Valuing and Evaluating the Liberal Arts
in the Research University
The Liberal Arts & Sciences in the Research University Today:
Histories, Challenges, and Futures
Paul Courant
Jeffrey Smith
May 22-24, 2013
In a nutshell
1. It’s ok, even useful, to talk quantify benefits
from higher education and liberal arts
education.
2. Contrary to some beliefs, the return on
investment, pecuniary and nonpecuniary, is still
high.
3. There are many significant benefits and costs of
higher education that don’t show up as
additions to or subtractions from income.
4. There is an enormous amount of heterogeneity,
in students, in curricula, in the effects of higher
education on average and on individuals.
“I think (hope) we can agree that accountability is key
in connection with essentially everything we have been
discussing: admissions policies, financial aid structures,
pedagogy, graduation rates, and so on.
Fortunately, there seems to be much more willingness
today than in times gone by to look with a cold eye at
the actual evidence concerning outcomes, and to be
willing to make adjustments, or even to shift directions
entirely, if something is not working.
It will not do simply to assume that what appears to be
a good idea is in fact a good idea.”
William G. Bowen
Money payoff to college
Caveat: literature not just about
research universities.
Clear unconditional mean difference
But what do the means mean?
Owen and Sawhill 2013
Limitations of mean differences
Not causal
Synthetic cohort assumption dodgy –
see Heckman, Lochner and Todd
(2006)
Selection bias
Students do not attend and/or complete at
random
Conditioning on “ability” and other
background variables lowers the money
payoff to college
Best evidence still suggests a substantial
causal effect; see e.g. Card (2001)
Econometrica
What about the current cohort?
They are paying a larger share of the cost
Earnings payoff lower when entering the
job market in a cyclical downturn
Opportunity costs lower too
No reason to think recent increase in
premia will decrease
Costs and benefits for individuals
Compare current costs (direct, opportunity)
to current and expected future benefits of all
kinds
Lots of heterogeneity in costs and benefits
Marginal student likely differs from the
average student => estimated average
effects of policy a poor guide to effects for
marginal students moved in or out by policy
Other payoffs to college
College reduces employment risk
College improves health outcomes
College reduces criminal behavior
College increases voting
College increases subjective well-being
Heterogeneous money payoffs:
college quality
Earnings effects increase in college quality
Evidence: Dale and Krueger (2002, 2013),
Hoekstra (20009), Black and Smith (2006),
and many others
Dillon and Smith (2013): college quality
effects much more important than
mismatch effects
Completion
Literature suggests non-trivial “sheepskin”
effects of college completion
Completion rates a key mechanism by which
college quality affects earnings
How much of low completion is
experimentation?
Policy aside: ways to better predict who will not
complete would have a huge payoff
The liberal arts and sciences
What does the literature on college major
have to say about the determinants and
effects of major choice?
Big differences in money payoffs to major
choice
Conditioning reduces but does not
eliminate these
Black, Sanders, and Taylor 2003
Interpreting major choice effects
Majors have many aspects:
1. Current consumption and effort: who is in the library
or the lab on Friday night?
2. Labor market payoff in dollars
3. Labor market payoff in other job characteristics
4. Earnings variance – Dillon (2013)
The marginal student in each major is indifferent
Major issues
How much information do students have? A lot!
Evidence: Stinebrickner and Stinebrickner
(2013), Wiswall and Zafar (2012) and others
Stability of the earnings differences suggests
ignorance is not the main story
Tastes matter a lot
Bottom lines
1. Measure and evaluate, but respect the
subtlety of meaning
2. College still has a large economic payoff for
most students
3. College affects many outcomes other than
earnings
4. Heterogeneity matters a lot!