Universities redux: The anti-market folks begin to crow

Geoffrey Manne —  4 March 2006

Last week I made a few observations and asked a few questions about higher education in the wake of the Summers fiasco (which I dubbed l’Affair Étés, but apparently no one thought that was nearly as clever as I did).

Over at Prawfsblawg, guest blogger Jonathan Zittrain takes NYT columnist John Tierney (for my money, the only reason to buy the Times other than the weather map and the movie listings) to task for his assertion that universities would do well to adopt a for-profit corporate model of organization. Bill Henderson piles on. Zittrain’s argument is, essentially, that the profit motive would subvert “proper” higher education.

Zittrain’s key conceit is to turn the tables on Tierney and assert that newspapers would, in fact, be better if they adopted a less market-responsive stance and emulated the universities Tierney is so quick to criticize. He says,

[w]e might actually know more about our world if journalists had tenure and were free to pursue stories wherever they led, without fear of financial repercussion.

The funny thing is, newspapers operate in an extremely competitive market. If Zittrain were right, they would already be doing this (or failing). Oh — and it turns out, according to Bill Henderson, they are! He quotes the Times’ Howell Raines:

Hiring mistakes are rarely shown the door at the Times, and the paper can be stuck with them for years. After a probationary period of fourteen weeks would-be staff members get tenure for life.

Now, to what effect? Has this behavior, along with myriad others, served newspapers like the Times well? I doubt anyone would actually make that claim. Tierney’s point is that tenure helps to insulate university faculties from market forces, to the detriment of students’ education. He asserts (perhaps incorrectly) that newspapers tend to take a different tack. Countering in response that newspapers would be better if they, too, were more insulated from market forces hardly scores any points.

But Zittrain goes on:

The idea behind a profession — law, medicine, journalism — is that it exists as something other than simply a raw market-responding entity. There are ideals associated with it, and members of the profession are to see those ideals as influencing their behavior independently of market forces (while also having good arguments about what those ideals should be).

This strikes me as dangerously naive. It means one of two things:

  1. We can and should rely on the idealism and self-restraint of professionals untainted by market incentives.
  2. Someone or something other than the market can and should police the professions (hmmmmm . . . who could it be . . .? Why, the government, of course!)

Forget #2 for now (it doesn’t factor in Zittrain’s analysis). Does anyone really believe #1? Leave aside the reality (which Zittrain does seem to acknowledge) that even relatively-insulated professionals are still subject to important market forces — does anyone really think we’d be better off with a greater degree of ideology and self-appointed moral arbiters to guide the professions?

If you do, please run out and buy this book: Armen Alchian, Economic Forces at Work (Liberty Fund, 1977). Turn to page 151 and read Alchian & Kessel’s 1962 article, Competition, Monopoly and the Pursuit of Money. Alchian and Kessel point out that, because property rights are attenuated in monopolies (and other “nonowned” institutions like nonprofits), more resources in these non-competitive environments will be used to satisfy “personal interests” rather than profits. Perhaps this will be a personal interest in fulfilling the noble ideals of the profession. Or, as Alchian and Kessel emphasize, it may be a personal interest in discrimination, pretty secretaries and easy work environments.

I have never understood why the world is so quick to believe the insiders in the academy (or journalism, for that matter) when we claim to be motivated by the “public good.” The same mechanism that takes the profit motive out of the equation also insulates insiders from the repercussions of extreme self-regard and makes these claims dubious. Precisely where market constraints are at their lowest we defer most fully to the insiders’ relatively un-monitored, unaccountable motives. That seems perverse.

Higher education and print media (oh — and health care. Can’t forget health care) may be two of the last bastions for defenders of the odious notion that the public good and markets are incompatible. But as Larry Ribstein has noted:

The Times is . . . selling a product. I also think that, in doing this, it is performing a public service, like every other profit-seeking business.

In contrast, Zittrain seems to belive that profit-making and good journalism are incompatible. He fears that

[i]f newspapers were to grant tenure to journalists, they might be less responsive to market demands and therefore less profitable.

In other words, the idiots out there who, you know, buy newspapers, think “good journalism” entails something quite different than what Jonathan Zittrain thinks it entails, and a newspaper that catered to his (inherently superior) vision would inevitably go belly up. Actually, he’s probably right. I gather that almost no one buys the NYT anymore. But he is wrong to imply that “selling a product” effectively is inconsistent with “public service.” The two are actually intimately entwined, and it seems quite elitist to me to suggest otherwise here.

I agree with Zittrain on one point: There is a great benefit (to those who can afford it) to getting a liberal arts education.

[T]here’s a world out there beyond the raw vocational skills needed for one’s next phase of life, and . . . there is a benefit — an incredible privilege — to have a number of years to view the world according to one’s intellectual curiosity, seeking and building truth for truth’s sake, and learning to know it when one sees it.

But to me, this suggests that universities that look a lot like today’s universities would continue to exist and thrive in a more competitive, more accountable environment. The market does not lead to the lowest common denominator as Zittrain implies; it leads to a diversity of choice, responsive to the range of consumer demand. It is rather the current model that is static — and troubling.

Geoffrey Manne


President & Founder, International Center for Law & Economics

Trackbacks and Pingbacks:

  1. TRUTH ON THE MARKET » More on universities - March 16, 2006

    […] madisonian.net » on Universities redux: The anti-market folks begin to crow.Josh on Trust the Customer!.Matt on Trust the Customer!.Thom Lambert on What I Did on My Blog Vacation.Kate Litvak on What I Did on My Blog Vacation.Roger Jolley on The Ethicist strikes again.iSift.com on State of the Blogosphere.Chris on Trust the Customer!.Josh on Trust the Customer!.Bob Smith on Trust the Customer!. […]

  2. madisonian.net » - March 15, 2006

    […] File this under the “I just can’t resist commenting on Harvard, again“: Talking about Harvard, Larry Summers, universities, markets, and ideals, Jonathan “there are ideals associated with a profession” Zittrain and Geoff “let the market constrain the faculty, too” Manne are talking past each other. […]

  3. Ideoblog - March 5, 2006

    Universities, journalists and markets…

    Jonathan Zittrain doesn’t like NYT’s John Tierney’s idea, in the wake of the Summers’ resignation, that universities should go for-profit. Moreover, he wishes journalists had tenure and were free to pursue stories wherever they led, without fear of…