Folks, it’s Econ 101…the following is from Richard Vedder:
When asked the question, “Why do colleges keep raising tuition fees?” I give answers ranging from three words (“because they can”), to 85,000 (my book, Going Broke By Degree). Avoiding both extremes, let’s evaluate two rival explanations for the college cost explosion, followed by 12 key expressions that add more detail.
University presidents and some economists (e.g., David Feldman and Robert Archibald) often cite the Baumol Effect (named after a Princeton economist), arguing that higher education is a service industry where it is inherently difficult to raise productivity by substituting machines for humans. Teaching is like theater: it takes as many actors today to produce King Lear as it did when Shakespeare wrote it 400 years ago. While there is some truth to the argument, in reality technology does allow a single teacher to reach ever bigger audiences (using everything from microphones to streaming video). Moreover, in reality a majority of college costs today are not for instruction–the number of administrators, broadly defined, often exceeds the number of faculty.