For-Profit, Non-Profit & Education
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).