Wednesday, July 01, 2009

Revenue to Cost Spiral

by Andrew Gillen

The Pope Center released an absolutely phenomenal paper today, The Revenue-to-Cost Spiral in Higher Education.

The author, Robert Martin, explains why “Higher revenues induce higher costs, and those higher costs are used to justify future calls for more revenue.” Those of you familiar with my financial aid report, or with Bowen’s rule (from which we both drew crucial insights) will recognize the argument.

Martin goes into much more detail on this, exploring why it happens, and how perverse incentives and a lack of information indicate that unless there is change, this process renders higher education “a black hole that cannot be filled.”

There were also a few great insights about why universities are biased against reform.

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