COMMON AND JOINT COSTS. Charles Schwartz contemplates the decline of the University of California.

There are two great missions of a first-rank public research university:

-to provide top quality undergraduate education for all qualified students, exposing them to great ideas from all over, imparting high-level skills for the job market, and making them capable citizens and leaders.
-to provide top quality academic research, and related graduate student programs, in the pursuit of basic knowledge across the spectrum of human endeavor.

Who should pay for these two important functions? It used to be that the State of California paid for both through generous taxpayer funding for faculty salaries, departmental staff, and the institutional infrastructure of buildings, laboratories, libraries and so forth. It was called the "I&R Budget" (Instruction andResearch).

As the research mission expanded over time, a significant proportion of the cost came to be paid for by external sources, especially grants from the federal government. Such "sponsored research" is well-monitored and accounted for. But it does not cover all research activity, by any means. The state still covers the rest and it is buried in the "core academic budget".

The search for new knowledge is an expensive business. Yet it is unequivocally a public good, the advances in knowledge being of great value for both the economy and the progress of modern civilization. The research mission of the university can, therefore, only be viewed as something that should be paid for by the whole of society, for the benefit of the whole of society.

What about undergraduate education? Is it a public good or a private gain? There are sharp differences of opinion on this. To many people, UC students are a privileged group who are gaining a private benefit through their access to higher education. Therefore, the argument goes, they should bear the cost, rather than having the general taxpayer shoulder the burden.

But this raises a fundamental question: what is the actual cost of an undergraduate education in the University of California? That turns out to be a more difficult thing to answer than one might suppose.

Any reckoning of the actual cost of an output produced under conditions of common and joint costs is going to be difficult, and ought not be attempted at home. (That's leaving aside the public good properties of basic research, many of which have private benefits that can be appropriated by patent or copyright in a sum sufficient for inventors and entrepreneurs to conduct the work. It's also leaving aside whether the marginal benefits to education accrue primarily to the early grades.)

The official accounting by the UC administration concludes that student fees now cover 30% to 40% of the average cost of education (this is the source of the numbers quoted by the Howard Jarvis group, above). But the official calculation includes the full cost of faculty research throughout the academic year. It is, therefore, a badly distorted figure.

To correct this, one must disaggregate the accounting reports according to the two basic functions of the university. This idea raises the hackles of administrators and faculty alike, not just at UC, but at research universities across the country. The common practice is to hide all of the cost of faculty research not covered by sponsored research grants under the misleading heading of expenditures for "Instruction."

My own calculations, separating those cost components by using data from a faculty time-use study, lead to the conclusion that, as of 2007, undergraduate student fees at UC had reached 100% of the actual cost of providing their education. And fees have since risen by 30 percent!

There is a sharp conflict here to be resolved. If the administration's number is accepted, then taxpayers might well be right to complain that they are subsidizing UC students. If my number is more correct, then undergraduates (and their families) are already paying the full cost (or more) for their UC education. This is true whether or not we agree on the public good of a UC education.

If I am right, then it is up to the state government and taxpayers to assume full responsibility for funding the university's research mission and to stop pushing the cost of that research - which is a benefit to all - onto the tuition bills of students. This is a direct challenge to the Board of Regents and their hired executives.

Let's see if I get this right: if a faculty member is working on research during the summer rather than teaching summer classes, or doing some research during the academic year without benefit of a grant (and the research reassignment that sometimes accompanies the grant) that's somehow stealing from the students?

What happens to the money that the university takes in from undergraduate tuition and fees? This is the largest pot of discretionary revenue that our administrators collect, but there is no way to find out how they spend most of it. I have made repeated requests for data, but no one has an answer. It turns out that tuition money at UC is thrown into the mix with state appropriations, and it is spent without regard to its relation to undergraduate teaching. One recent controversy surrounds the practice of pledging student fee revenue as collateral whenever the university sells bonds to finance construction projects on the campuses.

Yes, money is fungible. Professor Schwartz, however, is getting into unfamiliar waters here ... does he want to focus on research, or does he want to identify the hidden subsidies to athletic facilities or buildings for student services? Perhaps California universities operate under constraints that allow them to borrow money for capital projects, including athletic facilities and administrative offices, but not for operating expenses. He chooses, however, to make a different point.

The allocation of university funds between research and instruction is only part of the problem we face at the university. Another is the sharply rising administrative overhead, which pushes costs upward - as noted by the letter writer to the Chronicle.

Administrative bureaucracy has grown at an alarming rate. I collected data from official UC sources and found that over a recent decade student enrollment had increased by 33%, university employment had expanded by 31%, and the ranks of management had more than doubled, up by 118%. This excess represents an added cost of roughly $600 million to the university's budget. When presented with this data, top officials have failed to give any credible response. This bureaucratic bloat is likely the result of administrators feathering their own nests with too many vice-chancellors and deputy assistants. To faculty, it certainly appears that there is too much staff and glitter at the top, while the core of academic departments are left to starve.

Moreover, executive compensation at the university has been a never-ending scandal. While the total amount of money involved here is not so large, the practice of treating university administrators like corporate executives has outraged many people both inside and outside of academia. Even within the faculty there has been a scramble for higher salaries by playing the game of soliciting offers from wealthy private institutions. This siphons off money from basic needs and creates internal tension, especially with poorly paid junior faculty. For my generation, the old practice of uniform salary scales and steady promotion on merit was instrumental in making UC one of the world's great centers of learning.

You can't have it both ways. An administration that is reluctant to pay its star faculty -- including the up-and-comers in competitive disciplines -- is an administration in which the stars and the up-and-comers are going to seek offers elsewhere. The dean or the provost cannot kid himself or herself that a post at Berkeley (or Columbia or Wayne State or anywhere else) is somehow sufficient honor that the honoree will not be so crass as to accept an offer somewhere else.

An unrelenting chorus of obeisance to the gods of "the market" has seriously eroded the time-honored virtues of the university. Universities are not corporations operating for a profit, putting out products called "science", "innovation" or "degrees." They are collegial bodies of faculty pursuing knowledge and teaching under the watchful eye of their peers. They are communities of the young seeking to learn from the wisdom of teachers before they go out into the world. They are motivated by a remarkable (if always imperfect) degree of selfless pursuit of ideas for their own sake and for the good of humankind.

Adam Smith: "I have never known much good done by those who affected to trade for the public good."

To "captains of industry" it is natural that top executives are responsible for the success of any enterprise and therefore deserve large monetary rewards. But a university is not like that. Presidents and Chancellors do not decide what courses to teach and how to teach them; they do not decide what research projects to pursue and how to do that. It is the thousands of professors operating independently and in concert with their peers, who make those decisions. The role of university administrators is to keep the plumbing in working order and to see that the bank accounts are well-managed - necessary work, but not deserving of extravagant salaries.

Note, however, the formal and informal networks, and markets for ideas, that influence those professors' choices of course content and research projects.

There are two fundamental reasons for defending public universities against the corrosions of market logic and erosion of state funding. The first, following our greatest thinkers, from Thomas Jefferson to John Dewey, is that a well-educated citizenry is vital for good government. It is a public good America cannot do without. Money making cannot be the only order of business for a democracy.

The second purpose of public education is to provide opportunity to all qualified students regardless of background and financial status. For generations, our great public universities have been an antidote to the poison of an immanent aristocracy, by providing broad avenues to advancement for our most talented youngsters. The great danger today is the growing gap between a wealthy elite and the rest of us, whether through excessive executive compensation, Wall Street bonuses, or stock speculations.

If these public universities are choked off - either by becoming mediocre schools or by becoming more and more exclusive - then we will have lost a major counterweight to the rule of privilege and a principal foundation for the future of the Republic.

Note that these paragraphs do not depend on the allocation of joint and common costs of research and teaching. They do, however, depend on market tests. The popularity of the U.S. News rankings reflects in part the decision of far too many public universities to pursue enrollments irrespective of whether the matriculants are, as Professor Schwartz puts it, qualified students.