The Ivy Coach Daily

September 11, 2017

A Case of Misaligned Incentives in Admissions

There’s a great piece up on “Politico” highlighting misaligned incentives in college admissions.

Highly selective American universities seek to admit students who will be the first in their families to attend college. These schools seek to admit low-income students, students who often haven’t had the same opportunities growing up as the more affluent students they’re competing against in the applicant pool. If you weren’t sure that colleges love these students, just read the press releases hailing from admissions offices each and every year. These schools love to tout the percentage of students in the incoming class who will break the barrier of being the first in their families to pursue their educations beyond secondary school. But while colleges love to admit students who come from low-income families and/or will be the first in their families to attend college, these same schools aren’t entirely incentivized to do so.

Misaligned Incentives in Admissions

Tomorrow, “US News & World Report” will release their college ranking. By any measure, while there are many college rankings published each and every year, the “US News & World Report” ranking is the kingpin of such rankings. It’s fundamental to note that every highly selective college cares deeply about where they place in this all-important ranking, although they’re unlikely to ever acknowledge this fact. It doesn’t serve their interest to do so. It contradicts their decades-long narrative that their admissions process, their decision-making isn’t influenced by how it’ll impact their ranking. They simply aren’t incentivized to acknowledge this fundamental truth.

This, of course, isn’t the only case of misaligned incentives in highly selective college admissions. A piece by Benjamin Wermund up on “Politico” entitled “How U.S. News college rankings promote economic inequality on campus” highlights a number of misaligned incentives that encourage universities to offer admission to affluent applicants. In fact, Wermund highlights four of these misaligned incentives: (1) students’ performance on standardized tests — students perform better on these tests with expert tutoring. (2) having a lower acceptance rate — which is heavily impacted by the Early Decision / Early Action school, a pool that many believe caters to the wealthy, (3) quality of school counselors — college counseling can often be better at more affluent high schools, and (4) alumni giving — graduates who donate to the school expect their children to have preferential treatment in admissions. All four of these factors favor the affluent, disincentivizing schools from admitting the students they love to boast about, low-income and/or first-generation college students.

Talk about a case of cognitive dissonance!

A Misaligned Incentive Analogy to Admissions

One of the lessons from #1 “New York Times” bestselling “Freakonomics” was one most Americans already knew in their heart of hearts — to never trust your real estate broker. And why? Because a buyer’s incentive is not necessarily aligned with a real estate broker’s incentive. After all, if a buyer is bidding on an apartment, the buyer’s objective should be to get a great deal. But a great deal isn’t in the interest of every broker. The more money a buyer spends, the more money that broker makes. Now are there honest brokers who want their clients to get great deals, to encourage repeat business? Yes. Are there also dishonest brokers who want the buyer to spend as much as possible, to boost their commission? Yes again.

If you think about it, the incentives of the highly selective college admissions process align similarly with the incentives of the real estate business. Colleges want to admit low-income students. Real estate brokers want their clients to purchase apartments. Colleges need affluent students to off-set the costs of students who need financial aid. Colleges also seek to boost their “US News” ranking, which is impacted by the affluence of their student body. Real estate brokers make more money the more a client spends, since their fee is ultimately a percentage of the purchase price.

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