Cato Unbound - much to say about academia!

Well, I took a break to pack for my trip up to college, and Cato Unbound has a whole host of new discussion on Capitalism and the future of the internet. I have at least 5 posts I'd like to make, but I think I'll start with one, and see what I have time for before I leave on Friday.

First, on Eric Raymond and David Gelerter's posts back and forth discussing academics' undervaluation in a capitalist society, I will start with an explanation, and then give my view. (All numbers used are purely made up.) Simply put, the value of a person a capitalist society is determined by how much they produce - this is their value to the system. The salary of a person is determined by how much they can convice their employer that they are worth to them. Are academics ineffective at convincing others of their worth? I will assume not. So why, we must ask, are they paid so little? Is the free market failing for some reason, or is there a better explanation?

An actuary may have a value to the economy of, say, $10 million per year, because that is how much what they compute is worth in terms of total gains in efficiency, profit to their company, etc. They only get paid $150,000 becasue there are lots of actuaries around that will do it instead of them, and the cost to replace them is much less than the value they produce. If actuaries wanted more money, they could band together and refuse to work unless their pay was increased. Assuming their union was effective, they might be able to raise their salaries. However, long-term, they might be replaced by computer models that suddenly cost less than hiring an actuary, or they might lead businesses to train others instead of actuaries to do the job.

Now, let's look at academia from the same perspective - They get paid $50,000 a year, on average, and contribute, to venture a guess, $10 Million per year in gained salary by their students per class. (We assume 400 people take a class by each professor each year, each need 10 classes per year, on average, for four years, and let's decide their average salary goes up by $25,000 per year for the 40 years they will work because they have a degree, totaling $1 million. Each professor contributes 10 full degrees worth of classes each year, at $1 million each, leading to the figure used above.) This of course ignores the benefit humanity may receive from the fact that people are more educated, because I'm going to unfairly and pejoratively assume that all education is a load of manure, for the sake of simplicity. Now, why doesn't the professor that contributes $10 Million per year make as much as the actuary?¹ There are a couple possibilities; there may be many more people who are willing to be professors, there may be no money availible for the professors from the university, constraining salaries, or the professors may simply not have enough leverage to persue salaries. (I'll explain that last one.)

Of these possible explanations, the first is clearly true - the competition for tenured positions at universities is fierce, and so demands for more money could be met with the hiring of other professors to replace the current ones. In fact, this already happens when universities hire adjuncts instead of professors - they basically go outside their system to save money. The second explanation is possible - donations are large, but very few people want their money going to operating expenses like salaries. They want buildings named after themselves instead. The third explanation is the most interesting. Why would professors not have leverage to ask for higher salaries? It could be because the political capitol that they have for contributing so much to the school was spent on other things. Professors have; tenure, academic freedom, most of the day to do research, and even grad students to do the stuff they don't enjoy. The benefits package for employees of Universities is princely, including perks that few other professions routinely have.

I think that the question could be put differently, however; do we value the existance of an intellectual class? If in fact the claim is that they are not valued properly by a capitalist society is true, why isn't it? Since valuation is so much based on perception of value rather than actual value, perhaps the question becomes one of image. And this is where I think that it is here that the problem mainly lies - we don't value academia. As a country, we question their values, ridicule their isolation from mainstream America, and dislike their (perceived) anti-religious bias. When viewed through the lens of historic American ambivalence towards intellectualism, we see that the low value placed on academia is unsurprising.


¹⁾Now, of course, if you were paying attention, you'll ask the following question: I made up data to fit an assumption, then started asking why the answer I get was unfair. If I used real data, maybe the question would be obviated. It's a good point. Moving on...