Tag Archives: economic

Should We Charge Different Fees for Different Majors?

Rick Scott.jpg

In the first couple weeks of any survey course in the
principles of economics, students are taught that prices are determined by the
interactions of consumers (demand) and producers (supply). Prices for many
things, such as oil, or of common stocks, constantly change with the frequent
shifts in the willingness of consumers and producers to buy or sell the good or
service in question.

Yet the price of college–tuition fees–seems to be
determined differently. For starters, tuition fees change but once a year, not
constantly. Universities are like restaurants, with “menus” giving prices for a
variety of different offerings, with the menu changing once a year.  For many schools, however, the listed price
is not what economists call an “equilibrium” price–a price equating quantity
demanded with quantity supplied. Rather, thousands are turned away at the
listed price at selective admission universities.  Also, massive price discrimination exists, so
many customers–often a majority–pay less than the stated or sticker price.

Amidst all of this, schools typically charge students the
same regardless of their major. A committee advising Florida Governor Rick
Scott has recommended a move to differential pricing–majors would pay
differing amounts. The goal is partly to entice students into the STEM
disciplines (science, technology, engineering and math) on grounds that our
future would be enhanced by having more scientists relative to, say, English
majors or anthropologists. By making STEM tuition fees lower, we will encourage
enrollment expansion in those fields. Ohio University’s Board of Trustees
recently considered (but did not yet adopt) a multiple-price approach, and
other schools are doing so. 

Continue reading Should We Charge Different Fees for Different Majors?

Don’t Cut The Sacred Cows

A modified version of this piece appears today in the Washington Examiner

Georgetown University, like many colleges and universities hit by the current economic downturn, is in what look like dismal financial straits. The value of Georgetown’s endowment shrank 25.5 percent last year, to $833 million, the annual deficit it has been running is estimated to climb to $37.8 million this fiscal year with little abatement in the near future, and donations are expected to be down–and likely to fall further if President Obama’s proposal to reduce tax deductions for charitable gifts takes effect. So Georgetown’s president, John DiGioia, like many another college CEO these days, recently announced a plan to cut costs.

The nature of DiGioa’s proposed cost-cutting, however—freezes on salaries, delays in filling vacant positions, and a hold on the construction of a planned science center—seem anemic in the face of the university’s obvious financial problems. That’s probably because Georgetown’s desire to trim its budget is running smack into the reality of campus politics, in which every program, silly, overstaffed, or non-essential as it might seem to outsiders, has an aggressive constituency ready to raise the pitchforks in its defense. Harvard, for example, facing a projected 30 percent drop in the value of its massive $38.5 billion endowment, announced in February it would trim the ranks of its contract janitors—not even Harvard employees—by a few dozen, leaving some Harvard buildings a shade less spic and span. The upshot? A series of student protests, denunciations by the Service Employees International Union, and on March 23, a unanimous condemnation of Harvard by the city council of Cambridge, Mass. Georgetown clearly doesn’t want to go down that road.

Private businesses might shrug off such negative publicity, but most universities are sensitive to their images as repositories of progressive values. So there is a long list of campus sacred cows that can’t be nicked by the budget-cutting knife without an uproar. One is tenured faculty. Tenure means having a job for life, no matter how lackadaisically you perform it or whether the department in which you teach attracts many students. The University of Texas Medical Branch laid off 30 of its 127 faculty members, many of them tenured, after Hurricane Ike devastated its Galveston campus last year and forced the temporary closing of its main teaching hospital. The Texas Faculty Association is now suing the state university system to force the professors’ rehiring.

Continue reading Don’t Cut The Sacred Cows

Universities As The New Corporations?

An article in Governing explores the increasing centrality of Universities and medical centers to regional economic health. It notes a 1999 Brookings Institute study that found multiple cities in which more than half of the jobs among the top 10 private sector employees were provided by universities or hospitals. Baltimore, for one:

One of the most compelling illustrations is taking place in Baltimore, where Johns Hopkins is far and away the largest private employer. In an effort that joins the university, the city and the mega-developer Forest City Enterprises, the John Hopkins medical system is building an immense new life sciences park aimed at spinning off business opportunities from its research, and is placing the park in the deeply struggling East Baltimore neighborhood the school inhabits. In conjunction with the Annie E. Casey Foundation and the city, it has created a public-private enterprise, East Baltimore Development Inc., whose job is to oversee an ambitious effort to rehabilitate the neighborhood by building new housing for its residents, helping them with family and health counseling, creating a new elementary and middle school, and perhaps most important, crafting workforce development programs to place East Baltimore residents in the construction, health care and bioscience jobs generated by the project…”

Today’s new factory? Increasingly, it seems so.