Higher Education Cartel, Meet Creative Destruction

Modern colleges and universities have collectively become a rent-seeking cartel, an alliance of nominally competitive institutions that maintains a highly profitable monopoly of accreditation.

Correspondent Mark G. succinctly summarizes why higher education is ripe for the creative destruction of its cartel model. His brief account captures the essential dynamics so well that I made it the foreword of my book The Nearly Free University and The Emerging Economy: The Revolution in Higher Education.

Here is Mark's essay:

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Developments in education and information media have always impacted each other. Below is a brief review of the history of each for the past 2,500 years. The aim is to open minds as to how the asymptotic expansion of the information media technology known as the Internet is expanding education beyond its previous boundaries.

Brief History of Educational Media

Archimedes independently derived the Fundamental Theorem of Calculus over 2,300 years ago. This theorem did not become widely known until recently because of the scarcity of media, specifically papyrus and vellum parchments. During the time of the Roman Empire, the Library of Alexandria and the Roman imperial bureaucracy consumed almost the entire annual production of papyrus in Egypt. In fact, the competing library at Pergamum in Anatolia developed the use of vellum parchment specifically because of a lack of papyrus.

The extreme shortage of written media caused learning to become focused on two customs. One was the primacy of the oral lecture, such as Hero's lectures on mechanisms. The other was the requirement to concentrate students in one small geographic area to hear these lectures.

Due to the concentration of all this academic information in one place with limited access, the libraries tended to become centers of academic study and scientific research. Thus ancient colleges and universities first developed in parallel with the ancient libraries, for obvious reasons.

Development of the Oral Lecture

Many surviving ancient books began as sets of written lecture notes. Many other books, such as the New Testament, began as letters addressed from one person or group to another. An especially well-endowed library might have as many as 500 books, each produces by scribes, by hand, a single copy at a time. Due to the lack of time and papyrus/vellum, it was impossible to provide every student with their own set of textbooks.

Instead, students were assembled in a room to hear a professor read to them from the school's single book copy. It is notable that one of the most ancient of present-day universities, Cambridge University in England, to this day preserves the memory of this practice with the formal academic rank of "Reader.”

The ancient oral lecture method of delivering information is still in use at most universities, but is now subject to what I call the Johnny Carson Principle, which states "there is and can be only one Johnny Carson.” Within a talented, diverse field of talk-show hosts, only one host occupies the top spot. Applying this principle to the education filed, in any given field there will only be a handful of truly A-list lecturers, but with one clearly at the head of the pack.

In my view, Dr. Walter Lewin of MIT is clearly the Johnny Carson of Physics I & II. His Physics lectures--which are theatrical-grade productions--are readily available on YouTube. Note that unrivaled genius in theoretical research is no guarantee of being an excellent physics lecturer and educator.

Where We Are Today

Two thousand years later the modern college and university is clearly still structured around the ancient principles. Even the appearance and spread of Gutenberg's printing press in the 15th century simply served to multiply the numbers of schools organized on this ancient pattern. Currently two primary elements of the old style system, written media and oral lectures, are already widely available at greatly reduced cost.

The Nearly Free University (NFU) already exists in a practical sense. One example of open-access curriculum will suffice: the study of physics for science and engineering majors. Free, professional-level materials for Newtonian mechanics and subsequent developments in electrical, optical and nuclear physics are available online.

Yet science and engineering continue to be taught using the ancient system, using well-paid professors and expensive university classrooms to teach physically present students.

Despite major advances in media technology and the accompanying reduction and sometimes outright elimination of cost, the ancient model of organizing schools has persisted to modern times, with education costs and student debts now spiraling out of control.

One reason for this persistence may be that tenured professor jobs with six-figure salaries, excellent health insurance, and generous pensions are increasingly rare in the private sector. The academic priesthoods that benefit from the current system have a vast self-interest in perpetuating it no matter what. The ancient practices of oral lectures and costly texts are actively blocking lower cost superior methods. The organizational imperatives of this ancient system are clearly obsolete.

Why does the old style system still persist even though it is already demonstrably inferior? In addition to the financial disincentives, there is another reason: the current system retains a monopoly on assessing student learning and granting credit for demonstrated accomplishment. The schools are able to do this because they have arranged a monopoly on accreditation. This is ultimately a grant of state power.

As a result, modern colleges and universities have collectively become a rent-seeking cartel, an alliance of nominally competitive institutions that maintains a highly profitable monopoly of accreditation. To grasp the power of the cartel, consider a typical Physics I course even at MIT is almost entirely based on Newtonian mechanics, and the subject matter is entirely in the public domain. Only a cartel could arrange to charge $1,500 and more per student for tuition and texts, in the face of far lower cost and superior quality materials, for subject matter that is no more recent than the 19th Century.

Breaking down this system means developing alternate methods to accredit what already exists. This is individual learning. Rather than accrediting institutions, the NFU must aim at accrediting individuals directly.

My new book The Nearly Free University and The Emerging Economy (Kindle eBook) is available at a 20% discount ($7.95, list $9.95) this week. Read the Foreword, first section and the Table of Contents. 

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The Nearly Free University and The Emerging Economy:
The Revolution in Higher Education

Reconnecting higher education, livelihoods and the economy

With the soaring cost of higher education, has the value a college degree been turned upside down? College tuition and fees are up 1000% since 1980. Half of all recent college graduates are jobless or underemployed, revealing a deep disconnect between higher education and the job market.
It is no surprise everyone is asking: Where is the return on investment? Is the assumption that higher education returns greater prosperity no longer true? And if this is the case, how does this impact you, your children and grandchildren?


We must thoroughly understand the twin revolutions now fundamentally changing our world: The true cost of higher education and an economy that seems to re-shape itself minute to minute.

The Nearly Free University and the Emerging Economy clearly describes the underlying dynamics at work - and, more importantly, lays out a new low-cost model for higher education: how digital technology is enabling a revolution in higher education that dramatically lowers costs while expanding the opportunities for students of all ages.

The Nearly Free University and the Emerging Economy provides clarity and optimism in a period of the greatest change our educational systems and society have seen, and offers everyone the tools needed to prosper in the Emerging Economy.
Read the Foreword, first section and the Table of Contents.

print edition (list $20, now $18)
Kindle edition: list $9.95, for one week only, $7.95 (20% discount) 

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Things are falling apart--that is obvious. But why are they falling apart? The reasons are complex and global. Our economy and society have structural problems that cannot be solved by adding debt to debt. We are becoming poorer, not just from financial over-reach, but from fundamental forces that are not easy to identify. We will cover the five core reasons why things are falling apart:

1. Debt and financialization
2. Crony capitalism
3. Diminishing returns
4. Centralization
5. Technological, financial and demographic changes in our economy

Complex systems weakened by diminishing returns collapse under their own weight and are replaced by systems that are simpler, faster and affordable. If we cling to the old ways, our system will disintegrate. If we want sustainable prosperity rather than collapse, we must embrace a new model that is Decentralized, Adaptive, Transparent and Accountable (DATA).

We are not powerless. Once we accept responsibility, we become powerful.

Kindle: $9.95       print: $24

Thank you, Karl L. ($50), for yet another superbly generous contribution to this site-- I am greatly honored by your steadfast support and readership.