the number of staff carrying out administrative supervision work for the third level education institutions across D/E&S and the Higher Education Authority (HEA). There are 44 staff in the D/E&S supervising the third level institutions4. The Special Group is of the view that this staffing level is too high considering that the HEA (staff of 59) already carries out similar activities. The Group considers that the HEA should be merged with the D/E&S to generate efficiencies in staffing and administrative expenditure. The Group envisages savings of €1m and associated staffing reductions of 15.

How will these differing views be brought into register? Central Planning hasn’t worked so well (either in the former USSR or currently in the HSE), for reasons that good Hayekians appreciate: the existence of a widespread  ‘pretence that central government …[can] acquire knowledge which, in fact, is unobtainable’ (via), which can then be used to generate courses of action,  and even to know and predict the future.

It would be have been good to have seen within the Hunt report sunset options for strategies that were palpably not working, as well as a few clear statements of what empirical observations would void the recommendations of the report. (See also this post on how centralisation suppresses cognitive diversity, creates perverse incentives and misallocates resources). Homogenising the third-level system cannot be a good thing; as Ferdinand von Prondzynski comments:

The flaw in this vision is that it doesn’t work. Universities are at their most innovative and creative when they are allowed to pursue their own vision. So for example, the current German government is busily changing the post-War framework of universities as coordinated government agencies and giving them higher levels of strategic autonomy exactly because the ‘agency’ model has made them under-perform in global terms. American universities became the global leaders they now are from the moment that they were allowed to escape from bureaucratic controls. There is no evidence from anywhere that a centralised coordination of institutional strategies creates wider benefits for society. (Emphasis added)

Clay Shirkey on Collapsing Societies, Institutions and Business Models (… and how about universities?)

November 11, 2010 Leave a comment

Clay Shirkey in a much-commented upon post addressing collapsing business models, institutions and societies (this post has been around a while). Read the whole post – it seems very relevant to the way all sorts of instutions are actively resisting the call of the future at present. Universities in general seem resistant to this sort of institutional collapse, as they have survived for so long (but will particular universities be able to resist such institutional collapse, given the host of pressures that are building?). To re-write the financial watchdog warning: perhaps past survival of a university is no guarantee of future survival!

A quote:

In 1988, Joseph Tainter wrote a chilling book called The Collapse of Complex Societies. Tainter looked at several societies that gradually arrived at a level of remarkable sophistication then suddenly collapsed: the Romans, the Lowlands Maya, the inhabitants of Chaco canyon. Every one of those groups had rich traditions, complex social structures, advanced technology, but despite their sophistication, they collapsed, impoverishing and scattering their citizens and leaving little but future archeological sites as evidence of previous greatness. Tainter asked himself whether there was some explanation common to these sudden dissolutions.

The answer he arrived at was that they hadn’t collapsed despite their cultural sophistication, they’d collapsed because of it. Subject to violent compression, Tainter’s story goes like this: a group of people, through a combination of social organization and environmental luck, finds itself with a surplus of resources. Managing this surplus makes society more complex—agriculture rewards mathematical skill, granaries require new forms of construction, and so on.

Early on, the marginal value of this complexity is positive—each additional bit of complexity more than pays for itself in improved output—but over time, the law of diminishing returns reduces the marginal value, until it disappears completely. At this point, any additional complexity is pure cost.

Tainter’s thesis is that when society’s elite members add one layer of bureaucracy or demand one tribute too many, they end up extracting all the value from their environment it is possible to extract and then some.

The ‘and them some’ is what causes the trouble. Complex societies collapse because, when some stress comes, those societies have become too inflexible to respond. In retrospect, this can seem mystifying. Why didn’t these societies just re-tool in less complex ways? The answer Tainter gives is the simplest one: When societies fail to respond to reduced circumstances through orderly downsizing, it isn’t because they don’t want to, it’s because they can’t.

In such systems, there is no way to make things a little bit simpler – the whole edifice becomes a huge, interlocking system not readily amenable to change. Tainter doesn’t regard the sudden decoherence of these societies as either a tragedy or a mistake—”[U]nder a situation of declining marginal returns collapse may be the most appropriate response”, to use his pitiless phrase. Furthermore, even when moderate adjustments could be made, they tend to be resisted, because any simplification discomfits elites.

When the value of complexity turns negative, a society plagued by an inability to react remains as complex as ever, right up to the moment where it becomes suddenly and dramatically simpler, which is to say right up to the moment of collapse. Collapse is simply the last remaining method of simplification.