America / Education / Fiscal policy / Uncategorized

Ravenous Cookie Monsters and Higher Education

In a recent New York Times piece, Robert H. Frank attempts to explain the dynamics behind the continued growth in college tuition in the United States. Using elegant analogies, Frank points to rising costs for universities, such as increasing salaries for professors and technological degrees.[1] Responding to the President’s recent call to tie subsidies to tuition, it is the author’s conclusion that such action would ease the intensity of the “bidding wars” between universities that drive up costs. Like any good academic, he rounds out the article by calling for appropriating even more of the wealth of those with high incomes.

Unfortunately Frank’s analysis is a prime example of the flawed thinking that dominates the perspective on college tuition. Generally there is a failure to recognize the unique nature of a university when it comes to costs and spending.

Quality of education is difficult to quantify, and therefore difficult to measure. Instead of focusing on outputs, universities focus on inputs, running on the implicit assumption that higher spending will lead to better quality product.[2] This leads to what Andrew Gillen has termed “Ravenous Cookie Monsters Engaged in an Arms Race.”[3] Thus, universities have an unlimited utility for more spending, since that is the primary means of increasing quality, at least according to the predominating logic. When considering whether higher spending leads actually to better quality or only an appearance of better quality, I would only submit the pressing need for several universities to construct water parks and record size Jacuzzis.[4]

Subsidies in the form of federal aid is akin to giving the Cookie Monster one warm, gooey, freshly baked chocolate chip cookie. Because of its nature, the Cookie Monster won’t be content with just that. In the same way, universities can engage in a kind of price discrimination, where they can increase tuition to a price that only their most wealthy students can pay, while the government pays the difference for those who were priced out of the market.[5]

Consequently, the higher and higher spending has engendered higher and higher upkeep costs. It is difficult to say if or when the day will come, but soon universities will be forced to raise tuition to cover growing upkeep costs, independent of the financial aid they receive. The author of the New York Times article may agree with this conclusion, but he certainly missed the boat as to its cause.

The government intrusion into higher education has fuelled a boom that has resulted in an escalating increase in tuition. With an equally dizzying logic, the President has threatened to take away the cause of a problem if the problem is not fixed. However, this government induced bubble can have a messy ending. If universities upkeep costs require artificially high tuitions that the market doesn’t tolerate, we could see a total collapse of major universities across the country. In that case, you could surely count on higher education as receiving a bailout, a la the automotive and financial sectors. Academics like Frank may end up getting their way: by just having the most productive of society pay for it.

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