The Evolving Economic Structure of Higher Education

25 Pages Posted: 26 Jun 2012 Last revised: 31 Jul 2012

See all articles by Henry Hansmann

Henry Hansmann

Yale University - Law School; European Corporate Governance Institute (ECGI)

Date Written: January 21, 2012

Abstract

As an industry, higher education shows some striking anomalies. It is the only important industry in the United States that has been increasingly socialized in recent decades: the market share of public institutions grew, roughly, from 50 percent to 80 percent over the last half of the twentieth century. Now the industry is suddenly heading down a very different path, with the market share of proprietary institutions — which was negligible thirty-five years ago — presently in excess of 10 percent. Such contradictory developments bring into question the future economic organization of higher education and the forms of financing and regulation that might be appropriate to it. I offer some speculation in that direction, focusing just on several of the main structural features of the industry and, of necessity, addressing them at a very general level. I also compare the evolution of higher education with the evolution of health care, seeking the reasons for both similarities and differences. The general conclusion I offer, perhaps unsurprising in the current political and economic climate, is that market forces are likely to play a much larger role in higher education in the future than they have in the past, and a larger role than they will play in health care as well.

Keywords: higher education, universities, colleges, privatization, ownership, governmental services

JEL Classification: D23, H11, H42, I22, L31, L32, L33

Suggested Citation

Hansmann, Henry, The Evolving Economic Structure of Higher Education (January 21, 2012). University of Chicago Law Review, Vol. 79, No. 1, 2012, Yale Law & Economics Research Paper No. 448, Available at SSRN: https://ssrn.com/abstract=2093656

Henry Hansmann (Contact Author)

Yale University - Law School ( email )

P.O. Box 208215
New Haven, CT 06520-8215
United States
203-432-7101 (Phone)

European Corporate Governance Institute (ECGI)

c/o the Royal Academies of Belgium
Rue Ducale 1 Hertogsstraat
1000 Brussels
Belgium

HOME PAGE: http://www.ecgi.org

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