Schansberg: ‘Varsity Blue’ Scandal

April 12, 2019

by Eric Schansberg, Ph.D.

The university admissions scandal “Operation Varsity Blues” is interesting on many levels: rich people working the system; corruption and bribery in institutions of higher learning; elite, liberal universities sullied by scandal and greed. But as an economist, the episode brings other comparisons to mind.

First, consider how the scandal resembles both “legacy admissions” and “affirmative action” — two other strange aspects of university admissions. In all of these cases, students are able to enter college based on something other than their own merits. In the case of legacy admissions, universities discriminate against the children of non-alums to favor the children of alums. The parallel to the current scandal is quite close, since alums usually contribute money to a university and receive unequal access.

Affirmative action is a policy response to try to remedy past wrongs or address uneven outcomes by gender or race. For example, some universities require higher ACT scores for Asian-Americans than Caucasians — and higher scores for Caucasians than African-Americans and Hispanic students — to strive for the “ideal” proportion of students in each race.

One of the ironies of these arrangements is that the favored students are under-qualified — and so, they are less likely to be successful. I heard commentators wondering why the parents in the Varsity Blue scandal were so passionate to send their children to a school where their success was less likely. I wonder if the commentators would have the same criticism about affirmative action.

There are many ethical problems with affirmative action, but it has practical problems as well. Again, the students are less likely to succeed in college — or if they do, they’re more likely to end up in a “softer” major. And the discriminatory approach inevitably encourages people to wonder whether the students earned it on their own merits or not.

One explanation for the Varsity Blue scandal is that these parents believe that having a college degree is far more important than having a college education. And maybe they’re correct. Labor economists note that education serves two primary purposes. It builds “human capital” — skills for the workplace. And it serves as a signal that the holder will be more productive than the average person without the credential.

The “human capital” function of college is more famous — and the more pleasing outcome. You go to college to gain a level of knowledge in a particular field plus basic literacy in many fields. You become better at writing and speaking, critical and creative thinking, time management and working in groups. You learn how to learn — even in areas outside your comfort zones.

But the signaling function of education is not trivial. It’s important for individuals to be able to signal their quality in labor markets. And it’s important for businesses to have low-cost ways to screen job candidates. Imagine how difficult it would be to discern the quality of candidates for white-collar jobs without the existence of college degrees.

Bryan Caplan has a useful thought experiment on the human capital and signaling functions of education. Would you prefer a diploma without doing anything or would you prefer the knowledge that comes with a degree without getting a diploma? The answer depends on your goals and the degree you’re pursuing. But it’s safe to say that the parents in the Varsity Blue scandal put more value on the prestige of the signal than what their children would learn in the classroom.

What does all of this say about the future of higher education? First, society should worry that problems with family structure and stability — and the subsequent struggles for public high schools — will continue to result in more and more remediation and reduced standards in college. This could reduce both the human capital and signaling of a college degree.

Second, colleges should worry that the internal temptations of grade inflation will erode the signal and human capital value of a degree. Third, with a push for on-line education, we should worry about its quality — and its impact on education as a signal and a skill-booster. And finally, with all of these concerns — along with more wariness about racking up debt to pay for college — universities should worry about their long-term survival.

Eric Schansberg, Ph.D., an adjunct scholar of the Indiana Policy Review Foundation, is professor of economics at Indiana University Southeast.


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