Very early in the history of Cold Spring Shops, I called readers attention to the phenomenon of administrative bloat in higher education.  In retrospect, I should have been grateful for 1985 level enrollments with 1995 staffing, given that we're now working with 1985 level enrollments and 2013 staffing.  More recently, I've attempted to link financial aid, administrative bloat, and tuition bubbles.  And financial aid provides all sorts of opportunities to practice perfect price discrimination.
To the extent that vouchers make potential students or their parents less price-sensitive, the administrators are free to exercise more market power. We also have to know what preferences the students are acting on. These vouchers might be subsidizing Jacuzzi U and other creature comforts -- not a new problem -- rather than additional computer connections, journals, or smaller classes.
The passage of time didn't make me less gloomy.
Furthermore, whether you want to call the third-party payment a voucher or a guaranteed loan or a subsidy, it is still a third-party payment. Students will have less incentive to shop around and administrators less incentive to cut out the expense-preference behavior. To obtain lower tuitions and greater enrollment requires both shopping around and an end to that behavior.
The good news for today is that commentators at outlets appealing to different constituencies are picking up the argument.  First, the Via Media argument, which will probably be picked up by Insta Pundit and circulated around the libertarian cyberspace.
Once upon a time, the government-subsidized student loan system was about putting college within reach of a wider array of Americans. But this model has gone sour, as colleges have raised prices to keep pace with federal aid. Universities increased tuition by 65 percent in the past ten years alone, meanwhile taking on debt to finance lavish new facilities. The number of administrators hired by higher ed institutions has increased 50 percent faster than the number of instructors since 2001.

It’s hard to imagine that universities would have done this if they had been forced to compete with each other on price. Alas, abundant government loans ensured that the only competition that mattered to them was the quest to lure in students and their federally subsidized grants and loans.
Rents sought, rents generated, rents dissipated in climbing walls and new-age dorms with self-contained kitchens.

So here's Matt Yglesias in Slate, likely to be picked up by a different set of constituents.
I think it's misleading to say that administrative spending is "contributing to" rising costs. That's not how things work. The issue is that schools are finding that they can get away with charging high prices. Since colleges are non-profits, ability to charge high prices doesn't lead to dividend payouts or the acquisition of big cash stockpiles. The money gets spent. And the trend lately has been to spend it on administrators.

All of which is one reason I'm skeptical that you can really do much on the college "cost" front by offering more tuition subsidies. At any given level of subsidy, schools are going to charge families what they can afford to pay and then they're going to take that money and spend it on the stuff that the people running the school want to spend it on.
Where it's not strictly what families want to pay, now it's what our political masters see fit to provide in the form of subsidized loans and other attempts to introduce affordable education.  And Business Week weighs in: "From 1993 to 2009, U.S. universities added bureaucrats 10 times faster than they added tenured faculty." Just in case anybody needed reminding why I frequently sound tired or cranky.

No comments: