Tuesday, September 16, 2008

Mission Impossible: Burt Weisbrod on Universities

By Richard Vedder

My sidekick Andy Gillen reminds me by his latest blog that I have not written much on Burton Weisbrod's new book with Jeff Balloou and Evelyn Asch, Mission and Money: Understanding the University. This is a nice addition to the literature on the economics of higher education written by one of America's leading thinkers about the behavior of non-profit organizations.

The basic premise is simple --arguably TOO simple. Universities essentially are about two things --defining and carrying out their mission, and finding the money to fund it. The two go together. A mission is impossible without money. Scarcity of money limits the scope and nature of missions. A paucity of good missions or mediocrity in performing those missions can even impact on the ability to raise money. The two are linked. Sometimes, the universities will do things to raise money to finance their missions that, in the long run, damage their reputuations and hurt their ability to perform the mission (e.g., when the university plugs commercial products).

A majority of the book is about money --funding universities, rather than the missions themselves. There are lengthy discussions of tuition policies, endowment management, the quest for donations, commercial use of scientific research, intercollegiate athletics, etc. Not much discussion exists about the trade-offs between undergraduate and graduate instruction, the arguments for performing non-commercially relevant research (e.g., in the humanities), on the measurement of mission accomplishment, etc.

The book does not explore the big trends concerning many Americans: the reasons for the rapid increase in higher education costs, the role that third party payments play, the economics of the student loan issue, etc. The authors make too much of the similarity between profits and non-profit institutions, and not enough of the powerful role profit incentives play in leading to different outcomes in the two types of institutions. There is no discussion of the use of cost-benefit techniques to evaluate mission success.

Even within the fairly narrow "money and mission" framework, vastly more space is devoted to intercollegiate athletics, which rarely is more than 5 percent of either money or mission at a university, than to tuition policy, which is quantitatively a far more important financing device. The importance of fixed supply at selective admission schools, and of the trade-off of lost tuition revenue from pricing tuition below equilibrium levels against the loss of prestige and the denial of access to lower income students is not discussed, despite its importance. An inordinate amount of discussion revolves around patent issues, which are of trivial import to most of higher education.

Despite these and a few other flaws, the book is on the whole good. It gives some good information on issues that every university president must face. The information on contracts for football coaches, for example, is interesting and offers some insights into real institutional priorities as opposed to professed pieties (e.g., it is pretty clear that winning football games is infinitely more important than graduating football players). In short, the book has a number of interesting insights that make it a good read for serious students of universities and the way they work.

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