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 picture. 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 ERIC A. HANUSHEK