Archive for October, 2011

The Virtual University is Possible; Are We Ready?

October 31st, 2011 by under The University in the Future, The University Today. No Comments.

A popular Stanford Professor, Sebastian Thrun, is offering an online course, Introduction to Artificial Intelligence, free of charge to about 130,000 students around the world. If students complete the exams, they receive a certificate of accomplishment, not college credit. Thun thinks that the virtual University is the way of the future because the cost of the current University model is so high. The idea is that in a setting with a smaller number of students, teaching assistants could meet virtually with students in smaller groups for discussions of lecture material (New York Times, 10/3/2011).

The idea of star faculty teaching across the country or the world online has been possible since the dawn of the Internet, but except in limited instances it has not happened yet. Maybe no one can agree on who the best instructor for introductory economics would be. Possibly faculty are afraid of becoming unnecessary if a few hundred of the country’s best lecturers teach all the intro courses in the University. What tenured faculty member wants to be relegated to leading discussion sections for a star from another University’s online lectures?

The article mentions some problems with online teaching, for example, it would be easy for an online student to cheat or to have someone else take the course for him. Will students sit at their computers, but tune out during the lectures? If there are hundreds of students, where will the teaching assistants come from? (Thune’s course would need 5200 TAs to have 25 person sections for discussion.) If the virtual model takes hold, we will need fewer faculty and that means fewer graduate students preparing to be faculty members. Would there be enough graduate students to staff discussion sections? Would faculty members be willing to do so just to have a job?

The economics of virtual are orders of magnitude more favorable than the bricks and mortar university. In other domains it appears that consumers have already decided that virtual is better than physical, for example, think of recorded music, newspapers, photography, video distribution, online commerce and book publishing. What does the physical university have to offer? The president of Stanford, John Hennessy, is supporting Thune, but he also argues that there are huge benefits, especially for undergraduate education, from having students together physically to be immersed in a culture of exploration, discovery and hopefully, critical thinking. The author of the Times article describes our University system as “a wonder of the world.” But how long can we afford this wonder?

Is there a way to preserve tradition and at the same time reverse the constantly increasing costs of college? The four-year college of the future has to change if it is to remain economically viable. In an earlier blog I presented ideas on how to restructure the University into four parts, an undergraduate college, a graduate school (for a university), a research division and a franchised athletic operation. Here I want to concentrate on the teaching side that affects the first two units.

Consider a University offering undergraduate and graduate education. It will draw on some national courses, probably of two types, to be offered online with local faculty and graduate students running discussion sections. The first type of course will be the very large lecture that might have hundreds of students; this course like intro Economics, Psychology, Political Science, etc. will feature lectures from the leading teachers in the country. These teachers will earn modest revenues for their university. Local faculty will organize the classes and supplement the online lectures with their own material. In a sense, they will co-teach the course with the remote, star faculty member from another institution.

The second type of course will be specialized like Thune’s lectures on AI; he is the designer of Google’s self-driving car which means he can offer a course that few others could. Having specialized faculty and courses like this will enrich the offerings of any college and expand choice for students.

In an earlier blog I suggest that the nature of the college experience will change. Some, probably a relatively few, will spend four years on a campus getting an undergraduate education. A much larger number will spend various periods of time on the campus, taking the rest of their courses virtually. The technology exists to have much of this online teaching done with synchronous video and audio interaction over the Internet; we are not talking about the University of Phoenix asynchronous online courses. Instead the faculty member and students see all of the others in the class on their screens so that the interactivity of a physical class is captured online.

The technology is just about ready for this kind of model; unfortunately universities in general are not. At some point in the not-too-distant future, cost pressures and student demand will force us to move in this direction. It might make sense to start that movement now to be ready for an environment in which the competition among colleges for students will exceed the competition between their athletic teams.


To Tax or Not to Tax

October 11th, 2011 by under Business and the Economy, The American Aristocracy. No Comments.

To Tax or Not to Tax

While people have probably complained about taxes since someone levied the first tax, the debate seems to be getting more strident every day. I wonder if when Moses came down from the mountain there was an 11th Commandment, lost over time, that said “The Maximum Tax Rate shall be 10%.” When are taxes too high? What is the benchmark?

In the 1950s the U.S. had marginal income tax rates over 90%, though they did not apply to very many people. Today the maximum bracket is 35% and there are substantial numbers of citizens and Congressmen who say that this rate should never be increased.

On the corporate side, companies complain about how a 35% tax burden is higher than competitors face in other countries. Yet in the mid-1950s corporate taxes made up 30% of federal revenues while the number was 6.6% in 2009 (New York Times, 3/14/2011). How does this happen? G.E. is a great example. This same article says that in 2011 G.E. made $14.2 billion in profits of which $5.1 billion came from the United States. And what was its U.S. tax bill? Zero, none, and the company claimed a tax benefit of $3.2 billion.

GE reports a U.S. tax burden of 7.4%, about a third of that reported by the average multinational. GE has a large, very successful tax department and lobbies aggressively for tax breaks. It also keeps a lot of profits offshore and does not pay taxes on them until they come back home. (Companies are now lobbying for a reduced tax to repatriate their profits saying they will create jobs; the last time they received tax relief for foreign profits the money was used primarily for stock buybacks.)

If one has traveled extensively or lived abroad, the fact that in general the United States “works” is very obvious. It is still the easiest place in the world to start a new business; there is both venture capital and a well-developed infrastructure. This infrastructure includes the obvious like transportation, roads, railroads, air and shipping companies. But it also includes a banking and financial system that makes it easy to accept and make payments. And until the financial crisis of 2008, credit was easily available to small businesses and startups. Broadband access to the Internet is not as fast as in some other countries, but it is widely available. We have a strong legal system that provides patent and trade secret protection.

Yes there are regulations that companies must follow, many of which are designed to protect consumers. We want to buy food that we know is safe to eat; we want an air traffic control system that operates without flaws. We want companies to minimize the pollution they create and not poison the environment.

How do we pay for all of these services? While there are some fees such as those on air tickets, I believe that it is mostly through taxes, especially the income tax. Is it not a little disingenuous for companies to arrange to pay no taxes in the U.S.? They benefit greatly from the supportive business climate in this country.

If taxes are so distasteful to corporations, we should follow the lead of the airlines and introduce fees. Maybe what we need is a “participation fee” for being a part of our economy, a percentage of a company’s gross sales in the U.S. with no deductions or exemptions and no way for a firm to get out of paying that fee even if it is losing money. It becomes a cost of participating in and enjoying the benefits that the U.S. provides to business. No one likes taxes and fees, but it is important for the U.S. to keep on working, and that is not going to happen if companies feel they have no obligation to help finance the system that lets them succeed.