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Affluent Christian Investor | December 12, 2018

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Accelerated and Selective Learning

It is not difficult to further illustrate that restructuring post-secondary education would not affect the quality of learning. Consider this: in many years over the last few decades, accounting is among undergrads’ top choices at business schools. Do students specializing in accounting really have to spend four years as “business undergraduates”?

Accounting is a trade that one learns by practicing, rather than by passing multiple-choice exams. Until the 1960s, one could become an accountant (or a lawyer, another trade) by working, rather than studying at university. In fact, it makes little sense for 18-year-old kids to enroll in four-year business programs to start with. What does it mean for them to take courses in such topics as “management,” “strategy,” “organizational behavior,” or “the psychology of organizations”? And such topics are taught by lecturers who, more often than not, have zero experience in ever managing, executing, financing, or marketing anything. Many of these kids have hardly worked, and some would not know how to manage and organize their own rooms even if their allowances depended on it.

Imagine if lecturers in medical schools never operated, but wrote many papers on “Optimizing Procedures in Operation Rooms.” The above pattern holds true for most business undergrad studies: At worst, they can be offered in three years with impunity, but at best they would not exist. Yes, students could learn the vocabularies of finance, accounting, and economics – but these would be complements to some “non-trade” studies.

Thus, it may not be accidental that with the release of the 2007-08 Federal Reserve minutes, it appears that Richard Fisher, the head of the Dallas Federal Reserve and the only Fed board member with wide experience in the various segments of the financial sector, also seems to be the only one who grasped back then what might happen. But he was silenced by the academics and the bureaucrats, who appear to have been absolutely clueless. Then–New York Federal Reserve President Tim Geithner was prominent among the latter group (no surprise for anyone who has read about his interventions during and after the crises in Sheila Blair’s book Bull by the Horns).

How did J.D. Salinger put it in The Catcher in the Rye? “All you have to do is say something nobody understands and they’ll do practically anything you want them to do.” This reads as if Salinger correctly anticipated not only the hormonal angst of bored teenagers, but also the macro-economic rationalizing policies – the jargon disguising self-interest or ignorance, take your pick – of the last few decades, too.

This brings us back to the point about selection and the implications for inequality: “Selection” was once the main idea upon which high schools and universities were based. No matter how good and dedicated teachers might be, if students are mediocre and below, they will stay mediocre and below. You can change class sizes and spend billions of dollars on computers, but neither will change the distribution of talents. Brilliant students will benefit from access to the subsidized technology, and they will do brilliantly even if their teachers are mediocre. And the brilliant ones raise the above-average students’ performance – just like a Wayne Gretzky or a Michael Jordan raises the performance of an average sport team. Having stricter selection, closing down a good fraction of high schools, colleges, and universities, and directing students toward various technical skills with which they may be well-matched, does not imply that such students will end up earning less money, or will not be well-versed in history and arts (if they decide to study such topics during their leisure time).

In fact, the much discussed increasing inequality in the United States and other Western countries might be partly explained by the fact that governments so extensively subsidize high schools and universities. After all, the best and brightest benefit the most from these subsidies. On the other hand, if someone is not thrilled about studying in school, but gets excited tinkering with cars or computers, and wants to open a garage or a small business, the government offers him no subsidy. It’s the bright kid who gets the subsidy when studying math, engineering, biology, or medicine.

The consequences are predictable: Inequality will increase and the distribution of wealth will become more skewed. The talented youngster, using his education, may be compounding the $500,000 educational subsidy in high school and university and turning it within, say, 20 years at just 4 percent compounding interest, into a $1 million addition to his wealth. Meanwhile, from a young age, the grocery store or garage owner paid taxes as either an employee or a small business owner. Add to this the fact that the lower-skilled employees and even the mediocre ones face increased competition from the rest of the world, and the much decried inequality becomes even more pronounced. It would appear that stopping the heavy subsidies to schools and universities would mitigate inequality worldwide (which is rising, in part, due to the unexpected political innovations of the last 20 years), in addition to all the beneficial effects outlined above.

Do not be misled by many statistical studies of the last few decades showing that people in Western countries who stay longer in schools or go to universities secure higher incomes. The erroneous inference has been that necessarily longer education is the path to greater income and social mobility. But these studies were done during a period that coincided with the expansion of government bureaucracies, which employed graduates knowing little but jargon. Until the late 1980s, the resulting compounding costs were covered, in part, by the flow of capital and talent to U.S. shores from communist countries. That world is gone with the wind, though many of its ideas remain. And, to paraphrase one of Warren Buffett’s favorite sayings: You discover who is naked when suddenly waves recede.

To summarize: Can the drastic restructuring of education achieve all that was suggested at the beginning of this article? It would appear so. Will it be done?

The timing seems right: In politics — as in business and private life — bankruptcy, or fear thereof, is the mother of invention. Western countries are getting closer to such an approach. But don’t hold your breath: Many interest groups, relying on endless subsidies, will slow down change and rationalize the status quo.


This article originally appeared in The American magazine, a publication of the American Enterprise Institute, Washington, D.C.

Reuven Brenner holds the Repap Chair at McGill’s Desautels Faculty of Management, serves on the Board of the McGill Pension Fund and is member of its investment committee.

He worked with Bank of America, Knowledge Universe, EEN, Bell Canada, Repap Enterprises and with investors in Canada, Mexico, the US and Europe. He has been involved in the private equity markets as partner in Match Strategic Partners, has been investing in start-ups across Canada, as part of an “angel group,” and also created his own start-up, “” He has also been serving on boards of companies and institutions.

He was expert witness in cases covering anti-trust, bankruptcy and financial matters. In other spheres, Quebec’s government asked him in 1995 to be member of a commission whose mandate was to examine all aspects of Quebec’s possible separation. He was also asked to testify before US Congressional Commissions and Canada’s Senate’s Banking and Finance Committee, and worked with Poland’s central bank during the recent crisis.

His recent books are A World of Chance (2008) and Force of Finance (2002). His regular columns appeared in Forbes, The Wall Street Journal, Asia Times and other financial press around of the world. Forbes’ journalists put two of his earlier books in their all time recommended list, and Forbes Global dedicated a cover story, titled “Leapfrogging,” to his works and endeavors. Brenner also received the Killam Award (1992), the Royal Society elected him as “Fellow”(1999), and he received a Fulbright Fellowship Grant (1976).

Brenner was born in Rumania and immigrated to Israel in 1962. He served in the Israeli army between 1966-69, during the Six-Day War, and again during the 1973 Yom Kippur War. The Fulbright fellowship brought him in 1977 to Chicago, after completing his PhD at the Hebrew University and working at the Bank of Israel, where he received the First Prize from Israeli banks (for work with Saul Bronfeld, designing indexed securities). He lives in Canada since 1980. He is fluent in English, French, Hebrew and Hungarian.


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