Here are the reasons from the article.
The first is *third party payments*. When someone other than the consumer
is paying, at least temporarily, some of the bills, the customer is not
very sensitive to prices.
Second is *lack of information*. For markets to work effectively, buyers
and sellers need lots of information. Yet colleges (in the information
business) and their customers, are remarkably ignorant about key aspects of
higher education. Do seniors know more or think better than freshmen? Does
the senior year add as much value to a student's knowledge, sense of right
or wrong, leadership or critical thinking skills, etc., as the sophomore
year? How much do students apply themselves? Do they like their school?
What do they earn five years after graduation? Does a sociology degree have
the same vocational relevance as a degree in accounting or mechanical
engineering? Answers to these and many other questions would help students
and academic administrators make intelligent resource allocation
decisions--yet no answers are available.
Third, most higher education is *not for profit*. While most academics view
that as a great virtue, I don't. The lack of a profit motive reduces
incentives to cut costs, improve product quality, and other things
necessary to make profits and enhance wealth in the private market economy.
Fourth, closely related is the term *bottom line*. General Motors and
Wal-Mart have well defined bottom lines--the stock price and profits. What
is the bottom line for Harvard or Slippery Rock State? Who knows? How can
you achieve goals if you don't know, in a well defined sense, what they
are? How can you get "more productive" when you cannot even measure your
outputs well?
Fifth, *resource rigidities* are a problem. Tenure makes it hard to move
faculty resources from areas of low demand to those of higher demand.
Faculty with lifetime appointments can fight innovation and change with
relatively few adverse consequences, stifling innovation. Universities own
large buildings that often get little utilized, particularly after changing
consumer demand renders some of them obsolete or underutilized.
Sixth, there are problems with *barriers to entry* and restrictions on
competition. Both accreditation agencies and regulators make it difficult
for small but innovative new institutions to begin. For example, proposals
to require "state authorization" of on-line instruction in every state an
institution operates forces smaller on-line companies out of the market in
some states.
Seventh, the public nature of *support and control* of schools containing
most students means that higher education is now, in some sense,
politicized. Universities have to conform to rules in order to get
government grants or allow students to receive student loans, and not
always do these rules make sense, having a "one size fits all" dimension to
them.
Eighth, universities try to charge what the traffic will bear, engaging in
massive *price discrimination*, favoring some students (poorer ones,
extremely bright ones, those with preferred skin colors) more than others
(more affluent, less bright kids, those whose skin color is less desirable).
Ninth, universities engage in *rent-seeking*--receiving more payments than
necessary to provide services. Workers sometimes receive inflated salaries
not justified by market conditions or merit. Salaries are higher for those
who get research grants for time off from teaching to do research, compared
with those who continue to teach full loads.
Tenth, many schools, especially large research universities, engage in
massive *cross-subsidization*, showering vast resources on some activities,
such as graduate education, while providing little for, say, undergraduate
instruction. Lower teaching loads to promote research are subsidized by
tuition fees ostensibly paid to provide for student instruction. This
increases tuition sticker prices.
Eleventh, *ownership* of universities is murky. Many groups think they own
"their" school--the faculty, the trustees (the legal owners usually), the
alumni, state government officials, sometimes even students. This leads to
turf wars and unproductive wastes of resources; for example, the chemistry
department might forbid others from using "their" building, even though it
might be wiser to use some of the space for other needs.
Lastly, there are often massive *governance* problems often. Who runs the
schools? There are several who claim that right, leading to murky
decision-making, often by committees ("shared governance") of a
non-innovative nature to appease all powerful claimants on power.
J
-
Ninety percent of politicians give the other ten percent a bad reputation.
- Henry Kissinger
Politicians are people who, when they see light at the end of the tunnel,
go out and buy some more tunnel. - John Quinton
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~|
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