The College Cost Disease

The College Cost Disease

Higher Cost and Lower Quality

Robert E. Martin

College cost per student has been on the rise at a pace that matches – or exceeds – healthcare costs. Unlike healthcare, though, teaching quality has declined, and rapidly rising costs and declining quality are not trends easily forgiven by society. The College Cost Disease addresses these problems, providing a behavioral framework for the chronic cost/quality consequences with which higher education is fraught. Providing many compelling insights into the issues plaguing higher education, Robert Martin expounds upon H.R. Bowen’s revenue theory of cost by detailing experience good theory, the principal/agent problem, and non-profit status.

Chapter 2: Statistical Measures: Teaching Productivity, Cost, Financial Burden, and Quality

Robert E. Martin

Subjects: economics and finance, economics of education, education, economics of education


2.1 INTRODUCTION This chapter contains descriptive statistics designed to establish a context for the cost and quality issues considered in the book. First, however, it is important to understand how administrative decisions regarding student/ staffing ratios, average class sizes, and teaching loads directly affect cost per student and teaching quality. To this end, the simple algebra in this chapter makes the connection between administrative decisions and cost per student. In each case, I demonstrate what the algebra suggests will happen to productivity/cost as student/staffing ratios, average class sizes, or teaching loads change. Then, I use data from the National Center for Education Statistics (NCES) to confirm that, as colleges and universities lowered the student/faculty ratio, class size, and teaching loads, productivity declined and cost per student rose. 2.2 THE COST/QUALITY ISSUE Higher education costs rose more rapidly than costs in any other sector of the economy, including health care, from 1980 to the present. If teaching quality and cost rose together, there would be less concern about this issue. The evidence suggests teaching quality actually declined, however. Technical progress in health care has been remarkable: new diagnostic procedures, less invasive treatments, and more effective treatments saved many lives. Unfortunately, technical progress in health care means higher cost as quality improves. This is not true for higher education for two reasons: innovation in higher education is very slow and quality is declining as costs rise. Thus, college cost is a serious policy concern. It appears students, parents, taxpayers, and donors are...

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