The business model of a new university

Reviewing Warren Treadgold’s The University We Need, John Leo writes,

Mr. Treadgold thinks that a new private university may be needed, not an explicitly right-wing one but one that reflects the intellectual opinions of a spectrum of educated Americans outside academe. When Leland Stanford founded Stanford University in the 1880s, Mr. Treadgold notes, he possessed a considerable fortune, though it would be too small in today’s dollars to put him on the Forbes 400. A lot of even wealthier donors are now available, and many of them are troubled by universities’ hostility to free speech, capitalism, religion and traditional education. A gift of $1 billion, he believes, would trigger the rest of the donations needed to launch such a university. A planning group could seek and find roughly 1,000 good scholars willing to join the faculty. The college itself need not, he says, be larger than Princeton—i.e., about 5,000 undergraduates.

My thoughts:

1. The proposed student/faculty ratio is 5. If each student takes 10 courses a year, then each faculty member has to teach 50 students a year. A faculty member could do this by teaching one course a semester with 25 students in each course. That sounds like a low bar. Maybe the student-faculty ratio could be a little higher.

2. Suppose you pay each faculty member $200K per year. If there are 5 students per faculty member, then each student has to pay $40K per year to cover that.

3. So you don’t need a $1 billion endowment to compete on the basis of bread-and-butter teaching. You need it to compete on amenities. Some of the “amenities” at existing colleges are administrators who seem from the outside to be superfluous. Others, like fancy sports facilities and coaches, appear to be expensive relative to any educational value.

4. If everybody woke up tomorrow with no memory of our higher education system, and educators had to start from scratch, chances are we would settle on a very different model. The problem is that students and parents know the current model, and from their point of view, any deviation from that model is risky. If you define complacency as an unwillingness to try significant innovation, then our higher education system is steeped in complacency.

18 thoughts on “The business model of a new university

  1. There have been some new university projects, including Ave Maria; but by way of example, Ave Maria attempts to create a conservative Roman Catholic university as an alternative to the liberal Roman Catholic universities, not a broadly representative university as an alternative to liberal higher education as a whole.

  2. And what happens when (not if, when) this little project has difficulty getting accredited, because all the opinion-makers are denouncing it as a “diploma mill” peddling “right-wing propaganda”, and any professor who signs up to teach as a “crackpot” comparable to a creationist or flat-Earther.

    Because, they’ll say (as I’ve seen so many do), the reason Academia is in such massive agreement on the political issues of the New Orthodoxy is the exact same reason Academia has massive agreement on whether the earth is round or flat and what two plus two equals.

  3. The billion is basically for marketing. The major differences between Harvard (selective and high-status) and DeVry (hardly considered an institute of higher education at all) are:

    1) Better students, because top-notch students feel comfortable trusting their futures to Harvard.
    2) Better teachers, because top-notch professors feel comfortable about trusting their careers to Harvard.
    3) Better opportunities, because top-notch employers feel comfortable about recruiting from Harvard.

    It’s hard to imagine that a billion in marketing (including needless amenities and other conspicuous consumption) would get a new school into the position Harvard is in, but it might be enough to get it into the position of an unremarkable state school.

    • I thought that High Point University more or less has tried something like this, albeit with more borrowing.

    • What you are saying is that college is 95% signaling. Starting a new school, even if far and above on imparting knowledge in a useable form to students and inculcating the basis for them to become educated, is risky as the signaling attribute will take generations to build.

      • I’d say 99 percent for a communications major, and maybe 40 percent for a mechanical engineer. But you’ve got the gist of it.

      • It is certainly possible to imagine a university that has as its main mission educating its students. I don’t think it would take much more than a decade for employers to trust that it actually does a good job of producing educated graduates. But that university would probably want to focus its academics on subjects in which employers are actually looking for students who have learned particular things, and aren’t just using the university as an outsourced HR department. I suppose it would be a lot like Western Governors University, but with a campus, and presumably with more areas of study that require a bit of hands on learning, like chemistry or biology.

        • On the one hand, you’re certainly right because basically all universities functioned much like that before WWII. Changes after that caused rapid growth, which changed the selection pressures that universities were subjected to. Universities adapted accordingly.

          On the other hand, the overall demand for educated employees has not kept pace with the supply. Some fields are better than others, but AFAIK no field is as much in demand as it was 20 years ago. I personally have a Ph.D. in chemistry, and I can tell you for certain that that job market is not good. In general, we seem to have much more education than the economy needs, and more that most people would want except for its signalling value.

          • I suspect that you are right about the supply of educated people exceeding the demand for them, even in fields that require a lot of domain specific knowledge. I think that where colleges and universities can compete based upon a superior ability to educate students isn’t against highly selective schools, but against schools that don’t have very selective admissions. In that case, the question of how much students learn is actually important, as those universities don’t really have any cachet with future employers, except maybe beyond producing grads that are good enough for what companies with low salaries can afford.

  4. Leland Stanford’s fortune measured in overall inflation adjusted dollars may not have been so large by today’s standards; but how large was it measured in professor-hours? The neglect of a Baumol correction in historical reasoning about this most Baumol-ified of fields makes me more skeptical of the author’s estimation abilities generally.

    • There are also some positive returns to scale in higher education. A school of 5,000 undergrads will definitely support an English department and probably a Chinese department, but probably not a department for instruction in Korean. Bigger schools can offer a bigger variety. That tends to argue in favor of something entirely online (Khan Academy, University of Phoenix), but so far I’m not aware of any implementation that really works. Student motivation is tough enough when the students live on-campus in an environment that has been designed around the idea that everyone goes to class.

  5. Legions of administrators may appear to be superfluous from the outside, but unless the new university intends never to take a cent of Federal money (including student loans, scholarships and so on) they are probably not dispensable.

    • True. Sometimes you got to have a huge office full of tons of people with nothing important to do, “to make the numbers come out right.”

      Still, do they have to get paid so much? At the University of Michigan,

      Robert Sellers, whose title is “Vice Provost for Equity and Inclusion & Chief Diversity Officer” … makes $396,550 per year.

      .

      And he has a staff of 100, with a budget of $90 million. I’m sure Sellers says, “Yeah, but what about that football coach, huh? Huh?!?”

  6. How does this new school avoid the flaw in the current schools? Namely, that a school that embraces open discussion of ideas, and therefore, hiring of an ideological diverse faculty will fall victim to the ideologically intolerant faculty who will achieve positions of influence and limit hiring of new faculty that don’t conform to their ideology.

  7. 4. If everybody woke up tomorrow with no memory of our higher education system, and educators had to start from scratch, chances are we would settle on a very different model.

    So would a number of other things as well. In terms of housing in expensive cities, the biggest barrier is not regulation but owners not wanting to sell houses. (Conor Sen has notes on this!) What about the subway vs. freeway systems.

    Mr. Treadgold thinks that a new private university may be needed, not an explicitly right-wing one

    How about simpler more practical and vocational type training? Truth seeking seems like a waste of time and the professors I remember better taught the subjects and did little to ‘seek the truth (Either left or right or whatever.)

    Also I wish the college system would be better integrated with the private sector for jobs. College does do some good math and writing skills.

  8. The Minerva Project, which you blogged about five years ago and which I believe recently graduated its first class of bachelors”s degree students, is an attempt, apparently successful so far, to establish a new model of university.

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