Some college officials complain that they don’t have enough money. In past decades, they often managed to talk donors and legislators into giving them more, but that isn’t working as well as it used to. They should be thinking about how to get more value out of the resources on hand.
In today’s Martin Center article, economics professor Richard Vedder explains that they could do so by making more use of market competition. He writes, “Unfortunately, universities behave more like governments (which largely finance them) than like private enterprises, which are constantly pressured to cut costs and improve product quality in order to survive. Those incentives hardly exist in the world of colleges and universities.”
For one thing, bureaucratic management does a poor job of efficiently allocating resources. An auction to decide who gets what would lead to better results. “If the psychology, economics, and English departments all want the big lecture hall at 10:00 AM or 2:00 PM on Monday, Wednesday, and Friday, have an auction for the space. Maybe give rooms away for nothing for summer school or during other lightly attended periods. Do that, and suddenly the concept of trade-offs will emerge in decisions regarding the allocation of resources,” Vedder argues.
Another great market-based reform would be to adopt Adam Smith’s idea that there ought to be a direct link between student satisfaction and faculty compensation.
Read the whole thing.