Higher Ed’s Diseconomies of Scale

In Texas, we take pride in doing everything BIG. That seems to apply to our university systems, as well. While other states have one or two public university systems, we have six! “Why?” a colleague recently asked. “Wouldn’t Texas be better off merging some of its systems and saving on administrative costs?”

My inner economist immediately balked at this idea. More is generally better, correct? A number of past Nobel laureates came to mind. Certainly F. A. Hayek would agree that multiple systems foster innovation, as each strives to move ahead in the discovery process, experimenting with new models in a dynamic educational landscape. George Akerlof might argue that each system and its individual institutions build a distinct brand and reputation over time, which serves as a crucial signal of quality to students and employers. Elinor Ostrom could highlight the benefits of polycentric governance, which allows individual systems to tailor their programs and rules to the specific, unique needs and circumstances of their local area.

The question piqued my curiosity, so I did a little digging to see how administrative costs in Texas compare to those of North Carolina, where my colleague calls home. The American Council of Trustees and Alumni has built a wonderful tool to compare university administrative costs across the United States.

Read the full article at the James G. Martin Center.