4 ms·

The students are paying a lot of money, but the professors are getting screwed. If we see the university as a 2-sided marketplace, then you'd think that as the

The students are paying a lot of money, but the professors are getting screwed. If we see the university as a 2-sided marketplace, then you'd think that as the cost of doing business goes up, the number of merchants willing to keep doing business would go down. This is not the case. And that is why starting a university is such a good business.

weberc2 8y ago
I wonder what is the economic issue that is driving this? Are students not paying for quality of education? Perhaps they're shopping based on amenities instead? Or perhaps the supply of professors simply exceeds the demand, and the system is properly stabilizing itself?
- hannasanarion 8y ago
  It's because demand is inelastic: everybody wants a university education and will pay a usurous price to get it (with government assistance)
- thatfrenchguy 8y ago
  Evaluating “quality of education” is really hard, especially at age 18. You end up with “random Shanghai/US News rankings” that end up having criteria that are easy to game.
- brightball 8y ago
  It boils down to student loans and the ability for anyone to borrow almost any necessary amount of money to get an education when they are accepted to a highly desired school. The endless supply of money combined with the demand for students to try to secure their future careers leads to constant price increases with no impact on demand.
- nicoburns 8y ago
  Students are paying for a reputation based qualification. Sure, you get teaching too, but thw quality tends to be hit and miss, whereas you can get consistently good learning resources elsewhere for much cheaper or free.
- afterburner 8y ago
  Manager class growing and pursuing profit motive.
- ppseafield 8y ago
  The number of staff at many universities has drastically increased in the last 10-15 years. The number of full time, tenure track faculty positions has not. However, there are plenty of adjunct professors that have low wages, poor benefits, and no job security. Government-insured student loans mean that the university has an incentive to take as much from that as possible. But the job market now often requires some kind of degree, and new students don't really know what they're signing up for by taking on $25k, $50k loans and beyond.
- coredog64 8y ago
  As you’ve identified, I think there is an amenities component to the cost growth. As school gets more expensive, students expect more. My alma mater had dorms that would make a roadside hotel on the interstate look like a luxury 4 star hotel. When I get the glossy magazine from the alumni association, the fancy new dorms, Greek housing, and student union are front-and-center.
  - souprock 8y ago
    What I find weird is that dorms have mostly not improved in the one way that would really matter: being private, including the bathroom. Issues with roommates are severely harmful to being able to study. You risk fights, disease, noise (early morning or late night even), and theft. Everything else is secondary. It would be fine to save space in weird ways, like the shower doubling as the entryway or the sink above the toilet or the bed bunked over the desk. Even the best roommates are disruptive, and most are far worse. Shared bathrooms are a horror show.
Zigurd 8y ago
Starting a university is in general not a good business, unless, like Olin, you start with a substantial endowment. There is plenty of perversity in university spending priorities and compensation structure without trying to make the equivalence with a two-sided market, which is only a small part of the picture. Moreover, the problems of universities are different for elite private, public, 2nd tier private, lower-tier private, speciality, and for-profits.

weberc2 8y ago

I wonder what is the economic issue that is driving this? Are students not paying for quality of education? Perhaps they're shopping based on amenities instead? Or perhaps the supply of professors simply exceeds the demand, and the system is properly stabilizing itself?

hannasanarion 8y ago
It's because demand is inelastic: everybody wants a university education and will pay a usurous price to get it (with government assistance)
thatfrenchguy 8y ago
Evaluating “quality of education” is really hard, especially at age 18. You end up with “random Shanghai/US News rankings” that end up having criteria that are easy to game.
brightball 8y ago
It boils down to student loans and the ability for anyone to borrow almost any necessary amount of money to get an education when they are accepted to a highly desired school. The endless supply of money combined with the demand for students to try to secure their future careers leads to constant price increases with no impact on demand.
nicoburns 8y ago
Students are paying for a reputation based qualification. Sure, you get teaching too, but thw quality tends to be hit and miss, whereas you can get consistently good learning resources elsewhere for much cheaper or free.
afterburner 8y ago
Manager class growing and pursuing profit motive.
ppseafield 8y ago
The number of staff at many universities has drastically increased in the last 10-15 years. The number of full time, tenure track faculty positions has not. However, there are plenty of adjunct professors that have low wages, poor benefits, and no job security. Government-insured student loans mean that the university has an incentive to take as much from that as possible. But the job market now often requires some kind of degree, and new students don't really know what they're signing up for by taking on $25k, $50k loans and beyond.
coredog64 8y ago
As you’ve identified, I think there is an amenities component to the cost growth. As school gets more expensive, students expect more. My alma mater had dorms that would make a roadside hotel on the interstate look like a luxury 4 star hotel. When I get the glossy magazine from the alumni association, the fancy new dorms, Greek housing, and student union are front-and-center.
- souprock 8y ago
  What I find weird is that dorms have mostly not improved in the one way that would really matter: being private, including the bathroom. Issues with roommates are severely harmful to being able to study. You risk fights, disease, noise (early morning or late night even), and theft. Everything else is secondary. It would be fine to save space in weird ways, like the shower doubling as the entryway or the sink above the toilet or the bed bunked over the desk. Even the best roommates are disruptive, and most are far worse. Shared bathrooms are a horror show.

Zigurd 8y ago

Starting a university is in general not a good business, unless, like Olin, you start with a substantial endowment. There is plenty of perversity in university spending priorities and compensation structure without trying to make the equivalence with a two-sided market, which is only a small part of the picture. Moreover, the problems of universities are different for elite private, public, 2nd tier private, lower-tier private, speciality, and for-profits.