Wednesday, June 14, 2017

The Power of Economic Inefficiency

I grew up in a time when long distance domestic phone calls from AT&T costed $0.20/minute off peak ($1.30 in today's dollars). I also grew up close to AT&T Bell Labs, a mecca that claimed more PhDs than any university many doing independent research. Now I get all the phone minutes I can use and Bell Labs is a tiny fraction of what it once was. Was it a good trade?

Technology has helped eliminate many of the economic inefficiencies. Usually for the better but sometimes these inefficiencies has good side effects. For another example take airlines--we can now so easily compare airlines on price so they often compete on price at the cost of service. Don't even get me started on newspapers.

Universities remain one of the institutions where technological change has not had the cost savings effect that we've seen in communication and transportation. That's one of the reasons that universities have become more expense. We can't keep raising tuition and being pushed to focus on eliminating inefficiencies, seeking new ways to deliver classes for example. Will the research university as we know it survive?


  1. Well, universities are hardly the sole institutions to be immune to cost savings... Real estate agencies charge *more* today than they did before smartphones and the Internet...

  2. Don't get me started on academic publishing ...

  3. What about child care? Pre college education?

  4. We may have big technology efficiencies but that doesn't mean that they are necessarily shared benefits:

    In the technology sector we are already at a spot where the efficiencies are not leading to further cost savings because of an effective monopoly/duopoly. (e.g., Prices for flash memory are tiny but the major laptop vendors charge ridiculous amounts for drive upgrades.)

    Online retail has led to greater convenience and cost-savings, but how long are the savings going to remain when brick and mortar competition is gone and we have more of an Amazon monopoly?

  5. Savings potential abounds. Look at staff members working half time but being paid full time and consolidate and cut. Look at non-academic programs that cost a fortune and cut them. Look at high-paid administrators whose jobs are running programs whose main purpose is to keep themselves employed. If a professor wants to buy out of teaching so they can spend more time on research make them use their grant funding to pay for what they are getting paid for that time rather than discounted rates. Stop subsidizing and having state money go into football and basketball programs so they can have plentiful resources and million dollar coaches while other parts of campus suffer.

    Or would that be the same as the research university as you know it going away?

  6. get rid of tenure.