What economists call an “agency problem” pervades higher education
What economists call an “agency problem” pervades higher education. By Michael Rizzo In September 2011 my university proudly unveiled a green investment in campus infrastructure, the “Solar-Dok” picnic table/charging station. While it looks like a picnic table, it has 10 square feet of solar panels attached to its awning. Those panels are connected to a battery so that people can plug in their laptops phones, cameras, iPads or other devices. Rochester doesn’t get a whole lot of sun, but the potential justification for it was that it might save $90 per year in electricity costs and $9 per year in damages to the earth from reducing carbon dioxide emissions (both unreasonably optimistic assumptions). Aside from being a funny-looking table that gets virtually no use, at $11,500 it is a terrible economic investment and an even worse environmental investment. But it remains prominently featured on the college’s website and proudly sports the campus symbol of smart sustainability. When asked whether they had calculated its impacts, college administrators indicated that no such calculations were even attempted. Nor did they care: it was an important symbol and message. “A few students wanted it,” admitted one administrator, and “that’s what our competitors are doing.” I can think of no better illustration of what economists call the agency problem that cripples American higher education: It’s only a few dollars, what’s the big deal? And even if it’s a lot of dollars, well, there’s no harm to university administrators. Thus there is little incentive for administrators not to engage in these activities. Also classes mostly confined to Tuesday through Thursday for students convenience.