Potential Project Description for 2012-13


Title: The Economic Future of Liberal Arts Colleges
Domain Expert: David Schodt (Economics)

The escalating cost of higher education—what some have described as an affordability crisis--has received increasing attention from the media, Congressional committees, and academic researchers, spurring debate within the sector about both the causes of these cost increases and a search for new models. Although the liberal arts colleges are subject to the same cost pressures, until recently these institutions have been largely silent bystanders to these conversations.Furthermore, most recent empirical work on higher education costs either analyzes cost for the higher education sector as a whole, or limits the disaggregation these data to “private bachelors institutions,” a category much broader than the liberal arts colleges.

In the spring of 2012, this appeared to change when leaders of a group of largely highly selective liberal arts colleges met to discuss "The Future of the Liberal Arts College in America and its Leadership Role in Education around the World." These discussions, which were widely reported in the higher education press, were highlighted by the acknowledgment of the ever growing cost of educating students at liberal arts colleges, and questions about whether there was anything that liberal arts colleges could do to reduce these costs while maintaining their educational effectiveness and their position in the higher education market.

As important as these questions are for the highly selective liberal arts colleges, they are even more pressing for the many liberal arts colleges that educate the majority of students who attend such institutions, but which have neither the endowments nor high income enrollees that are typical of highly selective colleges. Moreover, the ongoing economic crises, including the reduction in real wages for middle class families, may have an even greater impact on less selective and less well-endowed liberal arts colleges than on their wealthier peers.

The goal of this project is to analyze the economic context of the liberal arts colleges, and to explore how the experiences of the wealthiest institutions may differ from those of the less wealthy. My own target is to prepare a presentation for the annual meetings of the Association of American Colleges and Universities to be held in January 2013. Other opportunities for presenting the work might include the Associate Colleges of the Midwest, and, more locally, the Faculty Conversations organized by St. Olaf’s Center for Innovation in the Liberal Arts.

Very little work has been done in this area, with the most recent example the work by David Breneman in the early 1990s . Data limitations made this early work very challenging, but, fortunately, economic data for higher educational institutions are now available in a very large data set.

• A first task will be to learn how to manipulate these data.
• Subsequently, we will need to construct a subset of these data consisting just of the liberal arts colleges (and this will require making some decisions about what constitutes a liberal arts college).
• We will also need to determine the best way to rank the liberal arts colleges by some measure of financial capacity, and to use this measure to divide the colleges into quintiles, so that we can investigate the different experiences of these groups of institutions.
• We will need to identify an appropriate measure of costs and to plot changes in this measure over time.

• A next step will involve identifying the factors responsible for the cost increases we observe. As part of this analysis, we will need to determine if these factors play the same role in cost increases over time.