10 April 2018

How markets can redeem the university

By Rod Hewlett

Colleges and universities are increasingly relying on adult learners, students from corporate partnerships, online learners, and first-generation higher education participants to fill their enrolment needs. Yet, much of the academic fare is still traditional — or structured for a novice scholar. A recent Wall Street Journal article, “More Companies Teach Workers What Colleges Don’t” points out that organisations are filling the gaps where higher education may be missing the mark in regard to what workers need to know, do, and how to behave professionally.

Basic knowledge and skills may be developed in formal education. Yet, the full stock of a human’s capacity is developed through daily work, practice, reflection, and refinement. Strong and full human capital development requires participation in free markets. There is no substitute. Markets are the proving ground for knowledge application, skills, professional behaviours, and even values that shape an individual’s human capital. The union of individuals pulling education as needed (demanded) while participating in free markets is quickly becoming the new imperative. Many students cannot afford a four-year traditional experience hoping to net a professional role. Society needs productive workers, and businesses need skilled personnel that are “work ready.”

Organisations are filling the gaps where higher education may be missing the mark in regard to what workers need to know.

The National Research Council, in a comprehensive meta-analysis, categorised the key 21st Century skills necessary for personal and organisational success in industry, STEM fields, and education. It should not come as a surprise that the competencies for success in the 21st century include:

  • Cognitive competencies such as critical thinking, problem-solving, decision making, communication, active listening, information literacy, creativity, and innovation.
  • Intra-personal competencies such as intellectual openness, work ethic/conscientiousness, positive self-evaluation and regulation.
  • Interpersonal competencies such as teamwork, collaboration, and leadership.

Formal education is great at fostering the building blocks (the what) of human capital and even creating exceptional scholars. However, markets build, exercise, and refine these competencies through market-based activities (the how and why of competence). Humans take unique paths for their growth, development, and ultimately performance. Free choice, or free will, allows for the full development of these unique abilities, achievements, motivations, aspirations, choices, and consequences.

Where can these skills, abilities, talents, and behaviours be fully developed? Markets! In simple terms, markets allow for interchange and competition. Market participants receive unmistakable signals of success and failure such as sales, losses, profits, promotions, and terminations. Does this imply that higher education and degrees have no place in human capital development? No, just the opposite. Colleges and universities are important in building human capital and degrees can signal obtained abilities. But institutions of higher learning should consider change and commit to an evolving partnership role in human capital development. Given limited budgets, resources, and enrolments — higher education institutions partnering with market participants is not just efficacious — it is essential.

Markets allow each of us to practise freedom and hone our life-long journey. Education allows for introduction of ideas that shape our journey. Markets enforce accountability — the best ideas and products win. Failure is a signal to try something else, to do it differently. Failure is a market signal to change. Coping with failure and learning to embrace it, learn from it, and become successful from failure is itself a learned experience. Markets allow for practice on how to avoid failure and attain success. Failure is why we have bankruptcy laws for businesses and why many of our successful organisations today are like the Phoenix that rises from the ashes of bankruptcy and temporary failure.

Failure is a signal to try something else, do it differently. Failure is a market signal to change.

Markets allow us to own property, create, dream, and derive value — or a living — from our intellectual and physical assets. Well-honed markets shape economic and legal institutions that protect peoples’ property and ideas. Markets hone free people who create substantial societies where quality of life is a key characteristic. The ability to make choices and win or lose from these choices are market-driven devices.

Markets allow for discovery, knowledge acquisition and refinement, and innovation. The action of markets where people make value-based choices allows for the refinement of intrinsic values that lead to extrinsic rewards. Most important, markets are accountable — we must serve others’ needs through goods and services, and stand behind these goods and services, or failure shall ensue. Free markets lead to responsible and accountable lives where consequences and rewards are made obvious.

Liberty and private property grant rights — important ones. The right to possess, sell, improve, enhance, dispose, and create. People care about what they own. Discovery and knowledge mediated through markets provide important signals — extrinsic markers — such as wages, returns, profits, and sales that help shape future knowledge and intellectual capital. Without markets, research and development would flounder without direction and needed capital to foster productive invention and creation. Central planning sounds attractive, but how can a few individuals plan for the many? Markets allow for individuals to participate in their purchases and “vote” for market-driven products and services that derive planning and production direction from people’s unique needs.

To turn knowledge into productive action, it requires practice and application. Markets allow for that practice — learning, decision-making, judgment development, critical evaluation, and even thrift are driven by competition to serve others and meet their needs. People must create, innovate, and produce to craft a living from their value creation activities. These activities foster responsible behaviour and avoid the moral hazard of government being responsible for us. We are the agents in our lives, not others. The more one contributes, the more one gets. Our gifts are different and allow for diversity of contributions.

Efficient, transparent, and effective open markets allow for responsible actions. Thoughtless and irresponsible actions have negative consequences. Success is rewarded, and failure is a cue to change. People decide on what is important and open markets are responsive and accountable to people.

Capital is created, honed, and grown in free markets. The growth of intellectual, human, physical, and financial capital is regulated and shaped by markets. Competition, markets, and growth are intertwined with our existence. Why else would humans voluntarily organise our lives through markets?

How can higher education leaders rethink institutional participation in human capital through markets? Oddly enough, the answers can be discerned from published works separated by over 150 years. In the middle of the 19th century, Cardinal Newman argued that the purpose of a university should be a liberal rather than a professional education. Newman argued for the university to help students become citizens with broad civic and social perspectives, endowed with habits of thought drawn from essential truths found in philosophy, literature, and science. It would be entirely accurate to suggest that Newman believed the university had a noble, unique, and high calling in society.

The self-doubt about higher education’s efficacy in crafting critical thinkers became abundantly obvious to many during the last few decades.

Ah, but that nagging draw of professionalism plaguing universities from their founding by the guild masters that formed our initial universities — as we would know them today —over a millennium ago still haunt us. Medicine, law, engineering, business, education as professions needed many of the attributes found in a higher education degree yet rounded-out by the professions and markets. An uneasy alliance between universities as Newman saw them and the professional and market needs of society continued right into the 21st century.

The self-doubt about higher education’s efficacy in crafting critical thinkers as well as professional preparation became abundantly obvious to many during the last few decades. Citizens, business leaders, politicians, and yes, even graduates, started to question the mountain of debt they took on to earn a degree versus the return on their investment. These doubts and questions were crystalised by two scholars. Richard Arum and Josipa Roksa analysed outcomes of a university education and found them inconsistent and, in many cases, graduates failed to achieve stated university or programme goals or outcomes. Goals that Newman articulated 150 years earlier — such as real improvements in critical thinking. Ultimately, critical thinking is problem-solving, judging, and deciding — the cornerstone of Newman’s stated idea of a university.

Is there a better answer? Well yes, but that ultimately is a market choice. Universities and colleges have a few options.

  1. Continue to pursue Newman’s ideas of a university.
  2. Consider using the market as an integration device (apprenticeships, expanded internships, and partnerships) with formal education and finding a balancing act with private organisations.
  3. Fully embrace the emerging notion that formal education is just one part of an individual’s human capital and radically rethink how degrees are attained, earned, and integrated with the experiential education found in market participation.

It makes little to no sense in America for the vast number of universities and colleges to attempt to mimic Harvard, Yale, University of Michigan, University of Chicago, and the list of vaulted research universities. Why not experiment with what a degree means and foster radical experimentation with market grounding — a shared learning experience? Well, the main blockages today include perceived reputation, homogenised rankings of universities and colleges against traditional measures of excellence, accrediting bodies, and even the US Department of Education itself that seeks homogeneity of effort through prescriptive regulations.

Why not let the market itself define success? Markets and public research partnerships have served America well in medicine, law, engineering, applied science, and mathematics. New solutions are on the horizon. Let us seize the challenge and expand the idea of a university and a degree through market-based experimentation and rigorous measurement of results. Let student-clients decide what they want in an education. Let hiring organisations participate and define success. Let graduates inform and shape the experiment. In essence, free higher education to achieve and compete in the market.

This article was originally published on FEE.org. Read the original article.

Rod Hewlett is co-founder and key researcher at Kochab Human Capital, LLC and a course instructor for graduate economics at Western Governors University.