The Role of Accreditation Commissions in Higher Education: The Troublesome Case of Dana College

One of the standard results of modern economic theory is that it is far easier for consumers to obtain reliable information about goods than it is about services. The ordinary consumer of goods often buys fungible products in small quantities, which can typically be inspected before use. Even with respect to those attributes that are latent, experience with the initial purchase generates a lot of information about product characteristics that influences the willingness to make the next purchase. With most consumer goods, individuals can rely on some mixture of search and experience. They can rely on brand reputation, obtain free samples, review consumer reports, or rely on word-of-mouth endorsements from strangers and friends. Taken together, these multiple sources ensure that the information deficits for standard goods are relatively small, so that people know that once they purchase branded commodities they are confident of having uniform experiences from one case to the next.

Services are often far more difficult to evaluate. To be sure, there are some services supplied by TV repairmen, plumbers, and automobile mechanics whose quality can often be determined relatively quickly after use: we know whether the TV works, whether the pipes are still clogged, or whether the engine turns over. But with many types of services, such as health care and education, the evaluative process is a far chancier operation for two reasons. First, the time horizon on which these judgments have to be made is often quite long. Second, the nonstandard nature of the treatment and the intervention of other relevant causative factors make it difficult to determine whether favorable or adverse consequences should be attributable to the efforts of these service providers or the behavior of the service recipient. The likely fit between a given student and a given institution is often hard to measure, and the simple strategy of trying the product once and then switching to a close substitute if it fails to meet expectations does not work well in many service markets. Education at a college or university is ordinarily consumed in one-, two-, or four-year quantities, and any effort to switch educational institutions midstream is a costly alternative that in most settings (but not, as we shall see, in the case of Dana College) is taken up only by a relatively small number of students. Choices are largely made in an environment that poses a high risk of information failure.

In markets characterized by delayed outcomes and massive confounding factors, reputation continues to matter, perhaps even more than it does with inspection-type goods. Yet the information shortfall systematically leads to the introduction of intermediate institutions to evaluate key information about these products. This is surely the case with education, where gaps in information about the quality of education have led to the rise of intermediate institutions whose function is to organize information about the comparative strength of different institutions in any given market segment. It is for these reasons that the rankings offered in such publications as the Princeton Review, Bloomberg Businessweek, and US News & World Report on colleges, business schools, and law schools pack so much punch. They offer a common reference point that allows applicants without direct information to make choices that, while imperfect, are thought to be more reliable than those choices that would be made in the absence of any such source of information.

One of the great virtues of this voluntary market is that entry into that space is not hampered by any form of government regulation. The information from one source can be offset, at least in part, by information gleaned from another source, which results in a useful, if imperfect, limitation on the information so generated. In some cases, organizations that receive negative rankings can— indeed, they are invited to—make presentations to these various ratings organizations, which may in some instances result in either the reworking of the standard or a revaluation of the institution in question.

In many ways, however, these self-generated, third-party evaluations are often incomplete; so, many educational institutions commission other organizations to rate their overall performance. From such modest origins are various accreditation systems born. It is no accident that accreditation systems tend to flourish in those areas where participation in the market is voluntary, which includes virtually all educational institutions above K–12 and the private educational market for the K–12 level. In one sense, these accreditation associations are more comprehensive than the standardized audits that many financial firms commission about their own affairs. Few private institutions are so confident of their own stature that they are willing to forsake all forms of evaluation by independent accreditation organizations of which they are a part.