Friday, September 15, 2006

Who Owns the Universities?

By Richard Vedder

Bryan O'Keefe and I ventured out to the George Mason University Law School yesterday, where I was giving a standard academic presentation. An unexpected bonus was a delightful lunch with Professor Lloyd Cohen, who previously wrote a thoughtful review of my book GOING BROKE BY DEGREE.

Lloyd put a little different twist on something I have been saying for years. I have been saying that the non-profit nature of universities leads to reduced accountability, limited metrics to evaluate performance, and blurred lines of authority. But Lloyd summed it up: "who owns the university?" It is a property rights issue. There are no stockholders, although in some state universities taxpayers (citizens) would claim collectively they own the institutions. But at better schools, faculty act like they own them, making decisions generally not within the pay grade of a large group of rank-and-file employees. University administrators sometimes act like they own the institutions, often extracting some of the cash surpluses generated to better their own lives financially and vocationally. The trustees think they hold title, but usually abdicate authority.

The issue of university "ownership" goes to the heart of many problems facing universities today, along with the lack of incentives to behave efficiently with the best interests of the customers and society as the primarily consideration.


Editor Theorist said...

Interesting point.

I think this will only become clarified when competition hots up for students and fees. This will inevitably come, as trends always end.

Ive been doing some analysis of research output of UK and US universities, 1975-2004, in terms of publications and citations - and there are some surprises in the data. Im not quite sure what to make of it, but the big state universities with big medical research facilities seem to be catching up on the elite privates) except Harvard, which is way above anyone else).

But a number of factors are pushing me towards the idea that teaching and research are going to get ever further apart - at least at undergraduate level. Indeed, its hard to see how a university could - even in theory - do both at the highest level.

At present there are probably cross subsidy flows between T&R, but I doubt whether this is sustainable over decades.

My guess is that students and their parents will, as tuiton fees increase, become more picky about the nature of subjects studied and the quality of teaching. I doubt whether colleges that teach pseudo-subject badly for premium fees used to subsidize research can keep this scam going in the long term.

superhiker said...

Well, theorist, an interesting theory you have there. It's not clear to me that tuition is being used to subsidize research, however. Perhaps it works the other way? In any case, the top schools seem to get more and more competitive for admission ...

Butter Cup said...

"Universities may pay for these 'own' research expenditures, including underrecovery and cost sharing, from a research account or from any of their unrestricted funds accounts: revenue from state sources, industry, private donors, educational sales and services, auxiliary enterprises such as campus stores, etc., and tuition. Thus, a subsidy of research by tuition cannot be ruled out and might be contributing to the research universities' persistently higher tuition charges."

See NSF article that comes to some "maybe" conclusions at:

Actually I don't particularly care for this article since it isn't very decisive in its conclusions.