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Revew [of McPherson and Schapiro]

Eric A. Hanushek
Published Date: 
Economics of Education Review
pp. 187-188

Keeping College Affordable: Government and Educational Opportunity. By MICHAEL S. MCPHERSON and MORTON O. SCHAPIRO. Washington, DC: The Brookings Institution, 1991.

GOOD BOOKS on higher education are hard to find. For that reason, this book - a good one - deserves
considerable attention.

This book has three major sections. There is an insightful empirical analysis of higher education finances
This is followed by a thoughtful and balanced discussion of policy options. Finally, there is a quite radical set of proposals representing the authors’ guide to reorganizing higher education finance and, maybe, the entire structure of the sector.

The major empirical chapters deal with today’s most
discussed issues of higher education finance. Chapter 2
provides a nice picture of enrollment and finance in higher
education over the postwar period. The changing picture
of student support IS set out in an illuminating way. The
analysis smce the mid 1970s provides details of how school
costs and financing interact urlth family income This
analysis relies chiefly on the Amencan Freshman Survey.
It thus offers a different view from the more commonly
used Current Population Survey (CPS), trading a nonrepresentative
sample of students for a more complete
treatment of independent students for whom parental
incomes are unavailable in the CPS. The picture that
emerges is one of U-shaped net costs to students: a steady
fall during the 1970s is balanced by a sharp and steady rise
during the first half of the 1980s.
The relationship between college costs and enrollments
rates is the subject of Chapter 3. McPherson and Schaplro
present new econometric evidence about how tmtlons
affect enrollment using aggregate panel data from 1974 to
1984 on white enrollment rates by income and sex. This
analysis demonstrates the particular sensitivity of the low
income population to price changes for schooling. There IS,
however, one aspect of the analysis that escapes attention.
The period 1974 to 1984 1s one of rapidly rising income
advantage for college completers, yet changes m benefits
never enter into the analysis of college attendance declslons
Neither are the large changes m unemployment
rates of the period, even though these would be expected
to alter the opportunity costs of college attendance. The
omission of these factors might well be explained by the
limited data available, but it IS difficult to accept that they
were not an important ingredient m the attendance
Chapter 4 1s a very interesting drscussion and analysis of
institutional behavior The simple question, raised to
natlonal debate m recent years, is whether the form and
level of student aid directly affects the tuition and
behavior of colleges and umversltles In simplest terms,
they fmd that schools respond, but they do so m quite
different ways than the public discussion has suggested.
Chapter 5 considers details of the attendance pattern,
specifically concentrating on what 1s happemng at elite
schools. Their findings are fairly straightforward, even if
the pohcy lmphcations related to them are not First, high
quality students (those with high SAT scores) have roughly
unchanged access to elite schools even though tuition
charges have risen noticeably. Second, middle and lower
income students of lower quality have less access to ehte
schools These findings are clear, but become a bit
muddled when intertwined with a variety of potential
policy issues The central pohcy ambiguity 1s whether all
students, regardless of mcome or ability, should have equal
access to expensive elite schools.
The final emplrical chapter provides various proJectIons
of the future of college costs The results here are fairly
clear under plausible scenarios, college costs will not
188 Book Reviews
become an immediate crisrs Nevertheless, costs ~111
become increasingly Important for non-aided students.
Chapters 7 and 8 provide some of the clearest, most
dispassionate analyses of policy Issues and options that I
am aware of. Perhaps because most analyses of hrgher
education are done by people who are directly affected by
the outcomes, the majority of policy options supenmpose
strong beliefs, wishful thinking, and the hke on the
analysrs. McPherson and Schaprro’s analysrs guide us
through the issues and optrons in an enhghtened and
msrghtful way. It should be the starting point for anybody
thinking about financial policy in higher educatron.
The final chapter of the book goes to the really btg
Issues. They come out wrth a flat and unequivocal
recommendatron for federahzatron of higher educatron
student finance. This conclusron, which obvrously goes far
beyond their empirical analysis or even their prior chapters
on pohcy options, really stands apart from the rest of the
book. I personally subscribe to parts of their argument -
the lessening of current pubhc-private distortions, the
applications of general fiscal federahsm arguments for
doing income redistribution at the highest level of government,
and so forth On the other hand, I think they too
cavalierly dismrss issues such as the impact of contmumg
federal deficits This chapter, which surely will be very
controversial, IS thought-provokmg - but It 1s also a
conclusion that goes well beyond the prior analysis.
This book is essentral readmg for anybody who wants to
understand student financing m higher educatron It is
careful, it is insightful and it provrdes invaluable help in
framing the issues.
At the same time, whde a bit unfair to the authors, I
cannot help but point out my problem with vutually all
analyses of the economrcs of higher education. This
exceptronal book follows one bit of tradmon m higher
educatron work. It never says anything about quality, the
measurement of output, or the production function for
higher education. The closest it comes IS to separate elite
colleges and universities from the non-ehte or to separate
public and private. Are these good summary indicators of
quahty or performance? Clearly the economics of hrgher
education must address these issues at some point