Sentences to ponder

Richard H. Thaler, a former colleague at Cornell and another contributor to the Economic View column, once remarked about an unsuccessful candidate for a faculty position, “What his résumé lacked was five bad papers.”

The rest is from Bob Frank.

Comments

Since it is non-obvious:

By that, he meant that while the candidate had published several papers containing enough genuinely important ideas to satisfy any rational hiring committee — more than could be said of most faculty members — he had too few to satisfy the bean counters, who fretted about how uninformed outsiders might react to the appointment.

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Is this like Benford's Law? You're expecting to see a few bad ones, and if you don't suspicions are raised?

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A surfeit of bad papers? I'm a shoe-in for any job!

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^ a very funny comment

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The other point, escalating faculty salaries, does deserve attention, although I think salaries will be dampened by online competition.

I didn't realize, though, how much faculty make.

I used to take a faculty member in the Graduate Business School where I have occaisionally taught as an adjunct.

I thought, I can afford it, and he must be making what I thought was the faculty salaries of my youth. Be generous, Bill.

My wife, one day, pointed out there was a website where you could now find out how much each state employee, including faculty at the university, make.

Imagine my surprise when I found out the guy I was taking out to lunch was making $270k a year.

For teaching two graduate classes, and doing research and writing.

"For teaching two graduate classes, and doing research and writing."

They could be working almost unimaginably hard or milking it. The trouble is there is no way to know.

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This time, Bob Frank is on to something with his ever watchful eyes on relative standing. Yes, only the elite can be elite--a tough signal to imitate cheaply! But who will hire the graduates of the elite universities? Obviously, only firms in winner-take-all markets, such as law, or weird markets, such as finance. Those graduates not hired in such markets can still do well enough for themselves in the competitive marketplace [though surely not the bottom quarter or even third of BA recipients who clearly don't belong in college--any college].

Put differently, the elasticity of supply of elite education is not going to rise. I don't see how price controls can help.

A low elasticity also implies that the supply will not fall if price controls force the supplier's price down instead of up (i.e., if we force universities to charge less instead of trying to subsidize it).

Not subsidize is correct. Letting quantity fall, holding quality constant? No.

Cheers,

Frank

Sadly elasticity arguments are a sword that cuts both ways when you invoke them for ideological reasons!

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The other part of academic competition is the ability to write grant proposals, and obtain research and consulting projects from private and government sources. Faculty salaries cover more than teaching, and in fact often reflect the capacity to draw research dollars which fund administrators and graduate students. Add to this the "network" nature of who knows whom in academia, coupled with well connected politicians who want a "center" or two named after themselves but who need some "names" to lead it and you have a powerful incentive to raise salaries for those few connected.

And, don't get me talking about private foundations that fund academics indirectly, endowed chairs, and faculty ownership of outside businesses and licensing deals.

None of these being the real problems with academia.

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Prof. Frank is insightful, but this time I think he is attacking a straw man (bidding wars for top researchers as the main explanation for higher ed tuition increases). The universities he is talking about, the Ivies, Stanfords, Dukes, and other top-10 to top-20 universities, represent a small fraction of the overall higher education picture. Most universities do not try to attract a top researcher by offering him or her two or three times his current salary. Likewise, Wall St does not hire many grads, so the Ivy-to-Wall St connection, while relevant, is a very small part of the problem.

For your typical university, the problem is simple: Baumol's cost disease (the cost of services delivered by humans must keep up with inflation, at least, so unlike widgets, becomes more expensive over time, not less); and the variety of university expenditures that are at best marginally related to education (fancy new buildings, deluxe cafeterias, gyms and other perks, marketing and outreach for prestige and not recruiting, lots of administrators and V-Ps of who-knows-what, sports programs, etc.)

If universities returned to a simple, teach and research model, tuition would be reigned in.

There is always Canada... even with the unfoavorable exchange rate, many good Canadian universities are a good deal for Americans.

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I think Frank misses a key point which has affect state universities:
Their legislatures have over time decreased support per student significantly, while population grew..
Everyone at a state university knows that when the going got tough for the state budgets during the recession, state legislators cut what was easiest and least objectionable: university budgets. They refused to cut very much of their pork for obvious reasons.
However, schools must still offer a quality product, climb rankings, etc. So the money has to be made up from higher tuition.
I think Frank is trying to sell books and get attention by focusing on one small part of the issue.

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