What if a university ISN’T like a business?

8 02 2012

I’ve expressed my admiration for Thomas Frank in this space many times now. Therefore, you can imagine how excited I was to learn that he has a new book out. It’s political, so you won’t get a review from me here other than that I loved it. For purposes of this space though, the most important thing I got from Frank’s new work is an excellent Thorstein Veblen quote out of the footnotes.

From The Engineers and the Price System (p. 9):

That is to say, in no such community can the industrial system be allowed to work at full capacity for any appreciable interval of time, on pain of business stagnation and consequent privation for all classes and conditions of men. The requirements of profitable business will not tolerate it. So the rate and volume of output must be adjusted to the needs of the market, not to the working capacity of the available resources, equipment and man power, nor to the community’s need of consumable goods. Therefore there must always be a certain variable margin of unemployment of plant and man power. Rate and volume of output can, of course, not be adjusted by exceeding the productive capacity of the industrial system. So it has to be regulated by keeping short of maximum production by more or less as the condition of the market may require. It is always a question of more or less unemployment of plant and man power, and a shrewd moderation in the unemployment of these available resources, a “conscientious withdrawal of efficiency,” therefore, is the beginning of wisdom in all sound workday business enterprise that has to do with industry.

Now let’s apply this to higher education.

Cal-State Northridge is currently running at full production. They want to cut back, but that’s easier said than done:

When spring session opened Jan. 21, campus administrators tried to reduce enrollment by placing limits on class sizes and capping the number of units most students can carry at 15. But they were met with a furious backlash by faculty and students who risk losing financial aid, campus housing, veterans benefits and athletics eligibility, among other things, that require them to be full time (carrying 12 units).

Phil Hill, who I got this link from, suggests that this is a good reason to open up online learning opportunities. Despite my well-known hatred of online learning, I’ll stipulate that that might be a solution to this problem. But where is Cal-State Northridge going to get the money to set this system up? Raising tuition on their existing students? That will take care of the problem as they’ll all move to Colorado for our comparatively cheap educational product, just like they’ve been doing for years now. They’re certainly can’t get the money from the State of California. It claims to be broke.

As Veblen explains, smart businesses will cut back on production in order to avoid overproduction that will hurt long-term profitability. Unfortunately for public universities, they actually have a responsibility to serve their constituencies. It comes with the state funding. With inadequate state funding, public universities have to either increase tuition or admit more students in order to make up the difference. That leads either to the political hardship of expensive college or the PR disaster that you see now at Cal-State Northridge.

Yet they tell us that universities should be run like businesses. As with any other business that wants to sell a product that costs more than you are allowed to charge for it, this is a recipe for a going out of business sale.


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