142:, when "economic conditions were good and, according to surveys, the public placed an ever higher value on postsecondary education"), and 29% at public universities and 64% at private universities during a "tight revenue period" between 2008 and 2011 (after the financial crisis, when "economic conditions became severe and the public was pressed by the cost of higher education"). Additionally, they determined that Bowen effects are larger than
65:: universities raise as much money as they possibly can and then spend nearly the entirety of it in an attempt to increase prestige and quality of education. It follows from this that if universities are able to increase their revenue streams, costs will also rise, creating a revenue-to-cost spiral. The revenue theory of cost has thus been offered as an explanation for rising costs at universities, including rising tuition.
130:, compared universities to "compulsive gamblers" for whom "there is never enough money to satisfy their desires". However, evidence for the revenue theory of costs has been mixed. The economists Robert E. Martin and R. Carter Hill argued in a 2014 study of American universities, for instance, that Bowen's rule does play a major role in rising university costs, accounting for 51% of the cost change in
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He concludes that, "the cumulative effect of the preceding four laws is toward ever increasing expenditure". In other words, because universities always seek to raise more money, and spend all that they raise, universities inevitably tends towards spending more.
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146:. However, a 2006 study by economists Robert B. Archibald and David H. Feldman found the reverse, contending that Bowen's rule played only a minor role in rising higher education costs while the Baumol effect dominated.
81:, as it expresses the fundamental fact that unit cost is determined by hard dollars of revenue and only indirectly and distantly by considerations of need, technology, efficiency, and market wages and prices.
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Bowen further argues that not only are costs determined by revenue, but that universities tend towards higher costs. He lays out four basic characteristics of universities:
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The Costs of Higher
Education: How Much Do Colleges and Universities Spend per Student and How Much Should They Spend?
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The Costs of Higher
Education: How Much Do Colleges and Universities Spend per Student and How Much Should They Spend?
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There is virtually no limit to the amount of money an institution could spend for seemingly fruitful educational ends;
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The basis of Bowen's revenue theory of cost is the primacy of university revenue in determining university spending:
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Many scholars have confirmed that universities fit much of Bowen's description: the economist
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Gillen, Andrew (2010). "Financial Aid in Theory and
Practice". In Hall, Joshua C. (ed.).
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237:"Alternative Theories for Rising College Tuition: Baumol's Cost Disease and Bowen's Rule"
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The theory posits that costs at universities are almost entirely a function of
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Universities in the
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Universities in the
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during a "loose revenue period" between 1987 and 2005 (before the
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383:. Johns Hopkins University Press. ISBN 9781421438887. p. 187.
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Archibald, Robert B.; Feldman, David H. (October 21, 2016).
453:"Baumol and Bowen Cost Effects in Research Universities"
451:Martin, Robert E.; Hill, R. Carter (March 2014).
303:Doing More with Less: Making Colleges Work Better
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513:"Explaining Increases in Higher Education Costs"
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379:James V. Koch, & Richard J. Cebula. (2020).
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95:Each institution raises all the money it can;
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395:Tuition Rising: Why College Costs So Much
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134:and 43% of the change in
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