<p>I think the question is why someone who had a choice would pay more money to attend an LAC when comparable universities cost significantly less. Swarthmore, Williams and Amherst already have to combat the fact that they are less well known than their Ivy peers. If even students willing to put aside the prestige factor have to reconsider their choice because of finances, they aren't going to stay competitive.</p>
<p>"Clearly it is something besides costs, even at a gross level (even things like tenure), that drives pricing. "</p>
<p>La De Da. Mini discovers ECON 101!!!!!</p>
<p>FWIW, costs NEVER drive pricing (except in cost plus custome contracts). The only relevance of cost is that, in the long run, it affects whether you stay in the game or not.</p>
<p>mini, </p>
<p>I think we get your point. </p>
<p>Can you contribute anything substantive to this discussion?</p>
<p>Funny, I thought one was allowed to ask questions, rather than provide answers. I thank JHS and Interesteddad for providing at least a modicum of one.</p>
<p>"Funny, I thought one was allowed to ask questions, rather than provide answers. I thank JHS and Interesteddad for providing at least a modicum of one."</p>
<p>Yes, but implied in that is that one READS THE ANSWERS and responds accordingly, not with selective reading deficit disorder (SRDD).</p>
<p>There is little evidence that for students of similar ability attending an expensive private college provides significant economic benefit. With little or no economic benefit, it would be foolhardy economics to spend extra tens or hundreds of thousands of dollars at certain colleges. Gold-played commodes add little value to the experience of taking a #$%^. Same for colleges.</p>
<p>
[quote]
In practice, schools "punish" senior faculty who are unproductive by allowing their salaries to be held down and making them teach more...
[/quote]
</p>
<p>If teaching is viewed as punishment, then I think we have serious problems in higher education.</p>
<p>
[quote]
There is little evidence that for students of similar ability attending an expensive private college provides significant economic benefit.
[/quote]
</p>
<p>The evidence to the contrary seems to consist mostly of the lone, unreplicated Krueger-Dale study, which even on its own terms says </p>
<p>1) the lack of difference in outcomes applies to a class of students who applied to, and were admitted to, the private colleges </p>
<p>and </p>
<p>2) that there IS a difference between private colleges and state universities for the lowest-income students. </p>
<p>You are a graduate of a state university, as I recall, and so am I, and certainly I agree that a young person with initiative can get a good education at a large state university. But the economics of the labor market for today's young people (people in the generation of our children) includes "signaling" competence or other desirable qualities by where one goes to school, and I think the Krueger-Dale study needs to be replicated a few more times on a few more data sets before I will believe the conclusion that it makes no difference at all for my kid where he goes to college. The Krueger-Dale study suggests to me, at least, that a high school program that prepares my kid well enough so that he can make a successful application to an elite school would be prudent to arrange. Then, if he goes to State U., he can perhaps be a more successful student there.</p>
<p>Years ago, when being interviewed for a position at an Ivy, a senior colleague told me "And if you teach too well here, it will be held against you." Despite indicating that I planned to publish and teach well, I was offered the job though I went elsewhere.</p>
<p>I'm sure the official line denies this, but such attitudes are commonplace at most of the best schools. Most young hotshots are brought in to teach no more than one undergrad course a year at several top ten departments.</p>
<p>And that's the way the world works...</p>
<p>
[quote]
Let's also agree that the tuitions charged to full-pay customers don't cover these costs.
[/quote]
</p>
<p>I don't agree with that. In looking at LAC financials, there are only a handful of schools where per student expenditures exceed the sticker price tuition and fees.</p>
<p>Even schools as highly ranked as Oberlin, Holyoke, and Davidson are close to equilibrium between sticker price and costs per student.</p>
<p>Drop down another tier to places like Muhlenburg and the sticker price is higher than cost per student expenditures.</p>
<p>Operating Cost per student of a few selected schools (FY2004):</p>
<p>68,304 Swarthmore
66,936 Williams
45,499 Davidson
44,558 Mt. Holyoke
41,461 Franklin & Marshall
40,135 Oberlin
34,488 Occidental
27,355 Muhlenberg</p>
<p>Once you are out of the top tiers of schools, colleges are funding substantially all of their operations from tuition and fee revenues. For example, Muhlenberg's spending from endowment returns is less than $1500 per student. Their sticker price this year is over $38,000. So full-fare students are paying a $10,000 premium over the operating cost per student. Even their net per student revenues after discounts ($25,000) nearly match their per student operating costs.</p>
<p>For me, the biggest problem with Dale-Krueger is that income may be the wrong outcome variable to consider. I think that for the best students, entry to the elites pays off in terms of higher status jobs, not necessarily into higher incomes.</p>
<p>These include entry to the elite law/accounting/management firms, better shot at becoming a top professor, entry to the top ranks of government, connections in the East Coast publishing world, etc. I only look at the number of brilliant people knocking themselves out to get into even mid-level academic positions where "failure" means looking for a job in business or consulting that pays much, much more. It's rational for many to do this, but it doesn't show up well in studies of lifetime dollar income.</p>
<p>Several people are trying to work on alternative tests to look at these issues.</p>
<p>Another recent study came to similar conclusions.</p>
<p>
[quote]
I think the question is why someone who had a choice would pay more money to attend an LAC when comparable universities cost significantly less.
[/quote]
</p>
<p>Your premise is flawed. I've seen no indication that "comparably ranked" liberal arts colleges and universities charge different net prices. The cost of attending Williams or Dartmouth is roughly the same, across the spectrum of financial need.</p>
<p>On the operating cost side, the picture is cloudy because universities co-mingle many subsidiary business units, only one of which is undergrad education. I think it's fair to say that no more than perhaps three universities in the country (Harvard, Princeton, Yale) spend as much per student on undergrad education as Amherst, Pomona, Swarthmore, Wellesley, and Williams do.</p>
<p>Just look at per student endowments and consider that 100% of the endowment return at an LAC is supporting undergrad education while the endowments at universities are supporting a number of other endeavors including grad schools and professional schools which cost 1.5 to 2 times more in operating costs per student than undergrad. </p>
<p>With roughly the same per student endowment, Stanford cannot possibly spend as much per undergrad as Williams can because they have to fund the higher operating costs of grad and professional schools. Offsetting that are some economies of scale: larger class sizes, etc.</p>
<p>This isn't that hard to see in the real world. Just look at the class sizes for an Intro Econ or General Chemistry course. Big lecture classes are cheaper to operate. That's why there are big lecture classes.</p>
<p>Colleges/Universities: Endowment per Student for 2004
1. Princeton University $1,678,406
2. Yale University $1,328,552
3. Harvard University $1,278,283
4. Grinnell College $893,666
5. Pomona College $837,825
6. Swarthmore College $789,735
7. Williams College $748,146
8. Rice University $723,909
9. Stanford University $714,622
10. Caltech $701,004
11. Amherst College $698,469
12. MIT $650,426
13. Wellesley College $557,347
14. Berea College $553,778
15. Dartmouth College $486,734
16. Wabash College $415,412
17. Smith College $361,572<br>
18. Emory University $358,322
19. Bowdoin College $344,786
20. Haverford College $336,788
21. Washington University $327,601
22. University of Notre Dame $317,991
23. Claremont McKenna College $315,208
24. Earlham College $309,135
25. Middlebury College $306,253
26. University of Chicago $293,211
27. Hamilton College $287,572
28. Macalester College $284,891
29. Bryn Mawr College $280,279
30. Harvey Mudd College $277,207
31. Carleton College $274,779
32. Vassar College $271,254
33. Trinity University $269,780
34. University of Richmond $268,827
35. Univ of California, San Francisco $262,341
36. Lafayette College $255,066
37. Northwestern University $250,785
38. Washington and Lee University $245,384
39. Scripps College $242,171
40. Brown University $239,584
41. Colby College $232,952
42. Duke University $232,650
43. Vanderbilt University $230,054
44. Columbia University $223,404
45. Davidson College $222,963
46. Southwestern University $218,710
47. Oberlin College $218,498
48. Mount Holyoke College $214,832
49. Denison University $214,666
50. Whitman College $206,231</p>
<p>You forget one big item in the financial equation--research generates substantial "free' money to be allocated to the other operating aspects of the university. Michigan with about $750M in total research shows $165 Million in cost recovery allocated to the general fund.</p>
<p>Barrons:</p>
<p>OK, that works out to approximately $4,000 per student in the general operating fund. Using the 2 to 1 multiplier for grad student costs, that means something on the order of an additional $2,000 per undergrad in operating money generated by research. That's a fairly insignificant number when we are looking at per student operating costs ranging from $25,000 to $70,000 a year.</p>
<p>In comparison, Williams and Swarthmore are currently spending nearly nearly $30,000 per undergrad from their endowment returns.</p>
<p>If anything, your numbers for Michigan support the hypothesis that the research contracting is a wholly separate business unit that is largely immaterial (financially) to the undergrad teaching subsidiary. I think it could be legitimately argued that the top R1 univerisities are non-profit research companies first and foremost. When you look at the contribution of health care subsidiaries and research to the financial statements at places like Emory or Duke, it is hard to draw any other conclusion.</p>
<p>It's very significant when looking at costs more in the normal range of $20,000. Most large research schools have 3 or 4 times as many ugs as grads too so your impact calculation is way off.</p>
<p>Barrons,</p>
<p>I'd be careful considering research overhead to be just extra money. Overhead rates are highly negotiated between the U and the govt. The rates are supposed to reflect real costs related to the research (hence Stanford's dustup of a few years ago that cost their president Kennedy his job - all over some flowers....)</p>
<p>Regarding the value of elites, Caroline Hoxby has done some work in this area. The Atlantic summarized it:
[quote]
Some analysts maintain that there are indeed significant advantages to the most selective schools. For instance, a study by Caroline Hoxby, a Harvard economist who has researched college outcomes, suggests that graduates of elite schools do earn more than those of comparable ability who attended other colleges. Hoxby studied male students who entered college in 1982, and adjusted for aptitude, though she used criteria different from those employed by Krueger and Dale. She projected that among students of similar aptitude, those who attended the most selective colleges would earn an average of $2.9 million during their careers; those who attended the next most selective colleges would earn $2.8 million; and those who attended all other colleges would average $2.5 million. This helped convince Hoxby that top applicants should, in fact, lust after the most exclusive possibilities.
[/quote]
</p>
<p>You can find the whole article here: <a href="http://www.theatlantic.com/doc/200410/easterbrook%5B/url%5D">http://www.theatlantic.com/doc/200410/easterbrook</a></p>
<p>Too bad none of this means anything to our OP, whose mind is made up.</p>
<p>Barrons:</p>
<p>UMich has 25,000 undergrads and 14,000 grad students.</p>
<p>BTW, here are Michigan's operating revenue streams:</p>
<p>Operating revenues in millions:</p>
<p>599.4 Student tuition and fees, net<br>
792.7 Research contracts
1,712.3 Health Care Revenues
279.4 Other</p>
<p>As a business entity, what is the appropriate focus of the President and the governing board?</p>
<p>If you back out the health care system operating expense and the research operating expense, UMich per student operating cost is $45,000. Using a 1.75:1 ratio for grad student to undergrad cost, a rough guess would be $35,000 per undergrad spending and $61,000 per grad student spending. I think it's a reasonable guess that this is probably among the highest, if not the highest, for any public university in the country.</p>
<p>As to the Atlantic article--I find the .1 million difference between elite and good schools to be close to trivial. I'd like to see some lists of the schools to judge how the groupings were done. I also wonder if the figures were adjusted for COL as elite grads are concentrated in high very COL areas compared to the next group.</p>
<p>Barrons, I agree that the differences seem rather trivial. </p>
<p>Regarding your other questions, read the article:</p>
<p>The advantage of the elite college may be increasing in recent years, as the news release cited by Barrons acknowledged was possible.</p>