Wednesday, February 04, 2009

Art Museums, Radio Stations, Presses: Redeploying Assets

By Richard Vedder

Times are tough for universities, so they are starting to do interesting things out of desperation to cut costs or raise cash. Brandeis University wants to get out of the art museum business. Now the art museum, with paintings perhaps worth millions, costs the school cash to operate. Sell the paintings, the university ends that cash outflow, and gains funds that can be redeployed --increase scholarships, reduce debt, build more vitally needed buildings, etc. At my university's rival, Miami of Ohio, the school has decided to get out of the radio station business, in effect giving the nearby Cincinnati public radio outlet the right to its frequency (although the school will still retain ownership of the license). Still other schools are asking: why do we run an university press? Are the benefits in terms of institutional prestige, etc., enough to justify the costs?

All of these moves have been controversial. But every change, it seems, in higher education is precisely that. No one wants to lose their job, or see a familiar university asset be redeployed. Yet this sort of redeployment goes on all the time in the private sector. Old investments sometimes crumble and fail-- bankruptcy, and on other occasions are sold. Companies exit some endeavors, while entering others. Creative destruction, the essence of capitalism, coexists with creative innovation and construction.

The recession is hitting universities hard enough in some cases that they are being forced to adopt some of the practices of the private sector. David Hodge (the president) of Miami probably reasoned that the residents of Oxford will still be able to get their favorite NPR shows after the station sale, and it was not worth several hundred thousand dollars annually in subsidy just to keep local news that will no longer be aired after the Cincinnati people take over the Miami operation. My suspicion is that President Hodge is absolutely correct. Similarly, my guess is the Brandeis paintings will still be enjoyed by the public after the closure of the museum, to be sure perhaps a different public in different settings. But Brandeis will have more funds for other purposes.

Yet the savings from closing these quasi-academic ventures are actually probably less than can be gained from getting out of other commercial activities that have little or NO academic content. My university rarely gets more than 15,000 persons at a football game or 7,000 for a basketball game, but spends millions on athletic subsidies --at a prohibitively high subsidy per attendee. Almost every university has some food and/or housing operations that could be run more efficiently by outside contractors --and free up millions in capital outlays by so divesting.

I suspect that some schools should contract out some of their academic activities as well. Remedial education is essentially teaching high school level work to (academically speaking) rather mediocre kids --something a variety of private providers do successfully to help high school kids overcome deficiencies so they can graduate. Some nifty proprietary tutorial services are available for college students as well --why not let them handle more of the intensive instruction of students having difficulties? Universities own airplanes (mine does anyhow), printing operations, movie theaters, and a host of other things that are tangential to the mission of schools that might be profitably divested in these times of stress. Necessity is the mother of invention.


capeman said...

Yes, by all means, the public colleges and universities should follow the model successfully deployed by the likes of AIG, Citibank, Bank of America, the entire financial industry, the American automobile companies. Thanks to the magic of the market, the colleges can get hundreds of billions in bailout money, rather than the paltry $7 billion in the latest version of the "stimulus" package.

Lenny said...

You can almost feel the anticipation building as Dr. Vedder constructs his straw man in the opening paragraphs before making his inevitable--and ridiculous--leap of logic to his oh so predictable conclusion of privatizing public higher education.

Well done, Doctor. Straw man constructed and successfully knocked down.

capeman said...

Yes, the glee at the prospect of universities having to dispose of their art collections is palpable.

I wonder if he is so gleeful about the wreckage of the market system in the United States, due to the greed and incompentence of people on Wall Street and in Washington.