Phi Beta Cons

The Pursuit of Profit

Carol Iannone asks a fair question. Why do some conservatives defend for-profit colleges when those schools exploit the “overselling” of college even more than non-profits do?

Her question is largely directed at me, because I have pointed out that these schools must be doing something right to keep getting customers, and because I have raised questions about the attacks on for-profits. (And now we learn that those attacks, complete with congressional hearings, were orchestrated by a short-seller who wanted to drive down the price of the schools’ stocks!)

I don’t defend the actions of individuals or institutions that mislead or dupe people, whether instigated by profit-making corporations or non-profit organizations. (That includes any deception by the short-seller.) But if we are concerned about solving a societal problem, rather than simply directing moral opprobrium, we should place the blame where it belongs, which is on the easy money provided by the federal government for college-level education. 

Let me step back a bit and summarize some elementary facts. Economists who study the wealth and poverty of nations recognize that prosperity stems from the actions of individuals seeking opportunities for rewards. “It is not from the benevolence of the butcher, the brewer, or the baker, that we expect our dinner, but from their regard to their own interest,” wrote Adam Smith.

The United States and many other countries have become prosperous — the average person has wealth way beyond what kings had two centuries ago — because they allowed individuals to pursue their self-interest, often in the form of profit-making companies. Three things have restrained people from harming others in this pursuit: competition, individual responsibility, and government protection against force and fraud. Essentially, that’s all that is needed to bring about a prosperous nation. 

What throws gum into the works of education is the extraordinary amount of money supplied by the government through aid and subsidized loans. This money goes to for-profit and non-profit schools alike — the amount determined by individual choices. Unfortunately, as the Pope Center has observed from time to time, when expenditures are subsidized, people often make poorer choices than they would if they were fully responsible for their spending.

Student aid and loans are just part of the picture, of course. Public universities and community colleges (the prime competitors of for-profits) have many additional government resources, such as state appropriations and research grants, to draw on. Anyone who feels that the for-profits’ pursuit of students and their money is unseemly should consider the university lobbying that goes on in a state legislature or look at the federal earmarks that go to universities.

I hope my point is clear. I abhor deception and duplicity.  But the pursuit of self-interest, which the for-profits are doing, is the way that a prosperous society operates. The problem, and it is a big problem, is that the government is providing too much money.

Jane S. Shaw — Jane S. Shaw retired as president of the John W. Pope Center for Higher Education Policy in 2015. Before joining the Pope Center in 2006, Shaw spent 22 years in ...

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