Education is a Business; Lehigh Laughs
By: Benjamin Mumma
The idea that education is, itself, a business is obvious to most. Particularly with higher education, you have students, who are the consumers of a good provided by University for the price of tuition. While many institutions like Lehigh are not-for-profit organizations, they still have to play the fundamental game of making sure that revenue covers expenses (and even look to expand the excess reserves within the endowment).
While education is a business, it is a strange one for several reasons.
First, consumers pay different prices for the exact same product, with prices set primarily based on how much wealth the consumer has. In other sectors of the economy, this type of behavior would be price gauging, and illegal.
Second, Universities enjoy selling a product that has a high replacement cost for the consumer. Consider a student who is unhappy with the University he or she attends. Switching to a new school involves a physical move, damage to personal relationships, and difficulties surrounding the transfer of credits from one institution to another. Quite simply, most people end up staying at the institution they start at.
Third, in most cases, the end consumer of the product (education) is wholly oblivious to how his funds are spent and the quality of the product he or she receives. Of course, this is often because students are not making tuition payments themselves. Parents, scholarships, or student loans are almost exclusively utilized, with the latter being vague enough so that the student often misses the connection between his consumption of a good now and his eventual payment for that service. Additionally, a school like Lehigh that has about 10 applicants for each student who matriculates has little concern of “running out” of new students. A strong reputation insulates Lehigh from being affected by poor investments.
These dynamics always provide an interesting perspective of an institution’s spending decisions. Obviously, institutions have an interest in offering the services desired by students, but beyond that they can divert funding to whatever may serve to benefit the University’s interests, as opposed to the student’s. This incongruity is a simple byproduct of the large costs that surround transferring: most schools are able to assume that once a student arrives on campus as a freshmen, that student will be purchasing four (or more) years of tuition. So when Lehigh raises its tuition another 3% next year, it can do so safe in the knowledge that no one will transfer because of the price increase. All it has to worry about is attracting new students – the current ones don’t matter anymore.
It is through this lens that we should examine a recent decision by Lehigh to hire two “clusters” of professors.
The first cluster, a hiring of four professors to focus on Smart Grid Electricity Systems is a great idea, and would seem to provide an essential course offering to Lehigh students. For a second, it seemed that Lehigh may actually be making decisions based on what served its students. But then there is the second cluster: a hiring of three professors within the Africana Studies Department.
The problem here lies with the numbers: Lehigh currently has (according to its online directory) one undergraduate student enrolled solely as an Africana Studies major. While others certainly take Africana Studies courses as part of a minor or through the sociology or anthropology programs, the simple fact is that the market within Lehigh for Africana Studies courses is very, very small.
Apparently, Lehigh would like to expand that program. What is the motivation behind this? It is clearly not for current students. A cluster within a field that aligns to more of Lehigh student’s fields of study would have provided more value. It is also not to generate increased revenue. Quite simply, Africana Studies, like other obscure courses of study are not profitable – they do not bring in enough students to cover the high costs of professors, office space, et cetera.
Ultimately, Lehigh is most likely expanding the Africana Studies department in an attempt to make this campus a more diverse place. That is an admirable goal, but the method in this case is expensive and ineffective. The cost of three new professors is likely to run upwards of $300,000 per year when all costs are taken into account. That is a sizable cost, and for what benefit? Maybe 20 or 30 of Lehigh’s students will be able to take two or three more courses in Africana Studies. The other 99% of Lehigh students are unaffected.
The bottom line is, Lehigh continues to attempt to turn itself into an elite institution in every department. But in doing so, they are going against everything that Lehigh has done to be successful. No matter how hard Lehigh tries, it will not be an Ivy League institution. The Africana Studies cluster is clearly an attempt to become an all-encompassing institution like those within the Ivy League. That is a mistake.
Lehigh’s success stems from engineering, and recently business as well. Almost all of Lehigh’s success, and its successful alumni have come from those areas, and there is nothing wrong with that. MIT, Cal Tech, and many other schools have fantastic reputations as a result of focusing on hard sciences. With the technological revolution that we are living through, success will only become more highly correlated with truly practical courses of study.
The decision making process that Lehigh went through here shows the deviance between a normal market and the higher education market. Lehigh is making a decision no business would ever make. It would be like Coca Cola deciding that it wanted to manufacture computers, or Boeing deciding that it wanted to branch into the pharmaceutical industry. It just doesn’t make sense. But Lehigh will keep trying to do everything, and in doing so become a worse institution in the ways that matter most.