Tip and Ring: A Parable of College Tuition

The latest economic parable explaining why tuition at American colleges and universities has risen twice as fast as health care costs is aimed at supporting an insupportable value proposition: a university education is cheap at twice the price.  In my last post I talked about the danger to higher education in “clinging to myths”, as MIT’s John Curry put it.  Justifying the high cost of a college education rests on one of those myths.

Here is the basis of the economic argument: since college costs are driven by labor intensive processes that require high degrees of skill and are resistant to technological efficiencies, we should look to the value received in other specialized service markets like health care and banking where quality demands 1-1 contact with a highly trained service provider. The conclusion is that higher ed prices have fared no worse than prices in those other markets. Some of the comments to my last post also repeated this argument.

The problem with this line of thought is that virtually none of the assumptions underlying it are true.  Never mind that wholesale “mission creep” has systematically siphoned off value that should be delivered to students in the classroom in favor of dozens of other priorities. The basic underpinnings of the things-aren’t-so-bad argument are simply fabricated.

Running a university is like running a business.  There are denyers who dispute that claim, but the fact of the matter is that in higher education income has to balance expenses.  If expenses rise, then a university president has to search for new sources of income.  State subsidies are drying up. Endowment income has been shrinking. Research income does not help, and licensing income is, well, let’s just say it’s an unlikely source. The only source of new income is tuition, and the parable concludes by saying,  “Labor costs are high, so let’s get students to subsidize the increase.”

There are not that many different ways to bring costs down in any business: (1) you can deskill your workforce, (2) you can find a more efficient physical plant, or (3) you can use materials better.  There is no reason that a higher quality university education cannot be delivered to more people by applying one or more of these principles.

Let’s take on the we-must-use-high-cost-labor assumption. Even if you are not a believer in online education, only a stunningly short-sighted point of view  fails to recognize that ed tech is on a different innovation curve than classroom instruction. Compare the improvement in the educational blogging experience over the last six months with the rate of change in the classroom, where it can be argued that the last real technological innovation–one that became ubiquitous because of its obvious value–was the introduction of the chalk board in 1801.

I understand the thesis: university teaching cannot be deskilled because it is by definition undeskillable.  Higher education is artisinal by its very nature.  It has to be delivered by professors to individual students–or, at least, to small groups of individuals–in person. I agree with that:  given the premise of an artisinal workforce, deskilling makes little sense.  If we do nothing at all to change what and how we teach then what we have today is probably pretty close to the best that we can expect from the system.  But I reject the premise out of hand. Which brings me to a very different way of looking at the economics of higher education: the parable of  tip and ring.

Tip and ring is the technology that telephone operators used to manually switch telephone connections a hundred years ago. The tip and the ring of the plugs that operators used kept the twisted pair of copper wires in a telephone cable separated so that they could be inserted into the large patch panels of a central exchange switch.

Early studies of telephone operator efficiency by Western Electric indicated that a skilled worker at peak performance could switch up to 250 calls at one time. Everyone did the math.  Given projected population growth and even the most conservative estimates for network growth, the current method of switching was going to be very expensive.  Underlying labor costs would limit the extent to which Americans would have direct access to telephone communications. An investment banker in 1887, summarized the various Bell System technical memos on the subject very succinctly:

The possibilities of a private home telephone system throughout the country is out of the question. Almost the entire working population of the United States would be needed to switch cable.

Network engineers were aware of the current economic curve and a few brave souls piped up: “Well, what if we do things differently? What if we replace the human telephone operators with automated workings? Wouldn’t we be able to multiply the number of switching operations per minute by many fold?”  By 1918, rumors of the promise of deskilling in voice telephony reached the office of Theodore N. Vail, president of American Telephone & Telegraph:

Automated working is not adapted to our needs, any more than radiography will will ever supplant telegraphy by wires.

Human operators were eventually helped out by some technology, but it wasn’t until the first crossbar switch was installed in Brooklyn, New York, in 1938 that automation began in earnest.  It took a hundred years for the U.S. telephone systems to reach 700 million installed lines. In the next ten years, the number of lines doubled, while technology put voice call quality on its current growth curve. By 1986, fiber optic technology enabled Sprint to revolutionize the long distance telephone business with its “So clear you can hear a pin drop” marketing campaign. None of this would have happened if Theodore Vail had  his way and the telephone business had remained dependent on a highly skilled manual workforce to switch voice calls.

So, yes: if higher education remains dependent on the tip and ring process of using an unnecessarily labor intensive system, costs will continue to rise. There are many–perhaps a majority–in higher ed circles who would repeat Vail’s dictum: “Automated working is not adapted to our needs.” To be more precise, they say, “Higher Education remains essentially an artisinal industry.” There are others, however, who believe that fundamental change will not only bring costs down, it will bring the 1986 promise of pin drop quality to the 21st century university. And don’t get me started about how wrong Vail was about mobile telephony.