On the Margins

The Girl took a microeconomics class last fall. She mostly hated it, although when pressed, she admitted that two concepts were uncommonly useful: opportunity cost and marginal returns. Opportunity cost refers to options forsaken when a different option is chosen: for instance, the true cost of graduate school includes the wages one could have been earning over all those years. Marginal returns are the impact of additional spending or effort on top of the spending or effort that has already happened. It’s different from an average, in that the average takes account of what was already there. For instance, I typically enjoy the first piece of pizza much more than the fifth. The marginal benefit of the fifth piece is far less than for the first piece.

This week, my own state got a lesson in both.

Governor Murphy is advocating for a “Garden State Guarantee” in which students from families with adjusted gross incomes of $65,000 or less can choose between the first two years at a four-year public college or university for free, or a two-plus-two in which they’d get two years at a community college followed by two years at a four-year college for free. It’s a last-dollar program, so the grants would fill in the gaps left after Pell and other resources have been tapped. (Among other benefits, that way if the Biden administration succeeds in increasing the value of Pell, then the cost to N.J. of this program would decline.) We already have the Community College Opportunity Grant program, which is a last-dollar program for community college attendance for students with family AGIs of $65,000 or below; the Garden State Guarantee would essentially expand the program to include public four-years.

The idea is to open up college to students who otherwise couldn’t afford it, or, just as important, to those who otherwise would think they couldn’t afford it. As a state, New Jersey doesn’t have much oil or cheap land; with the highest population density in the country, cheap land simply isn’t going to happen. If the state is going to compete with other states to lure businesses, it needs to compete on the high end. Educating the citizenry provides the kind of workforce that can benefit all sorts of businesses. The governor is proposing that we put some resources toward the students who need them most, on the theory that over time, a rising tide will lift all boats.

It’s possible to nitpick the proposal, of course. In my perfect world, for instance, it either wouldn’t have an income cap at all or it would have a much higher one. It would also come with some sort of basic stipend for transportation, housing and/or food. I’d build in direct institutional supports (that is, operating budget support) to ensure that colleges could provide the level of services and supports to ensure that students not only enroll but complete. But it’s a great start.

In the very same week, the Bloomberg foundation decided that it would support diversity in higher education by giving $20 million to … Princeton University.

For context, $20 million is almost a quarter of Brookdale’s annual operating budget, and we have more students than Princeton does.

How much difference would that $20 million have made at, say, Mercer County Community College, just a few miles away? I’m guessing the marginal benefit would have been astronomically higher than at Princeton. That lost benefit is a massive opportunity cost.

I don’t have anything against Princeton. It’s a terrific university in a cute town. I’ve been known to spend far too much time and money at Micawber Books. It’s a lovely place. But Princeton is not hurting for resources. It has its own man-made lake for its crew team. (True!) If it wants to dedicate resources to supporting diverse students, it absolutely can. The Wall Street Journal article notes that as part of its commitment to diversity, Princeton has started taking as many as 12 transfer students per year.

Twelve.

After decades of taking none at all.

Hey, if Princeton wants to open its doors to a few Brookdale grads, I’m more than happy to send them. It’s a terrific place. But the marginal impact of another $20 million there, as opposed to at the colleges that already serve diverse students and have for years, just isn’t close.

Kudos to Governor Murphy for recognizing that if you want to make a meaningful difference for large numbers of prospective students, you have to start with the public institutions. And thanks to Bloomberg for providing such an excellent teachable moment for the concept of marginal returns. The Girl might not have loved her class, but she could figure this one out pretty fast.