Tuesday, May 11, 2004

Rentseeking teaching 

Erin O'Connor starts last night's post with "Here's a question for economically-minded readers:" Now how am I supposed to turn down a question like that? Her question is simply whether tuitions would rise if universities required all courses to be taught by tenured or t-track professors rather than adjuncts? I'm stealing her question for my summer introductory course starting next week, because it's a good question to teach from.

The answer, surprisingly, is "Not a bit." It requires an assumption that I think is justifiable to arrive at that conclusion, but of course others will wish to argue. That's the joy of blogging with a comment box!

The conditions Erin lays out are these:
This question assumes that the (bloated) bureaucratic structure of today's higher ed instituitions would remain constant, and that tenured faculty members' teaching loads and salaries would, too. It also accepts the current estimate that between 40 and 60% of college and university teaching is done by graduate students and adjunct lecturers.
The assumption is that universities are price-searchers rather than price-takers. We can assume Erin means to use this assumption because by referring to a constant "bloated bureaucratic structure" she implies that competitive forces are not reducing prices. Price searchers will price their goods based on the rule of "marginal cost=marginal revenue". The question is answered by asking the following question -- will there be an increase in marginal cost by changing who teaches a class?

Now remember that marginal cost means future cost. Since a tenured professor is already guaranteed income as long as she remains at the university, she is not a marginal cost. She's in fact a sunk cost. Pulling her from research to teaching changes nothing for the university except any grant income she might generate. If she's in the humanities, that's not likely to be a major concern for most administrations. Engineering and physical sciences are, of course, another matter but that's not where the "adjunctification crisis" is.

The same is probably true for t-track faculty: When you hire someone to whom you promise the opportunity for tenure, you will be very unlikely to let them go in response to fluctuations in course demand. They're a sunk cost too up to the time of the tenure decision. And given that tenure depends only tangentially on teaching in a research institution, it is again inframarginal.

The only way it would matter to universities is if students (and their parents) are willing to pay more for schools that only use tenured and probationary faculty to teach. Take a baseball game: Do we adjust ticket prices for the quality of the starting pitcher? No. There's been debate over some teams charging premium prices for traditional opponents or the New York Yankees' one visit to your stadium, but that's again a demand side question. We don't pay more to see the Yankees play because they're paid so much: We pay more because they are an exciting team to watch (as painful as it is for this Red Sox fan to say so) and probably because transplanted Yankee fans have high and inelastic demand for their games relative to, say, the Devil Rays. Will students pay premium tuition for a course taught by a Nobel Laureate or an instructor with a NYT bestseller?

Given a negative answer to that, we see that the debate over who teaches is one of rentseeking between faculty and administrators. Students will pay what they pay due to their own demand for courses and are not likely too sensitive between who is used. Faculty support using adjuncts to reduce teaching loads; administrators like it to reduce cost and allow themselves to hire more administrators. What is left is to decide how the economic rents generated by colleges is to be divided.