Colleges and Bloat

I couldn’t get at the Chronicle article “College Administrations Are Too Bloated? Compared With What?” from home (no login here),  so I read the paper it looks like it may have been based on instead.

It’s well worth a look — it articulates what I think many of us knew but could not express — that college is expensive because it is structured as a service industry, and the rise of college prices relative to the rest of the economy is actually in line with how all other labor-intensive service industries have tracked. And it introduces an explanation which is apparently well-known to economists, but is new to me — cost disease theory. In cost disease theory, gains in productivity in industries benefiting from technological and process enhancements adversely affect costs in service industries, where there are no such gains — both types of industries compete for the same pool of workers, and the rising wages in the industries experiencing productivity gains force wages in the service industries upward — even in the absence of productivity gains.

There’s really only two solutions to this, according to the authors. The first is not really a solution per se — it is to see the situation rather like a haircut or a musical concert — you cannot significantly increase productivity associated with the delivery of the service. You’re just going to have to lump the costs. The second is to reconfigure the process of delivery and achieve productivity gains.

But the key point here is that if you do not achieve productivity gains, costs will not remain stable — they will rise.

[One interesting note — I probably could have written this in half the time if I could have blockquoted some text from the paper to explain the above concept. But the PDF is locked against copy and paste. If you want to explain why higher education is doomed when it comes to productivity, closed processes like that might make a good start.]

3 thoughts on “Colleges and Bloat

  1. Thanks for stopping by David — and thank you for the article. It really was a Eureka moment for me — so many fruitless discussions happen on the idea looking for productivity gains are somehow antithetical to a focus on quality — this really allowed me to understand the complex way that the two are linked.

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