It bothers many of us that colleges operate in a sea of money. Tuition has been rising faster than inflation to the point where spending $50,000 a year for college is not unusual, and colleges are competing for students with costly features such as luxurious dorm rooms with double beds, state-of-the-art gym facilities, and million-dollar athletic coaches.
A new book by a well-known economist, Burton Weisbrod, and two researchers attempts to make us feel better about such revenue-raising efforts. In Mission and Money: Understanding the University, Weisbrod wants us to recognize that colleges need money if they are to pursue their “social mission,” typically summarized as “education, research, and public service.” So they must pursue revenues avidly. He does see the potential for conflicts, however, and believes that they should be the topic of public debate.
Before I explain why this seemingly innocuous approach leads in dangerous directions, let me say that this book has a wealth of valuable information about how schools actually do obtain their money. Using econometric research, Weisbrod and his coauthors, Jeffrey P. Ballou and Evelyn D. Asch, tell us a lot about how schools exploit their revenue streams—tuition, patents, licensing, donations, endowments, and lobbying, among others. A rewarding chapter delves into the revenues and costs of intercollegiate athletics and even compares the contracts of presidents and athletic coaches. And the writing is clear and simple.
Now, here is Weisbrod’s case.
Higher education is an industry, but not an ordinary industry. It has a social mission, which he defines as “to promote educational and research activities that would not be provided by profit-motivated firms.” To carry out this mission, it has another mission, raising money. Thus, he calls a university a “two-good firm” that must make production decisions about “which methods to use for raising money [revenue goods] and which activities to spend the money on [that is, its mission goods].”
The basic concept is that colleges need to exploit many revenue sources in order to cross-subsidize unprofitable “mission” activities. Weisbrod doesn’t worry about whether the social mission is valuable, dubious, or even whether it exists. He assumes that a college or university (as long as it is public or non-profit) has a mission that can’t support itself and that is worthy.
What Weisbrod does worry about is that the search for revenue may compromise the social mission. Colleges can go too far in seeking revenue.
For example, if a school sells an exclusive marketing license for a concept that a faculty member has patented, the school may be diminishing its social mission of disseminating new knowledge. Or if it keeps posted tuition high in order to subsidize low-income students, some worthy modest-income students may be priced out of the market. (It doesn’t seem to bother Weisbrod that families who have saved for years to pay tuition end up subsidizing those who haven’t.) He also expresses some concern about the unseemliness of excessive commercialism, whatever its academic effects.
To resolve the conflicts, he wants a “national dialog.” For example, should there be statutory limits on the size of endowments? Should joint ventures with for-profit firms be restricted? In Weisbrod’s view, “critical questions remain regarding where to draw the line and whether it should be drawn by each school or by a governmental regulator.”
Now, what is my problem with this framework (other than a predictable worry about inappropriate regulation)?
I’m worried about the social mission, the bedrock of the book. Weisbrod assumes that the social mission of a school is valuable and worth subsidizing. He also assumes that pursuing this mission is unprofitable.
I have great doubt about whether most schools are properly defining and carrying out their “social mission.” Weisbrod doesn’t consider the fact that very human people (presidents, faculty, trustees), motivated by very human passions, especially self-interest, are the ones who define the social mission (sometimes by default). Thus, that mission may not be as high-minded as the familiar terms “education, research and public service” would imply.
Weisbrod actually provides evidence to support my case that the mission of most schools is vague and largely neglected. He compares employment contracts of athletic coaches and university presidents at public universities.
Coaches’ contracts spell out clear measurement goals and financial incentives (mostly for winning), while presidents’ contracts have virtually no goals or measurement indicators. Even if there are performance bonuses, the “actual performance being rewarded” is “almost never specified,” says Weisbrod. Pursuing the university’s mission is left up to the president. The president can be fired if the trustees don’t like what he’s doing, but rarely is the decision to hire or fire premised on actual steps carrying out a pre-stated mission.
Furthermore, it’s pretty well accepted these days that most presidents are chosen for their ability to raise funds. So who is minding the mission? By and large, no one.
My argument—one that the Pope Center will be presenting at greater length in the future—is that all nonprofit colleges and universities have great difficulty pursuing their missions, even if the mission is stated formally or embodied in school mottos.
To begin with, they lack the discipline of profit, which is a measurement of the efficiency of the organization (its revenues over its costs). Seeking profit inevitably leads to controlling costs (a topic that Weisbrod largely ignores). As Robert E. Martin has outlined in a book on college cost control, without a determination of profit it is virtually impossible to know which costs are excessive and which are not. This is one reason why there is little cost control in higher education.
But the problem is worse than that. Not only do schools lack a bottom line, they lack owners. The absence of owners (whom economists call residual claimants) means that no one has a direct, financial interest—and authority—to determine what satisfies the mission and what does not. Everyone in the higher education world, from faculty to trustees and including presidents, has his or her own idea and preference for how to carry out the mission.
The result is that “the mission” incorporates whatever the internal politics demands. Weak trustees may allow administrators to choose which components of the mission need financial support, and powerful faculty may intimidate administrators into expanding programs that lack student support. Carrying out such an ill-defined and infinitely expandable mission is costly, and its cost fuels demand for revenues from other sources.
Indeed, not only is Weisbrod’s “social mission” vague; it may not exist at all. That is, a college education—and much of research, as well—may be a private good rather than a social good, something that people want and are willing to pay for. If that is the case, the frantic search for subsidies from other sources is even less appropriate.
My conclusion is that Weisbrod is right to question universities’ insatiable demand for more revenues, but not primarily because seeking them will undermine the social mission. Rather, the poorly defined—and possibly mythical—social mission may be serving as an excuse to justify the quest for inordinate revenues.