Ideoblog

Who owns universities: the case of Dartmouth

Today's WSJ has an article and an editorial on the threat to Dartmouth's unusual governance system where the alumni have real power on the board of trustees. The problem at Dartmouth is that reform-minded alums have gotten active on the board, threatening the usual university equilibrium – that is, dominance by academic elites. Thus Dartmouth is poised to quash the rebellion by transferring power to an internal committee. As the editorial says

institutions of higher learning now shy from the same oversight their faculties have demanded of the corporate world. . . . Former Harvard Dean Harry Lewis recently recounted the disposition of the Corporation during the Larry Summers debacle: "[It] was a leadership vacuum. . . . If Harvard were a public corporation . . . the shareholders would have been up in arms about the failure of the directors to care responsibly for the institution." It is not surprising that the "best practice" Dartmouth seeks to emulate is precisely the practice that enabled Harvard's expulsion of Mr. Summers.

At the time of the Summers ouster I said

Harvard, like other universities, is worker-controlled. The next Harvard president, unlike Summers, will be very aware of who’s the boss.

As he did with so many other governance issues, Henry Manne nailed this issue in an article 14 years ago, Comment on Peter Byrne's 'Academic Freedom and Political Neutrality,'43 J. Legal Educ. 340 (1993) about "[the] use of perpetual charitable trusts as the legal form of American private universities." Henry pointed out that the trust form was intended to lock control in those who would ensure that the institutions adhered to the religious precepts of their founders. But

As new generations of trustees emerged without the strong religious faith of their predecessors, the old, well-understood sense of direction of most schools was lost. Trustees had no particular agenda or conviction. The "customers" (students and their parents) had no power under the perpetual trust form. "administrators have no objectively identifiable goal--i.e., no interest that is distinctive and peculiar to administrators as such--that would allow them to occupy the role religionists once had." * * *

That leaves only one group for serious consideration: the faculty. And they were inspired to action by more than a process of elimination. The faculty was the only group that had a real self-interest in matters of university governance. Obviously, it is better to have a job where you are not monitored, no one oversees you, and no one enforces a particular doctrine that has to be taught. And certainly it is nicer if you can select your own colleagues, particularly if you can select people with whom you are intellectually and socially (and in years gone by religiously, racially, and by gender) compatible. So power in matters of real moment in university education devolved onto the faculty. There was in fact no one else around who even cared. The only ones who should have cared were the students and their parents, and they had no way whatever to make their concerns felt. Thus, the faculties evolved into real governors, or “owners” if you will, of the universities.

So, as many academics gripe about the problems of the separation of ownership and control in modern corporations and the power of managers rather than shareholders, they actively promote a governance model that puts power in a small elite and disenfranchises most of the university's stakeholders, including those who provide the funds.

A couple of years ago I wondered if there might be some viable alternative to this status quo.

[I]f for-profit or non-faculty-governed universities had significant advantages over the status quo, I'm confident our society and economic system are open enough to accommodate this change. Then why hasn't it happened? Possibly because the academic elites on which these institutions depend would refuse to work for such enterprises. But that's not a complete answer, because the elites don't provide the money, and can't ply their trade without it. So they have to persuade state governments not notably sympathetic to university non-athletes, private donors and alums to support them. The money people do continue their support because "labor" and "capital" are willing to compromise their objectives. The academic elites accept some constraints, and do not live in a complete worker paradise. * * *

Anyway, I'm still wondering:  is the current model of academic governance really the best possible approach despite the disenfranchisement of most stakeholders?  Or is it preserved by a combination of government regulation and powerful cartels (i.e., accreditation and licensing bodies)?  If the latter, I suspect the market will find a way of breaking through eventually and bringing us a for-profit alternative to the traditional university.

Summers' resignation and the worker-owned university

Looks like Summers is resigning as Harvard president.  According to the WSJ:

Backing for Mr. Summers from Harvard's seven-member governing board, known as the Corporation, has eroded in recent weeks in the face of renewed criticism from many arts and sciences faculty members, the people familiar with the matter said. . . Mr. Summers's supporters, and even some of his detractors, say they are worried it will be difficult for Harvard to find a strong successor now that the faculty has demonstrated its clout.

The bottom line is that it has become clearer, as I said a year ago, that Harvard, like other universities, is worker-controlled. The next Harvard president, unlike Summers, will be very aware of who’s the boss. Buy why should it be hard for Harvard “to find a strong successor”? Why not a “strong” advocate of faculty interests?

The problem is – what are those “interests”? University faculty are a notoriously unruly lot. Moreover, the interests that end up mattering are not those of the average or majority but of the loudest faction. These are inherent problems in worker-owned firms.

Meet the new university. Same as the old university.

Via Tom Smith comes this little essay about the fate of universities in the Internet age.  The gist (with some embellishments of my own) is this:  Brick and mortar universities are anachronisms in an age of podcasts, webcasts and blogs.  Increasingly higher education will be available asynchronously and it will be available in a real market setting, with students paying by the course, by the teacher, and without much of the wasteful cross-subsidization (think athletics) that goes on now.  Of particular interest, the essay notes, "[f]urthermore, the professors could let non-students download their lectures and charge them royalties, just like the Black Eyed Peas. Ordinary folks already buy courses on tape or CD."  Paradoxically, it is a throwback to an earlier age -- a much earlier age.  Charles Homer Haskins, in his essential little book, The Rise of Universities, describes the student-teacher interactions at the University of Bologna in the 14th century where professors were paid (or not paid) directly by their students according to the students' perceptions of the quality of the class. 

Such changes are likely for the better.  Here's Adam Smith on universities:

The endowments of schools and colleges have necessarily diminished more or less the necessity of application in the teachers.  Their subsistence, so far as it arises from their salaries, is evidently derived from a fund altogether independent of their success and reputation in their particular professions.

In some universities the salary makes but a part, and frequently but a small part of the emoluments of the teacher, of which the greater part arises from the honoraries or fees of his pupils.  The necessity of application, though always more or less diminished, is not in this case entirely taken away . . . and he still has some dependency upon the affection, gratitude, and favourable report of those who have attended upon his instructions . . . . 

In other universities the teacher is prohibited from receiving any honorary or fee from his pupils, and his salary constitutes the whole of the revenue which he derives from his office.  His interest is, in this case, set as directly in opposition to his duty as it is possible to set it.

Faculties in today's universities are substantially insulated from both the reputational and remunerative consequences of offering poor (or exceptional) education.  As direct payment by students -- and, eventually, the conferring of degrees on "independent" courses of study -- becomes more commonplace, this insulation will be seriously weakened, much to the likely benefit of the students.

Don't get me wrong -- there are some benefits to the current model, and I'm certain it will endure in some form even after the Internet revolution hits home.  In particular and off the top of my head, universities offer some evaluation of students, signaling to employers through the admissions process, and a marriage market (this last characterization attributable to Armen Alchian). 

But won't we be better off with a world of separate research institutions (with no teaching) and teaching institutions (with no research), along with a few throwback hybrids?  I know it's commonly the best scholars who are also the best teachers -- in the brave new world these folks will doubtless excel at both.  But for the lesser scholars with a comparative advantage in teaching (and vice versa), our current regime is a mess.  It all but precludes the better teachers from cultivating their reputations (and their remuneration) on the basis of their teaching, and it forces the better researchers to waste time teaching.  And let me hasten to add that to the extent that there is inherent synergy between the two (to the extent that researchers are better researchers for having taught and teachers are better teachers for having researched), the best researchers and the best teachers will continue to do both; a direct market for teaching does not preclude this.

Market forces are exceptionally weak in our nonprofit, well-endowed universities.  Their introduction will, I think, be a promising development.

UPDATE:  Professor Bainbridge jokes about the brave new world here.  I take it he's dismissive of it, but I'm not entirely sure.  Also, one of his commentors recognizes the (perhaps unintentional) allusion to the classic cinematic example of asynchronous education, Real Genius.  Very nice.