A Philosopher's Blog

For-Profit, Non-Profit & Education

Posted in Business, Ethics, Philosophy, Universities & Colleges by Michael LaBossiere on December 2, 2013
For-Profit Education

For-Profit Education (Photo credit: Truthout.org)

As a professor, I have some interest in the increasing trend to turn education into a profit focused industry. One example of this is the push for schools to partner with for-profit companies that provide MOOCs. Another example is the relentless push for assessment that involves instruments provided by for-profit companies. There are many other specific examples, but it is clear that education is being regarded as a new frontier for economic exploitation.

Being a reasonable person, I do favor things that can increase the availability or quality of education (or both) while doing so at a lower cost. As such, I was rather intrigued by the idea of MOOCs and their promise to provide quality education to the masses at a low cost. Likewise, I was interested by the idea of for-profit colleges that were touted as providing quality education at a low cost—all driven by the invisible hand of market forces. As someone who has served on assessment committees since 2004, I am always eager to hear about effective methods of assessment that take as much workload off the faculty as possible.

Unfortunately, I have been rather disappointed by the reality of MOOCs, for-profit colleges and assessment. Since I have written numerous essays on these specific topics already, my focus will be on the generic problem that seems to arise from the for-profit model relative to the non-profit model of traditional education.

On the face of it, the problem with the for-profit approach is obvious: a for-profit must charge to a degree that covers the costs and also provides for a profit. In contrast, a non-profit needs to only cover its costs. To use an analogy, a for-profit is like a vehicle that is loaded with extra weight—it has to burn fuel to move itself, but also to move that weight. In contrast, the non-profit does not need to move that extra weight.

To take a specific example, consider a university that is considering contracting a for-profit company to provide instruments of assessment or online courses. The for-profit will need to charge the University for the cost (including paychecks for workers) of the instruments or courses, plus extra for the profit. That is, the university is effectively giving the company some of the money in return for nothing. After all, the university could simply create the assessments or courses itself and pay just the cost, thus saving money that could be used on other things, like student scholarships or updating obsolete classroom technology.

The obvious reply is to argue that a for-profit can provide goods and services at a lower cost than the university and, even with the profit tacked onto the bill, the cost to the university would be lower than it would be for the university to do it itself. For example, consider the development and operation of an online course. The university would need to pay faculty and staff their usual salaries to do this while a for-profit could hire cheaper labor to do the work (perhaps even outsourcing it to countries with very low wages). Also, the university would need to create the online infrastructure to  run the classes and this could cost considerably more than having a for-profit company provide infrastructure it already has in place (perhaps in another country).

The obvious counter to this reply is that university could simply do what the for-profit does and thus bypass the middleman. That is, if a for-profit company has lower costs because it will hire people in low-wage countries to do the work, the university could simply hire people in low-wage companies to do the work. There is, after all, no special for-profit magic that allows a for-profit company to do things that cannot be done by a non-profit. The university could thus save money or, alternatively, pay the low-wage workers a better wage.

It can be objected that while there is no special for-profit magic, for-profits have the advantage of the profit motive. That is, to steal a bit from Adam Smith, they will work hard to provide a better product at a lower price so that they can make that profit. Since non-profits do not make profits, they lack that motivation and hence will deliver inferior products at a higher cost.

The easy reply to that, as I have shown in my essays on for-profit MOOCs and for-profit colleges, is that the for-profits in education consistently deliver inferior products at higher prices than the non-profit colleges and universities.  This is not to say that a for-profit education company cannot deliver high quality at a lower cost than a non-profit. After all, just as there is no for-profit magic, there is no special for-profit curse that precludes this. However, universities should be cautious before turning to for-profit companies—assuming their goals are to provide quality education at a reasonable cost (as opposed to more corrupt goals).

 

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  1. Delivering education | Civil Commotion said, on December 2, 2013 at 9:36 am

    […] Michael LaBossiere, a philosophy professor in Florida, continues his series of posts taking-up some of the implications of education’s continuing evolution — MOOC’s, for-profit, and not-for-profit. […]

  2. T. J. Babson said, on December 2, 2013 at 12:05 pm

    Mike, let’s say you have an idea for revolutionizing education and you start a university in a couple of old mobile homes. How can you possibly grow your university unless you are a for-profit enterprise? You do not receive money from the state to build buildings, and you don’t have any endowment. How can you possibly grow?

    • Michael LaBossiere said, on December 2, 2013 at 2:47 pm

      Good question.

      If I charge the customer $X so I can grow my business, I would seem to be overcharging her $X. After all, she is getting nothing in return for that $X. However, if expanding the university would provide value to my customers, then I could charge them $X to fund the expansion that would be used by them.

      My moral concern is with charging people for nothing.

      Now, what I could do is charge for the value of what is provided, but accept less pay for my own use and instead use that money to expand.

      But, you do raise a good point: profit can be seen as a way of redistributing the wealth: my current students would subsidize the cost of expansion which would benefit my future students. Rather like how taxes on the wealthy would subsidize the costs of services to those less wealthy.

      • WTP said, on December 2, 2013 at 3:31 pm

        So if Mike gets a “deal” on a product because the proprietor overbought and needs to move the merchandise, as it is costing him storage space, Fair And Equitable Mikey insists on paying full price, over and above what is marked, because Mike would never, every want to take advantage.

        Mike has no concept of risk/reward. All he understands is money. What something costs. Not what the value of that something is. And he’s a philosophy professor with a PhD from Ohio State, excuse me, THE Ohio State University. Could you at least go back to Ohio, say Oberlin College or some such, and stop misinforming the youth of Florida? You’re costing us money on both ends.

      • magus71 said, on December 3, 2013 at 6:26 am

        “My moral concern is with charging people for nothing.”

        Not all things are easily classified by profit margins. If you post something for sale on ebay, and one bid is $25 and another is $35, who gets the product? Did the person who payed $35 purchase $10 of nothing?

        • Michael LaBossiere said, on December 3, 2013 at 6:57 pm

          Bidding does create an interesting problem in terms of value. After all, what you pay (if you win) is set by the base bid plus what other people bid rather than the worth of the product. But, if you are freely bidding, then presumably you value the product to the degree of what you will pay. Your valuation could be stupid, however.

          • magus71 said, on December 4, 2013 at 6:07 am

            Isn’t in many cases a wage a bid for a job?

            • Michael LaBossiere said, on December 5, 2013 at 7:06 pm

              Interesting analogy. In some cases, it works quite well: if a person is comparable to a desirable item, she can command competitive bidding. However, most workers operate from a disadvantage and the lower bid tends to win the typical job.

            • magus71 said, on December 7, 2013 at 11:25 am

              They operate from a disadvantage, but not as much as may be imagined. After all, business men need workers. Their (workers) only weakness is in a lack of unity, which is why Marx implored: “Workers of the world, unite!” Workers have options in the West, and this mostly keeps business in line. I’m not concerned about the gap between rich and poor so much as how the poor actually live now when compared to all other times in history–which is to say better than all other times.

              But I believe there are many workers who get a fair wage, and who get raises only because the boss thinks they should.

              And if we can believe that capitalists wish to have production without wages, we can also believe that workers wish to have wages without production.

            • Michael LaBossiere said, on December 7, 2013 at 5:12 pm

              That is why unions are so important to workers-without a union, it is typically the individual worker against the collective company. And many against one usually ends badly for the one.

            • magus71 said, on December 8, 2013 at 8:28 am

              I am not against unions, except when they do bad things of course.

            • WTP said, on December 7, 2013 at 4:00 pm

              However, most workers operate from a disadvantage and the lower bid tends to win the typical job.

              And again, Mike speaks with his knowledge of the cost if everything and the value of nothing. As if all workers produce equivalent quality of work. It’s another sign of the socialist that workers are interchangeable robots with no value or quality distinguishing them. This allows for much forward thinking and those excellent five year plans that don’t let icky humanity get in the way of the planning process.

        • WTP said, on December 4, 2013 at 1:48 am

          You can lead a horse to water…

  3. WTP said, on December 2, 2013 at 2:41 pm

    On the face of it, the problem with the for-profit approach is obvious: a for-profit must charge to a degree that covers the costs and also provides for a profit. In contrast, a non-profit needs to only cover its costs. To use an analogy, a for-profit is like a vehicle that is loaded with extra weight—it has to burn fuel to move itself, but also to move that weight. In contrast, the non-profit does not need to move that extra weight.

    Mike, seriously. Simply put, study some economics before you continue to make a fool of yourself blathering on about things you simply do not understand. By this rational, all production should be run by the state, not just education. Profit is not “built-in” to the cost structure. If something costs too much, it will not sell. I could go on and on, as I have in the past, explaining this to you but you’re too damn stubborn and/or obtuse to make it worth my time. Should anyone else need edification on this point, I’d be happy to provide, however there is plenty of information available if you just make an honest effort to look and to think for yourself.

  4. T. J. Babson said, on December 3, 2013 at 3:13 pm

    Mike, because you regard profit as a form of theft, you cannot be regarded as a capitalist in any meaningful sense.

    So the question becomes: what label most properly describes Mike’s economic views?

    • WTP said, on December 3, 2013 at 3:41 pm

      Not-so-closeted Envyist? Has a certain sophistication to it. Though I think he’d be better off accepting that he IS a socialist.

      What amused me was his earlier post on Democrats @ Work, to wit “Socialist” is like an old coin-it is so worn down that it is almost not currency anymore.. As if such does not apply to his constant leftist inspired harping about robber barons, consumption and acquisition of material goods, etc. etc. ad nauseam.

    • magus71 said, on December 3, 2013 at 6:46 pm

      I vote for State Capitalist, described by Leon Trotsky as “a partial negation of capitalism”.

      http://en.wikipedia.org/wiki/State_capitalism

    • Michael LaBossiere said, on December 3, 2013 at 7:02 pm

      Well, I’m not a socialist-I do not advocate state ownership of the means of production. I am also not a communist, because I’m not much into religion.

      I’m fine with everyone getting paid the value of their work and I’m cool with people who generate a lot of value getting huge stacks of cash. Heck, I’d like my books to generate huge stacks of cash for me.

      It might be that “profit” is a bit fuzzy. I take it to be what is acquired after all expenses and costs are paid for (this includes pay for everyone involved). But, some folks take “profit” to be what is acquired after only some costs. For example, some folks have told me that a business owner’s profits is what he gets after he pays everyone else, operating costs and so on. In this case, profit would also include what the owner earned. I have no problem with that sort of earned profit.

      • WTP said, on December 4, 2013 at 1:55 am

        Well, I’m not a socialist-I do not advocate state ownership of the means of production.

        Ownership? No. That would entail some sense of responsibility. Control through excessive regulation of not just the means of production, but via high taxes and wage and price controls, control of the profits as well. Controlling other peoples’ venture capital while taking none of the risk makes ownership conveniently unnecessary.

  5. T. J. Babson said, on December 4, 2013 at 10:55 am

    The Diplomad does it again:

    The people we have running and ruining our country are not really Marxists. They have taken bits and pieces of Marxism such as the hatred of capitalism, the belief that the history of the West is an unending saga of greed, corruption, exploitation, and death, and, above all, that there is a need for a vanguard that will transform society. Yes, you guessed it, they are the vanguard who will transform society. Unlike some modern day Marxist philosophes, however, they are not really concerned about educating the rest of us in seeing the wisdom of their vision, of their transformative work. Not at all. They are much more practical than that. They want to control the state and the coercive power of the state to force, yes, force, the rest of us into living life as they want it lived. They want and will use the many coercive agencies of the modern state in furtherance of their objectives. The IRS, for example, will crush political opponents; agencies such as the EPA will silence pesky business owners, etcetera.

    And what is the vision that drives these new mandarins, these elites? Government. That’s all. They want a society in which government forms the center of our lives. Government will decide. Even and especially our most personal decisions must be tempered by taking into account the government. Can and may we have a gun for home defense? What kind of health insurance and health care can and may we have? Can and may we have a car? What type? What salaries can and may we earn? What speech can and may we utter so as not to be considered hate-mongers? You get it.

    The bottom line is that new leftists are not embarrassed by the bureaucratic nightmare of the USSR and the GDR. Not at all. That is their goal. They want a society defined and built around government, and they, of course, will control it.

    http://thediplomad.blogspot.com/


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