<p><a href=“http://www.quickanded.com/uploaded_images/Delta-Cost-Chart-716225.bmp[/url]”>http://www.quickanded.com/uploaded_images/Delta-Cost-Chart-716225.bmp</a></p>
![http://www.quickanded.com/uploaded_images/Delta-Cost-Chart-716225.bmp[/url]](http://www.quickanded.com/uploaded_images/Delta-Cost-Chart-716225.bmp%5B/url%5D){kind=link}
<p>That source doesn’t discuss how they have adjusted (if at all) for FASB vs. GASB standards, something that makes it difficult to compare private and publics in the way this chart does. Would you post some accompanying text or the article it came from?</p>
<p>Education is the only industry in which a higher cost per unit of production is thought to be a proxy for quality. Everywhere else it’s taken as an indicator of inefficiency. My own view is that in education it’s a mixed bag. It costs a lot to deliver a high quality education, and schools that skimp on those costs will generally deliver a lower quality product. On the other hand, schools with larger enrollments should be able to achieve efficiencies in things like large-scale purchasing, and to spread their fixed costs over a larger production base, thus achieving economies of scale. So I wouldn’t necessarily assume that the highest cost-per-unit of production schools are better on that basis alone.</p>
<p>I made no personal judgment, just supplied the info. The blog post I grabbed it from is below:</p>
<p>[The</a> Quick and the Ed](<a href=“http://www.quickanded.com/2009/01/wealth-disparities.html]The”>http://www.quickanded.com/2009/01/wealth-disparities.html)</p>
<p>An accompanying NYT article responding to the same study:</p>
<p><a href=“http://www.nytimes.com/2009/01/16/us/16college.html?_r=1[/url]”>http://www.nytimes.com/2009/01/16/us/16college.html?_r=1</a></p>
<p>As for spending versus efficiency-- I think most people who make these claims have not been looking at the inner workings of many higher level universities. Some have clear cases of waste, some have clear policies of too much conservatism in spending. The thing that is most interesting about universities versus the K-12 system is that in the private area, faculty, students, and corporations are keenly aware of spending issues and are often hypercritical of everything that goes on in the university. Mistakes tend to be identified quickly and come with a high price of criticism and typically the president’s head.</p>
<p>Some people may view having far more tenured, full-time faculty with high salaries as an inefficiency, others do not. That’s one major way many smaller, local (not necessarily community) colleges save a lot of money and are more “efficient” but at what cost?</p>
<p>It’s hard to make sweeping statements about efficiencies across higher education because the institutions tend to function in highly unique ways and under rather unique circumstances. K-12 education, while far from uniform, looks like a smooth surface compared to the chaos of higher ed in this regard.</p>
<p>All you can say for sure is that, from an educational perspective, at some point there is a law of diminishing return. Instead of spending on better faculty, there is more spending on arboretea, golf courses, alumni relations, rock climbing walls, parking lots, saunas at the faculty club, or the ten millionth book in the library.</p>
<p>Oddly enough, for some schools, among the more expensive items in the budget are for well-known, visiting, non-tenured professors rather than full-time faculty. In certain areas (such as government, and, sometimes, business) part-time faculty (as a portion of the total educational experience) will be a plus, not a minus.</p>
<p>It depends entirely on the school. Look at some of the highest spending schools and you’ll find the highest paid faculty members, lowest faculty to student ratios, brand new academic facilities being built up, increased spending on funding for student research and travel abroad, etc, etc.</p>
<p>Some schools are building golf courses, some are not.</p>
<p>Alumni relations are often for-profit ventures, FWIW, at top schools.</p>
<p>However, on the whole, in a way that would affect university-wide spending, part-time faculty on the whole end up lowering cost at a cost most places. Sure, in government and occasionally business experience on the outside matters more, and sure, sometimes the best teachers are part-time teachers, but more often than not, non-tenure tracked faculty have far less at stake at the university, far less expertise, are far less likely to have the top degree in their field (which is important in areas outside of business, IR, education, etc), are far less likely to be taking part in top research (essential for good science education, for instance), etc etc etc.</p>
<p>I think the point is that university spending is largely a mixed bag, and to say that all extra spending is waste is crazy. Much of it is justified in many places, much of it is wasted at others.</p>
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Would you rather own a computer that has a CPU that cost $50 or $500? Would you rather stay in a hotel that spent $1,000 furnishing the room or $7,000? Would you prefer your rental car to have been bought by Hertz or Avis for $12,000 or $30,000? Would you like your bottled water to come from the company that has spent the least on purification? Do you like books printed on high-quality paper or the cheapest stuff they could get thru the printing press? Do you like sweaters made of the cheapest grade of cashmere or the most expensive? And so on.</p>
<p>Increased cost of production being associated with increased quality is hardly unique to education.</p>
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<p>Your point is well taken (and I agree), but your examples are a bit presumptive in their wording (e.g., “books printed on high-quality paper or the cheapest stuff they could get thru the printing press”).</p>
<p>Except with education on the K-12 level, over and over again increasing spending has been shown to not have large ROI. In fact, it often does nothing to hurt but rarely helps when looked at in isolation.</p>
<p>So no, you don’t always get what you pay for and in particular in education it can be difficult to prove increased spending results in education gains.</p>
<p>However, the university is quite different than K-12 ed and there are ways which funding can make remarkable differences-- most notably in areas of research, facilities, and faculty, none of which have the same constraints as k-12 education in higher ed. That being said, there is also significantly less “oversight” on spending. So while there are more ways money can be spent resulting in a true advantage in using resources for students, there are clearly responsible and irresponsible forms of spending and examples of both at higher ed institutions of all time.</p>
<p>However, it is quite interesting to observe such a remarkable disparity.</p>
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<p>Well, I don’t know about you but when I buy a computer I don’t spend a lot of time inquiring about how much the manufacturer spent on the components. I care about the performance, reliability and durability of the machine, and if there are two machines that perform equally well and are similarly reliable and durable yet one is cheaper, I’ll go with the cheaper one every time—even if it’s cheaper in part because the manufacturer paid less for the components or otherwise had lower production costs per unit (which it probably did if it can produce a comparable product at a lower price). Toyota is beating the pants off GM in product quality and reliability, not because Toyota has a higher cost per unit of production—it doesn’t. In fact, Toyota’s costs per unit of production are significantly lower than GM’s. But if you prefer to buy the GM car on the theory that because it’s costlier to make it must be better, go right ahead, be my guest.</p>
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I couldn’t resist adding a few more examples that seem to disobey this ‘rule’.</p>
<p>Do car manufacturers recommend synthetic oil to get 15K drain intervals, or do they say to use any oil you can find? Do better down jackets and comforters come with 400 fill power down or 750? (see <a href=“Fill power - Wikipedia)%5B/url%5D”>Fill power - Wikipedia)</a> Does the quality of a knife blade increase as more expensive steel is used to make it (for a given manufacturing process)? Are better chandeliers, vases, etc. made out of glass or crystal? Are windows better when they are single pane or double pane? Do stronger boards have more knots per board foot or less? For racing or long-distance bike riding are better bike frames made of something like carbon or titanium, or made of heavier materials?</p>
<p>Economies of scale-The decrease in unit cost of a product or service resulting from large-scale operations, as in mass In other words, even the smallest company can make itself healthier by improving its economy of scale.</p>
<p>[define</a> economy of scale - Ask.com Search](<a href=“define economy of scale, www.ask.com”>define economy of scale, www.ask.com)</p>
<p>Spending per student is relevant only when it actually translates into services that serve the student. Huge research expenditures might make the spending per student look good and might even advance the reputation of the college, but does it do anything to affect the undergraduate student experience? I would encourage looking spending IN COMBINATION WITH other student-related factors like class size, student/faculty ratio, advisory services, etc.</p>
<p>I’m no economist or mathematician, but could there be a positive “spending per student” correlation between endowment and student body size? IOW, would the schools with a larger endowment and a smaller student body size likely spend more per student?</p>
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I’m not sure where anyone is even discussing that this is a way to decide upon a school. The disparity, in fact, is what most people are covering about the issue, and wondering what this says about the future sustainability and fairness of the model.</p>
<p>This was not really meant to influence school choice, more to point out an important and maybe dangerous trend.</p>
<p>^^^^^ mikemac,
does the airline with the highest operating costs per passenger mile provide the best service . . . or is it an inefficient dinosaur on the road to bankruptcy? Do state highway departments put road construction contracts out for competitive bids to see which one comes in a the HIGHEST cost, and therefore on your theory must be the one that provides the highest quality work . . . or do they choose the low bidder that fully meets their quality specifications and has a demonstrated track record of meeting such standards? Is the farmer who has the highest input and operating costs per bushel of crop output thereby producing superior grain . . . is is he, again, simply an inefficient producer? Is the K-12 school district with the highest expenditures per pupil necessarily doing the best job of educating them . . . or is it, perhaps, simply inefficient, bloated with unnecessary layers of bureaucracy and spending money on bells and whistles that contributes little or nothing of value to the actual education of students? And if the latter could be true in K-12 education, why might it not also be true in higher education?</p>
<p>Granted, with particular consumer products or production inputs, a superior good may sometimes cost more. It may cost more because it costs more to produce; or it may cost more because demand outstrips supply and consequently the producer may reap substantial economic “rents” at least until a similarly high-quality but lower-cost competitor emerges. But part of the genius of our economic system is that it’s animated by a relentless drive to produce superior products at a lower cost so as to be able to undercut your competitors in price, gain greater market share, and/or earn extraordinary profits on the difference between production costs and the price the market will bear on the sales side. Only in the rarest of instances do we make the mistake of rewarding high production costs for their own sake, and when we do it results in extreme inefficiencies like the famous $800 toilet seats the Pentagon once paid for under a “cost-plus” approach to military contracting. </p>
<p>US News makes that same mistake in using expenditures per student as a measure of education quality in its rankings. It’s understandable, perhaps, because we don’t have many good, clear, objective metrics of educational quality, so we end up looking for proxies. But mistaking high production costs for quality is silly, and potentially very destructive. At the margins it could lead to a kind of spending “arms race” with schools intentionally competing to raise their costs to improve their rankings, adding unnecessary luxuries here and their, not only for the creature comforts they bring to students, faculty and administrators, but because it looks good to USNWR on the balance sheet as higher expenditures per student. And believe me, this does go on. I’ve seen some schools quite consciously and deliberately raise their tuition, for example, not because they needed the extra income, but because every additional dollar of tuition revenue they raise (and recycle back into increase financial aid dollar-for-dollar so as to keep net cost-of=attendance constant for their students) will translate into higher expenditures and, at the margins, improve their US News ranking. Is this the kind of competition we want to encourage?</p>
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<p>Actually, recently published studies have found that this is not what is occurring. Instead, lowered revenues provided by state, local, and federal government to schools directly have caused the rise in tuition to increase far faster than cost as the university attempts to compensate. In fact, this has been the predominant trait for the increase in cost for students of higher ed in general for quite some time.</p>
<p>All of the money the fed has thrown into subsidizing student debt, has, in many ways, created the larger student debt problem. There has been a shift in opinion that rather than provide universities with the money they need to function at lower cost to students that instead we should help shift the cost to students and alleviate the increased student debt.</p>
<p>There’s a thread in the parents forum on this issue right now.</p>
<p>The constant assault that higher ed needs to be more efficient often comes from business minded individuals who simply assume academics have no ability to reign in expenses and act with financial competency. There are real increased costs due to a competitive marketplace that have had real benefits to students, not harm. Costs are high and getting worse, which is frustrating, but I have the sense that if you examine most individual cases, those schools that are under the most fire for “screwing things up” are actually acting responsibly and in good faith.</p>
<p>The chart linked in post #1 is one reason so many students are fighting to get into private research universities–the resources & opportunities are outstanding & numerous. Something that we all already know, but it is nice to see it displayed in this manner. Thank you for sharing this chart!</p>
<p>Don’t kid yourself. Even private research universities are taking a big hit. This economy is affecting everyone.</p>
<p>bclintok, you made a specific statement
I gave you a multitude of examples across a wide range of industries where a consumer might rationally conclude that higher costs of production mean a higher quality product. Does that mean every time production costs are higher the quality is better? Of course not. So giving examples where higher costs don’t mean higher quality just begs the question of whether education is the only industry where it is ever thought to be true.
That of course is not my “theory”. My theory, if you want to call it that, is that your claim is proved false if even one counter-example exists. I supplied not just one, but many.
If you’re now saying we need to examine on a case-by-case basis whether higher production costs actually leads to better quality, that’s a different argument entirely than your previous claim that it was believed to be true for one and only one industry.</p>