Book review: Campus Economics

Unsurprisingly, I have a strong view that everyone would be better off understanding and applying a little more economic thinking in their everyday lives, and their business and policy decision-making. In particular, recognising that there are trade-offs in every decision (TANSTAAFL - there ain't no such thing as a free lunch) would go a long way to improving the decisions that many people make. So, I had high hopes in reading Sandy Baum and Michael McPherson's book Campus Economics, which is subtitled "How economic thinking can help improve college and university decisions". And Baum and McPherson are explicit that their goal in the book is to:

...facilitate communication among groups on campus by creating a common vocabulary and encouraging modes of thinking that allow participants to better see other viewpoints and grapple with the trade-offs involved in making sound decisions.

Unfortunately, my high hopes for this book would go mostly unfulfilled. Much of the book is devoted to a descriptive presentation of data on college and universities, with a particular focus on enrolment and financial data. That sort of data has its place, and is interesting in some ways. However, the book didn't add a whole lot of value beyond the data, other than posing some questions to consider in various decision-making situations, including decisions related to faculty compensation, budget cuts, tuition pricing, college endowments. Now, the tertiary education sector in the US is quite diverse, with public, private not-for-profit, and private for-profit institutions, all with different goals and constraints, but nevertheless there are common elements to all of them and Baum and McPherson don't go very deep on any of these areas of decision-making. What we are left with is a once-over-lightly approach to a number of topics, which isn't very satisfying.

The book does have some positive aspects. For those unfamiliar with the US tertiary education context, it does provide a good primer, and may be useful for that purpose. Baum and McPherson present economic concepts close to the beginning of the book, but mostly avoid using the technical terms (like opportunity cost) thereafter, but I feel like the book would have been better if the technical terms (occasionally reminding readers of their meaning) had made more frequent appearances. In discussing college endowments, Baum and McPherson did point out one thing that many people should have a better understanding of, which is fungibility:

However, if the business curriculum is funded partly from the endowment gift and partly from general university funds, there is nothing to stop the university from reducing the general funds going to business and directing that money to hiring faculty in the arts. Because very few activities at universities are fully funded by endowment gifts, even restricted endowments are more "fungible" than they look.

Indeed, there are many occasions where funds that are earmarked for one purpose may nevertheless lead to no additional spending on that purpose, and we should always be conscious of that possibility.

Overall, despite those positive aspects, the people who would get the most out of this book are those who are interested in campus finances in higher education in the US. However, even then, the data are likely to get dated reasonably fast, even if the underlying concepts remain relevant. Beyond that, I don't think that the book provides enough depth to sustain a wider readership.