This is what Dr. Eric Fredland and I talked about over lunch in June of 2006. We were trying to better understand the economics of private vs. public education by answering the following hypothetical question: If my kid is accepted to both Harvard and The University of Texas, which should I recommend?
Background on Professor Fredland
Dr. Eric Fredland is a Professor Emeritus in the Economics Department at the U.S. Naval Academy in Annapolis, MD. He received a B.A. in economics from Harvard University and a Master's and Ph.D. in economics from the University of Michigan. He taught economics for over 35 years. Somewhere along the way he taught me macroeconomics - we've been friends ever since. This month we continued our private vs. public education conversation.
Is Harvard better than The University of Texas?
The answer is... it depends. Professor Fredland notes that if we're only looking at academic resources, the "public vs. private" case most likely favors the public schools for all but the "most brilliant of kids, for whom Harvard is perhaps worth the money." Both institutions provide tremendous academic resources. Only the most brilliant of students would be able to take advantage of the difference. Professor Fredland points out that the public vs. private debate needs to consider more than academic resources alone. Depending on the individual, the size of the campus can have an impact. "Most public schools are large. Many private schools are small and pride themselves on being student oriented. Some kids would flounder in the large school environment and blossom in the small school environment. Finding a small public school that's a good fit is not always easy."
We should also consider the time it takes to complete a bachelor's degree at a particular university. Says Fredland, "A student at a public school can take one to two years longer to complete his or her degree compared to a private university. The opportunity cost of an extra year or two in college can be high."
Brand matters, right?
In addition to quality of education, size of school and time to obtain a degree, Professor Fredland shared his thoughts regarding whether brand should be an important part of the decision-making process. "Brand matters up to a point. A degree from Harvard opens the first door. After that, it is performance on the job that is key. However, if most people from Harvard did not perform well in that initial go, then graduation from Harvard would cease to be a good screen for employers, and that first door would not open so readily. Public school brand matters too, particularly locally. It is my perception that among potential employers in Virginia, a UVa degree is a door opener; in Texas, a UT-Austin degree is a better brand than a Texas Tech or even an A&M degree (I could be quite wrong, but I don't think so.) And so on. In Maryland, I suspect that a College Park degree opens more doors than a St. Mary's College or a Salisbury degree, but for a lot of kids, I think the educational experience is better at the latter two. Service Academy degrees (from all three Academies) are door openers too. The theory is that buyers (employers in this case, but it applies to people buying cars, or beer or toothpaste or anything else) have limited information, and so use what information is easily and cheaply available in making decisions. College pedigree is cheap, available information to use in screening potential employees. So is grade point average (thus the pressure for grade inflation.)"
Taking a closer look at the numbers
Interestingly enough, when you consider the time to complete a four-year degree and financial assistance, prestigious private schools aren't that much more expensive than in-state public schools. Payscale is a site that's taking a scientific approach to answering the question - is Harvard worth the money? In a lot of cases, the answer is yes. Endowments play an important role at elite private universities. Because of endowments, many private colleges provide "need blind" admission seeking to attract the brightest students. Even if you are one of the lucky few that can afford to send your kids to Harvard, due to the availability of scholarships and "need blind" admission, you might not be shelling out as much as you'd think.
What we cannot quantify
I don't think it will ever be possible to model which college will be best for both my kids and my checkbook. I like the approach that Payscale is taking by comparing the explicit costs and benefits of a particular university. Unfortunately, there are implicit costs and benefits that are difficult to quantify. For instance, how do you model the impact of an individual's ability to choose where he or she wants to go to school? When I was 18, being able to choose where I would go to college was extremely important to me. I would imagine that being forced to go to a particular school has a negative impact as well. So my kid wants to go to Harvard. Now what? Luckily, I have a few more years before I have to answer that question (my kids are 5 and 7.) I guess I'll cross that bridge when I get there.