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Market Forces in Higher Education

Market Forces in Higher Education

(p.23) 2 Market Forces in Higher Education
Saving Alma Mater
Ernst R. Berndt
University of Chicago Press

This chapter reviews market forces in higher education. Government appropriations and tuition controls provide disincentives for public universities to rein in expenses and enhance productivity. Removing these disincentives not only would enhance efficiency but also would provide a host of other positive benefits, including a moderation of annual tuition increases. The loss of financial flexibility in public higher education was brought on primarily by a confluence of demographic and social changes that put increasing pressure on state treasuries and reduced the ability of lawmakers to make large discretionary appropriations. Partly this pressure came from growing societal needs—for health care, road and infrastructure maintenance, K–12 education, public employee pensions, and federal entitlements—but it also came from the growing scale of public higher education itself. As the pressure on state treasuries grew, lawmakers became increasingly concerned that public universities were making up for appropriation shortfalls by hiking tuition charges. The traditional business model for public higher education worked well only so long as public subsidies held up, state campuses were well maintained, faculty members were paid adequately for their teaching and research, and taxpayers received a solid education at a bargain price. But over the years, as state support has dwindled, public colleges have had no choice but to try to make up the shortfall by shifting the financial burden onto students and their families.

Keywords:   public universities, college education, higher education, market forces, tuitions, demographic change, social changes

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