The future economic challenges for the liberal arts colleges

Daedalus

Volumn 128, Issue 1, 1999, Pages 47-75

  McPherson, Michael S ^a   Schapiro, Morton Owen ^b,c  

^a MACALESTER COLLEGE   (United States)

^b 257 Dwire Hall   (United States)

^c UNIVERSITY OF SOUTHERN CALIFORNIA   (United States)

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[No Author keywords available]

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EID: 12444317684     PISSN: 00115266     EISSN: 15486192     Source Type: Journal    
DOI: None     Document Type: Article

References (11)

1. Traditional liberal arts disciplines here include mathematics, the physical and biological sciences, social sciences and history, English, and the modern foreign languages. These numbers are calculated from data in the National Center for Education Statistics, Digest of Education Statistics (Washington, D.C.: U.S. Department of Education, 1997), 261, 307, 311, 313, 315.
2. David W. Breneman, Liberal Arts Colleges: Thriving, Surviving, or Endangered? (Washington, D.C.: The Brookings Institution, 1994).
3. Expenditure and revenue patterns are discussed in greater detail in Chapter 7 of Michael S. McPherson and Morton Owen Schapiro, The Student Aid Game: Meeting Need and Rewarding Talent in American Higher Education (Princeton, N.J.: Princeton University Press, 1998).
4. The survey of freshmen in 1997 reflected family income in the 1996 calendar year while the survey of freshmen in 1981 reflected family income in the 1980 calendar year. Inflation between 1980 and 1996 equaled 90.4 percent. Inflation-adjusted income brackets for the 1981 survey would be as follows: <$10.5, $10.5-$15.8, $15.8-$31.5, $31.5-$52.5, $52.5-$105.0, and >$105.0. The selectivity definitions vary somewhat across institutional categories. We define low selectivity as having the following SAT ranges: <1050 for private universities, <1025 for private nonsectarian 4-yr. colleges, <1050 for Protestant 4-yr. colleges, <1025 for Catholic 4-yr. colleges, <1000 for public universities, and <1025 for public 4-yr. colleges. We define medium selectivity as having the following SAT ranges: 1050-1174 for private universities, 1025-1174 for private nonsectarian 4-yr. colleges, >1049 for Protestant 4-yr. colleges, >1024 for Catholic 4-yr. colleges, 1000-1099 for public universities, and >1024 for public 4-yr. colleges. We define high selectivity as having the following SAT ranges: >1174 for private universities, >1174 for private nonsectarian 4-yr. colleges, and >1099 for public universities.
5. But there is an important difference between colleges and airlines: everyone at a college receives a subsidy, even those who pay the sticker price. According to Gordon C. Winston, Jared C. Carbone, and Ethan G. Lewis, spending (educational and general expenditures plus an allowance for capital costs) at the average liberal arts college in 1994-1995 amounted to $16,000, compared with a sticker price of $10,500. So even students with no financial aid received a subsidy of $5,500. Winston, Carbone, and Lewis, "What's Been Happening to Higher Education? Facts, Trends, and Data: 1986-87 to 1994-95," Williams Project on the Economics of Higher Education Discussion Paper #47, March 1998.
6. Need-based and merit aid are discussed in great deal in McPherson and Schapiro, The Student Aid Game, on which the following account relies.
7. William G. Bowen and David W. Breneman refer to this type of financial aid as an "educational investment" - as opposed to a tuition discount. They suggest that a good way to distinguish between student aid as a price discount versus student aid as an educational investment is to ask whether the provision of student aid increases or decreases the net resources available to the college to spend on other purposes. A tuition discount seeks to do the former while an educational investment does the latter. Bowen and Breneman, "Student Aid: Price Discounting or Educational Investment?" Brookings Review (Winter 1993): 28-31.
8. An excellent analysis of these strategic dimensions of aid and admissions policy is contained in James Scannell, The Effects of Financial Aid Policies on Admission and Enrollment (New York: College Entrance Examination Board, 1992), which contains an example similar to the one presented here.
9. Lawrence F. Katz and Kevin M. Murphy, "Changes in Relative Wages, 1963-1987: Supply and Demand Factors," Quarterly Journal of Economics 107 (February 1992): 35-78.
10. Truman Schwartz, an award-winning and revered professor of chemistry at Macalester College, said recently, "I don't teach chemistry; I teach students, and the medium is chemistry."
11. The Nobel Prize-winning economist George Stigler was known to comment that in his experience you might as well sit on the student and talk to the log. He was obviously not employed at a liberal arts college.