Bacon's Rebellion

Higher Ed’s Competitive Arms Race, Part Trois

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by

James A. Bacon
in

Today’s Wall Street Journal ran an article, “Colleges Get Building Fever,” exploring the connection between tuition hikes and the proliferation of grandiose college/university building projects, including ever more luxurious student unions and other facilities not central to learning. Sayeth the WSJ:

Why is the price of college going up? There are a lot [of] reasons, including declines in state budget support, the ballooning of college bureaucracies and the competition for superstar professors. But also high on the list is what Richard Vedder, an Ohio University economics professor, calls the “country clubization” of universities, as competition for students heats up….

“The reason it’s happening is that we can get away with it,” says the university’s Dr. Vedder. Instead of competing by lowering their prices, he says, universities are competing with “Cadillac facilities because someone else is paying for them.” In Congressional testimony that caught the ear of Republican leaders last month, he cautioned lawmakers against boosting the size of federally funded student grants and loans, arguing that schools would see the increases as an invitation to raise their prices.

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  1. Will Vehrs Avatar
    Will Vehrs

    I’ve followed this series with interest.

    The time will come when the country club university product will begin to price itself out of the range of even the affluent and its financial assistance funds will be drained by the strain of trying to accommodate poor over-acheivers.

    That’s when we’ll need to have a “different kind of college.” It will really be like the college some of us remember–relatively affordable, few frills, basic classrooms, and an emphasis on undergraduate education.

    One reason I support the concept of a state-supported university in Southside is that I see its concept as close to that “no frills” idea.

    SCHEV may not see a market now, but I believe it will come.

  2. Jim Bacon Avatar
    Jim Bacon

    I agree with you, Will. There is definitely a market for a quality, “no-frills” education…. Not just in higher education but in private schools, too. I see the same “country clubization” occurring at St. Catherines, St. Christophers, Collegiate and other prep schools in the Richmond area. Rock climbing walls at St. Christophers? C’mon. Give me a break.

    I would gladly send my child to a school that simply emphasized academic excellence and character development… especially if it could cut my tuition payments by $5,000 a year!

  3. Terry M. Avatar
    Terry M.

    Part of the problem is that all the colleges and universities that you see as pricing themselves out of the market started as small, affordable no frills institutions. However, academic leadership being what it is, tends to attract presidents and deans that want to build and grow, build and grow.

    What is an institutional president evaluated on? The amount of money raised, the number of buildings built, and enrollment growth. Rarely, rarely, rarely are they evaluated on the ability to build and maintain a steady enrollment at a no-frills school.

    We have public institutions siginifcantly larger than many cities in the Commonwealth. In many ways, they are cities…why shouldn’t they have significant recreational facilities?

  4. James Atticus Bowden Avatar
    James Atticus Bowden

    Another part of the problem is that Public Higher Education is a Socialist’s Paradise.

    Look closely at the administration overhead and salaries. Look at what each job ‘does’ – like VPs based on race or gender(s) and their offices.

    Look very closely at the management of public money. I’ve never seen a detailed accounting report (a real operational analysis) – and would love to see one for any Virginia college or university. Maybe the General Assembly could spring for a couple hundred thousand from the new surplus to lift a few rocks and examine carefully.

  5. Paul Avatar
    Paul

    I’d count my 4 years at UVA as “no-frills”. It’s a beautiful place, but the infrastructure is pretty old. Old crumbling classrooms. Old dorms.

    Sure, the Darden school is grand. But the rest of it’s pretty old.

  6. David Feldman Avatar
    David Feldman

    You must be careful not to see arms races in everything. An arms race is a prisoner’s dilemma. The building boom (counry clubbing of colleges) doesn’t have all (or even many) of the attributes of an arms race. Could a college opt out? Indeed it could, and charge a lower price …if there is a market for that.

    All “competition” isn’t an arms race. Do students and their families gain nothing from better quality dorms or more ports for wireless access? I suspect they do, and they are willing to pay for it. On the other hand, is there a social payoff from merit aid? That’s more of an arms race. If all schools could agree to eliminate the practice there would be no noticeable decrease in college attendance, and there would be a lot of revenue available for need based aid, or faculty salaries, or nicer dorms, all of which create real value.

  7. Jim Bacon Avatar
    Jim Bacon

    David, If I understand you correctly, you’re drawing a distinction between an “arms race” form of competition between colleges/universities, such as merit scholarships in which there is no “value” created, and other forms of competition in which, arguably, value is created. Let me chew on that. That may be a useful distinction, I’m not sure.

    Perhaps it depends on what your main focus is. Your primary focus, it seems, is ensuring access to higher ed for all elements of society. My primary focus is bringing the costs of higher ed under control. They are related concerns, in that escalating costs for higher ed contribute to its unaffordability and inaccessibility, but they are not identical.

    Back to the point about the “country club-ization” of higher ed. That’s clearly one factor among many that’s driving up the cost of higher ed and thus, indirectly, its affordability and accessibility. There may be some value in providing nicer recreational amenities for students, but in my judgment it’s pretty minimal compared to the value of preserving affordability and accessibility. Maybe the “country club-ization” is not an “arms race” form of competition to your way of thinking, but it does not seem to be a terribly productive competition either, by my way of thinking.

  8. David Feldman Avatar
    David Feldman

    Jim,

    I do draw a distinction between a true arms race and market competition over the attributes (quality) of a product. The former is an inefficiency that often requires an outside enforcement mechanism to remedy. The latter is not an economic problem of the same sort.

    We already have a set of schools that are far more “no frills” than others. They are the larger urban commuter schools and the private for-profit outfits like Phoenix. The country club effect is strongest at schools that are residential and that serve the traditional 18-22 year old student population.

    What these schools are doing largely mirrors the broad economic pattern of rising living standards. When I was a kid, families usually put 2-3 kids in a room. So did universities. The average home today is larger and filled with more amenities, and so is the average residential university. Is this excessive? I don’t have the data at hand, but in any case we’re now into value judgements about a market outcome.

    Colleges know their market pretty well. They want to have the highest quality student body they can achieve, and price discrimination among students is the way to get it.

    I’m just an ol’ country economist (!) who thinks that markets usually (but not always) give better outcomes than government rules about what colleges must (or cannot) do. Government rules work best when they are simple and clear. Unfortunately the kind of micromanagement we get usually results in an explosion of “compliance hiring” of administrators. These administrators (or faculty who fill these roles) gather information of dubious utility in ways that often throw lots of grit into main educational mission of the school.

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