Thursday, December 08, 2005

Putty-clay universities 

Putty-clay is a model of investment we learned when I was in grad school that I don't see textbooks use anymore. In short, capital before it is built is putty and can be put anywhere. Once in place it hardens like clay; you may have capital you would never buy again if you could do it over, but because it's there in place you continue to use it to produce goods and services. It is sometimes also called investment irreversibility.

I thought of that when reader jw sent me the story of Tulane University announcing faculty layoffs.
Tulane University announced plans Thursday to lay off about 230 faculty members and shut down some programs to cope with the financial damage done by Hurricane Katrina.

In a set of budget cuts totaling about $100 million, the university will eliminate about 180 faculty positions at its medical school and about 50 in its undergraduate and graduate programs.

...The university said it will continue to participate in such NCAA Division 1 sports as football, baseball and men and women's basketball. But it eliminated men's track, men and women's tennis, men and women's golf, women's swimming, women's soccer and men's cross-country.

The university also said that it will concentrate on areas where it has attained, or has the potential to achieve, world-class excellence and "will suspend admission to those programs that do not meet these criteria." But the university did not immediately identify which programs that would mean.

"Essentially, they're going to reinvent Tulane," said Terry Hartle, senior vice president of the American Council on Education. "The kinds of changes they are likely to make would be the most significant restructuring of any American college or university in the last century."
If you wonder why it takes a disaster to get a university to "concentrate on areas where it has attained, or has the potential to achieve, world-class excellence," the answer is putty-clay. These places get large, investments made in programs that looked great in the 1960s don't ever die but continue to take resources away from new possibilities. When an engineering schools sets up a program in microcomputer engineering, does its computer science program go away? Art departments are expensive -- should every university have one, or should there be an attempt to contract out to someone else to provide art appreciation to students? Putty-clay.

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