Bryan Caplan

Tenure and Non-Profits

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Steve Levitt has come out against tenure, and Greg Mankiw is standing up for it on grounds I'd normally accept:

[U]niversities may well be better off by paying lower salaries to tenured faculty, despite the adverse incentive effects, than paying higher salaries to professors without tenure. In other words, Steve thinks the competitive market for professors is resulting in inefficient contracts, while I believe that, absent any reason for market failure, the labor contracts we observe are likely to be efficient.

But there is a glaring source of market failure that Mankiw overlooks: the non-profit status of universities. There are lots of reasons to think that non-profits tend to choose inefficient paths of least resistance. (Here and here are two cases of interest).

The most obvious reason: In a non-profit, efficient reforms give the people in charge big headaches (see the case of Larry Summers) with virtually zero financial reward. So why rock the boat?


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The author at Maggie's Farm in a related article titled Sunday Links writes:
    WaPo: Here comes the river of blood! Blue CrabUnemployment drops some more. Not much more room to improve.What kind of "green" are we talking about?The proletarianization of doctors. StumblingTenure and non-profits. Interesting. Of course, you c [Tracked on March 11, 2007 6:51 AM]
COMMENTS (8 to date)
Bruce G Charlton writes:

Non-profit colleges: motivated by morality, not education

Good comments Bryan, and I liked the link to the prejudice article.

My own take is based on the observation (which I assume to be correct) that if the university system was being set up now, and in the private sector, there would *not* be tenure.

Would any sane employers create contracts from which it is virtually impossible (ie. slow, expensive, and an incredible hassle) to fire employees for incompetence or idleness? Surely, not?

While Makiw's point is a powerful one, I think BC may have the answer when considering the non-profit status. There are powerful inertial forces in any organization, and the weaker the 'bottom line' then the less likely that the organization will be efficient.

Why don't for-profit universities take over? My feeling is that too many people believe that they are immoral. They believe that for-profit universities would put profit above educational standards as a goal. Probably true, but with the important qualification that educational standards are the means to the end of profit.

But the crucial point is - what motivates not-for -profit institutions? Okay, it isn't profit, but it isn't primarily education either. It may be that the primary motivation is moral - the moral self regard of the administration, and the moral perception of the institution by the public.

There certainly is a heck of a lot of moralizing at the administrative end of universities (eg about race preferences, or social engineering). Maybe that should be regarded as a clue to the main intrinsic purpose of the institution.

A primarily *educational* institution would have a mission something like: 'we strive for a better educated world'.

But the implicit mission of existing non-profit universities (to which their administration would probably be much happier to subscribe) is more like: 'we strive to make the world a [morally] better place, via education.'

Here in the UK, the only time you see a university administration really going all-out to fire a tenured academic is for moral reasons: for instance when the person is supposed to be a racist, or accesses pornography using university equipment. By contrast, I have never heard of any serius attempt to let-go a professor because they did not do their job.

Tom West writes:

Given that universities exist primarily to conduct and disseminate basic (i.e. non-commercial) research, it's pretty much a given that a for-profit university would be a failure. (Teaching responsibilities are an important but secondary concern for universities.)

Efficient reforms are difficult because there's no metric (or rather, thousands of metrics) that can be used to measure and evaluate any policy that one cares to implement.

Bryan's use of efficiency would indicate he believes that there is a single metric that can be used to evaluate any policy. This may be true in a for-profit company where that metric is dollars. For an organization whose metric *cannot* be simply dollars (or else first step is to close the university. Dollar cost now equals zero - case closed :-)), the metrics that are successfully used tend to be a blend of all the stakeholders, employees, administration, students, funders, recipients of the research, etc.

Certainly the idea of building consensus is not likely to meet the approval of someone who's not too impressed with democracy in the first place...

dearieme writes:

Bruce, I once distantly witnessed the hassle that a British Uni went through to sack a tenured lecturer. Mind you, he used to turn up for his classes drunk and incapable.

Bruce G Charlton writes:

How pleasing to get a comment from one of my favourite blog commentators - dearieme.

It is also pleasing to know that a UK university jumped through all the expensive hoops to sack a tenured academic for persistent failure to do the job. That must be a good university, I would guess that most universities would not bother.

But they shouldn't have to jump through so many hoops (and the process has such an unpredictable outcome, too).

My feeling is that the existence of egregiously bad tenured academics has a demoralizing effect which extends far beyond their minority numbers (although I have know of a few humanities departments where the deadwood pretty much equaled the quantity of sound timber).

I see no compelling reason for tenure in relation to teaching and administration duties. And I feel that the main research/ scholarship advantages of tenure can be retained by rolling contracts with a timescale which reflects the timescale of academic production - at least 5 years.

If someone is unproductive (by reasonable criteria) over (say) 5 years, then the contract should be finished. If the research-inactive individual is valued by the university for other reasons then they can be re-hired on a teaching/ administration contract.

But if this is optimal, then why hasn't this happened yet? - asks Greg Makiw, on his blog. I think the answer is that unversities (quite reasonably) depend on reputations which change only over a timescale of decades.

I only recently noticed that Harvard's relative and absolute performance in top quality science (which wins Nobel prizes, and similar awards) has declined sharply over the past twenty years - Harvard was by a margin top in the world for Nobels from 1947-1986 - now it is only seventh and MIT is top. This hasn't yet filtered through to reputations, but it will.

When reduced perfomance results in declined applications, lower fees, reduced alumni contributions etc, only then will Harvard be motivated to take radical action to reverse the trend (although of course they might not do so). The same also applies to Oxford and Cambridge (at a lower level of performance).

The problem of ordinary academic underperformance is, of course, quite different from Nobel quality. But would guess that a similar timescale applies. If a major university perceives that it is being hurt by inappropriate contracts, only then it may go through the considerable disruption short term damage necessary to reform - and if the reforms are successful then others will follow.

As a general rule, all significant reforms cause short term damage - which is why their implementation is delayed. Furthermore, the damage usually gets greater the longer the reform is delayed - which temps administrators to let the next generation do the dirty work. And the first major institution to reform gets most of the bad national publicity from unions etc.

In other words, there are lots of strong reasons _not_ to reform US or UK university contracts - even if it is accepted that such reforms would be - for sure - an improvement in efficiency.

In the end the only thing that will induce this kind of reform is competition. US higher education has been in an expansion phase for a long time (fuelled mostly by huge expansion of medical research funding) - all the major research univesrities have been expanding quickly for decades.

Reforms to tenure will come only when the expansion slows up and reverses (eg. when the medical research funding bubble bursts), and competition for survival hots-up.

Tom West writes:

I'd say that ending tenure won't happen at the high end institutions for a long time (if ever). Why would any high quality professor put their career at the mercy of the administration, politics of the minute, whim of the corporate funders, etc. every 5 years?

I can't see the first few institutions to end tenure doing anything but cratering their academic reputation as recruitment dries up.

Besides, tenure has an important effect that doesn't get mentioned here enough. It forces departments to make a decision. In most organizations, there are a fair number of people who are "good enough". Not bad enough to fire, but not that good.

Tenure acts as at least a one-time bar to inertia, the keeping on of somebody because he's not bad enough to fire. What other profession has a probationary period with teeth that last several years?

Really, unless you need to fire the majority of professors in any given institution, removal of tenure is going to cost a lot more than its worth.

Bruce G Charlton writes:

Tom West asks: Why would any high quality professor put their career at the mercy of the administration, politics of the minute, whim of the corporate funders, etc. every 5 years?

The answer is more money.

As Greg Mankiw points out, universities would need to pay higher salaries at the top end in order to abolish tenure.

This would probably be a good deal for the best academics (who get the extra money and can always get another job elsewhere); and also for the universities - since they would be able to get-rid-of those academics who give-up or go off-the-rails.

dearieme writes:

Sacking someone for persistent drunkeness had one major disadvantage: the process took so long that by the last hearing the bloke could plead that he'd dried out.

In some disciplines, if you didn't reward people with tenure, you'd have to reward them with seriously larger pay. The British Unis have been exceedingly feeble at grasping the nettle of discipline-related pay, save for medics.

Barkley Rosser writes:

I thought I posted a comment on this thread yesterday, but it is not here now.

Anyway, I repeat that at James Madison University, where I have taught for 30 years, we had a megalomaniacal president during the 1990s. He wanted to end tenure so that he could fire faculty who criticized his policies. Do you guys really think that this is such a good thing? I will note that among those criticizing this president were several of the most productive scholars on campus.

One in particular whom he did not like for criticizing him was Ralph Cohen in the English Department. This president, Ronald Carrier, was so powerful that when he went to the Harrisonburg city planner to propose building the first replica in the world of Shakespeare's indoor Blackfriars Theater, he was told to get lost because he was a public critic of President Carrier. He did not lose his job because he had tenure. But he built the theater in Staunton, VA, and moved to Mary Baldwin College there out of disgust.

BTW, I still have a letter of reprimand in a dest drawer from a member of the Board of Visitors taking me to task for joining the critics of the president that points out that in private business such things are not allowed. These bastards would have fired me, and today in Business Week's rankings of Colleges of Business undergrad programs, where JMU's program comes in 35th in the nation, I am listed as its most prominent professor.

So, I take all this crap seriously, very seriously. Put a bunch of CEOs in charge of universities with the power to fire tenured faculty, and you will soon have a bunch of mediocre, drooling, sycophants.

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