Higher Education and Construction Industry Productivity

By Richard Vedder

In my capacity as a professor and economic historian, I occasionally review books, and therefore happened to read Broken Buildings, Busted Budgets, a book on the stagnation of productivity and performance in American construction. Interestingly, the author, Barry B. LePatner, tied some of the blame for declining productivity to higher education, and made some insightful observations about American colleges and universities.

LePatner starts off by arguing that construction engineering programs have been too theoretical and "contained...too little exposure to actual industrial conditions." He goes on to say "A reasonable reader may…wonder why architectural or engineering schools do not improve their performance...or...why new, better...schools do not arise and supplement the existing ones. The answer is far from simple but...U.S. higher education is also an inefficient sector, one characterized by high barriers to entry, significant market distortions due to high government involvement...and the use of sub-optimal ownership structures." I could not say it better myself. He goes on and makes an even more stellar observation: "Almost all U.S. colleges and universities are nonprofits or joint-stock corporations, the theoretically superior form, the professional partnership, is almost never used. Government subsidies and endowments make nonprofits schools fat and complacent, while concern for stockholder interests renders corporate schools perpetually under-gunned in the brainpower department."

Before turning to the major point, let me comment on the "theory vs. practice" complaint. It is commonplace throughout higher education. For example, colleges of education want to teach students a lot about education theory (mostly very bad) rather than emphasize hands on classroom experience with professional guidance (a good idea). My discipline of economics teaches much math-based theory at the expense of imparting to students a feel for the human implications that the existence of scarcity creates. I have heard the same complaint expressed in other disciplines as well, such as communications. Indeed, many professors show disdain for "trade schools" that impart practical knowledge applicable to real world jobs, arguing that if we teach students to think they will learn quickly on the job in a world where the technical knowledge needed for jobs is changing rapidly in any case.

Yet I think the theory emphasis largely reflects the fact that the faculty are isolated from the disciplines of markets and the realities of an unsubsidized real world economy, allowing them the luxury to ignore practical matters in favor of elegant theoretical abstractions that seem intellectually more challenging.

Moving on to the major point, LePatner hits the nail on the head on the economics of higher education, rare for a lawyer (which he is). What is particularly intriguing is the idea of the professional partnership as the ideal form of organization -- superior even to for-profit corporations. We have talked occasionally about professors marketing their services directly to consumers, assisted by firms which specialize in providing administrative and managerial services (renting office and lecture hall space, collecting fees, etc). Perhaps partnerships of professionals should provide services doing the teaching of, say, the present university hired Political Science Department to an administrative organization which will contract with other partnerships in other disciplines, with the administrative overseer calling the combined products a university. The university would not employ its own professors, but put out to bid the teaching of educational services to private providers (by the way, that is the way CCAP is run). Maybe we should also separate research from teaching to some extent by creating separate research institutes. The pathetic thing is that there is almost no serious thinking and discussion going on about these possibilities --because the incentives to do so are lacking. Ownership and organizational issues are ignored --contributing to the lack of innovation and the resistance to change which characterize American higher education.