September 07, 2003

Why are Tuition Costs Rising?

I've just come across Ronald G. Ehrenberg's Tuition Rising: Why College Costs So Much. Though I haven't yet read the book, I'm intrigued by the following description:

America's elite colleges and universities are the best in the world. They are also the most expensive, with tuition rising faster than the rate of inflation over the past thirty years and no indication that this trend will abate. Ronald G. Ehrenberg explores the causes of this tuition inflation, drawing on his many years as a teacher and researcher of the economics of higher education and as a senior administrator at Cornell University. Using incidents and examples from his own experience, he discusses a wide range of topics, including endowment policies, admissions and financial aid policies, the funding of research, tenure and the end of mandatory retirement, information technology, libraries and distance learning, student housing, and intercollegiate athletics. He shows that elite colleges and universities, having multiple, relatively independent constituencies, suffer from ineffective central control of their costs. And in a fascinating analysis of their response to the ratings published by magazines such as U.S. News & World Report, he shows how they engage in a dysfunctional competition for students. In the short run, these colleges and universities have little need to worry about rising tuition, since the number of qualified students applying for entrance is rising even faster. But in the long run, it is not at all clear that the increases can be sustained.

So what do you think? Why are tuition costs rising and what, if anything, can be done about it? Comments, questions, criticisms, hard-nosed analysis, half-baked ideas, moderate reformist agendas, radical programmes, utopian flights of fancy, rhetorical sleight of hand...The floor is open for discussion.

Posted by Invisible Adjunct at September 7, 2003 10:33 PM
Comments
1

I think Richard Ohmann's Politics of Knowldege has something to say on the topic: "Cuts in government support [of universities], generally began around 1970 and accelerated after 1980, since which year state and federal funding of universities has dropped about 25 percent....More than a few major state universities, such as Berkeley and the University of California--Los Angeles, receive less than 25 percent of their revenue from state budgets" (96). These tuition increases lead to the competition for "better" students that Ehrenberg describes.

This level of competition seems remarkably consistent (Ohmann still) with the effects of the Bayh-Dole Act, which essentially allowed universities to patent and commercialize discoveries made using federal funds. Of course, there are some "benefits" here as corporate donations have increased significantly, but these new conditions have led companies to think like corporations leading to the academic labor crises we all know very well and the extension of the logic of students as customers.

I'm not sure I have a suggestion, a plan of action, or even a utopian flight of fancy, to add at this point. I know that research (even when it is not funded by a major corporation) is never disinterested. I'm aware that organizing has only moderate success at best. I hope someone else has some better ideas.

Posted by: chuck at September 7, 2003 11:08 PM
2

Its all about the Benjamins.

G.O.P. Plan Would Restrict Rise in Tuition

It is an issue because it impacts middle class life in this country.

I read an article this weekend about Ohio State University's budget for next year. As near as I can figure it the net instructional cost (gross minus financial aid) per student is ~$17,500 (undergrad tuition is $6600 this year) and assuming 30 weeks of class, 3 hours of class time per class and a full time load of 4 classes, ~$50 per hour of class time. These numbers are very rough but I think they are accurate to an order of magnitutde.

What do they tell us? I think they show that way too much money is being spent.

If the average class size is 20 (I am just guessing here) that means the cost per class is 20 students x $50/hr x 3 hrs/wk x 30 wks/yr or $90K/yr.

Now the average faculty member @ OSU makes less than $72K/yr, and if he teaches 2 classes each year then his salary is ~40% of the cost per class.

The cost of space in a city where Class A office space rents for less than $40 sqft/yr can not exceed $4000/yr (assumming 1000 sq ft. and 10 classes per week per classroom).

So G&A (overhead) must be more than 55% of cost. And that is way too much for any business.

The quote IA gave above:

"He shows that elite colleges and universities, having multiple, relatively independent constituencies, suffer from ineffective central control of their costs."

is most likley bang on, but too restrained. I think they have let costs get way out of hand.

I have run a business and it is easy to have costs spiral out of control and hard to get them under control. We had a refrigerator that we stocked with sodas. People would take them, take a few sips, put them down and wander away. We were spending hundreds of dollars a week on sodas. We stopped stocking the refrigerator and installed a vending machine priced at cost ($.40/can at that time). The howls were bloodcurdling, but they receeded with time.

Universities will have to face up to overhead or there will be sever consequences.

Posted by: Robert Schwartz at September 8, 2003 12:48 AM
3

One thing for sure would be the rising return to a college education in the workplace. With the decline of manufactoring in the United states has come the decline of many of the jobs that provided a good living for someone without a college education. Numerous studies have documented the rice in return to schooling over the last fifties years, so you should only expect a rise in the cost of such schooling. The correct thing to measure the rise of tuition against is not inflation, but the return to education. If we see that education is outpacing even that, that would be indicative of furthe dysfunction of the market for education.

Posted by: Dennis O'Dea at September 8, 2003 01:26 AM
4

there's noting rational about this. Why should Harvard cost so much? They don't have the highest expenses -- in fact., they were pioneers in the art of screwing jr. faculty and grad student labour. Like the rest of capitalist pricing it's arbitrary. Harvard decided that 100 kilobucks/yr (or whatever it costs -- have no idea really) fit their image best. Y'know, exclusivity and all that.

This is going to hit the reality iceberg one of these days. The results will not be pretty.

enjoy...

Posted by: che at September 8, 2003 06:54 AM
5

http://www.forbes.com/free_forbes/1986/1229/072.html

Forbes has another argument that tuition outstrips inflation because of all the tax breaks for tuition over the last few years.

Posted by: BillyJoeRobidoux at September 8, 2003 08:36 AM
6

A partial explanation (primarily discussing public universities):

An extract from a July 1999 report, "State Spending For Higher Education In The Next Decade"

http://www.highereducation.org/reports/hovey/hovey.shtml

From the Executive Summary

"Based on national averages, state spending for higher education will have to increase faster than state spending in other areas -- just to maintain current services. Whereas total state funding for all services will need to increase by 5% annually to maintain current service levels, state funding for higher education will have to increase by 6% -- largely due to enrollment increases. This means that even if states were not facing structural deficits in reaching the 5% annual growth in revenues, the percentage of state funding devoted to higher education will need to increase annually in order for higher education just to maintain current services. Since the percentage of the state budget dedicated to higher education has actually declined over the past decade, continuing to fund current service levels for higher education would represent a significant shift in state budget trends. It would also represent a dramatic departure from near-universal statements about priorities for K-12 education in the 1998 campaigns."

From Chapter Two

"The fluctuations in higher education spending stem from use of higher education as a "balance wheel in state finance." Typically, when state finances are strong, appropriations for higher education have risen disproportionately to appropriations for other functions. But current service budgets in higher education have been cut disproportionately when state fiscal circumstances are weak.

Selection as a balance wheel results from some perceived characteristics of higher education relative to other objects of state spending. First, higher education institutions have separate budgets with reserves of their own and perceived fiscal flexibility to absorb temporary fiscal adversity, unlike state agencies which do not have these features. Second, higher education is perceived as having more flexibility to translate budget changes into employee pay than state agencies, which are bound by statewide pay scales, and local education agencies, which are subject to collective bargaining and multi-year employee contracts. Third, higher education is seen as having more flexibility to vary spending levels (e.g., through changes in courses offered and class sizes) than most programs, which have spending levels that are more fixed. Fourth, in most states, higher education has the ability to maintain and increase spending levels by shifting larger proportions of costs to users by tuition and fee increases."

(Sorry for the length. Read the whole paper.)


Posted by: Paul Nelson at September 8, 2003 10:02 AM
7

The Forbes article cited in #5 above is from 1986. I cites $40,000 as the cost of a private college education. Four years of private college tuition at today's rates is $108,000. From 1986 to 2003 the CPI increased at 3% compounded annually, but tuition has increased at a 6% rate. The rate difference means that tuition will continue to increase at a rate that is exponential when compared to other prices.

One good question is whether the colleges are impounding all of the future putative income gains to education.

Posted by: Robert Schwartz at September 8, 2003 11:12 AM
8

The highereducation.org report cited in #6 above is about the funding side. My analysis is that the problem is on the expense side. More funding won't help if costs are not under control.

Posted by: Robert Schwartz at September 8, 2003 11:26 AM
9

(1) Dennis, I don't think it's by any means certain that there is a rising return to education. Many of the studies purporting to show this are methodologically flawed. If colleges select for people who are, say, more literate and harder-working, then the higher incomes of these people might have been achieved whether or not they went to college. To the extent that college degrees have a direct causal influence over future income, it is at least in part due to credentialling rather than to knowledge per se: thus, it is zero-sum in nature and cannot be extrapolated at the % of college graduates rises.
The role of universities today is at least in part similar to the medieval "river barons," who kept chains across the river and would remove them for river traffic only on payment of a toll. Profitable for the baron, but didn't really contribute much to medieval productivity...

2) The position of the universities today is analogous to that of the American auto manufacturers in 1965. They form an oligopoly and have little concern for their customers or for the improvement of their own "product." As was the case with Detroit, something will happen to challenge this system: it's just not clear yet exactly what it will be.

Posted by: David Foster at September 8, 2003 11:34 AM
10

This is an issue that I've long thought about as well. I think basically there is no single-issue explanation: it's a messy, complex problem. Just as the question of what the actual economic returns on a college education might be is messy, as David Foster observes.

The price tag is not just arbitrary, however. Both elite private universities and public universities have a lot of fixed costs at this point; the amount of budgetary "give" in a given year is small, and most budgets stand on a knife's edge where even a small drop in annual giving or a small decrease in tuition would be a huge shock to the system necessitating major changes on the expense side of the ledger.

Nor do I think changing government subsidies explain most of it, and when they do, they explain only some of the financial changes at public universities, not across the board.

Part of what is important here is what several posters have already noted: the customer base perceives the university to be an absolutely necessity, almost on a par with health care, and so they will pay whatever they are charged, regardless of how difficult that might be. Part of what is equally important is to note that at elite private universities and colleges, the people who can pay (with whatever degree of difficulty) are also now paying for those who cannot.

Which is the first thing on the expense side that requires some attention: financial aid is now a major cost, and effectively the top tuition price is where it is in order to pay for those who are receiving major discounts. This, I think, is a very good thing, and anyone who complains about the high cost of tuition is going to have to look this aspect of it square in the eye and decide what it means.

But of course this is not enough. You might wonder: if some people pay $30,000 so that some people can pay $10,000 or less, wouldn't it be better if everyone paid $15,000? This is where other expenses come in, and other issues arise, because a lower flat rate would still mean a huge overall cut in revenue unless it was high enough as to be prohibitive for the students of more limited economic means.

First, in between 1965 and today, there has been substantial real overall growth in faculty and staff salaries at most elite institutions. This also seems a good thing to me, and not for selfish reasons. The real dollar salaries of faculty in 1965 were pretty damn squalid by professional standards. This would be a particular issue in professional faculties (medicine, law, business) where it would be extraordinarily difficult to attract well-qualified instructors at those salaries today.

It's not just or even primarily a salary question, though. More importantly by far has been the dramatic, extraordinary expansion of the mission of higher education and the diffusion of its organizational structure, which it sounds like Ehrenberg's main point is focused on. We now teach and administrate in hundreds of domains that the university of 1965 wouldn't have dreamed were part of its purview: there are separate administrative departments and officers for an incredible diversity of tasks, and universities and colleges now provide services and facilities that span the totality of the economic, social and cultural lives of their students.

I tend to agree that this state of affairs in tuition can't continue, but confronting it is not going to be a matter of turning on the federal spigots again or anything so simple. It's going to require that universities and colleges simply do less than what they do, that they provide fewer services and a less efflorescent vision of endlessly expanding knowledge. That's not just a small adjustment, or something that someone can accomplish with a quick whack of the budgetary axe. It's a fundamental revolution in what we think universities are and should be, with somewhat unpredictable results. No wonder most of us just prefer to muddle on ahead and hope that when the iceberg looms, it'll be after we get off the ship.

Posted by: Timothy Burke at September 8, 2003 03:53 PM
11

I think there are two different problems, roughly public and private.

Private colleges don't actually charge most students the nominal tuition. Private colleges, at least those that advertise they only provide need-based aid and meet full need, in effect tell students, "tell us everything about your finances and we'll charge you what we think you can afford, up to a declared maximum [the nominal tuition]." It is therefore in the college's interest to raise the nominal tuition, the declared maximum, but gently and regularly, to avoid shocking potential students. To boil the frog.

State colleges' tuition fluctuates. It is only four years ago that Virginia cut its universities' tuition by 20% across the board, as dot.com revenues made the state coffers uncomfortable full. Since then, tuition has risen as state support has declined, but tuition is still only at the level it was six years ago. Other states have different histories, of course, but generally tuition rates are what is politically acceptable given general state finance constraints; electorates will support raising tuition if the alternative is closing DMV offices, politicians will cut tuition rates if they're perceived as excessive and the state budget can cut it.

Posted by: jam at September 8, 2003 05:30 PM
12

Can I add one more variable to the puzzle? And it's an anecdotal variable at that. Oh well, I'll throw it out there. There are ten or so full professors in my department. Only one is actually teaching a class this semester. The rest are doing research and independent study.

Posted by: Laura at September 8, 2003 09:09 PM
13

#9

"The role of universities today is at least in part similar to the medieval "river barons," who kept chains across the river and would remove them for river traffic only on payment of a toll. Profitable for the baron, but didn't really contribute much to medieval productivity..."

Well put.

#10

"Both elite private universities and public universities have a lot of fixed costs at this point; the amount of budgetary 'give' in a given year is small, and most budgets stand on a knife's edge where even a small drop in annual giving or a small decrease in tuition would be a huge shock to the system necessitating major changes on the expense side of the ledger."

Every failed business has lots of fixed costs. The truth is that all costs are negotiable. If they ballon out of control the enterprise will go bankrupt and the fixed costs will be discharged for pennies on the dollar. Don't believe me, ask someone who retired from Behtlehem Steel about his pension.

Colleges can either get their costs under control, and pronto, or it will be done for them, roughly.

"financial aid is now a major cost, and effectively the top tuition price is where it is in order to pay for those who are receiving major discounts."

It can be a cost or a discount but not both. I vote for discount.


"This, I think, is a very good thing, and anyone who complains about the high cost of tuition is going to have to look this aspect of it square in the eye and decide what it means."

I have been looking at it square in the eye for some times and writing it big checks. I think it means that these institutions are spinning out of control.

"You might wonder: if some people pay $30,000 so that some people can pay $10,000 or less, wouldn't it be better if everyone paid $15,000? This is where other expenses come in, and other issues arise, because a lower flat rate would still mean a huge overall cut in revenue unless it was high enough as to be prohibitive for the students of more limited economic means."

I really do not know what you mean or what your model is. The current system pretty much sucks for everyone. Muskingum College in New Concord, Ohio did something like this a few years ago. It seems to have worked for them. I do not know why it wouldn't work elsewhere.

If the Colleges really want to maximize revenue, why don't they auction off spaces? (not that they don't sort of do it already for major donors). The auction could be in Dutch format to limit winner's curse.


"The real dollar salaries of faculty in 1965 were pretty damn squalid by professional standards."

I attended college from 1965 through 1970. I clearly remember what academic saleries were like in that time frame because I was investigating an academic career and I entered graduate school in 1970. As I remember in the late 1960's a tenured professor in the arts and sciences could make in the vicinity of $20,000 to $25,000. A young Ph.D. on his first 3 year contract could make around $9,500 at the top tier schools. It was 1968, IIRC that the New York law firms raised starting salaries to $15,000, partly because of the competition from academia. The Change in the CPI from the mid-late '60s to now is about a factor of 6. this would imply an academic salary range of from $55,000 to $150,000. My father zt'l was a very sucessfull lawyer and I remember him urging me to go to graduate school on the grounds that academics made as good money as he did and had better benefits and lower risk.

It was the radpid inflation of the '70s that did in academic salaries.

"More importantly by far has been the dramatic, extraordinary expansion of the mission of higher education and the diffusion of its organizational structure"

And its costs.

"I tend to agree that this state of affairs in tuition can't continue, but confronting it is not going to be a matter of turning on the federal spigots again or anything so simple."

This is true and its a good thing because issues like defense, homeland security and energy infra structure are going to suck up available resources.


"That's not just a small adjustment, or something that someone can accomplish with a quick whack of the budgetary axe."

But it will take a great wack of the bugetary axe and the wailing will be universal.

"It's a fundamental revolution in what we think universities are and should be, with somewhat unpredictable results. No wonder most of us just prefer to muddle on ahead and hope that when the iceberg looms, it'll be after we get off the ship."

As I pointed out above the escalation of costs has gone exponential. That is the ground hurtling up at you.


#12
"There are ten or so full professors in my department. Only one is actually teaching a class this semester. The rest are doing research and independent study."

Beautiful!
I knew it. the numbers do not lie.

Posted by: Robert Schwartz at September 9, 2003 12:52 AM
14

I think my own whacking axe would start with a serious questioning of the "mission creep" of higher education in two ways: first, the expansion of the services provisioned to students, mostly on the administrative side, and second, with the over-specialization of knowledge. I'd also say that the jig is up: you can be a research institute or a teaching institution, but you can't be both. If you're the former, your research has to pay its own way (meaning that research institutes mostly need to concentrate on the sciences and on applied fields) and a teaching institution needs to collapse specialized curricula into a smaller core (with a smaller faculty who are comfortable teaching across a wider range).

There are a few institutions that can ignore these imperatives by virtue of extraordinary wealth, and they'll stand out as such. My own might be one of them. But even there, that wealth needs to be leveraged to reduce tuition costs, and even at a Harvard or Yale, doing that is going to mean a reduction in services and coverage.

I would rather see a massive revisioning of what universities are and what universities do with the objective of reducing the cost of an education than what we've been doing so far, which most of the posters to this blog decry, which is basically leveraging the inevitable crisis through the adjunctification of academic labor.

Posted by: Timothy Burke at September 9, 2003 10:02 AM
15

"It's going to require that universities and colleges simply do less than what they do, that they provide fewer services and a less efflorescent vision of endlessly expanding knowledge."

Which would also require that parents, students, taxpayers and other relevant parties adjust their expections of the amenities and services that colleges should provide.

"I'd also say that the jig is up: you can be a research institute or a teaching institution, but you can't be both."

I agree. Despite Stanley Fish's recent attempt to justify the hiring of high-priced stars, I don't think the public will buy it. I think the senator in Fish's piece (State Sen. Steve Rauschenberger, an Illinois Republican) is speaking for a significant segment of the concerned public when he questions the argument that the hiring of academic superstars contributes to the quality of undergraduate education.

Posted by: Invisible Adjunct at September 9, 2003 10:21 AM
16

If English and other professors would stop teaching by rolling a tv into a room and turning it on for an hour, we might save some money in the technology budget.

Posted by: livia at September 9, 2003 01:19 PM
17

I think one overwhelming factor of the rise in tuition is the sheer demand for college. Even though only 20% of existing jobs require a college degree, high school guidance counselors are pushing kids into college. One of your earlier posters hit it right on; there are few jobs left for the non-graduate that pay a living wage. So people realize it's either college or fast food (schools think that promoting vocational tracks is 'beneath' them so you don't hear much about plumbing, electrical work, etc.) and they rush to aim for college. This is a lucrative market for the universities, because even if they only get a year's worth of tuition out of a freshman (the attrition rate is something like one third?) it's still a good deal for them. Another side effect of all of this is educational inflation. Don't be fooled by all the people you see graduating from college; the amount of jobs requiring commensurate education has not gone up at the same rate. So you're seeing cab drivers with PhD's and the "overqualified" adjuncts as a result. Either we increase the amount of jobs that require higher education or we have overeducated people in an under-supplied job market. Another radical solution would be to pay people a living wage, but that's another topic altogether.

Posted by: Cat at September 9, 2003 02:52 PM
18

"We now teach and administrate in hundreds of domains that the university of 1965 wouldn't have dreamed were part of its purview: there are separate administrative departments and officers for an incredible diversity of tasks, and universities and colleges now provide services and facilities that span the totality of the economic, social and cultural lives of their students."

Yes, it's definitely time for them to stop doing that.

Why in the world should a university be a combination apartment complex, restaurant, health club, health clinic, sports franchise, counseling center, and oh yeah, an educational institution?

Seems pretty wasteful to me. They should specialize in education, and let real property managers, restaurants, health clubs, doctor's offices, and so on, fill those respective roles separately rather than delivering an inferior and unnecessarily expensive product in all those areas.

"I tend to agree that this state of affairs in tuition can't continue, but confronting it is not going to be a matter of turning on the federal spigots again or anything so simple. It's going to require that universities and colleges simply do less than what they do, that they provide fewer services and a less efflorescent vision of endlessly expanding knowledge."

Well, if they specialize in education, they can certainly deliver an excellent one more cost effectively than they do now.

There's an old saying that if something can't go on forever, then it will eventually stop. As colleges continue to price themselves out of the market, the time will come when more and more students find higher education to be a losing investment and tell them where they can stick it, and employers will look beyond college graduates for bright individuals for sheer lack of supply of those bearing sheepskins.

Either they'll accept other credentials, or they'll simply start giving tests themselves.

(Can they give IQ tests without the EEOC getting their panties in a wad?)

Of course, that day will be delayed by the government pumping in money and turn losing investments into winning investments from the point of view of the subsidized students. For some students, that has already happened.

Posted by: Ken at September 9, 2003 03:53 PM
19

One part of costs is not arbitrary and is remarkably comparable across institutions -- ROOM AND BOARD. When I was applying to colleges in 1979 and the last time I looked (which was about 5 years ago) most schools charge fairly similar rates. The differential between tuition costs at schools vs. room/board costs at schools should tip us off to something about the meaning of tuition.

Posted by: Michael Tinkler at September 10, 2003 08:48 AM
20

This is a facinating question, and one that affects me rather personally (I went to college in the high-tuition inflation era of the early 90s). As near as I can tell, tuition has been outpacing inflation for the last 15-20 years due to many factors:

  1. The rising return to education (or at least the perception of a rising return to education): Education is an investment in future potential income, and a good deal of research suggests that the return to education has increased since the 1970s. Someone above wisely pointed out that we don't know to what extent investment in education is efficient - if education simply signals better able workers, it is likely that we overinvest in education. However, both imply rising private return to education (if not rising social return) and rising cost.
  2. Better access to educational credit: Student loans and tax-prefered treatment of student loan debt are likely to increase the willingness to pay for higher education and therefore the price of education.
  3. Little cost control: Universities have few mechanisms to control costs. The tenure system means that universities have limited flexibility in labor costs (they can hire adjuncts and visitors when demand is high, but can seldom dismiss full-time faculty when demand is low), donors often prefer their funds be targeted toward pet projects that are not necessarily the most efficient for the university, cost-based compensation for departments that offer few incentives to control costs, etc.

    What I find amazing is that private universities remain competitive, despite very little evidence that there is any return to the 'prestige' of a university (while the best research has shown a positive return to higher education, the best research has shown no evidence of a superior return to an Ivy-league education; once you control for observed and unobserved characteristics of the students, the (monetary) returns to public and private education appear to be equal). But perhaps with private education the demand does not reflect pure investment return, but class membership and social rewards (judging by the high visability of fading "Duke" "Stanford" and "Harvard" sweatshirts on my morning jog in lawyer/congressional aide dominated DC neighborhood).

Posted by: Matilde at September 10, 2003 02:45 PM
21

Timothy Burke

"I'd also say that the jig is up: you can be a research institute or a teaching institution, but you can't be both."

I think you are very right on this point. The multi-versity is a failed model.

"If you're the former, your research has to pay its own way"

A corallary is that they will not provide tenure. Lose your grant money and hit the highway.

"a teaching institution needs to collapse specialized curricula into a smaller core (with a smaller faculty who are comfortable teaching across a wider range)"

Fine by me. I went to the U of Chicago before they ruined it. Like high schools, teaching loads will be higher, but there will be tenure.

"There are a few institutions that can ignore these imperatives by virtue of extraordinary wealth"

But will they want to? Larry Summers can build Harvard Research Institute across the River, and tell the arts faculty to go teach undergrads. It could be a winner.


livia: "If English and other professors would stop teaching by rolling a tv into a room and turning it on for an hour, we might save some money in the technology budget."

It would be even cheaper if we had the janitor wheel in the tube and dispensed with the prof. I wonder why, in this age of video and DVD's, we pay professors to stand there and be talking heads?


Cat: "There are few jobs left for the non-graduate that pay a living wage. So people realize it's either college or fast food . . . and they rush to aim for college."

I do not think this is true. There are lots of jobs outside the must have a BA realm and if I were a real contrarian I would bet on them.


Ken: "(Can they give IQ tests without the EEOC getting their panties in a wad?)"

The Supreme Court decided that one years ago. Duke Power, IIRC. Tests must test bona fide occupational qualifications.


Michael Tinkler: "One part of costs is not arbitrary and is remarkably comparable across institutions -- ROOM AND BOARD."

True. And these functions do not seem to be the source of the trouble. The Ohio State numbers I cited above break them out as Auxillary and they balance.


Matilde: "1. The rising return to education (or at least the perception of a rising return to education)"

Perceived returns would drive demand, which would drive cost, until capital came into the market to increase production and then the bubble would burst. Why hasn't it burst?

"2. Better access to educational credit"

Monetizing a commodity allways increases its cost, this is why Government loan proagrams are seldom helpful in the long run.


"3. Little cost control: Universities have few mechanisms to control costs."

Amen.

"The tenure system means that universities have limited flexibility in labor costs (they can hire adjuncts and visitors when demand is high, but can seldom dismiss full-time faculty when demand is low),"

My understanding is that there is an exception to tenure rules when the school shuts down proagrams.

"But perhaps with private education the demand does not reflect pure investment return, but class membership and social rewards"

Most likley. I have described the USNews rankings as the score keeping system for commuter train parking lots and cocktail parties in the northeast.

I would like to provide ogged's comment from an earlier thread that seems apopros:

18

Not quite on topic, but I'm worried about Robert's children.

My children are not allowed to apply to Harvard, they can get the same education much cheaper at a State U in the Midwest.

That's a pretty limited view of what college is for. Nevermind the education; you send your kids to Harvard for the connections and the prestige. "Harvard" on a resume goes a very long way and attending the school puts one in a network of people that will be invaluable throughout one's life. No school in the Midwest is the same.

If the choice is between Harvard and Midwest U, you should send them to Harvard, even if you know in advance that they won't so much as see a single professor while they're there. [Did I just channel Chun? Perhaps, but he's right this time!]
Posted by ogged at September 7, 2003 11:58 AM

Posted by: Robert Schwartz at September 11, 2003 02:10 AM
22

You don't get many useful "connections" out of Harvard (or any other super-elite school) unless you have connections going in. Harvard confirms status, it does not confer status.

Posted by: THB at September 12, 2003 08:41 AM
23

THB's last sentence epigrammatically captures the truth, I think. There are a handful of employers (New York print media comes to mind) which still worship Ivy degrees; but by and large a BA is a BA is a BA. Employers don't even care about GPA, unless it's startlingly high. Evelyn Waugh made CousIn Jasper advise Jeremy Irons (sorry, Charles Ryder) you might as well get a fourth if you don't get a first. Effort expended on a good second is effort wasted. Don't tell your students, but he's still right.

Posted by: jam at September 12, 2003 07:54 PM
24

Let's not also forget what students are paying for at most large universities. They're paying not only the cost of their education, but also an assortment of fees to subsidize, among other things: brightly-lit 24-hour tennis courts; campus busses to bring them home on Saturday nights when they're rip-roaring drunk; a host of student organizations; high-speed Internet connections in dorm rooms; concerts; and who knows what else. Granted, all of these perqs make college life a damn good time, but it sure isn't free; it might even be cheaper, per item, on the open market; and, do most tuition-paying parents realize how much they're spending on such perqs?

Posted by: J.C.X. at September 15, 2003 12:53 PM
25

It was enscribed above:

Harvard confirms status, it does not confer status.

The last time I saw numbers on this that was not true. What struck me was that Harvard has far more diversity of imput than of output. That is, people very strongly tended to do well after Harvard, regardless of where, socially or geographically, they came from.

It may be (I saw one study indicating this) that Harvard simply admits people who would do well regardless of where, or if, they went to school. But getting into Harvard is a pretty reliable brand.

Posted by: It Changed? at September 25, 2003 09:39 PM
26

"Harvard confirms status, it does not confer status."

I believe this is true. Although diversity in was higher than diversity out, studies have clearly shown that people of equivalent SAT and grade averages that went to state schools did just as well. In other words, Harvards student talent level has more to do with the average levels of success of its students than does the value of its education or the extent of networks.

Posted by: david boyd at November 18, 2003 11:26 AM
27

Generally, education is what you make of it. Harvard (or MIT) generally have more resources available to the student (including contacts for social networking), but it is ultimately up to the student to utilize the resources.

Posted by: OpenCourseWare Community at December 1, 2003 05:58 PM