That Old College Lie

Are our colleges teaching students well? No. But here’s how to make them.

The economist Howard Bowen wrote the classic treatise on how reputation-seeking influences university behavior. He called it the “revenue-to-cost” phenomenon. Essentially, colleges don’t figure out how much money they need to spend and then go get it. Instead, they get as much money as they can and then spend it. Since reputations are relational–the goal is to be better than the other guy–there is no practical limit on how much colleges can spend in pursuit of self-glorification. As former Harvard President Derek Bok wrote, “Universities share one characteristic with compulsive gamblers and exiled royalty: There is never enough money to satisfy their desires.” Inevitably, much of that money comes from students.

The information deficit rewards and sustains these inclinations. In the absence of independent information about quality, consumers assume that price and quality are the same thing. At the trend-setting high end of the market, higher education has become a luxury good, the educational equivalent of a Prada shoe. These are unusually nice shoes, of course, just as Harvard is an unusually good university. But in both cases consumers aren’t paying for quality alone–they’re also paying extra for scarcity and a prominent brand name, the primary value of which is to signal to the rest of the world that they’re rich and connected enough to pay the price.

While most colleges aren’t in Harvard’s league and never will be, they pay attention to industry leaders. Luxury schools set standards for faculty salaries, student amenities, and other expensive things that ripple through the higher education sector as a whole. The status-seeking mindset is infectious. Colleges all want to become more important, and they all know how to get there–spend and charge more.

Indeed, they have little choice. Ten percent of the U.S. News rankings are based on spending per student, with additional points for high faculty salaries and other costly items. If an innovative college found a way to become more efficient and charge less while maintaining academic quality, its U.S. News ranking would actually go down. Public colleges, which most students attend, also get direct government subsidies to keep prices artificially low. So even community colleges and less selective universities that aren’t fighting tooth and claw for students can jack up tuition to do things like reduce faculty workload and increase administrative pay.

All of these factors combine to give colleges many reasons to raise prices and very few to lower them. To be sure, institutions occasionally try to hold prices down and market themselves as a good value (although this is difficult when the information deficit leads consumers to believe that price and quality are one and the same). But the long-term trend is unmistakable. Average inflation-adjusted college prices have more than doubled in the last two decades. The National Center for Public Policy and Higher Education recently found that the total increase in college tuition from 1983 to 2007 (439 percent) far outpaced the rise in median family income (147 percent) and even the medical care costs (251 percent) that are threatening to bankrupt the nation.

Information, Please

Price increases without end are bad enough. They’re made worse by the fact that the information deficit also has a pernicious impact on the quality of classroom teaching. In part, this manifests itself in spending priorities. For the reputation-maximizing university administrator on the make, the best things to buy are visible: new buildings, elaborate student fitness centers, renowned scholars who don’t actually teach undergraduates, Division I basketball teams. But there are no ribbon-cutting ceremonies for hiring better teachers, and office workers across the country don’t fill out photocopied tournament brackets for college learning every March.

The information deficit also acts as a powerful impediment to reform. Anyone who has ever attended college knows that many college teachers are terrible at their jobs. Universities like to pretend that great scholars make great instructors, but one indifferent, outdated lecture from a tenured professor is enough to conclude otherwise. Because scholarly outcomes are visible, in the form of publications and citations, while teaching outcomes are currently not, colleges privilege the former above the latter. Tenure-track professors are routinely discouraged from spending too much time teaching, lest students distract from the mandate to publish. Legitimate evaluations of professorial teaching skill are practically unknown.

Putting the scholarly and teaching missions in better balance would require a confrontation with traditionally autonomous academic departments. That inevitably creates controversy, and controversy is poisonous in a market that depends so heavily on hazy, decades-old reputations. As economist and longtime college professor Robert Martin recently wrote,

Reputation maximization leads to a bias against reform…Pointing out problems leads to controversies, and controversies damage reputations; hence, reform damages reputations…to the present generation of administrators, faculty, and trustees, the cost of a diminished future reputation is small, while the cost of a diminished current reputation is high…Controversies always suggest that something is wrong.

This reform-resistant environment exists only because institutional reputations are so disconnected from learning. If bad teaching created negative publicity or materially affected the ability of college presidents to recruit students and raise money from alumni, presidents would have much stronger incentives to tackle reform head-on. Right now those incentives don’t exist, which is one reason why less than a third of college graduates are literate in the best sense of the word.

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