Classical Economics

Let’s face it – not many of our students will be following in our academic footsteps. The vast majority will be entering the marketplace as businessmen and women. While a classical liberal arts education prepares them well for their careers, the ideology of modern economic scientism they are likely to encounter in college and the business world poses a real threat to their pursuit of the good, the true, and the beautiful. By marrying the study of economics to the classical liberal arts, classical and Christian schools can better prepare young men and women for the vocation of business. But what would a course in economics look like at a classical and Christian school? This symposium will explore why and how economics should be taught as part of a liberal arts curriculum.

Steve Tye

Steve is a husband, a father, and a high school dropout. He teaches classical rhetoric, debate, dialectic, and political economy at the Geneva School of Boerne. He was the recipient of Geneva’s Paideia award for outstanding teacher of the year in 2013-2014. Steve holds the title of Baron of the Principality of Sealand.

Taking the Trivium to the Marketplace

As Christians, we are directed by Christ to take the gospel to all the world. It is intuitively obvious how the “Christian” part of classical, Christian education supports our obedience. Do we understand, however, what a powerful tool the “classical” part is in furthering the Great Commission?

Several years ago, David Hicks, author of Norms and Nobility, spoke at the SCL summer conference. He argued forcefully that our students should study the classics and perhaps only the classics so that they can understand the depth of the truth of Solomon’s words in Ecclesiastes that, “There is nothing new under the sun.”

Our culture not only neglects history, we exult in our belief that history holds no relevance to the modern man. Twenty first century man only looks forward, straining for the “next new thing.” We live in a “new age.” We have a “new economy.” Every boom is the result of a first-time creative insight and every bust prompted by some never before experienced event.

For example, our headlines today scream about the hundreds of billions in bailouts necessitated by the real estate market, which has increasingly left behind the basic understanding of supply and demand. Speculation fueled an exponential rise in home prices when there was no parallel rise in incomes. This real estate market bubble was further exacerbated by a mortgage industry that ignored common sense and 90 years of mortgage practice with respect to the level of debt that could be sustained by any given income. Individuals took advantage, hoping against rational belief that the spectacular increase in real estate prices would continue indefinitely and save them from any imprudence. We are told that what made this volatile mix finally combust, however, was not the age old effects of unbridled greed but the “new” sophisticated financial instruments called mortgage backed securities. These hitherto unknown investments were “too new” and “too complex” for anyone to appreciate their destructive potential.

The overwrought headlines bring to mind some background work my eighth grade literature students did when we read Alexandre Dumas’ Black Tulip a few years ago. In the early 17th century, the tulip bulb was introduced to Holland from the Ottoman Empire and quickly became the rage. Demand for the tulip bulb increased so rapidly and so consistently for several years that fortunes were made. As more and more people entered the tulip market, speculators looking for even greater profits introduced a new, complex financial instrument, the tulip future. Tulip-mania became so pervasive that, as one 18th century commentator writes, “even the dregs of society entered the tulip market.” Between the months of February and May 1637, the bottom dropped out of the tulip market. People were left holding virtually worthless securities whose risk they had not appreciated at the time of purchase. Though modern historians debate the depth and breadth of the impact of the crash the parallels are striking.

So, there really is nothing new under the sun.

But our culture needs more than economic insight. Last October, the Pittsburgh diocese of the Episcopal Church became the second diocese to leave the church, a reaction, in large part, to that denomination’s stance on homosexuality. Other dioceses are expected to leave as well. As I listened to Bishop Katharine Schori lamenting the split in a radio interview, the argument was familiar: biblical statements on homosexuality cannot be literally applied to our modern culture. The Bible is an ancient document to which our reason must be applied in order to keep it relevant. Of course, the conservative response was simply that the Bible is the inerrant Word of God. It cannot be altered to suit modern whims. It struck me that in this exchange two lines were drawn in the sand. There was no basis for any further discussion. One group asserts its “belief” in the proper way of reading the Bible. The other group asserted an opposing “belief.” No one was pleased but the moral relativists who are perfectly happy to let us each entertain our own private “beliefs” as long as we don’t presume to have any actual facts.

What answer might a classically trained student offer? A student whose analytical thinking skills had been honed along with his understanding of history and literature might ask simply, “How?” How does our cultural situation differ from the culture of biblical times on the issue of homosexuality? Modern man, divorced from any depth of historical understanding seems to have a vague notion of all morality pre-dating Woodstock as a cross between Victorian prudery and 1950s conservatism.

The classical student, however, might recognize that the ancient and classical worlds were far more comfortable with homosexuality than even our culture today. A student of history or literature might recall that of the first ten emperors of Rome, only one, Claudius, was believed to be exclusively heterosexual. He might also recall the famous defenders of Thebes, a military regiment exclusively populated by homosexual couples renowned for their valor. A reading of The Iliad might raise an eyebrow. In the Bible itself, Sodom and Gomorrah hardly seem to be homophobic societies. Even a student’s exposure to the bawdy side of Chaucer and Shakespeare would suggest that for centuries before the modern era, sexuality was viewed quite liberally. The assertion that our higher level of comfort with homosexuality justifies reinterpretation of the scriptures seems far from self-evident.

There is still nothing new under the sun.

But what good to the culture is our students’ historical foreknowledge, analytical thinking and insightful ability to connect the lessons of history or literature to today’s headlines? Are we simply raising students with the academic superiority to brag, “I told you so”? Do we believe that we can intellectually badger someone into accepting Christ, or even Christian morality?

There is one more tool that a student gifted with a Christ-centered, liberal arts education should possess: the heart of Christ broken on behalf of the lost. The arrogant belief that we are a new man in a new time no longer subject to the old rules opens a door to deception, oppression and destruction. The classically trained student with a heart for the lost has old tools, long forgo en, with which to open the eyes and build up the defenses of those around him. He is not only willing, but eager to enter the debates even when he isn’t certain in advance that he can win. He knows that the pleasure of pursuing truth is greater than the pleasure of winning an argument, and he invites those around him to join him in the pursuit. He also believes Christ’s words, “I am the way, the truth and the life.” So he knows that those who join his pursuit of truth, in whatever arena, pursue Christ, whether they recognize it or not.

The Big Challenge: Can We Beat the Rising Cost of Christian Schooling?

Retiring Association of Christian Schools International (ACSI) President Ken Smitherman is sounding the alarm. According to a study of ACSI tuition statistics, over the past twenty years ACSI member school costs have risen an average of five percent a year.

(Quick math: At these rates, a $3,000 tuition in 1988 now costs more than $7,500—a 152% in- crease. Compare that rate of increase with the Consumer Price Index, which rose an average of 3.06% per year during the same period. If ACSI tuition costs had held to the CPI, a $3,000 tuition would be just over $5,300—a 77% increase.)

“Given recent economic trends,” says Smitherman, “these tuition rates are not sustainable.” Affordability, he says, is one of five critical challenges facing the Christian school movement in the next decades. In his 60-minute workshop, he discusses finances for more than half the time.

And Smitherman’s concern is not isolated. In a recent blog, National Association of Independent Schools (NAIS) President Pat Basse noted the fol- lowing:

  1. Schools that have experienced a downturn in applications and/or “pushback” from parents on tuition increases have reached their “price-break point” and should consider moderating tuition increases in the future. Some of these will consider freezing tuition or even reducing tuitions. All will likely effectively reduce tuitions for a larger proportion of current and future families by increasing financial aid.

  2. The 25-year average trend of CPI+3 (Consumer Price Index, plus three percentage points) is unsustainable for much longer and…financial sustainability for the future would recommend much more modest increases.

The current crisis might recommend, even for schools with continued strong admis- sions indicators, a more modest increase in tuition than in the past — as acknowledgment to the anxiety parents are feeling about their own capacity to pay and give. A data point to consider here: 2007 was the first year since 1966 when family income for the top 5 percent actually declined. And 2008 is certain to be another such year, probably a much greater decline.

In general, ACSI and NAIS represent two ends of the socioeconomic spectrum of American private schools. Both models, however, are feeling an identical pinch.

On the one hand, ACSI schools have more typically appealed to parents on the basis of affordable pricing. Many ACSI schools advertise tuition in monthly increments—the message being that families can figure out how to afford private education on the same terms as they justify car payments or the Christmas savings club.

The parents who first enrolled their children in ACSI schools in the 1960s and 1970s were mostly the product of public schools. As public schools became increasingly secular, they opted for the new Christian schools with public school equivalent academics, gaining the bonus of Christian faculty, Bible study, and devotional activities. Despite
near universal efforts to control costs through low salaries and other “efficiencies,” however, tuition continues to balloon.

NAIS schools tend to appeal to more affluent families for whom private schooling is an automatic expectation. Old boarding schools with historic reputations are the backbone of the NAIS tradition, and the distinctive culture of each school is its main attractive feature. As you can infer from Basse ’s comments above, there has been a natural expectation among many NAIS member schools that private education is expensive and mainly for those families who can afford the rapidly rising costs. If you apply the above mentioned CPI+3 formula to the 20-year inflation average, NAIS school prices have risen by an average of greater than 6% each year. (At that rate, a $7,000 tuition in 1988 would now be $21,408—a 206% increase.)

Perhaps no more.

Before we start accusing private schools of mismanagement or malfeasance, it is important to remember that there are legitimate economic reasons for these costs. Research by Independent School Management, Inc. has associated the cost of running private schools with cost structures in other service industries. The problem with services like education, social work, legal, etc. is that technology cannot decrease costs and increase productivity to the extent possible in manufacturing and other industry sectors. Our basic delivery method is people. The longer they are with us and the more value they contribute to our schools, the more expensive they get.

So, what will we do? If even wealthy families are nearing the break-point on how much they are willing to spend on tuition, where does that leave the rest of us? There are at least two areas which many schools could focus on to begin to alleviate the mounting stress.

Pricing and Value

Since most school budgets are heavily dependent on tuition, it is unrealistic to expect that Christian schooling will somehow become less expensive over time. However, it is worth considering both how well the program is supported by our tuition structures and the impact on families over time.

If we think outside of the typical tuition box, we can spread the cost of quality education to reduce both the short-term cost crunch and to lessen the impact of cost increases over time. In the past three years, I have worked with schools that have been willing to address this challenge head-on. The results have been to strengthen the value to parents and to predict more manageable tuition increases.

In the midst of record state budget deficits, there is also an opportunity for Christian school to demonstrate superiority over public school offerings. California is poised to lay off 20,000 state workers, one result of which will be reduced staffing and deep programming cuts. Private schools will continue to offer art, music, and other educationally vital programs. All of a sudden, the qualitative difference between “free” education that is susceptible to economic shifts or legislative mismanagement and private schooling that enriches and shapes students consistently is evident.

Leveraging the Right Things

When examining a school’s finances, I frequently encounter operational costs associated with unfunded capital projects or budget deficits. I’m not a debt hawk, but I have been shocked recently by the extent to which heads and boards are willing to leverage their schools’ assets and growth projections. The days of easy credit may be gone for now, but in my view, easy money for schools is a slippery slope that both drives up costs and puts a school’s entire mission at risk.

It is also often true that a heavily mortgaged school has not learned to raise money on the basis of its mission. Developing a prevailing attitude of investment in mission within a school community takes effort, patience, and considerable skill. A school that has been making ends meet with fish fries and magazine sales will likely not be able to instantly generate the commitment and enthusiasm necessary for a multi-million dollar campaign.

If we cut corners with credit, we exacerbate the inflationary pressure that seems to be putting so many schools at risk. Board financial policies need to spell out the tolerance for debt maintenance in our operating budgets. Percentages of total debt to annual revenue need to be defined. And we need to learn to ask people to give to the reason that we exist—our mission. If I did not believe in the value of authentic Christian education to students, families, the church, and our culture, recent financial trends might make me more anxious. As it is, however,
I have a great deal of confidence in the future of Christian education. But we must face reality, and we must respond with creative plans and the determination to do what we do with greater attention to excellence than ever before.

School Finances in a Tough Economy

Serving schools in two cities affected by the tech bust eight years ago, I saw the effect that a tight economy has on parents’ decisions about private school.

First, it becomes evident very quickly that private school tuition falls into the discretionary spending category for most families. Tuition doesn’t compete with groceries and the mortgage, but it does compete with vacations, college savings, and charitable giving. Families who can still afford private school, but whose income prognosis is uncertain, may instinctively want to redirect tuition money to savings.

Second, as incomes go down and the cost of necessities goes up, many parents expect that tuition should not go up, too—at least not as much as other things they buy everyday. As everything that contributes to the expense of running a school goes up, parents might actually expect the cost to themselves to go down.

Third, whether they truly can afford tuition or not, many parents in a tight economy will feel as if they can’t—that private school is a luxury they are nobly providing for their children’s futures and the school’s benefit. One result is that during tough times, parents expect greater value in proportion to the feeling that they are sacrificing more to pay tuition than they used to.

So, how do we respond to the psychological and economic realities of a downturn while still strengthening the school’s financial base? Our financial management policies should communicate two things to our families: 1) we are confident in our school’s ability to weather a financial storm, and 2) we understand how stressed our families feel about their finances.

1. Avoid lowering or freezing tuition. Lowering tuition reinforces the assumption that the school’s finances are immune to regular economic forces. Schools are labor-intensive services that cannot create cost-saving efficiencies as effectively as other industry sectors.

The result is that our costs increase about 2% a year more than the average rate of inflation. So, if inflation this year is 4%, then our costs will rise 6%. A tuition increase of less than 6% leaves fewer dollars per student in our operating budget than the previous year.

2. Keep current families by temporarily increasing tuition assistance budgets. If your middle income families lose jobs
or take a short-term income hit, you can build long-term loyalty and protect enrollment by holding them in place with strategic emergency assistance. This is best accomplished by targeting tuition increases on the potential short term needs of families. Let’s say that you currently budget 5% of expenses for need-based tuition assistance on a $2 million budget. An 8% tuition/revenue increase, combined with a 3% increase in tuition assistance funding will provide 24 students with $3,000 in additional tuition assistance. Not only is this a wise use of tuition revenue, but it communicates that your school is serious about addressing the critical accessibility issue and that you have the ability to respond to the needs of your community.

3. Continue to appeal to the mission for gifts. With bad economic news, it can be tempting to curb appeals for donations or to seek gifts indirectly through sales and event gimmicks. But keep a couple of things in mind. The needs that gifts meet did not disappear because investors lost money. We also do not know the financial situations of our families, and many people still need to give for tax purposes. Even though people feel jittery, the mission of the school is still relevant to parents, grandparents and other friends of the school, and it is your most compelling case for generosity.

4. Focus on smaller gifts. Many major gifts (mid five- figure to seven-figure, e.g.) are made possible by individuals’ investments. With the markets down forty percent over the past year, the original capital of many investments is in jeopardy. Annual funds or mini-capital campaigns typically appeal for smaller cash donations, and as donors protect and rebuild their portfolios, cash may be all they have available. These campaigns also can strengthen the sense of community among our families and friends by focusing on short-term projects and goals that are accomplished through a high degree of participation. Again, we do not know who will give, so it is important to provide strategically important giving opportunities. 5. Invest in value. If enrollment decreases or short-sighted pricing policies shrink your budget, continue to spend on programs or initiatives that increase the value to parents. Perhaps you had planned to add a full-time maintenance supervisor and two part-time teaching aides. Even though the aides will make life easier for teachers, you might consider postponing those hires in favor of a cleaner, more orderly campus. When we find ourselves making tough choices about spending, it never hurts to ask ourselves which investments will make parents more confident that they are making the right educational choice for their children.