Thursday, January 15, 2009

The Delta Cost Project Report

By Richard Vedder

The Delta Cost Project, largely funded by the Lumina Foundation, has released a report. On the whole, it is excellent, detailing trends noted in this space for some time. Colleges are getting more costly to students, while the share of budgets allocated to instruction falls. The proportion of the cost of attending college paid for by students is rising, and in some cases, fairly dramatically. If one used appropriate pricing --measuring costs at the margin ---in some cases I suspect a growing number of students at private and some elite public schools are actually paying well over 100 percent of the incremental cost of college.

Of course, as I noted in the INSIDE HIGHER ED story running today, truly measuring college financial performance, efficiency, and productivity, takes more than tracing revenues and expenditures. We need to know what the students are getting for their education other than a piece of paper that has considerable credentialing value. Are they learning anything? More knowledge? Better critical learning skills? Values that will make them better citizens? Who knows? We measure inputs, not outputs. I don't fault Jane Wellman and colleges for not addressing this issue much, because of the inherent problems of measurement and because of university resistance to measuring the "value added" of the higher education experience.

Liberals will interpret the report as demonstrating that the public purpose of higher education is being eroded. Conservatives will show that universities increasingly ignore students and, despite falling state appropriations in real (and in some cases, absolute) terms, are still spending as much per student as ever. Real cost containment has not evolved, despite a growing public agitation of the rising real cost of higher education.

From 1960 to the present, the share of our national output going for higher education has nearly tripled. In the coming generation, we will face a growing proportion of output needed to sustain an elderly population that is no longer economically productive. We face intense international competition that makes tax increases economically very costly in terms of reduced competitiveness. The higher ed share of the national output cannot grow without huge costs and pain to society. For that reason, I think the time is coming when colleges will have to do what almost every other sector of society has done --get more productive. Too bad we cannot even measure productivity change. That said, the Delta Project is doing useful work, and their calls for greater financial transparency echo those of CCAP and other reformers.

1 comment:

Cowboy said...

It is really getting rediculous - Isn't it? And yet we have commenters defending this crap. While productivity may be hard to measure, the cost of higher ed schooling is not.

My daughter can attend the University of Glasgow (Where Mr. Adam Smith went to school) for the same or slightly more cost than U of Montana or Montana State (Where nobody noteworthy went). And nobody is beating down the doors to get into either of Montana's two universities. I wonder why that is? In Montana, we usually blame all our problems on Californians, so maybe it's their fault.

But seriously, the current business model and cost structure of colleges and universities can not be sustained. When it comes crumbling down (and it most assuredly will), I don't know what will happen to productivity, but I have a few thoughts on that matter.