Monopolies University Style

By Richard Vedder

Economists hate monopolies, as do most people. Monopolists, facing no competition, tend to become arrogant, inefficient, costly, and provide shoddy services. That is what the Bureau of Motor Vehicles in the typical state is a dreary place with long lines and indifferent to hostile employees --they have no competition.

Universities, trying to make a few more bucks, enforce monopolies all to often. Freshmen must stay (at many campuses) in university housing. Why do they flee as soon as they can? Because they want to leave the monopolistic university housing sector that has boring, one-size-fits-all rooms, and seek the diversity of choices available in competitive private housing. But housing and food services are not the only example.

My chief Whiz Kid, student, and friend, Matt Denhart, runs a student organization at our university. He wanted to have some tee shirts made. The town is full of tee shirt entrepreneurs. He was told, however, that the work must be done by the university print shop --that takes far longer, and probably charges more, than the private alternatives. You want to serve food at a reception for your majors? You must buy the food from the university food service. You need a lock changed? You must use the university key services.

This is all outrageous, of course. First and most fundamentally, not only should the university allow private entrepreneurs to provide the good or service, the university itself should not be in those businesses. Universities are about learning and extending the frontiers of knowledge, not about making keys, selling pizza, running quasi-hotels, or printing tee shirts. At the very minimum, individuals within the university should be able to choose between the university and private alternatives.

Why do universities have these crazy rules? It is a disguised way to add to revenue --dorm operations often operate at a profit that is used to subsidize other activities. Instead of raising tuition and annoying a lot of people, they raise dorm fees, which are less conspicuously known by the public. At many schools, the employees running monopolistic non-educational services receive compensation levels in excess of competitive private sector norms, increasing resistance to change.

Along the same lines, Jim Boyle of Concerned College Parents of America was in town, having his son Griffin look at my university. Jim is furious at colleges for refusing to let students pay for health services using their private insurance policy --many campuses don't want to be bothered with insurance paperwork. His view is that universities are supposed to be run for the students, not the convenience of university health personnel. University lobbyists managed to kill bills in two major states that would require universities to accept private insurance. Universities want to maintain their own health care monopoly, a dubious idea to say the least.

Should we tax the non-teaching, non-research quasi-commercial activities of universities? With behavior like that cited above, the case for doing so is growing.