The Revenue-to-Cost Spiral in Higher Education

The cost of higher education has been rising rapidly. This paper by Robert E. Martin explains why. The cause is the incentives inherent in the nature of higher education. Higher education is a nonprofit sector; profit and even clear ownership are missing. Martin compares higher education with the broader profit-seeking economy, where costs must be controlled if firms are to survive. He finds that higher education, due to its nonprofit nature and its focus on creating reputation, spends just about all the money it gets, avoiding cost control.