Tuition Rising: Why Colleges Cost So Much

Tuition Rising: Why Colleges Cost So Much is a tease.  Ronald Ehrenberg -- a noted labor economist, university administrator, and director of the Cornell Higher Education Research Institute -- lures the reader in, asking a most provocative question, and then proceeds to respond, rather engagingly and comprehensively, to a series of far more mundane queries, leaving the controversial issue of its subtitle squarely on the table.   As a result, the book poses questions it does not answer and frames dilemmas it cannot resolve.

The reader's frustration is exacerbated by small methodological lapses: Ehrenberg never fully defines his terms, he fails to embrace a set of clear normative or policy premises, and he tends to allow his focus to stray within relatively broad bounds. Even so, he articulates a tantalizing problem: How is it that a small group of elite colleges and universities (enrolling roughly one out of every twenty college students in America), have consistently managed to raise tuition more than the cost of living, year after year for more than a century?

This is an economic puzzle and a policy pickle, and it brackets the book: Thus, Ehrenberg asks at the outset, “Why can't these selective private academic institutions behave more like business firms and hold down costs?” (p. 5).  And, as he nears the conclusion, he observes that, if these elite schools “continue to raise their tuition by 2 or 3 percentage points more than the rate of inflation, as they have done throughout much of the previous century, they may further erode their already waning public support.  This in turn may lead to public policy changes that will not be in the institutions' best interests” (p. 283).

Unfortunately, the guts of the book – indeed, almost everything between these brackets – does little to engage with the puzzle or resolve the pickle.  Instead, the middle of the book is satisfied with providing an introduction to the range of management tasks that face elite colleges and universities. 

Ehrenberg documents the mechanics of the schools' “quest for prestige.”  He looks at program costs, faculty governance, salary, tenure, physical plant, admissions, libraries, even parking, HVAC, athletics, dorms, and dining halls.  The result is part primer for new department chairs, part peep show for parents writing tuition checks, part catalog of the factors that transform academics into bean counters when faculty take on administrative responsibilities.  Taken together, it makes a pleasant read, largely because Ehrenberg plays the role of participant-observer, describing himself and his milieu with objectivity, acerbity, and wit, taking us on a picaresque tour of an administrative vice president's inbox. 

In the final analysis, though, that trip is unsatisfying in two distinct ways. 

On the one hand, the bulk of the book provides a microeconomic analysis of a series of macroeconomic questions. It doesn't help us understand why or how these elite schools have managed to outpace the cost of living to show us the tools they use to do it or the things they have bought with the money they've taken in. 

On the other hand, the book falls short even as a microeconomic analysis, largely because it dodges the hard question of articulating who these colleges are and what exactly they are trying to do. 

To be useful for someone scrutinizing the economics of selective higher education, the book must start from a clear understanding of the category itself.  It requires an algorithm to test whether any particular school is or is not a member of the set.   Certainly there are a small handful of highly selective liberal arts colleges and research universities, but it is far more controversial to define membership in that elite club than it is to acknowledge their existence.  We need a metric that sorts some schools in and a far larger number out.

As portrayed here, though, the group shifts shape constantly.  Sometimes Ehrenberg focuses on selectivity, sometimes on wealth, sometimes on national ratings, sometimes on private schools alone.  Sometimes he lumps the liberal arts colleges in with the research universities, sometimes not.  Sometimes he just relies on US News and World Report.

More vitally, we need a normative anchor even if we're setting sail in a purely descriptive sea.  Plainly, these schools are not simply trying to maximize income.  But then just what are they trying to do, and can that mission be analyzed in economic terms?  That is, does it even make sense to assess elite colleges' economic efficiency at accomplishing their non-profit mission.  And even if it did make sense to do so, one could not tell how successful an institution was at maximizing its concrete goals unless one knew what those goals were. Without a sense of what it is that elite higher education is trying to produce even some of the simplest of Ehrenberg's questions necessarily elude our grasp. 

For instance, Ehrenberg seems to take it as obvious that Cornell did something economically unwise when it opted to subsidize student lunch service in the campus academic core (rather than channel it to cafeterias located at the college's periphery) (pp. 249-254).   That is surely true if one defines efficiency by encouraging roughly equal use of all the university's dining halls.  But if one defines efficiency by maximizing student satisfaction (an alternative that Ehrenberg discusses and more or less dismisses), then the situation is more complex.  And it's more complex still if one believes that part of the college's mission is to create a sort of intellectual soup in which students from many programs and divisions have an opportunity to simmer at the campus center.  If “community building” is part of Cornell's institutional mission (a possibility Ehrenberg does not address at all), then the subsidy may be money well spent.  The point here is not that Cornell was right or wrong to subsidize lunch facilities at the center of its campus, but that there is no way to call the shot, fair or foul, without first defining institutional mission.

The same is even more obvious when trying to determine whether it was worth Cornell's while to invest in costly new facilities for engineering and the physical sciences (pp. 101-103).  Ithaca and its environs are pockmarked with one vacant factory after another, each of which must not that long ago have thrived and been an avid consumer of the University's placement services.  This kind of dwindling employment path was surely part of the motivation that caused NYU, several decades back, to close down its undergraduate philosophy major.  It may well be part of what motivates Columbia University's rethinking of the justification for several of its constituent schools.  So perhaps these examples ratify Ehrenberg when he tries to weigh whether the benefit to the university's reputation was worth the cost of those new, high-tech bricks and mortar.

But might we not counter-argue that part of the role of research universities is to foster inquiry in subject areas that confound the marketplace?  Perhaps, that is, universities are places where we collectively preserve and extend knowledge in fields for which the free market doesn't generate demand or even a rationale.  If so, then the calculus shifts, dramatically, in ways that Ehrenberg's analysis fails to take into account.  Which might explain, in part at least, why it has become possible to major in philosophy at NYU once again.

A full microeconomic understanding of elite higher education would also have to explain a range of counter-intuitive market behavior:

• It would have to provide a reason why the tuition spiral is unique to American higher education.  Other nations have elite university systems, but their history doesn't include the same relentless price escalation that ours does. 

• It would have to explain why the thirty to fifty institutions that Ehrenberg tends to focus on manage to move their tuitions in lockstep, even though the actual resources spent per student (a number based on endowment, gifts and grants as well as tuition) fluctuates wildly within the same cohort.  If the value of the product varies so greatly from school to school, how come their prices are so similar? 

• It would have to come up with a justification for lumping together two vastly different sets of institution – research universities and elite private liberal arts colleges (other than the near-uniformity of their high and ever-increasing tuition levels). 

• It would have to explain how the selective schools manage to sustain a seller's market even as they inexorably crank up the price of their product.

• It would have to explain why, given precisely that seller's market, they nevertheless spend such a large proportion of their resources competing for buyers, recruiting applicants, and marketing their wares. 

• Finally, it would have to explain the seeming contradiction between the deeply competitive behaviors these schools manifest in other aspects of their recruiting and the anti-competitive, even monopolistic, pricing practices they embrace (by means of financial aid). 

Although the data it examines provocatively evoke all of these questions, at least implicitly, Tuition Rising does not provide a definitive understanding of any of them.

Ehrenberg leaves questions like these unanswered, in part because he or his publisher —Harvard University Press (the plot thickens!) — seems to have made a marketing judgment that this could be a crossover title, a work of scholarship that might appeal to a broad popular readership.  They appear to want to target the tens of thousands of new tuition-check-writers like me, for whom the cost of college has just shifted from abstract policy conundrum to painfully real drain on the family finances.  So the book is engagingly simple, comparatively readable, at times witty, at times pointed, at times even barbed.  But it fails to engage with the hard questions or the dry analyses that a serious student of the field would demand. 

Ultimately, Professor Ehrenberg is like a responsible journalist writing for a supermarket tabloid, unable to please any of his readers fully.  The academic in me craves a sober policy critique. The parent of a graduating high school senior in me screams out for the lurid details of a steamy expose.  Neither of us gets what we are looking for.