Mike the Mad Biologist

Brad DeLong, Scott Lemieux, and Felix Salmon all take Stanley Fish’s absurd discussion of Why Does College Cost So Much by Robert Archibald and David Feldman to task–and are right in doing so. It’s a shame because Archibald and Feldman actually do have some key insights into where the money goes. The arguments they make aren’t Fish’s arguments either. How one can claim that college costs haven’t risen faster than inflation boggles my mind: it simply involves division (college costs have risen much faster than the median household income). Of course, this is Stanley Fish, so numerical illiteracy is to be expected.

But why college costs so much is an important question. In the ultimate sense, colleges charge what the market will bear (even if that market is massively subsidized and distorted): when you hear a private institution crowing about how fifty percent of its students receive aid (i.e., it’s socioeconomically diverse), remember this means that half of the students come from families that can pay $40,000 to $50,000 per year in cash. When you account for families with more than one child–and children often overlap–we’re talking about families that can plunk down $80,000 to $100,000 for a couple of years in a row, with some $50,000 years in the front and back to boot. I’ve never looked at the rise of college costs compared to the increase in income among the top five or ten percent of households, but I’m guessing college costs haven’t exceeded this group’s increase in income–which is the target market share for most private colleges and universities.

But I digress.

As I see it, there are four major ways all those dollars are spent (and therefore, why tuition hikes are needed):

1) The administrators and deans go to the bank, withdraw a huge pile of cash, and roll around in it:

scrooge mcduck Pictures, Images and Photos

2) Certain legacy costs, such as delayed maintenance, healthcare, or pensions are spiraling out of control.

3) Universities invested (or overinvested) in shiny new infrastructure, for both students and faculty.

4) Universities are in the service industry business, and, like most other service industries that require highly skilled labor, wages have been rising faster than inflation.

Archibald and Feldman argue that the last point matters a lot, and it’s a pretty sound argument. While faculty salaries haven’t risen all that much, on the administrative side, salaries and the number of people have increased. By administrative, I don’t only mean what one usually thinks of as ‘admin’, but also student services, and IT. Despite Felix Salmon’s claims to the contrary, IT expenses do grow quickly. This has little to do with hardware costs, since costs per unit of storage, network, and CPU are dropping, although the total cost usually remains constant as capacity is added, instead of lowering costs (i.e., you get more computer for the same cost, not the same computing for less cost).

What is expensive are the human costs (pesky humans!). Where I work, I know we spend far more on ‘wetware’ than hardware. Good IT personnel are expensive, but vital to an institution whose purpose is to disseminate information. In other areas, we’ve seen addition of specialized staff that colleges simply didn’t have thirty years ago (e.g., rape crisis counselors). They don’t come cheap, and they require more infrastructure. Also, as the importance of grants (and the overhead associated with grants) increases, universities will pay top dollar for administrators at every level who are good at efficiently and effectively managing this money (a good grants person is worth her weight in gold).

So Fisk is an idiot; you don’t need me to tell you that (usually he’s a superb leading counter-indicator–do the opposite of whatever he says). But personnel costs are a key factor in the cost increase, and Archibald and Feldman provide pretty substantive evidence to make that case.

Comments

  1. #1 dmab
    November 22, 2010

    en.wikipedia.org/wiki/List_of_prizes_for_evidence_of_the_paranormal

    HOW NOSTRADAMUS WON ALL THE PARANORMAL PRIZES!

    en.wikipedia.org/wiki/Nostradamus

    THE HIGH PRICE OF REVOLUTION

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  2. #2 Therese
    November 22, 2010

    It is untrue that those families that are deemed “able” to pay 40-50K a year can actually “afford” it. My family is one of those, with 5 children to educate and a recent income that is likely just over the line where someone thinks that aid should be given has left us spending one entire family income on college per year that each child is in school. This will be the case for 20 years!!! It doesn’t leave us able to save for retirement, build a cushion against disaster or many of the other things that the upper-ish middle class need to do. We shoulder our medical expenses, huge property taxes and yep, if one of us become sick it all goes away. And, yea, the government will loan us money for college – at 8.5%!! Nice way to help provide for an educated population.

  3. #3 Phytophactor
    November 22, 2010

    I know exactly why the cost of higher education has gone up so fast at least for public institutions in our state.1. the real increase in costs: energy, labor, etc. 2. unfunded mandates – the state demands that the university do something either without providing any funding or after removing the funding. 3. withdrawal of state support – in my 30 years state support as a percentage of the cost of higher education has gone from 68% to 23%. Obviously tuition increases had to cover that difference, and the cute, brilliant part about this is that the university is getting dunned, not the government, in fact state politicians pile on the criticism. When taking into account changes in inflation and cost of living, our university is operating more efficiently now than it was 30 years ago. Of course updates and facilities are constantly in need of improvement too, but the change in funding from the state in the overwhelming factor in accounting for the increases.

  4. #4 Rugosa
    November 23, 2010

    Yep, Phytophactor. I used to work for a state university where the state was able to pony up for new buildings and infrastructure with the goal of increasing enrollment while cutting funding for actually running the place. I suspect, based on this state’s past performance, that there are many palms being greased via the new construction, not so many via operating costs.