Higher education

Perhaps fitting that the first post since I began my PhD program is regarding higher education. I sat in on a workshop presentation by a PhD student from U-Chicago this afternoon. The presenter seemed fairly comfortable with his research and handled a few tough questions from the mostly friendly audience. The model tied together tuition increases at private colleges to increases in wealth across the colleges themselves. Essentially, the model argues colleges are taking their wealth bequests and spending the money on improving quality, thereby allowing them to increase tuition since their product is more valuable.

My problems with the model were somewhat simplistic, at least in my way of thinking. First off, I have to believe that there are serious barriers to entry in the private college market. The prestige and name recognition necessary to compete at this level must be high. We have schools founded by Rockefellers and Vanderbilts from past centuries, but none by Gates or Buffett. So if we have a supply side issue alongside a demographic boom in the late 80's and a stock market boom in the 80's and 90's, is it possible that these phenomena fully explain the coincident rise in tuition and college wealth?

The other point I questioned was the impact of taking public universities out of the equation. I understand that the budget constraints are much different, but the fact that tuition is rising at public institutions (net tuition) is a question that must be taken into account. If private schools feel they are differentiated vs. public schools, then any decrease in government support that causes tuition to rise may compel, or allow private schools to increase tuition.

Both questions could be links to areas of further research, particularly the supply question. That seems to be a common thread these days -- grown up industry, even academia doesn't really want competition.

In any case, these seminars are motivation for a grad student taking core theory courses.