Elite University Admissions in a Winner-Take-All-Society

Megan McArdle is surely correct when she notes how much is expected today of young people who aspire to attend elite universities. Her own experience as a teenager was different:

…the things that we achieved were basically within reach of a normal human being who was going about the business of growing up: playing a sport, perhaps badly; taking classes; occasionally volunteering as a candy striper. Most of us took the SAT without the benefit of test prep services, and the “test prep” we got in class consisted of–learning vocabulary and algebra. People like me, who were painfully unathletic and had hashed some early high school classes still had a shot at an Ivy League School

These days, a nearly-perfect GPA is the barest requisite for an elite institution. You’re also supposed to be a top notch athlete and/or musician, the master of multiple extracurriculars. Summers should preferably be spent doing charitable work, hopefully in a foreign country, or failing that, at least attending some sort of advanced academic or athletic program.

She then raises a provocative question:

“This entire thing is absurd. I understand why kids engage in this ridiculous arms race. What I don’t understand is why admissions officers, who have presumably met some teenagers, and used to be one, actually reward it.”

Robert Frank and Phil Cook’s Winner-Take-All Society was written almost two decades ago, but its acute analysis of situations such as this remains relevant and informative today. Admission to an elite university is a classic winner-take-all-market. First, competition is intense because the number of competitors has grown (i.e., there was a time when you competed for a Harvard slot only against a narrow sociodemographic segment of Northeasterners — now all manner of people all over the world apply). Second, rewards are distributed based on relative rather than absolute performance and even a narrow advantage over other market participants can have enormous consequences. Third, the rewards are concentrated in the hands of a small number of winners. That is, if 10 applicants are fighting for a single slot at Harvard, there is no scenario under which they can each come out with 10% of the reward they seek, or even a scenario where the best candidate gets 30% of the reward, followed by the next person getting 20%, third place receiving 15% and everyone else getting 5%. Instead one person gets 100% of the reward and everyone else gets nothing.

This situation has generated what McArdle decries: An arms race that families hate yet at the same time are afraid to retreat from unilaterally. If no parent signed their teenager up for SAT prep courses, interview training and essay coaches, and no adolescent invested thousands of hours in resume-stuffing extracurricular activities, all parents and all adolescents would be better off and no one’s chance of getting into an elite university would be affected (Recall that in a winner-take-all-market, it’s relative performance that matters). The problem of course is that in a winner-take-all-market such as elite university admissions, once even a few people engage in these competitive behaviors it costs everyone else not to engage in them also. Hence begins an arm’s race that the participants are damaged by but will not unilaterally exit.

Frank and Cook note that in organized systems of competition, “positional arms control agreements” are possible. For example, athletic leagues can agree to test athletes for steroids, removing the pressure for everyone to take steroids because they fear someone else will do so and thereby gain a relative advantage. But the world’s parents and their children are not an organized system and could never agree to much less enforce such an arm’s control agreement.

McArdle clearly recognizes this as she isn’t blaming parents or asking them to do anything differently. Rather, she wants college admissions officers to stop rewarding kids who have over-stuffed, over-burnished resumes. That seems logical on its face, but another lesson of Frank and Cook’s work is that the people imposing brutal competition on others are sometimes trapped in a higher level such system themselves.

Frank and Cook cite the example of investment banking houses that refuse to hire anyone who didn’t graduate from a handful of Ivies. That creates a winner-take-all-market for young people who want an investment banking career. Don’t the people at the firms realize that brilliant young people graduate from a wide range of universities and that some certified witlings have Ivy league degrees?

Of course they do. However, if you are overseeing a division at the firm that makes a bad investment and loses millions of dollars, you must insulate yourself against being blamed by higher up management. One way to do that is to say “Look, I hired the very best people – it’s all Harvard and Princeton grads in my shop”. In contrast, if the investment team you oversee is full of Michigan State University grads (my alma mater) you will be vulnerable: “Your lax hiring standards made the firm lose money — you should have hired Ivy League grads like all the other division heads” (against whom of course YOU may be competing in a winner-take-all-market for year-end bonuses).

Investment firms are also in intense winner-take-all-competition with each other for super-wealthy clients. Even if the relative reputational advantage of having an all-Ivy team is a slight one, if it nets even one more oil sheikh a year your firm wins big and other firms with more open hiring lose big. Hence if you control hiring for the firm you will continue to impose what you know is an irrational winner-take-all-market on job applicants because your division and your firm as a whole are themselves competing in equally irrational winner-take-all-markets.

Back to university admissions. Elite universities compete with each other in a constant neck and neck race for educational prestige, of which the omnipresent and in my view malignant US News and World Report ratings hang over all. Everyone knows those ratings are of questionable validity, but they also know that if their university is rated say 11th versus 9th it can have dramatic short-term consequences for their number of applicants for admission as well for faculty positions, and adverse long-term consequences to the university’s endowment. There are only 10 spots on the list of top ten national universities, and if you are 11th instead of 10th you might reap the same rewards as the school that is 50th (As the noted philosopher Ricky Bobby put it “If you’re not first, you’re last”).

I suspect therefore that the reason individual admissions offices at elite universities don’t unilaterally take the step that McArdle suggests is that they fear the relative reputational disadvantage that would result if they become the one soft touch university in the brutal winner-take-all-market of educational reputation. The reputational effect might be slight, but one of the defining features of winner-take-all-markets is that slight relative differences can have huge consequences.

Is it therefore hopeless and/or excusable? I don’t think so. What I have said to my friends in the admissions business is this: For the sake of the young people they will admit and the young people they will not, the most elite universities in this country (Including mine) should negotiate a positional arm’s control agreement regarding admissions. Many options are available. The elite universities could allow students to list two and only two extracurricular activities on their application regardless of whether they’ve done two or two hundred. They could agree that all high school grade point averages above 3.7 would be counted as equivalent. I am sure with all the brainpower and experience among elite university admissions officers, they will find wiser suggestions than these ideas off the top of my head, but the goal would be the same: Ending the arm’s race that is causing emotional misery in and economic harm to the countless families who want their child to receive an elite university education.

[Cross-posted at The Reality-based Community]

Keith Humphreys

Keith Humphreys is a professor of psychiatry at Stanford University. He served as a senior policy advisor at the White House Office of National Drug Control Policy from 2009 to 2010.