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How much is a professor subsidized?
On average, full-time faculty members at the University of New Mexico’s Gallup campus were being subsidized to the tune of $10,554 apiece.
The word subsidization, in this context, refers to the subsidy from the university and not from government per se. That's the difference between the cost of the professor minus the revenue he or she brings in from tuition. Here is the full article, with further links. I am not sure how this estimate allocates various fixed costs (does a professor have to "pay for" the lawn care service?), but for the time being does that matter? The important truth is that while universities think in these terms all the time, they are rarely if ever willing to make their implicit estimates public or see how those estimates might be improved.
Posted by Tyler Cowen on August 11, 2008 at 07:20 AM in Education | Permalink
Comments
This sort of reasoning assumes that higher education is a private good that should be financed entirely by students as opposed to in any way a public good. Should we apply this sort of reasoning to elementary and secondary schools as well?
Posted by: Marvin S at Aug 11, 2008 7:51:03 AM
Wait, isn't this subsidy just another name for publicly funded education? How much are soldiers, cops, senators, high school teachers, Washington museum curators, and so on subsidized?
Posted by: James at Aug 11, 2008 7:56:32 AM
I have yet to ever meet a college administration who knew anything about cost accounting, so I give such numbers very little credibility.
Posted by: save_the_rustbelt at Aug 11, 2008 8:01:10 AM
This looks like a useful piece of precisely wrong accounting. The Accountancy Professors will be able to use it as an example of how not to cost.
Posted by: Diversity at Aug 11, 2008 8:23:37 AM
This looks like a useful piece of precisely wrong accounting. The Accountancy Professors will be able to use it as an example of how not to cost.
Posted by: Diversity at Aug 11, 2008 8:23:50 AM
Also, there is the spending from endowment at high end schools...
Posted by: no at Aug 11, 2008 8:50:04 AM
There may be a way to find out how much the professors within a given department are subsidized by their universities using published information. Look at the required course curriculum for undergraduates and see which and how many out-of-major classes are required by the university for graduation.
If the university's education program is balanced, then all academic majors will have roughly equal exposure to various disciplines outside their primary fields (for example: a Biology major is required to take an English class and an English major is required to take a Biology class).
But, if the students in one discipline are required to take classes in another, without a reciprocal requirement for the students in the other field to take classes in the first discipline, then the students in the first discipline are being required by the university to subsidize the other discipline. The more one-way the requirements, the more the field is being subsidized. This would be how the university's administrators communicate the relative values they place upon the various academic majors.
Posted by: Ironman at Aug 11, 2008 9:00:36 AM
First, the article does not address revenue sources such as government grants or research contracts. This omission is significant as tenure decisions sometimes hinge on grant and contract generation, as well as on publication production. Second, it would be interesting to compare public vs. private universities. Third, what is the "subsidy" for GMU full-time faculty after appropriate revenue allocation (by department)?
chsw
Posted by: chsw at Aug 11, 2008 9:16:50 AM
Cost accounting gone wild. I don't know how they did their calculation, but it looks like they didn't take into account the nature of a university. Without professors no one would go there. No amount of TAs can make up for that.
Posted by: Tim at Aug 11, 2008 10:24:19 AM
does a professor have to "pay for" the lawn care service?
Or for that matter, does the professor have to "pay for" bureaucracy? In this accounting, are professors being stuck with the "bill" for an out-of-control bureaucracy? I can just see an administrator making half a million, and then throwing his own salary in with the salaries of the lawn care staff, putting it all on the professors' virtual tab, and claiming that the professors are being subsidized.
Posted by: Constant at Aug 11, 2008 11:04:19 AM
CHSW beat me to the punch: the post above doesn't take into account grants certain professors bring in. I remember reading in The Billion Dollar Molecule (the story of Vertex Pharmaceuticals) that the founder of the company bragged, when he was a chemistry professor, of bringing in enough grant money to pay for the English department.
Posted by: DaveinHackensack at Aug 11, 2008 12:24:57 PM
So how would this make universities different from virtually all large organization, public or private. Everyone cross subsidizes. It is common -almost universal -- practice in big business.
Posted by: spencer at Aug 11, 2008 12:42:31 PM
Maybe somebody could have some fun with a spreadsheet and alternate general-ed requirements.
Posted by: odograph at Aug 11, 2008 1:53:02 PM
You can't spell profit without prof.
Posted by: Walt at Aug 11, 2008 3:08:33 PM
I wish philosophers would spend more of their time conforming their ideas to the way the world works rather than being engaged in impractical thought exercizes that end up with contrary conclusions and justifying those conclusions.
Posted by: David Peterson at Aug 11, 2008 4:35:52 PM
In addition to ignoring grants, this analysis assumes that the tuition is at the 'right' price and thus the difference between total tuition revenue and total costs are a subsidy to the producers (and then further that it is a subsidy to a subset of the producers, the faculty.) However, we could also assume that all the costs are 'right' and it is the revenue which is too low, i.e. the students are subsidized by being given an education which costs more to produce than the tuition they are paying. In fact, this is the way I've seen higher education economics most commonly discussed. We talk about how much the government and/or endowments subsidize the tuition.
Of course, the truth is probably somewhere inbetween. Compared to a free market with no government or private subsidies, tuition is likely lower and faculty salaries (and other costs) are likely higher. To estimate how much each is, we need to start looking at price elasticities. Hey, this is starting to look familiar.
Posted by: Marc in Asia at Aug 11, 2008 8:22:47 PM
This is sort of ridiculous. UNM-Gallup pays the professors what the labor market will bear; they hire a sufficient number of professors to teach the number of students they aim to enroll; and politics determines how much of the operating costs are raised from tuition, and how much from general tax revenues. The university doesn't subsidize its employees, it subsidizes its product.
Posted by: andthenyoufall at Aug 11, 2008 9:34:08 PM
Easy. Increase average class size until "subsidy" disappears.
Posted by: Frank at Aug 11, 2008 9:54:18 PM
I have a great idea -- fire all the professors, and then the university will start making money. Why are they paying for all these losers? Don't they know the simplest of all profit maximizing conditions -- making the value of the marginal product equal in all internal activities? Jeez, why don't they get with it?
Posted by: Carl the EconGuy at Aug 12, 2008 10:25:47 AM
