Social Mood Conference  |  Socionomics Foundation
By Alan Hall, originally published in the March 2012 Socionomist

Our February 2011 education study forecast “a massive shift in society’s attitudes toward education.” Our study said this shift would reverse a century-long, upward trend in the popularity and cost of higher education (click here to read it).

The bursting of such an enormous bubble takes years to accomplish. Nonetheless, significant change is already under way. In this update, we report on the status of seven developments in the education industry. Five are on track with our forecasts, one is evolving, and we have to admit that the emergence of the last one surprised even us.

1. The “Creative Destruction” of the Industry Has Begun

What We Said
Traditional educational institutions may eventually lose control of the manufacture and distribution of education much as the music and publishing industries lost their grip on music and text. Bear markets topple dominant players and open the field to nimbler entrepreneurs, who will develop alternatives to institutional education.1

What Has Happened Since
Seven months later, in an October 2011 article titled “The University of Wherever,” The New York Times practically quoted our study:

Two recent events at Stanford University suggest that the day is growing nearer when quality higher education confronts the technological disruptions that have already upended the music and book industries….2

As Pete Kendall reported in the October 1995 issue of The Elliott Wave Theorist, intense technological advancement is common to advances leading to major peaks in the economy. Such breakthroughs tend to lower the costs of production and consumption of certain goods and services and enable entrepreneurs to capture business from old, less nimble providers. Entire industries must adapt to survive; otherwise, they die. Economist Joseph Schumpeter called this process “creative destruction.”

Today’s technological breakthrough is the Internet, of course, which the July 1998 Theorist called “a massive engine for falling prices in countless businesses and professions.” Education is no exception. On March 4, 2012, The New York Times took note of the trend:

Welcome to the brave new world of Massive Open Online Courses — known as MOOCs — a tool for democratizing higher education. … in the past few months hundreds of thousands of motivated students around the world who lack access to elite universities have been embracing them … without paying tuition or collecting a college degree. And in what some see as a threat to traditional institutions, several of these courses now come with an informal credential….3

For example, Stanford professor Sebastian Thrun offers remote students the same lectures, assignments and exams that on-campus students pay $50,000 a year for. But the online courses are free. Online students get a “statement of accomplishment,” though not Stanford credit, for passing the classes. “If we can solve [quality-control problems such as cheating and accreditation], I think it will disrupt all of higher education,” Thrun says.

Bill Keller of The New York Times agrees: “Disrupt is right … [Free, online education] would be an earthquake for the majority of colleges that depend on tuition income … . Many could go the way of local newspapers.”2 Thrun goes on to say,

I’m not at all against the on-campus experience … . I love it. … But it’s also insanely uneconomical. … Literally, we can probably get the same quality of education I teach in class for about 1 to 2 percent of the cost.2

In December 2011, the Massachusetts Institute of Technology expanded its free, online M.I.T.x OpenCourseWare program to include nearly 2100 online courses. The university says more than 100 million people have used the program. Like Stanford, MIT also offers credentials for those who complete courses.4

Diploma-granting institutions are skeptical. Stanford’s provost said,

There are issues to consider, from copyright questions to what it might mean for our accreditation if we provide some official credential for these courses, branded as Stanford.

Thrun’s answer to the accreditation problem is to completely bypass the old system via a new business model. The idea is that online education can produce detailed data on precisely what the courses teach, which aspects of the classes the students master, how long they take to complete the courses and so on. This dataset can be far more useful to employers than just grade point average and a diploma from an elite school. Thrun’s new company, Udacity, plans to monetize the model by selling pinpoint leads to job recruiters:

If a recruiter is looking for the hundred best people in some geographic area … that’s something we could provide, for a fee. I think it’s the cusp of a revolution.3

Richard DeMillo, director of the Center for 21st Century Universities at the Georgia Institute of Technology, said, “If I were still in industry and someone came in with an M.I.T.x credential, I’d take it.”4

Thrun’s and MIT’s efforts are part of a trend that now extends even to grade schools. We included in our 2011 study a list of 100 online educational resources. Among those are the thousands of concise lessons in math, biology, chemistry and physics aimed at younger students and given away by Salman Khan, a Harvard MBA, at khanacademy.org. Khan now rides a growing wave of popular acclaim and has secured backing from Google, Bill Gates and others. Khan says his goal is to “change education worldwide.” Here are a few highlights from Khan’s March 11 CBS 60 Minutes interview5:

Khan Academy has created a dashboard so teachers like Courtney Cadwell can monitor each student’s progress … . I can see who’s rushing ahead, who’s lagging behind. I can see if they begin to stagnate. … you can see the number of seconds they spent on each problem. …6

Khan promises he’ll never put a price tag on his instruction.

The new “free-ed” model could soon bring top-quality education to many students, including third-world scholars who otherwise would have no such access. Many of those students, in turn, could become great online teachers.

In the meantime, the progress of education’s creative destruction will ebb and flow with social mood.

2. Education’s Image is Shifting

What We Said
“Society’s feelings about education shift in concert with social mood,” we wrote. We presented evidence that the public becomes critical of colleges and universities during negative trends in the social mood.

What Has Happened Since
Six months later, USA Today reported the results of a new study by the educators’ association Phi Delta Kappa International:

Since 2001, Americans have soured on schools in general: When 1,002 adults were asked June 4-13 to give a letter grade to “public schools in the nation as a whole,” only 17 percent gave them an A or B, down from 23 percent in 2001 and 27 percent in 1985.7

Teachers feel increasingly unfulfilled as well. The president of the American Federation of Teachers said that budget cuts and so-called “teacher bashing” by politicians and media have ravaged morale.8 The annual MetLife Survey of the American Teacher said, “29 percent of teachers say they are likely to leave the teaching profession within the next five years—up from 17 percent in 2009.” The report also said, “43 percent of teachers are pessimistic that the level of student achievement will increase in the next five years.”8

Similarly, a special-education teacher’s recent op-ed in The New York Times, “Confessions of a ‘Bad’ Teacher,” explained that the current teacher-evaluation push has produced an environment of pressure, humiliation, criticism and constant scrutiny: “Teaching was a high-pressure job long before No Child Left Behind, [the 2001 federal program for standards-based, assessment-based education reform] … the more intense the pressure gets, the worse we teach.”9 All in all, according to the MetLife survey, “Teacher job satisfaction is at the lowest it’s been in more than two decades.”10

Another example of society’s shifting attitude toward education is the increasing suspicion that institutions of higher learning pander to the rich. For example, in 1993 as the DJIA pushed to new 10-year highs, the state of Georgia launched its acclaimed and widely emulated HOPE Scholarship Program, which offered Georgia high school students four years of free college tuition provided they maintain a B average.11 In 1995, as the Dow surged another 35+ percent, Georgia abolished HOPE’s income-eligibility cap,12 granting free tuition to even the state’s wealthiest families. Critics noted that parking lots at the state’s flagship school, The University of Georgia, filled with fancy new cars—dubbed “Hopemobiles” by students—that parents bought for their kids with money freed up by the HOPE windfall.11 Today the manic mood is gone. Some now accuse the same program—once held up as the states’ standard in granting college access equally to all citizens—of fostering social inequality.

The recrimination is spreading beyond HOPE to higher education itself. Much of it is coming from within education. In his March 12 op-ed in The New York Times, journalist and Columbia University professor Thomas B. Edsall wrote, “Instead of serving as a springboard to social mobility as it did for the first decades after World War II, college education today is reinforcing class stratification.” Edsall cites a November 2011 report by The Education Trust, which shows that in the past fifteen years, public and private colleges have sharply boosted their “investment in education of students from the top income quintile,” but only modestly for the lowest income quintile.13 He also cites a new book, “How Increasing College Access Is Increasing Inequality, and What to Do about It.” The book warns, “The education system is an increasingly powerful mechanism for the intergenerational reproduction of privilege.”14 Sean Reardon, professor of education and sociology at Stanford, said, “The children of the rich increasingly do better in school, relative to the children of the poor … . This means that social mobility has gotten rarer [and] the ‘American Dream’ is increasingly difficult to attain.”14 Pundits have always complained about the achievement gap, but they seem to be growing more pointed and strident.

Even presidential candidates express the new hostility toward higher education. In late February, Republican candidate Rick Santorum said, “President Obama once said he wants everybody in America to go to college. What a snob.”15 In another speech, Santorum said, “The indoctrination that is going on at the university level is a harm to our country.”16 In March, Mitt Romney told a student to choose a cheaper school and “don’t expect the government to forgive the debt that you take on.”17

If the large-degree negative social mood trend continues as EWI expects, society will increasingly see university spending as wasteful and the system itself as anti-democratic.

3. Academic Performance Is Slipping

U.S. Academic Performance in Wave III Versus Wave V Appears to Mirror the Nation’s Financial and Economic Performance

Lawrence C Stedman of Binghamton University suggests that some measures of academic achievement never fully recovered from their Cycle-wave, bear-market-1970s declines (for details, see our February 2011 study). In fact, Stedman’s figures show that in Cycle wave V (1974-2000), student achievement overall was weak relative to Cycle wave III (1942-1966). According to Stedman, “High school students’ NAEP civics scores, for example, dropped substantially between 1969 and 1976 and have been slipping ever since. Their science scores also fell during the 1970s and have only partly rebounded.20
This parallels the relative economic performance of waves V and III as shown in Chapter 1 of Conquer the Crash. It is also reminiscent of Prechter’s market observation in Elliott Wave Principle, “fifth waves in stocks are always less dynamic than third waves in terms of breadth.”

What We Said
We wrote, “social mood determines educational, business and asset price performance.”

What Has Happened Since
In September 2011, The College Board reported,

Scores on the critical reading portion of the SAT college entrance exam fell three points to their lowest level on record last year, and combined reading and math scores reached their lowest point since 1995.18

In December 2011, The Center on Education Policy, an independent advocate for public education, issued a report showing that half of U.S. schools failed federal standards for student performance.19 For more analysis on declining student performance, see sidebar at right.

4. Student Debt Continues Its March

What We Said
We wrote, “The U.S. government continues to encourage people to borrow for an education. … This is exactly what it did with housing, to a disastrous end.”

What Has Happened Since
The issue of student debt has burst into the nation’s conscience. In October 2011, Ezra Klein of the Washington Post reviewed a number of stories told by the Occupy Wall Street protesters:

College debt shows up in a lot in these stories, actually. It’s more insistently present than housing debt, or even unemployment … . college debt represents a special sort of betrayal. We told you that the way to get ahead in America was to get educated. You did it. And now you find yourself … buried under debt. You were lied to.21

In that same month, USA Today reported that student loans outstanding would exceed $1 trillion in 2011.22 In March 2012, The Wall Street Journal also reported on the surging student debt:

Nonrevolving credit–which includes student loans–was up $20.72 billion, to $1.711 trillion, the biggest dollar increase since November 2001. Federal student credit outstanding … . is up more than four-fold from 2008–a sign high joblessness in the U.S. has prompted many people to go back to school.23

In June 2010, the total amount of U.S. education loans surpassed total U.S. credit card debt for the first time. To put this in perspective: 80 percent of Americans hold credit cards, yet only 15 percent hold the entirety of the student debt. The Federal Reserve Bank of New York (FRBNY) released a report on March 5 showing student loan debt now surpasses total U.S. auto loans, and student loans now have twice the delinquency rate of U.S. credit card debt. Further, nearly 30 percent of the 37 million student borrowers are at least 30 days past due on payments. About 70 percent of the student-loan debtors are over the age of 30, and seventeen percent are older than 50. The large-degree social mood peak has indebted even middle-aged people. The FRBNY concluded:

In sum, student loan debt is not just a concern for the young. Parents and the federal government shoulder a substantial part of the postsecondary education bill.24

In a telling anecdote about just how much debt some students take on, Federal Reserve Chairman Ben Bernanke revealed in his semiannual testimony to Congress that his son, “who is in medical school in New York, is likely to rack up $400,000 of student loan debt in the process of getting his degree.”25

5. The Era of the Academic Scandal, Once Unthinkable, Is Upon Us

What We Said
In February 2011 we wrote, “we may see academic versions of the Madoff scandal.”

What Has Happened Since
Just five months later, the Christian Science Monitor ran the headline, “America’s biggest teacher and principal cheating scandal unfolds in Atlanta.” The Atlanta cribbing proved to be only “the largest of dozens of major cheating scandals unearthed across the country … . an ongoing problem for U.S. education… .”26

The cheating is not confined to high-school grades, however. In August 2011, four states and the Department of Justice filed an $11 billion fraud suit against the Education Management Corporation—the nation’s second-largest for-profit college company—charging that it was ineligible for state and federal financial aid it received from July 2003 through June 2011. “The depth and breadth of the fraud laid out in the complaint are astonishing,” said a former federal prosecutor. The New York Times reported that the lawsuit is one of many filed against the expanding for-profit college industry.27

Similarly, in our June 2011 issue, Ted Solley described the emerging backlash against U.S. law schools (click here to read it). The furor continues to heat up. In October, Congress began inquiries into “‘the confluence of growing enrollments, steadily increasing tuition rates and allegedly sluggish job placement’ at American law schools,” according to USA Today.28 In February of this year, two professors from Atlanta’s Emory University published a 77-page paper, “Law Deans in Jail.” They wrote,

[Law] schools, their deans, U.S. News & World Report and its employees may have committed felonies by publishing false information as part of U.S. News’ ranking of law schools. The possible federal felonies include mail and wire fraud, conspiracy, racketeering, and making false statements. … crimes affecting the lives and careers of thousands of people.29

By March 2012, some fifteen law schools faced class action lawsuits over allegedly deceptive employment data.30

6. Tuition Prices Are Still Going Up—for Now

What We Said:
Our February 2011 issue showed a three-century, rising Elliott wave in tuition prices. The pattern appears to be complete, which means that a major decline is due.

What Has Happened Since:
Several universities cut tuition and fees in 2011.31 But according to USA Today, overall tuition prices rose eight percent at public colleges in 2011. At the same time, 41 states cut their spending on public higher education.32 The result? Students and their families must cough up even more cash. The president of the American Council on Education said, “It has become all too common for state legislatures to dip into the pockets of students and families to balance state budgets.”33

All of which means that the higher education tuition bubble remains, for the moment, un-popped. On March 12, an Atlanta Journal Constitution article, “College Students Majoring in Debt,” reported, for example, that The University of Georgia’s spending “on deans and vice presidents … jumped by more than a third” throughout the recession and 2011.

The article says, “The economy may be in a downturn, but the state’s colleges are on an upswing, and students are paying for much of it.”34 Such complacency on the part of universities is likely to persist until social mood shifts to negative at all degrees of trend.

But change is in the air. In March 2012, tuition hikes sparked protests in California.35 And, according to Elliott Wave International, social mood is nearing a large-degree positive extreme within a larger-degree negative trend. Once this peak is passed, we expect that universities will be in for a real crisis in enrollments, and by extension tuition receipts, shortly thereafter. Once that occurs, look for colleges to dramatically cut costs—as a matter of survival.

7. Here Is One Development We Did Not See Coming: The College Sugar Daddy

Socionomics can anticipate the tendency of the social system and sometimes nail specific predictions. But it cannot foresee every expression of society’s mood. For example, we never contemplated this possibility: “Sugar daddies: The new way to pay off college loans?” That was the headline on an August 2011 story in The Week. The article reported that websites such as “SeekingArrangement.com, SeekingTuition.com, and SugarDaddyMeet.com allow young, mostly female students to post ‘sugar baby’ profiles and hook up with a ‘sugar daddy.’” The founder of SeekingArrangement said he’s seen “a 350 percent jump in verified college-going ‘sugar babies’ since 2007, and he now actively advertises his site as a way to pay off student loans.”36 The Pulitzer Prize winning newspaper The Oregonian reported on March 12 that the respected 20-year editor of its editorial pages died at age 63 of cardiac arrest following a sex act with a 23-year-old college student. The woman told deputies that he had been giving her money for textbooks and other school expenses in exchange for sex.37

If EWI’s outlook for the looming negative mood is correct, the truly radical changes for the educational system still lie ahead. So far, social actions support that outlook.■


CITATIONS

1 Hall, A. (2011, February). Back to the School of Hard Knocks? The Education Industry Faces a Multi-Decade Peak. The Socionomist.

2 Keller, B. (2011, October 2). The university of wherever. The New York Times. Retrieved from http://www.nytimes.com/2011/10/03/opinion/the-university-of-wherever.html?_r=3

3 Lewin, T. (2012, March 4). Instruction for masses knocks down campus walls. The New York Times. Retrieved from http://www.nytimes.com/2012/03/05/education/moocs-large-courses-open-to-all-topple-campus-walls.html?_r=1

4 Lewin, T. (2011, December 19). M.I.T. expands its free online courses. The New York Times. Retrieved from http://www.nytimes.com/2011/12/19/education/mit-expands-free-online-courses-offering-certificates.html?_r=1&src=recg

5 Khan Academy: The future of education? (2012, March 11). 60 Minutes. Retrieved from http://www.cbsnews.com/8301-18560_162-57394905/khan-academy-the-future-of-education/

6 Khan Academy: The future of education? (2012, March 11). 60 Minutes. Retrieved from http://www.cbsnews.com/8301-18560_162-57394905/khan-academy-the-future-of-education/?pageNum=4&tag=contentMain;contentBody

7 Toppo, G. (2011, August 16). Local schools pass parents’ test. USA Today. Retrieved from http://www.usatoday.com/NEWS/usaedition/2011-08-17-PDK-Schools-Poll_ST_U.htm

8 Heitin, L. (2012, March 7). Survey: Teacher job satisfaction hits a low point. Education Week. Retrieved from http://www.edweek.org/tm/articles/2012/03/07/metlife11.html?tkn=WPNFZSHHUsXxBScWf7hLk8xebfZE%2B9GS5NQe&cmp=clp-edweek&utm_source=fb&utm_medium=rss&utm_campaign=mrss

9 Johnson, W. (2012, March 3). Confessions of a ‘bad’ teacher. The New York Times. Retrieved from http://www.nytimes.com/2012/03/04/opinion/sunday/confessions-of-a-bad-teacher.html?_r=1&pagewanted=all

10 MetLife survey of the American teacher. MetLife. Retrieved from http://www.metlife.com/about/corporate-profile/citizenship/metlife-foundation/metlife-survey-of-the-american-teacher.html

11 Severson, K. (2011, January 6). Georgia facing a hard choice on free tuition. The New York Times. Retrieved from http://www.nytimes.com/2011/01/07/us/07hope.html?_r=1&pagewanted=all

12 HOPE program facts and figures. GAcollege411. Retrieved from http://www.gsfc.org/main/ga411info/hope_facts.html

13 Lifting the fog on inequitable financial aid policies. (2011, November). The Education Trust. Retrieved from http://www.edtrust.org/sites/edtrust.org/files/publications/files/Lifting%20the%20Fog%20FINAL.pdf

14 Edsall, T.B. (2012, March 12). The reproduction of privilege. The New York Times. Retrieved from http://campaignstops.blogs.nytimes.com/2012/03/12/the-reproduction-of-privilege/?src=mv&ref=general

15 Crabtree, S. (2012, February 27). Obama rebuts criticism he’s an education ‘snob’. The Washington Times. Retrieved from http://www.washingtontimes.com/news/2012/feb/27/obama-rebuts-criticism-hes-an-education-snob/

16 Kaplan, R. (2012, February 23). Santorum: Obama college plan aimed at ‘indoctrination’. National Journal. Retrieved from http://www.nationaljournal.com/2012-presidential-campaign/santorum-obama-college-plan-aimed-at-indoctrination–20120223

17 Chait, J. (2012, March 8). Mitt: Pay for your own damn college! New York magazine.

18 Pope, J. (2011, September 14). SAT reading scores fall to lowest level on record. Huffington Post. Retrieved from http://www.huffingtonpost.com/2011/09/14/sat-reading-scores-fall-t_0_n_962138.html

19 Report: Half of U.S. schools fail federal standards. (2011, December 15). USA Today. Retrieved from http://www.usatoday.com/news/education/story/2011-12-15/schools-federal-standards/51949126/1

20 Stedman, L.C. The achievement crisis is real: A review of the manufactured crisis.

21 Klein, E. (2011, October 4). Who are the 99 percent? The Washington Post. Retrieved from http://www.washingtonpost.com/blogs/ezra-klein/post/who-are-the-99-percent/2011/08/25/gIQAt87jKL_blog.html#pagebreak

22 Cauchon, D. (2011, October 25). Student loans outstanding will exceed $1 trillion this year. USA Today. Retrieved from http://www.usatoday.com/money/perfi/college/story/2011-10-19/student-loan-debt/50818676/1

23 Sparshott, J., & Jackson-Randall, J. (2012, March 7). Surging student debt pushes up overall consumer credit. The Wall Street Journal. Retrieved from http://blogs.wsj.com/economics/2012/03/07/surging-student-debt-pushed-up-overall-consumer-credit/?mod=google_news_blog

24 Brown, M., Haughwout, A., Lee, D., Mabutas, M., & van der Klaauw, W. (2012, March 5). Grading student loans. Federal Reserve Bank of New York. Retrieved from http://libertystreeteconomics.newyorkfed.org/2012/03/grading-student-loans.html

25 Hilsenrath, J. (2012, February 29). Student loan debt hits home for Bernanke. The Wall Street Journal. Retrieved from http://blogs.wsj.com/economics/2012/02/29/student-loan-debt-hits-home-for-bernanke/

26 Jonsson, P. (2011, July 5). America’s biggest teacher and principal cheating scandal unfolds in Atlanta. Yahoo! News. Retrieved from http://news.yahoo.com/americas-biggest-teacher-principal-cheating-scandal-unfolds-atlanta-213734183.html

27 Lewin, T. (2011, August 8). For-profit college group sued as U.S. lays out wide fraud. The New York Times. Retrieved from http://www.nytimes.com/2011/08/09/education/09forprofit.html?_r=1&src=me&ref=general

28 Marklein, B. (2011, October 25). Law schools pressed to tell the truth on job placement, debt. USA Today. Retrieved from http://www.usatoday.com/news/education/story/2011-10-24/ABA-law-schools-student-debt/50898362/1

29 Cloud, M., & Shepherd, G.B. (2012, February 24). Law deans in jail. Social Science Research Network. Retrieved from http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1990746

30 Zaretsky, S. (2012, February 1). Twelve more law schools slapped with class action lawsuits over employment data. Above the Law. Retrieved from http://abovethelaw.com/2012/02/twelve-more-law-schools-slapped-with-class-action-lawsuits-over-employment-data/

31 Androitis, A. (2011, October 7). Colleges offering tuition discounts. Yahoo! News. Retrieved from http://finance.yahoo.com/news/pf_article_113616.html

32 Reich, R. (2012, March 6). Starving public universities shrinks the middle class. Star Tribune. Retrieved from http://www.startribune.com/opinion/commentaries/141627753.html

33 Marklein, B. (2011, October 26). Tuition and fees rise more than 8% at U.S. public colleges. USA Today. Retrieved from http://www.usatoday.com/news/education/story/2011-10-25/public-college-costs-increase/50919598/1

34 Salzer, J., & Diamond, L. (2012, March 11). College students majoring in debt. The Atlanta Journal-Constitution. Retrieved from http://www.ajc.com/news/georgia-government/college-students-majoring-in-1380067.html

35 Activists camp out at state capitol to protest tuition hikes. (2012, March 5). Los Angeles Times. Retrieved from http://latimesblogs.latimes.com/california-politics/2012/03/california-tuition-protests-occupy.html

36 Sugar daddies: The new way to pay off college loans? (2011, August 2). The Week. Retrieved from http://news.yahoo.com/sugar-daddies-way-pay-off-college-loans-151200599.html;_ylt=ApDiGXyRiI8q89BpkflDey07KbIF

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