Higher Ed as a Bubble?

This is a different angle at the Declining By Degrees hypotheses, likening the decision making in Higher Ed to that in the Financial Sector where there was a shift to high risk loans in order for investors to continue to earn high rates of return.

This brief Wall Street Journal Editorial from last summer likens the decision making to a Bubble Mentality.

Is Higher Education the Next Big Bubble? - Real Time Economics - WSJ via kwout

This Money Magazine series from a year ago (there are 3 articles) details the issues. One is an arms race on facilities. Here I will give a different spin on this than is in the articles. First, as the very rich got richer, it became increasingly important for college fund raisers to tap into them for big gifts, especially as other sources of revenue began to dry up. Second, many of these people want to give for facilities because the building serves as a monument to them long after they are gone. (Do note that some give for scholarships or for endowed chairs or in an unrestricted way, so not all givers are in give for a building category.) Third, the usual business practice is for there to be matching funds to an external gift. Way back when the state would provide those matching funds. More recently, those funds have to come from a different source. When tuition is used for this purpose it can't be used for what it usually covers.

The other issue is that funds that used to go for instruction are now going for research. (That's mentioned in the second of the Money Magazine articles). So the first question is whether this is a good or a bad. After all, places like our Campus are fueled by research. The argument is not that research is bad but that the balance between research and teaching has gotten distorted. This is an interesting issue to puzzle about. The second question is, if it is bad why is it happening? The argument here would be that top college administrators, like top business executives, look to their own advancement and making big splashes with notable research projects does that much more than doing less visible things on the teaching and learning front.

College tuition is far outpacing the cost of living - Aug. 20, 2008 via kwout