Posts filed under ‘Education’

Are “Private” Universities Really Private?

| Peter Klein |

Jeffrey Selingo raises an important point about the distinction between “public” and “private” universities, but I disagree with his analysis and recommendation. Selingo points out that the elite private universities have huge endowments and land holdings, the income from which, because of the universities’ nonprofit status, is untaxed. He calls this an implicit subsidy, worth billions of dollars according to this study. “Such benefits account for $41,000 in hidden taxpayer subsidies per student annually, on average, at the top 10 wealthiest private universities. That’s more than three times the direct appropriations public universities in the same states as those schools get.”

I agree that the distinction between public and private universities is blurry, but not for the reasons Selingo gives. First, a tax break is not a “subsidy.” Second, there are many ways to measure the “private-ness” of an organization — not only budget, but also ownership and governance. In terms of governance, most US public universities look like crony capitalists. The University of Missouri’s Board of Curators consists of a handful of powerful local operatives, all political appointees (and all but one lawyers) and friends of the current and previous governors. At some levels, there is faculty governance, as there is at nominally private universities. In terms of budget, we don’t need to invent hidden subsidies, we need only look at the explicit ones. If we include federal research funding, the top private universities get a much larger share of their total operating budgets from government sources than do the mid-tier public research universities. (I recently read that Johns Hopkins gets 90% of its research budget from federal agencies, mostly NIH and NSF.) And of course federal student aid is relevant too.

So, what does it mean to be a “private” university?

10 April 2015 at 9:01 am 6 comments

Benefits of Academic Blogging

| Peter Klein |

I sometimes worry that the blog format is being displaced by Facebook, Twitter, and similar platforms, but Patrick Dunleavy from the LSE Impact of Social Science Blog remains a fan of academic blogs, particularly focused group blogs like, ahem, O&M. Patrick argues that blogging (supported by academic tweeting) is “quick to do in real time”; “communicates bottom-line results and ‘take aways’ in clear language, yet with due regard to methods issues and quality of evidence”; helps “create multi-disciplinary understanding and the joining-up of previously siloed knowledge”; “creates a vastly enlarged foundation for the development of ‘bridging’ academics, with real inter-disciplinary competences”; and “can also support in a novel and stimulating way the traditional role of a university as an agent of ‘local integration’ across multiple disciplines.”

Patrick also usefully distinguishes between solo blogs, collaborative or group blogs (like O&M), and multi-author blogs (professionally edited and produced, purely academic). O&M is partly academic, partly personal, but we have largely the same objectives as those outlined in Patrick’s post.

See also our recent discussion of academics and social media.


30 January 2015 at 11:39 am 1 comment

Henry G. Manne (1928-2015)

| Peter Klein |

manneVery sorry to report the passing of Henry Manne yesterday at the age of 86. Manne made seminal contributions to the literatures in corporate governance, securities regulation, higher education, and many other subjects. Here are past O&M posts on Manne and his contributions. I tried several times to get him to guest blog on O&M but couldn’t pull it off.

I got to know him fairly well in the last few years and he was a charming companion and correspondent — clever, witty, erudite, and a great social and cultural critic, especially of the strange world of academia, where he plied his trade for five decades but always as a slight outsider.

Here are tributes and commentaries from David HendersonJane Shaw, Don Boudreaux, and me. We’ll share more in the coming days.

18 January 2015 at 6:13 pm 1 comment

SMS Teaching Workshop: Impact of New Technologies on Teaching and Higher Education

| Peter Klein |

Along with Gonçalo Pacheco de Almeida I am chairing the Competitive Strategy Interest Group Teaching Workshop at the upcoming Strategic Management Society conference in Madrid. The workshop is Saturday, 20 September 2014, 1:00-4:00pm at the main conference venue, the NH Eurobuilding, Paris Room. Our theme is “The Impact of New Technologies on Teaching and Higher Education” and we have an all-star lineup featuring Bharat Anand (Harvard), Peter Zemsky (INSEAD), Michael Leiblein (Ohio State), Michael Lenox (University of Virginia), Frank Rothaermel (Georgia Tech), Vivek Goel (Chief Academic Strategist at Coursera), and Andrea Martin (President of IBM Academy of Technology).

Background: The higher-education industry is abuzz with talk about MOOCs, distance learning, computer-based instruction, and other pedagogical innovations. Many of you are already using online exercises and assessments, simulations, and other activities in the classroom. How are these innovations best incorporated into the business curriculum, at the BBA, MBA, EMBA, and PhD levels? What can business scholars, say about the impact of these technologies on higher education more generally? Are they sustaining or disruptive innovations, and what do they imply for the structure of the business school, and the university itself?

The plan for this session is to discuss how leading companies and business schools are (a) driving innovation in the Higher Education teaching space, (b) thinking about the business model of virtual education (MOOCs, social learning, etc.), and (c) testing some of the assumptions behind globalization in the education industry.

The full schedule is below the fold. Additional information about the workshop, and the SMS itself, is available at the conference website.

If you’re coming to SMS this year, please plan to join us for the workshop. Pre-registration is encouraged but not required. If you’re planning to attend, please let us know by sending an email to Feel free to email Gonçalo or myself at the same address with questions or comments. (more…)

2 September 2014 at 4:10 pm Leave a comment

Gordon Winston

| Dick Langlois |

I was saddened to learn of the recent passing of Gordon Winston, an interesting economist who should have been better known (to readers of this blog) than he was.

I’m sure I knew of Gordon when I was a student at Williams in the early 1970s, but as I didn’t take any economics as an undergraduate, I never had any contact with him. I really first met him when he interviewed me for a job at Williams in 1983 (which I didn’t get — not his fault). We kept in contact for a number of years after that, including during at least one Liberty Fund conference in the 1980s.

Gordon is probably best known for his later work on the economics of higher education, which I use in teaching. But readers might be even more interested in his earlier work on the timing of economic activities, which resulted in a 1982 Cambridge book by that title. In essence, Gordon was trying to work out in detail how to think about time in a production-function model of economic activity, something that the late Armen Alchian had adumbrated in his famous paper “Costs and Output” (the original 1958 RAND working paper version of which is now available here). Gordon cites Lachmann and Shackle, but I think his biggest influence was Georgescu-Roegen. The book ought to be especially interesting to grad students, since I suspect it opens up a lot of ideas for further exploration.

9 January 2014 at 2:22 pm Leave a comment

Disruptive Innovation and Job-Market Signaling

| Peter Klein |

The job-market value of education, as famously argued by Michael Spence (1974), derives from two sources: additions to human capital and signaling. By going to college, you learn some useful skills, but you also demonstrate to potential employers that you have the natural ability to earn a degree. Depending on the difficulty of obtaining a degree for students of varying abilities, a college degree may be valuable even if you don’t learn a thing — you distinguish yourself from those who weren’t clever or patient enough to jump through the necessary hoops.

Of course, the human-capital and signaling components aren’t mutually exclusive. But, as long as at least some part of the job-market value of education comes from signaling, the demand for higher education depends on its perceived signaling value, relative to the cost of signaling. And herein lies the rub: getting a college degree is a very costly signal. Suppose high-ability workers could demonstrate their value to the job market by obtaining some credential that low-ability workers can’t or won’t obtain, without forgoing the explicit and opportunity costs of 4+ years at college. This would be an attractive alternative for many, and bad news for the higher-education industry, which today has a virtual monopoly on credentialing.

Michael Staton makes precisely this argument in today’s HBR Blog: “The Degree Is Doomed.” Staton argues that new technologies increasingly allow the unbundling of the learning and signaling functions of higher education, and that alternative signals such as “work samples, personal representations, peer and manager reviews, shared content, and scores and badges” are undermining the value of the college degree.

There are sites — notably Degreed and Accredible — that adapt existing notions of the credential to a world of online courses and project work. But there are also entire sectors of the innovation economy that are ceasing to rely on traditional credentials and don’t even bother with the skeumorph of an adapted degree.  Particularly in the Internet’s native careers – design and software engineering — communities of practice have emerged that offer signals of types and varieties that we couldn’t even imagine five years ago.   Designers now show their work on Dribbble or other design posting and review sites.  Software engineers now store their code on GitHub, where other software engineers will follow them and evaluate the product of their labor.  On these sites, peers not only review each other but interact in ways that build reputations within the community. User profiles contain work samples and provide community generated indicators of status and skill.

These are specialized areas, and probably not substitutes for the credentialing function for other fields and industries. But low-cost, innovative, specialized signaling methods could pose a significant challenge to the university establishment.

Of course, even if higher education loses its credentialing function, it can still add value the old-fashioned way, through teaching.

8 January 2014 at 10:54 am 4 comments

ISNIE Session at ASSA 2014

AEA_left| Peter Klein |

Those of you attending this weekend’s ASSA meeting in Philadelphia may want to catch a great session sponsored by ISNIE and titled “The Economic Institutions of Higher Education.” I am presenting along with Henry Manne and Sarah Smith; Scott Masten is chairing and discussants are Bob Gibbons, Henry Hansmann, and Jeff Furman. The session is Saturday, January 4 at 2:30pm in the Philadelphia Marriott, Grand Ballroom, Salon L

1 January 2014 at 2:20 pm 2 comments

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Our Recent Books

Nicolai J. Foss and Peter G. Klein, Organizing Entrepreneurial Judgment: A New Approach to the Firm (Cambridge University Press, 2012).
Peter G. Klein and Micheal E. Sykuta, eds., The Elgar Companion to Transaction Cost Economics (Edward Elgar, 2010).
Peter G. Klein, The Capitalist and the Entrepreneur: Essays on Organizations and Markets (Mises Institute, 2010).
Richard N. Langlois, The Dynamics of Industrial Capitalism: Schumpeter, Chandler, and the New Economy (Routledge, 2007).
Nicolai J. Foss, Strategy, Economic Organization, and the Knowledge Economy: The Coordination of Firms and Resources (Oxford University Press, 2005).
Raghu Garud, Arun Kumaraswamy, and Richard N. Langlois, eds., Managing in the Modular Age: Architectures, Networks and Organizations (Blackwell, 2003).
Nicolai J. Foss and Peter G. Klein, eds., Entrepreneurship and the Firm: Austrian Perspectives on Economic Organization (Elgar, 2002).
Nicolai J. Foss and Volker Mahnke, eds., Competence, Governance, and Entrepreneurship: Advances in Economic Strategy Research (Oxford, 2000).
Nicolai J. Foss and Paul L. Robertson, eds., Resources, Technology, and Strategy: Explorations in the Resource-based Perspective (Routledge, 2000).


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