In their paper "Industrial Organization of Congress," Weingast and Marshall sited opportunism as one of the two main costs to firms of purchasing production inputs in the marketplace. We defined opportunism as "the conscious practice of taking advantage of circumstances, often without regard to principles or morals."
Opportunistic practices can take on many forms in many different situations. One example comes up in this article discussing the illegal and immoral practices of a college chain that has left many students in serious debt (This is a very long article, but it is only necessary to read the first half or less to get the main idea and see the relevance to public choice). As the article explains, Corinthian colleges is a college chain that serves as the parent company to many colleges around the country. Its colleges, such as Everest University, act as its "agents" to the employ admissions officers as manipulative sales agents to persuade prospective students to enroll, promising a better future, job security, and better salaries. Rather, these sales tactics are "designed to capitalize on their [the students'] poverty and their trust in an accredited university" (paragraph 12). Students take out large loans with the expectation of support from the university in obtaining the means to repay these loans, but are instead ending up thousands of dollars in debt with no escape route, and are graduating without any good job prospects, often returning to low-paying jobs or unemployment. Students are even misled to believe that they are secured by certain grants and financial support, when really these grants are simply large loans, leaving them in debt they were not aware existed.
The opportunism in this situation is clear. People who have no intention of enrolling in these colleges are manipulated and persuaded through unethical sales tactics by admissions officers and university marketing teams who take advantage of the circumstances of lower-class citizens in order to meet strict enrollment quotas designated by their employers. They have asymmetric information and hidden intentions that are not revealed to students upon enrollment, causing students to end up in "contract commitments" they cannot afford. While law suits have been filed, and Corinthian colleges is being shut down by the federal government, this does not relieve the many students of their loan debts up to tens of thousands of dollars. The costs of opportunism these students have incurred are far higher than any benefit they received from these colleges.
1 comment:
After talking about the Weingast and Moran paper in class, I feel like you can also apply the idea of a bureaucratic action to this as well. It seems like these institutions fall into many of the characteristics of autonomous bureaucracies such as infrequent investigations and lack of knowledge of ongoing operations. The fact that the very students attending the institution didn't know the structure of their financial situation is proof of the ignorance of the consumers of this education. The lawsuits Corinthian is now facing could be construed as the "coming down hard" on the institution and may give other institutions strong negative incentive to not be so deceitful in the future. The lack of these type of stories may not be due to them acting independently, but rather from the strong incentive these institutions have to not act in such a way.
Post a Comment