HESA

Higher Education Strategy Associates

November 05

The Future of Transcripts

In theory, transcripts are a way to communicate a student or graduate’s academic achievement in higher education.  The problem is, they only really communicate achievements to other people in academia.  Outside academia, they’re fairly useless.

They say nothing about the skills a student may or may not have acquired at school.  They say nothing about what extra-curricular activities a student has engaged in.  At best, they communicate the lists of classes that a student took (though without curricula, it’s difficult to see what that means).  And if the credential is from another country, it might not even convey that much, since employers will be unlikely to interpret it properly (hence the multi-million dollar credential evaluation industry).

People have come up with all sorts of ways to overcome these problems – diploma supplements, badges, and whatnot.  But these sorts of initiatives suffer from a really basic collective action problem: employers only value what they understand, and new transcripts and credentials are, by definition, unfamiliar.  They only become familiar if a lot of institutions adopt the same standards on diploma supplements/badges/whatever, and start pumping out transcripts based on them.  And of course, that’s not easy to arrange.  Institutions won’t put in the collective effort unless they know businesses will use the new system, and businesses can’t commit to using the new system until they see it and understand it.

That sounds like a recipe for paralysis, and so it has been for many years.  But now there is new player on the scene who might be able to genuinely revolutionize the system.  And that player is LinkedIn.

Think about it: a LinkedIn profile is about the closest thing the world has to a common CV.  Employers all over the world know how to read it.  So whatever LinkedIn puts into its template becomes the de facto global standard.  So if LinkedIn starts to allow various forms of Open Badges onto the site (you can do it now, but it’s through a patch), vastly more employers will be exposed to this type of credential, badges will start to gain currency, and hence employer demand for badges will rise.

Now think a little bit ahead to when paper degrees die out entirely.  Already, schools in North America can link directly with the Ministry of Education in China to verify academic records.  At some point in the next 20 years, someone will come along and digitize academic records at every school in the world  (that someone may or not be LinkedIn – individual players come and go in tech – but there’s almost certainly going to be a single player that ends up dominating this CV/transcript market).  And while doing so, they will inevitably have to create some sort of standard template for the transcripts.  And just like that, you will have a global electronic standard for academic information for CVs, which will not just have courses and grades, but also will have access to data regarding the curriculum of each specific course.

All of which is to say, change is coming to this little corner of student business processes.  It’s time for institutions to start thinking how they’ll react.

November 04

Yet More Reasons Free Tuition is a Bad Idea

The easy case to be made against free tuition is that it benefits students from richer backgrounds.  That’s because they are more numerous in higher education than students from poorer backgrounds and so, on aggregate, would receive more aid.  But that misses a more important point: because of the interaction between student aid and tuition, students from wealthier backgrounds would also receive a bigger benefit on an individual level.

Let’s take a really simple example from Ontario.  Take two students, Adele and Diana.  Both live with their parents and attend university in the same Arts program, but Adele’s family’s income is $40,000, while Diana’s is $160,000.  Currently, both pay $6,957 in tuition.  Both also receive $2,163 in tax credits.  But Adele receives $5,000 in grant money, meaning her all-inclusive net tuition is -$206, while Diana’s is $4,794.

Now imagine the province gets rid of tuition entirely.  Diana, the rich kid, sees her sticker price go to zero, and her all-inclusive sticker price fall to -$768 (that’s the value of the monthly “education amount” tax credits, which would presumably still remain even if the tuition fee tax credit disappeared).  In this scenario, Adele’s sticker price falls to zero; she would also retain the education amount tax credit, and would keep her $2,000 Canada Student Grant.  But she would lose all her provincial grant funding, which is based on tuition.  Her net tuition would thus fall to -$2,768.

Think about that: adopting free tuition means that the kid from the poor family would benefit by about $2,500, while the kid from the richer family would be better off by $5,562.  And, of course, as we noted earlier, higher education enrolments tilt towards the better-off (this is true both in free-tuition and positive tuition countries) – meaning free tuition is a double give-away to the rich.  There’s more of them, and they get more back from a free tuition policy.

Remind me why this is a good idea, again?

Poor students from colleges receive even less of a benefit.  Students there have tuition of $4,032.  But if tuition were eliminated, that $4,032 savings would be offset by a loss of $2,016 in tuition-related grants, and a little over $800 in tax credits.  Net gain: less than $1,200.  While the kid from the $160,000 per year family in university gets an extra $5,562.

But where it gets really gets crazy is with respect to single parents.  Take Joe, a college student with one child, living on student aid.  In the current system, Joe would receive a little over $7,000 in pure loans, and about $10,000 in remissible loans (i.e. loans that are forgiven each year).  If tuition were eliminated, however, he’d lose the remissible loan (i.e. a delayed grant) almost dollar-for-dollar.  Plus, on top of that, he’d lose $825 in tuition tax credits (the lower tax credits for college are because of lower tuition, in case you’re wondering).  So Joe would actually pay more, in net terms, after a reduction in tuition.  While the kid from the $160,000 per year family in university would get an extra $5,562.

How is this fair?  How is it progressive?  How is it in any way a good use of money?

If you substitute in different students or different provinces you’ll get slightly different results, but the basic point remains: net tuition is already free (or close to it) for many people in this country – particularly, poor dependent students and single parents.  Reducing nominal tuition does little or nothing to help these people, and in some cases can actually hurt them.  Our student aid debate would be much better if more people understood this.

November 03

Cockroaches

One of the most maddening things about higher education journalism is the widespread assumption of fragility.

Take the notion of vulnerability to technological disruption.  The most recent example of this is a piece from University World News (which really should know better) entitled “Can Universities Survive the Digital Age?”  It’s an absolutely ridiculous question that could only be posed by someone who knew virtually nothing of the history of universities.

Every time there’s a technological innovation, somebody thinks the university must be in trouble.  Only 24 months ago MOOCs were going to kill universities.  In the mid-1990s there was loads of techno-fetishist nonsense about the Death of Distance, and what it would do to education.  Before that it was computers (check out this cute piece from the 1950s), and in the 1960s and 1970 it was television (remember the University of the Air?) – although the earliest predictions about the effects of TV on education date back to the 1930s.  And before that, it was radio that was going to revolutionize education.  And before that, as Gavin Moodie reminds is in this fine article (longer version available here), Gutenberg and the printing press had the potential to “disrupt” higher education (why go through all that oral disputation in Latin if you could just read a book in the vernacular?).

The fact is, every time there has been a change, universities have found a way to incorporate the new technology.  New technologies never replace previous channels of knowledge transmission – rather, new channels are just added to existing ones (this is of course is a major reason why technology is usually a source of university cost inflation, rather than a cost savings).  Universities adapt.  Because the point of a university is simply that it’s a place where people gather to learn and discover using all sorts of tools, not just (as some reformers seem to think) via oral communication.

But it’s not just the techno-fetishists who think universities are fragile.  People are always worrying about whether institutions can survive “cutbacks” (a term people use even though operating grants have been increasing continuously for over 15 years at a rate well above inflation).  Of course they can.  You can cut universities forever, and they will still function.  Look at universities in Africa, operating in conditions of unimaginable penury. Look at universities like Beijing or Tsinghua, which moved their operations thousands of km (on foot) in order to stay open during the Japanese occupation.  Or look back at Canadian universities in the 1930s, when most universities lost half of their funding (or more in the case of the University of Manitoba, where the bursar made off with the endowment).  They survive.

They survive because communities have pride in even the tiniest universities, and sustain them as best they can.  They survive because at least part of the academy will remain to the bitter end, wanting to continue in the mission of transmitting knowledge.  In the midst of wars and famines, universities have survived, sometimes in the most treacherous circumstances imaginable.

Universities are like cockroaches: they are almost impossible to kill.  They’ll be here after the apocalypse.  The idea that a temporary loss of income or some minor technological advance will do them in is simply laughable.

October 31

Apprenticeships and Commodity Prices

There’s been a lot of talk recently about the commodities “supercycle” coming to an end.  The most immediate evidence for this is what’s happening with the price of oil, which is falling rapidly (the spot price is down 27% in the last 4 months, but more importantly the 5-year futures price is down 24% ).   That’s both because of weaker global demand and because there’s a lot more oil out there than there used to be, thanks to (among other things) improved shale oil recovery techniques.

So what does this mean for higher education?  At the moment it seems unlikely to affect much for universities except insofar as it affects provincial economies, and hence tax revenues.  Alberta’s budget is less sensitive to oil prices than to gas prices; Newfoundland is the only province that is likely to get hit badly.  On the other hand, the economies of Quebec and Ontario are likely to see a boost – oil price drops tend to act like tax cuts, so that’s good news for universities in those provinces.

Where I think the end of the commodity supercycle (if that’s what it is) is going to hurt most is in skilled trades apprenticeships.  For the past decade and a half, apprenticeship registrations have been escalating constantly.  And while registrations have increased everywhere across the country, a lot of it has been driven by the migration of skilled tradespeople to Alberta (and to a lesser extent BC and Saskatchewan), which in turn has been linked to the rise in commodity prices, particularly the price of oil.

Figure 1 shows this pretty clearly.  The orange line is apprenticeship registrations, and the blue line is the spot price for West Texas Intermediate crude (which is the usual benchmark for Alberta crude).  It seems clear as day that the pick-up in apprenticeships in the late 1990s correlated pretty tightly with the return of the oil boom.

Figure 1: Oil Prices (in $2013 CDN) and Apprenticeship Registrations, 1991-2012

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That said, it does seem as though apprentice registrations and WTI decouples somewhat after the oil price crash in 2008, so maybe they can withstand a further reduction in price.  But if oil falls below $80/barrel (which it did this week), some estimates are that fully a quarter of new projects become uneconomical.  Intuitively, this seems like it would have enormous knock-on effects, not just in Alberta’s resource industry but also in its construction industry.  And if all those people from Ontario and the Maritimes start heading home, then the knock-on effects will be felt in the rest of the country, as well.

We got into a very lazy habit over the past decade of thinking that training and apprenticeships in the skilled trades was “safe”.  We told a lot of kids that they should forego other forms of education, because they could make out like bandits as apprentices.

In the short term, that was true.  But back in the 1980s, in the trough of the last commodity bust, unemployment rates in the skilled trades were in the double digits.  It’s not completely out of the question that could happen again.

October 30

Times Higher Rankings, Weak Methodologies, and the Vastly Overblown “Rise of Asia”

I’m about a month late with this one (apologies), but I did want to mention something about the most recent version of the Times Higher Education (THE) Rankings.  You probably saw it linked to headlines that read, “The Rise of Asia”, or some such thing.

As some of you may know, I am inherently suspicious about year-on-year changes in rankings.  Universities are slow-moving creatures.  Quality is built over decades, not months.  If you see huge shifts from one year to another, it usually means the methodology is flimsy.  So I looked at the data for evidence of this “rise of Asia”.

The evidence clearly isn’t there in the top 50.  Tokyo and Hong Kong are unchanged in their position.  Tsinghua Beijing and National University of Singapore are all within a place or two of where they were last year.  In fact, if you just look at the top 50, you’d think Asia might be going backwards, since one of their big unis (Seoul National) fell out of the top 50, going from 44th to 52nd in a single year.

Well, what about if you look at the top 100?  Not much different.  In Korea, KAIST is up a bit, but Pohang is down.  Both the Hong Kong University of Science and Technology and Nanyang were up sharply, though, which is a bit of a boost; however, only one new “Asian” university came into the rankings, and that was the Middle Eastern Technical University in Turkey, which rose spectacularly from the 201-225 band last year, to 85th this year.

OK, what about the next 100?  Here it gets interesting.  There are bad news stories for Asian universities.  National Taiwan and Osaka each fell 13 places. Tohoku fell 15, Tokyo Tech 16, Chinese University Hong Kong 20, and Yonsei University fell out of the top 200 altogether.  But there is good news too: Bogazici University in Turkey jumped 60 places to 139th, and five new universities – two from China, two from Turkey and one from Korea – entered the top 200 for the first time.

So here’s the problem with the THE narrative.  The best part of the evidence for all this “rise of Asia” stuff rests on events in Turkey (which, like Israel, is often considered as being European rather than Asian – at least if membership in UEFA and Eurovision is anything to go by).  The only reason THE goes on with its “rise of Asia” tagline is because it has a lot of advertisers and a big conference business in East Asia, and its good business to flatter them, and damn the facts.

But there’s another issue here: how the hell did Turkey do so well this year, anyway?  Well, for that you need to check in with my friend Richard Holmes, who runs the University Ranking Watch blog.  He points out that a single paper (the one in Physics Letters B, which announced the confirmation of the Higgs Boson, and which immediately got cited in a bazillion places) was responsible for most of the movement in this year’s rankings.  And, because the paper had over 2,800 co-authors (including from those suddenly big Turkish universities), and because THE doesn’t fractionally count multiple-authored articles, and because THE’s methodology gives tons of bonus points to universities located in countries where scientific publications are low, this absolutely blew some schools’ numbers into the stratosphere.  Other examples of this are Scuola Normale di Pisa, which came out of nowhere to be ranked 65th in the world, or Federica Santa Maria Technical University in Chile, which somehow became the 4th ranked university in Latin America.

So basically, this year’s “rise of Asia” story was based almost entirely on the fact that a few of the 2,800 co-authors on the “Observation of a new boson…” paper happened to work in Turkey.

THE needs a new methodology.  Soon.

October 29

Cost of Attendance

You may recall that we recently put out a paper looking at “net prices” in Canadian higher education, which concluded that, in many cases, these prices were substantially lower than is commonly believed, and that too many of our subsidies in higher education were effectively hidden from those who benefit from them.  The reaction for the most part was amusingly incoherent – mostly variations on “they must be lying, because I’ve never heard of these hidden subsidies”.

But there was one line of criticism that is very much worth discussing.  Several people said “look, expressing subsidies as a function of tuition is all well and good, but the cost of education doesn’t just consist of tuition and fees, it’s living expenses, too – so why didn’t you also include that?”

Fair question.  We did it for two reasons. The first is practical: fees are set and living costs are not.  Some students move to another city to study (either by choice or out of necessity) – that raises their costs by several thousand dollars.  Some students don’t move cities, but rather choose to move out of their parents house anyway – again significantly raising costs.  Students can and do choose various levels of accommodations, with different financial consequences.  Many students also either own or rent cars.  I could go on, but you get the idea: student living costs vary enormously either by choice or circumstance, and more to the point, these costs will be to some degree dependent on the resources government makes available, which brings an endogeneity problem.  It’s a methodological nightmare: hence, we decided to leave it alone.

But there’s another reason to leave living costs out: quite simply, they aren’t a cost of education.  Whether or not a young person goes to school, they need to live.  Those costs (or some of them, anyway) would be incurred regardless.

Pointing this out usually drives people mental.  “But they have to live!” people say, “and they can’t earn the money to do that while they’re studying!”  Well, indeed.  This is why the real cost of attendance is not what students spend, but rather what they fail to earn – their opportunity cost.  We confuse this point all the time, because through our student aid program we try to compensate direct costs rather than reward missed earnings.  But the fact of the matter is the actual “cost” is lost wages.

Could we have included lost wages in our “net cost” calculations?  Possibly – though of course we’d have to make a fair number of assumptions about employment rates, hours worked, and hourly wages, all of which would have been open to challenge.  So on the whole, it seemed safer to leave them out.

What about the policy aspect though?  Why do we compensate living costs rather than lost wages?  Two reasons, really.   First is that it’s a hell of a lot of easier to explain to students and the public.  And second, there are reasonable policy rationales for – at the very least – covering the cost of moving away from home, either for reasons of access (for students from rural areas who need to move to attend education) or program choice (for all students).

Basically, it’s one of those cases where what makes sense for policy analysis and what makes sense for actual policy aren’t one and the same.

October 28

Responsibility-Centred Budgeting

As I’m on the subject of finances and budgeting these days, I thought it a good time to bring up the topic of “responsibility-centred budgeting” (RCB).  It’s a timely topic, given both this ludicrous article in the Edmonton Journal last week, and the fact that I have one loyal reader who’s been urging me to write about it for months now (Hi, Alan!).

Responsibility-centred budgeting basically says that units (usually faculties, occasionally departments) are responsible for raising their own funds and covering their own costs.  If you use less space, you have more money for other things; if you teach more students, you’ll get more money.  It’s a simple formula, and is very true to the medieval origins of the university, where professors were all required to set their own fees and collect their own money.

At this point in the discussion, everyone should quickly go and read Nick Rowe’s Confessions of a Central Planner, which is by far the best thing ever written in Canada on university management.  There’s lots of good stuff in that piece, but pay particular attention to one specific point Rowe makes: universities, for the most part, get paid based on how many students they teach.  Yet within most institutions, there is a Hobbesian war of all-against-all to get other people to teach students.  This is because historically, in most institutions, the link between the number of students taught and the funding one receives is loose at best, non-existent at worst.

Some people – mainly those who literally have no clue about how universities are actually financed – abhor the idea of money following students within the institution.  Often, they (and “they” are almost always profs in Arts) come up with scare stories about how money will all go to Science, Engineering, and Business.  And while it’s certainly true that professional schools tend to be money-spinners, at most institutions the departments that do the most teaching – and hence, do the work to bring in money from tuition and operating grants – are frequently to be found in Arts (typically, English is one of them).  Science and Engineering, despite being thought of as “big money” disciplines, tend to net out pretty even because they are also “big cost” disciplines.

The importance of RCB is mainly that it aligns incentives within institutions.  When units are responsible for generating their income and covering their own costs, they tend to use fewer resources, and focus more on generating income.  That’s good not just for bottom-line reasons, but also because it fundamentally changes an institution’s culture – from one where the (much-derided) central administration is a government to be lobbied for money, to one where everyone is involved in the search for revenue and efficiencies.

RCB is not quite as simple as it sounds – for it to work, each faculty needs some kind of staff able to do sophisticated budgeting and course development, and that won’t work at smaller institutions.  There still needs to be central oversight to ensure departments don’t go hogwild hiring tenure-track staff on the basis of short-term profits, or start gaming the system of pre-requisites and required courses in order to screw cognate disciplines.  And there’s still a role for central admin to play in redistributing some money to disciplines that could never make it on their own (mostly Fine Arts).

It’s not a panacea, of course, and there are ways it can be misused.  But on the whole, RCB is proving to be an important tool for Canadian universities to deal with their shift to being more tuition-reliant.

October 27

The Way Forward on Collective Bargaining

So, last week (here, here, and here) I noted that in most parts of the country, total compensation levels have been running more or less in line with changes to total operating grants.  But this is not a reason to become complacent about university finances and future collective bargaining agreements, for two reasons.

First, what I’ve been showing is that salary mass has been increasing in line with operating income.  But salary mass and salaries are two different things.  If I give very high salary increases, I can keep salary mass down by reducing total staff complement.  That is very clearly starting to happen at some universities, and it’s not necessarily positive.  So there’s that.

Second, all the projections I’ve made have assumed that growth in tuition revenue is going to continue at present rates.  But there are some good reasons to suspect that this won’t be the case.  On one hand, domestic student numbers are already falling in Ontario and the Maritimes, due to demographics.  But more importantly, there’s simply no guarantee we’ll continue to increase tuition revenues from international students the way we have for the last seven or eight years.  And yet, every time another campus signs a big-money salary deal with staff, this is implicitly what the system is banking on.

What most people on Canadian campuses haven’t yet realized is the extent to which the 4.5% annual real increases in total operating budgets have been funded by international students (actually, a lot people don’t even believe that operating budgets have been increasing, but that’s another story).  And to keep those increases going into the future requires that institutions not only to keep the students they have, but also that they maintain a constant rate of growth.

So here’s the deal.  With institutional income increasingly coming from volatile market-based sources, sensitive to changes in demand, and quite possibly headed in the wrong direction, we are ill-served by a collective bargaining culture based on keeping-up with what profs at (insert comparator institution here) got 12 months ago.  That way lies an inflationary spiral.  What really matters is how total operating income is going to grow, and how to ensure salary mass increases don’t crowd out other important educational expenditures.

There is a simple way to do this, and, as I suggested back here, it involves linking pay to institutional income.  Institutions need to start saying publicly, at the outset of negotiations, what their likely income increases are going to be over the next 3-4 years, and make it clear that no settlement will be signed in which salary mass increases are more than this.  If an institution’s total net income is expected to increase by 10%, make it clear that 10% is the most that can be offered to staff.  Within that 10%, many things can be negotiated, of course.  But the bottom line has to link pay to income.

What if income increases more than 10%?  Staff should get their share of any incremental increase, of course.  That way, everyone has an incentive to see total revenues increase – which currently means giving everyone an incentive to be more foreign-student-minded.

Unions might not like this.  And that’s their right.  But then it would also be their responsibility to explain what universities should be cutting if growing paycheques can’t keep up with faltering revenue – publicly, and before the start of any contract negotiations.

October 24

Scenario Planning Outside Ontario and Quebec

After a one day hiatus, we’re back to the topic of scenario planning.  You’ll recall that on Wednesday, I showed some pretty pessimistic projections for what could happen to university financing in Quebec and Ontario.  Today, I have some better news for people in seven of the eight other provinces: your futures aren’t nearly so disastrous.

When scenario-planning at the provincial level, four things matter:

1)      The forecast for nominal GDP.  Over the long-run, government budgets tend to remain pretty stable with respect to the size of the economy.  And within the budget, the share to any given field of expenditure – with the signal exception of health – stays pretty constant, too.  So, a rough rule of thumb for what’s going to happen to government income is: it’s going to stay in-line with projected nominal GDP growth.  For this reason, it’s much better to be a university in a province like Alberta, where average nominal GDP growth over the period 2014-2016 is expected to be about 5.5%, than it is to be Memorial in Newfoundland, where the projected figure is just 2%.  In most provinces, though, the outlook is between 3 and 4%.

2)      Deficits. The only reason growth might not be equal to nominal GDP growth is if there’s a deficit to get rid of.  Here, there’s good news: BC, Alberta, Saskatchewan, and Newfoundland are essentially deficit-free.  Universities in other provinces are going to find the going somewhat tougher.

3)      The percentage of total income coming from fees.  In all provinces, nominal increases in fee income is outstripping increases in GDP; in other words: fees are becoming more important everywhere.  Obviously, this is better news for provinces that are already relatively fee-dependent than for those that are not; a 5% increase in fee income means a lot more in Nova Scotia (where fees make up almost half of all income) than in Newfoundland (where they make up about 15% of income).  In this sense, the Maritime provinces and BC are in better shape than the rest of the country.

4)      Whether salary mass is rising faster than total income.  If so, you’re in deep trouble.  It’s not true in most provinces; but it’s clearly been the case both in Alberta and Newfoundland over the past few years.

If we simply multiply out expected increases in nominal GDP, and assume that current trends for tuition revenue growth remain stable, we get the following projections for income:

Figure 1: Projected Real Annual Operating Income Increases, Based on Stable Increases in Tuition Revenue and Government Revenue Increases Based on Nominal GDP

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(*indicates a province with a significant budget deficit, meaning institutional income will likely be lower than indicated)

Alberta looks set for a good few years, with real income increases of 4.5% or more, while Saskatchewan and BC look set for annual increases of 3%, or so.  Manitoba and the Maritimes are, in theory, set for increases of 2-3%, but given that all four provinces are carrying deficits the strong likelihood is that their governments will not increase their budgets at the same pace as nominal GDP, and so actual results will be somewhat smaller.  Newfoundland, where projected economic growth is shaky, and the university has little in the way of tuition income to fall back on, looks in deep trouble.

Figure 2 shows what happens if current rates of salary growth are subtracted from growth rates in income.  Provinces with positive numbers can – assuming their income numbers hold up – afford current rates of salary growth, while provinces with negative numbers cannot.  Nova Scotia and New Brunswick appear to have the most sustainable numbers, but recall that both their governments have deficits to eliminate, so in fact their position is likely not nearly as good as this graph makes it seem.  Prince Edward Island and Manitoba are headed for trouble, and Newfoundland’s prospects resemble the Titanic.

Figure 2: Difference Between Annual Projected Percentage Rate of Operating Budget Growth and Current Annual Percentage Rates of Salary Mass Growth

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(*indicates a province with a significant budget deficit, meaning institutional income will likely be lower than indicated)

To sum up:

i)        Generally it’s better to be in the west than the east

ii)       Memorial University in Newfoundland is in for one heck of a shock pretty soon.

iii)     Most provinces appear to have relatively stable finances if you assume continued growth in tuition revenue, which implies continued international student numbers.  It’s not at all clear how stable an assumption that is.

We’ll wrap-up this topic on Monday, so stay tuned.

October 23

Where the Questions Are

I had planned to continue on today with my series about operating budgets by taking a look at some scenarios for Central Canada, but I’ve been on the east coast for work the past couple days, and so that post will have to wait.  We’ll get back to it shortly, I promise.  But for now, let me turn to something I’ve been thinking about lately.

One of the maddening things about many discussions that concern higher education and business is the crudeness of many popular views on their relationship.  Mostly, we hear about how business’ role is to “contribute” to higher education, either via taxes, or philanthropy, or both (depending on where you are on the political spectrum).  Often times, the role of business is to hire “our” graduates (and if that’s not happening then let the agonized introspection begin).

And while those things are all true, what these analyses actually miss is the true role of business, particularly with respect to science: it’s a huge, incomparable reservoir of questions to be answered, and problems to be solved.  Of course, people get this at the level of applied research – by definition, when companies engage with higher education on applied research, it’s to solve specific problems – but they have trouble understanding when it comes to “pure” research.  Partly, that’s due to rhetorical confusion – the wording of “pure” research (a rhetorical device of Vannevar Bush designed to keep money flowing to universities after World War II) implies that interaction between scientists and pretty much anyone else will “contaminate” research.

But a quick history of 20th century science will show you that this is nonsense.  Much of Einstein’s early work was hugely influenced by being immersed in commercial technology at the Swiss patent office.  Quantum physics was an accidental discovery made by German scientists who were trying to design more accurate instruments to measure very small weights.  The Manhattan Project wasn’t about meeting commercial needs, but as research goes, it’s about as applied as it gets.  Etc., etc.

The point here is that there are parts of commercial science that are up banging against the frontiers of the unknown just as much as university science is: just think of what was discovered at Bell Labs, or what Craig Ventner has accomplished.  It’s where the rubber hits the road: where the most advanced academic science gets put into practice and tested in real-world conditions.  Under commercial pressure, commercial science looks for every little advantage when learning how to cure disease, design better buildings, and develop new technology.

Even Vannevar Bush didn’t believe “pure” research happened in a vacuum.  Indeed, the justification for “pure” research is always that someone, somewhere, will find an application for it.  If you don’t have an inkling of where your “pure” research findings might actually be applied someday, you probably aren’t conducting your “pure” research in a way that’s very effective, because you’re not asking the right questions.

And this is the real reason universities need to engage with industry: it’s where the best questions are.  And you’re not going to get top-notch research without top-notch questions.

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