Unexpectedly Intriguing!
16 January 2006

What can we say about the state of education on the typical college campus today? Sure, the costs of getting a college education are soaring at more that twice the level of inflation, but did you know that one of the principal reasons for the never-ending cost increases is because modern U.S. universities have become less and less productive over the past decade?

Thomas Garrett and William Poole of the Federal Reserve Bank of St. Louis have noticed, finding that the rise in college costs may be attributed to the following factors:

  1. Universities have little economic pressure to adopt cost-saving policies and procedures, which result in inefficiencies. Examples include:
    • Excessive staffing.
    • Retaining low-demand, yet costly academic and research programs.
    • Increased administrative expenditures.
  2. Public funding crises:
    • Reduced public funding stemming from recent recession, coupled with lack of cost containment, led directly to tuition increases at public universities.
  3. Financial aid and student loans:
    • Act to subsidize demand for higher education, increasing total enrollment.
    • Increase costs associated with serving larger student population that are not matched by productivity improvements to accommodate increased student numbers at lower cost.

Garrett and Poole suggest several different means by which universities could reverse their dropping productivity:

  1. Privatization of certain services, such as food services, student housing, maintenance, and records management.
  2. Decentralization of administrative functions, such as clerical staffing.
  3. Improving student quality by emphasizing instruction over research and implementing or improving the quality of instruction through training.
  4. Increasing the flexibility of faculty staffing, adjusting faculty "capacity" or staffing levels to better match student-demanded education needs.

The decrease in the productivity of American colleges and universities is occurring in direct opposition to the increase in productivity of the U.S. economy at large over the same period. But why? This drop in academic productivity comes despite the highest concentrations of highly educated people anywhere in the U.S. In the private sector, there's no question that some of this intellectual potential would be dedicated to the improvement of the productivity behind a company's products or services. You'd think such a collection of smart people as you would find on campus ought to be able to figure out how to be more productive....

Update 1: Perhaps Michael Barone (via Powerline) might have put his finger on why - university administrators are too focused on the wrong things:

Our universities today have become our most intellectually corrupt institutions. University administrators must lie and deny that they use racial quotas and preferences in admissions, when they devote much of their energy to doing just that. They must pledge allegiance to diversity, when their campuses are among the least politically diverse parts of our society, with speech codes that penalize dissent and sometimes violent suppression of conservative opinion.

With such a corrosive environment on college campuses, it's hard to imagine any amount of proper attention will be paid to productivity improvements anytime soon.

Update 2: Gary Becker and Richard Posner look at the role of tenure in motivating (or rather, not motivating) professors to be more productive.

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