Should 'Abundance' Come for Higher Education?
Center-left journalists Ezra Klein and Derek Thompson have published a provocative new book—Abundance—which argues that overregulation has hamstrung progressive priorities. Though the government has poured trillions into liberals’ favored projects, much of that investment has come to naught. Housing, green energy, high-speed rail, and other priorities have fallen victim to red tape.
Klein and Thompson should add higher education to their thesis. Overregulation has made it hard to start new colleges and expand high-value programs of study—and the consequences for students are fewer opportunities and rising prices.
Today’s colleges are dinosaurs. Almost all traditional college students today attend an institution created at least half a century ago; new schools are rare. Between 1990 and 2023, the number of students enrolled in nonprofit, degree-granting colleges increased by 32%. However, the number of institutions serving those students barely budged.
“Giving people a subsidy for a good whose supply is choked is like building a ladder to try to reach an elevator that is racing ever upward,” write Klein and Thompson. If supply does not grow to meet rising demand, prices must increase to ration the limited supply available. This story fits the trends we’ve seen in higher education: as supply has stagnated, tuition has soared.
That’s not for lack of public investment. Federal and state governments have poured billions into financial aid. In the 2019-20 academic year, the average college student received $5,300 in annual financial aid from sources outside their institution, such as the federal government’s Pell Grant. That’s a threefold increase in real terms since 1989-90.
Yet colleges have increased tuition to capture this rise in financial aid, and then some. The average student in 2019-20 paid $4,500 more in annual tuition (adjusted for inflation) than the average student in 1989-90—after taking financial aid into account.
Free markets should respond to rising prices with market entry. This has occurred somewhat among for-profit and nondegree-granting schools, which generally operate under a different regulatory regime than traditional colleges. But among institutions that people think of as representing the typical college experience—public and private nonprofit colleges that grant degrees—market entry has been limited.
Aspiring new colleges must jump through many hoops before they can enroll students. Colleges need permission from the state where they primarily operate. These states typically require new colleges to become accredited, even if they have no intention of seeking taxpayer funding. Accreditation agencies impose stringent requirements and hundreds of thousands in costs before giving their stamps of approval. Moreover, accreditation commissions are typically constituted by representatives of existing colleges—meaning new schools must effectively ask their competition for permission to exist.
Consider the example of College Unbound, a startup nonprofit college in Rhode Island that serves adult, working learners with a low-cost model. The school took five years to receive initial authorization from Rhode Island and ten years to earn initial accreditation. In part, this was due to pushback from existing institutions in Rhode Island, which have a say in the state’s approval processes. College Unbound faced complaints that it departed from the “traditional” college model. But departing from current practices is how innovation happens.
It’s not just new institutions. Red tape may also prevent colleges from creating new programs with higher labor market value since regulators must approve new programs. Economist Michel Grosz has found that when labor market demand for a certain occupation increases, prospective college students respond by pursuing training in the relevant fields at higher rates. But when this happens, colleges don’t expand capacity by adding course sections or hiring new professors.
The “Abundance” movement ought to consider how to make higher education regulation friendlier to expanding supply. At the state level, I have argued that regulators should focus on key consumer protections, rather than prescribing how colleges should operate. Regulators should make it simpler to start new schools and programs, but ensure students are protected should those schools fail.
The U.S. Education Department should also consider approving new accreditors, as my American Enterprise Institute colleague Beth Akers proposes. “Accreditation has evolved to be a mechanism for maintaining the status quo,” she writes. But “introducing new recognized accreditors into the marketplace will push existing accreditors to examine their own standards to ensure that what they demand of institutions is really what is good for students.” While new accreditors should maintain high standards for student outcomes, they shouldn’t throw up unnecessary barriers to starting new institutions.
But the key to unlocking Abundance in higher education is a pro-innovation mindset. Policymakers should recognize that regulation may carry costs exceeding its benefits, and minimizing all risks is not always worth throttling the expansion of higher education. “Abundance reorients politics around a fresh provocation: Can we solve our problems with supply?” Klein and Thompson write. It’s time for higher education regulators to start asking themselves that question.
