This article alludes to a lot of the topics we discussed in class when we talked about the traditional view of bureaucracy. Universities, just as government agencies, are autonomous and thus the problems of bureaucracy arise. One of the biggest problems identified by Niskanen is the monitoring problem. It is really hard to monitor universities because output is non-market and it is hard to quantify and the university presidents' salaries are not tied to efficiency or profit because there is no profit associated with universities.
Just as in government agencies, decisions at universities are done by a senior bureaucrat (the president) who, as any other person, is homoeconomicus (utility maximizer). In order for the president to maximize his utility he wants to maximize the budget. Therefore, the decisions made by the president might not always be to maximize efficiency but rather to maximize the budget. This is facilitated by the fact that the state or donors do not see the cost curve of universities (take Penn State's non-disclosure as an example).
Overall, universities, like agencies appear to be isolated and run by budget maximizing bureaucrats. Weingast and Muran would respond to this article by saying that we don't see president turnover that often or other measures of punishment because the reward and sanction system in place for universities is strong enough that it scares bureaucrats to be in line with the broader interests.
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In this article, the phenomenon of massive tuition raises in higher education is quanified against the cost of living index. University tution has far outpaced both inflation and cost of living raises for about as long as we students have been alive. As Mariana pointed out, college administrators are naturally budget maximizers. With more students attending college than ever before, administrators have no incentive to not maximize their budgets. This budget maximization, however, takes place largely on the shoulders of student tuition payments.
When analyzed as a government agency, the University of Virginia exhibits many of the inefficiences we discussed in lecture. The overseeing committee, the Board of Visitors, is appointed by the Governor of Virginia. His appointments are usually political in nature with little oversight. They meet fairly infrequently, have large amounts of closed hearings, and are beholden to the governor, not the students. While the president has a very large say in the creation of the budget here at U.Va, it is this appointed, largely unregulated Board of Visitors that has final say on budgetary matters. It is very likely that if we operated government agencies like we do our own University, we would see an even more bloated and wastful Washington than we do now. With every incentive to be inneficient budget-maximizers, the Board of Visitors is likely to allow the trend of massively increasing tuition bills to continue.
http://www.huffingtonpost.com/2011/10/28/college-costs-are-rising-_n_1063617.html
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