there are a number of features of the higher education marketplace that make the effect possible. One is that higher ed is dominated by nonprofits. If revenue increases, it must be spent, or else refunded. It cannot simply be pocketed by the college or university. That means that it’s likelier for increases in revenue to lead to increases in spending than it is for normal companies.
The quality of college isn’t completely evident during freshman orientation. People overwhelmingly only get one undergraduate degree, so colleges and universities don’t have to worry as much about satisfying repeat customers. And there are more than two parties to the transaction. There’s a student and a college, sure, but there is also the student’s parents, and the government, and even the student’s future employers. Those all end up mattering for the financing of the product in question. It’s a really, really messed up market.
I’ll make Dylan Matthews -- and all the major news outlets -- a deal. If you want some insight into how people who actually make these decisions make them, call. I’ll take the call, and talk as long as you want. But for heaven’s sake, don’t postulate from some Hayekian theology and call it reportage. We matter too much for that, even if you wouldn’t know it from our budgets.