The subject is the interplay between cost and quality. Richard Vedder’s work, both before he joined and as a member of the Spellings Commission, focused on how American colleges and universities spend their monies and on the cost drivers that make American higher education so expensive without returning a commensurate quality premium. It’s the research that made Vedder among the best known and widely read of the nation’s efficiency pundits. Charles Miller, the chairman of the commission, regularly points out that American colleges and universities really don’t have a bottom line, and hence productivity and efficiency gains constantly elude them — though that observation is more true of the highly selective, most costly institutions than of the bulk of the colleges and universities responsible for educating most undergraduates. Taken together these arguments suggest that as a nation, we are spending more and getting less from our system of higher education.

Two aspects of that system are of particular importance here. First, the nation’s high cost, highly selective institutions have almost no incentive to be either more efficient or more productive. Rather, their success depends directly on their ability to raise ever more funds — through more research contracts, through bigger gifts and campaigns, through larger yields on their endowments and other investments, and through escalating tuition revenues, which are as often the product of new programs as of increased prices. Internally realized savings are rare — in part because they are so difficult to achieve, and in part because it has proved so much easier to raise additional revenues than to squeeze current operations. As a result, the kind of productivity-centered changes that came to characterize much of American industry and commerce in the 1990s largely skipped over higher education’s most-elite institutions.

The second aspect of the American system of higher education worth noting here is that most of the institutions in the middle of the cost-quality curve still seek to emulate those institutions at the top of the heap despite the fact that they have substantially less resources and are fundamentally more dependent on tuition revenues and/or state appropriations. To be sure, these institutions have compelling reasons to be more efficient; but they achieve their savings largely by squeezing salaries, hiring adjuncts rather than full-time instructors, and eliminating most of the perks associated with current expense budgets. What has not changed despite more than two decades of economic pressure in these institutions is their basic production function. In terms of the organization of the curriculum and the specifics of the academic calendar, what transpires in these institutions still duplicates the calendars and curricula of the nation’s best-endowed colleges and universities. The only real difference is the teaching loads of the faculty.

The growth of a for-profit higher-education segment further highlights how little traditional higher education has changed. What for-profit higher education realized was that the traditional higher-education production function was not sacrosanct — that alternative calendars that create savings could be successfully adopted, that the institution rather than individual faculty could own the curriculum, that it was possible to use a largely contingent work force whose benefits were vested elsewhere, and that some curricula would be far more profitable than others. The other lesson that for-profit higher education is teaching nonselective institutions in the middle of the cost-quality curve — those institutions most directly threatened — is that quality pays when it responds directly to student needs. For-profit higher education is winning an increasing share of the market, not by competing on price, but by emphasizing responsiveness, flexibility, and convenience.