All Commentary
Saturday, August 1, 1970

The “Power” Problem on Campus: An Economist’s View

Dr. Kirzner, Professor of Economics at New York University, and currently serving as Act­ing Chaiman of the Department of Economics, is the author of The Economic Point of View (1960), Market Theory and the Price System (1963), and An Essay on Capital (1966). Articles by him have appeared in numerous journals. This one is reprinted with permission from The Intercollegiate Review, Vol. 6, No. 3, © 1970, by the Intercollegiate Studies In­stitute, Inc., 14 S. Bryn Mawr Avenue, Bryn Mawr, Pennsylvania 19010.

Much of the current crisis at­mosphere in the universities re­volves around the question of the locus of power—student power and faculty power. From all sides, one hears the opinion expressed that students and faculty, who have until now languished pas­sively under authoritarian college administrations and boards of trustees are entitled to share in the running of their university. A democratic university—one which permits faculty and students to participate in the host of admin­istrative decisions which affect their lives—requires, we hear, a massive structural revision in the direction of greater direct student and faculty power. And there is no doubt that a feverish rush toward “democratization” is already un­der way on the part of college and university trustees and adminis­trations fearful of campus disrup­tions by students and even by faculty.

In this writer’s opinion, this tendency is—quite apart from the issue of disruptive and violent tactics—a most unfortunate one, the result of badly confused think­ing on the role of the university in society, and likely to be respon­sible for serious deterioration in the quality of higher education in this country. Let it be emphasized that what is being criticized here is not at all the very sensible opin­ion that student and faculty views should help determine university decisions in a meaningful way. The error, as we will discover, lies instead in the naive demands for a sharing of the ultimate responsi­bility for the university with fac­ulty and students.

The attitude underlying the con­temporary cries for greater stu­dent and faculty power is some­thing like the following. The uni­versity is seen as a kind of self-governing community—comprised of administrative, faculty, and stu­dent members. However, the gov­ernment of this community has until now been concentrated almost exclusively in the hands of the first of these groups: the administra­tion—a group which is, in turn, answerable to the trustees or a similar body. Students and faculty, although they spend years of their lives in this community, have until recently been treated, in effect, as children, with the most important aspects of university life legis­lated upon without their being con­sulted in any meaningful way. De­mocracy requires a change that will replace government by trus­tees and administrators with a government in which all the mem­ber groups of the community will participate. Campus stability re­quires that university rules be formulated on a procedure that ensures that student and faculty views be taken into direct account. (More extreme versions of this attitude would relegate adminis­trators to an even more insignifi­cant role.)

Responsibility for Resources

But this attitude completely mis­understands the economic relation­ship between the university and society in general. This attitude might be an appropriate one if a university were an economically independent entity, that is to say, if its ability to support its activi­ties were unrelated to the charac­ter of these activities. If this were the case, arguments in favor of “democracy” within the univer­sity might perhaps carry weight. But, of course, the reality is quite a different one. The university, in order to carry on its activities, must compete for economic re­sources with alternative social pur­poses. It must, therefore, like other enterprises, win support for its activities by virtue of the impor­tance of these activities to others. Ultimate responsibility for the university, then, does not and can­not mean merely the responsibility to act as steward over given re­sources—which responsibility might then, at least in principle, be shared jointly with faculty and students. Ultimate responsibility for the university must mean the responsibility both to marshal the resources necessary to carry out the declared purposes for which the university is intended, and to deploy these resources in a man­ner faithful to the declared pur­poses. To fail to see this simple truth is to be hopelessly unreal­istic.

That this simple truth may be an unpalatable one is not surpris­ing. The economist is accustomed to reactions of outraged shock whenever he points out that some noble and lofty goal competes for resources with other important purposes—and must justify its claim to these resources. But to the eyes of the economist, a re­fusal to recognize the importance of calling attention to such mun­dane matters as the need for justi­fying resources used, is worse than to be airily unrealistic and naive; it borders on an arrogant convic­tion that all the other purposes of people in society must bow uncon­ditionally to the needs of the uni­versity, no matter how or what the university turns out to be.

Organized for Profit or for Philanthropic Purposes

Who should bear the ultimate responsibility of marshaling and administering the resources needed for the university? In a free society this question is an in­appropriate one. In a free society anyone may, if he chooses, act as an “entrepreneur.” Anyone may, if he believes himself able to un­dertake the task, set out to build the institution he chooses. To do so he must convince owners of re­sources that it is worth their while to entrust their resources to his stewardship. He may, conceivably, be able to do this on a strictly businesslike basis, he may be able to produce a saleable brand of ed­ucation for which students are willing to pay sums sufficiently high to return a profit to inves­tors. In this situation what is chosen to be produced and sold is a brand of schooling, carefully at­tuned to the needs of the prospec­tive employers (reflected by the salaries that prospective gradu­ates can expect to command), to the tastes of the immediate con­sumers—the students (as reflect­ing their willingness to undergo the rigors of the course of train­ing being offered), and to the at­titudes of the teachers (as re­flected in the salaries and working conditions for which they are will­ing to sell their teaching skills). In such cases the paramount im­portance of paying careful atten­tion to student and faculty opin­ions is abundantly clear—without, of course, the slightest need to share ultimate responsibility with anyone.

Or the “entrepreneur” may, on the other hand, persuade owners of resources to invest in an insti­tution which cannot promise to re­turn a pecuniary profit on invest­ment. To do this he must convince philanthropic resource owners that his institution will fill a social need which these philanthropists are prepared to support. In this situa­tion what is chosen to be produced by the entrepreneur will be a brand of schooling which not only reflects, in part, the attitudes of prospective employers, students, and faculty, but reflects also the philanthropic goals of the resource owners.

Of course, the “entrepreneur” may well be one of the resource owners or one of the consumers. He may be a teacher or a student, or a group of teachers and/or stu­dents. Who the “entrepreneur’ is does not affect the basic relation­ship between the individual re­sponsible for the institution and all those affected by its activities. Ultimate responsibility for the university, as for any enterprise or institution, will, in a free so­ciety, inevitably tend to come to rest in the hands of those able to choose successfully a mix of educa­tional inputs and a mix of outputs that yields a return—whether in the form of pecuniary yield, or in the form of the psychic satisfaction to the philanthropist (who “en­joys” contributing to what he con­siders to be the betterment of so­ciety, or to the advancement of what he considers to be significant knowledge). It may well be that the successful “entrepreneur” of the university will be he who knows how much power to delegate to faculty and to students. But the ultimate responsibility must be his who is able to convince “investors” that he can secure them a return.

The State as Entrepreneur

The possibility of state-support­ed universities does not alter the picture. The state may act as “en­trepreneur” for the universities, raising the necessary support by taxation. Presumably taxpayers exercise, through their represen­tatives, control over the purposes which they are supporting with their tax dollars. In a democratic society, the justification for the taxation must lie in the quality of the institutions supported.

No matter, then, how a univer­sity happens to be run—whether as a profitable business, a philan­thropically supported institution, or a state-supported institution—decision-making must relate out­put to the mobilization of the re­sources necessary for input. As far as prospective new institutions are concerned, anyone—not except­ing prospective faculty, students, or janitorial staff for that matter—may seek to set up institutions which they believe can justify sup­port. Their convictions can then be tested against competition in the relevant markets—the market for teachers, for graduates, for students, for philanthropic sup­port, or in the competitive arena of those seeking government sub­sidies.

For anyone to attempt to con­trol, or to share in the control, of an existing institution, is how­ever, quite another matter. Any­one may, of course, seek to per­suade the present entrepreneurs—be they trustees, administrators, or whatever—of his own eligibil­ity and suitability to run the insti­tution. Times change, the tastes of students, teachers, and philanthro­pists change, and it may be entirely in order for an existing institution to change its direction. But such a bid, for a change in the pattern of control, cannot rest on grounds of “democracy”—which simply have no relevance in this context (except as a possible tool to be used by the entrepreneur to fur­ther the purposes of his institu­tion). Such persuasion must rest on the ability to achieve, with su­perior efficiency, those goals se­lected by the entrepreneur as feasible in the light of the market constraints that are operative.

To demand that control over an existing institution be surren­dered, in whole or in part, is to demand that one set of entrepre­neurs arbitrarily—that is, with­out reference to the degree of suc­cess with which the “investors” can be assured a “return” on their investments—hand over their en­terprise to another set. The ironic tragedy of such a demand does not lie, perhaps, so much in its tram­pling upon existing property and other rights as in its threat to the very future of the relevant insti­tution. As soon as the direct en­trepreneurial link between the supporters of the university and the university itself is severed, the university is in jeopardy.

Breaking the Link Between the Institution and Its Supporters

It is not difficult to understand the reasons why the demands for student and faculty power have gained currency despite the above considerations. The naïve observer is not fully aware of the necessary link between the institution and its supporters. Very often an at­mosphere is deliberately fostered to mask the dependency of the uni­versity as an institution upon out­side, private or government sup­port. Faculty and researchers are extremely jealous—and rightly so—of their independence from trustee, donor, or government in­terference with their work. But the wholly justified insistence that the supporters of education under­stand and respect the intellectual integrity of those whose educa­tional endeavors they sponsor, has become transformed into the spur­ious notion that the supporters of education do not (and certainly should not) exercise ultimate responsibility for the uses to which their resources are put.

The illusion has resulted that the university is costless or at least, that its activities, whatever they may be, can somehow be car­ried on regardless of cost. But the basic economic fact of life remains that in a free society ultimate con­trol over the university does in­evitably rest in the hands of those able to convince supporters of the worth of their final educational product. Only in an atmosphere in which a conceptual gulf sep­arates the need for support on the one hand, from the substantive ac­tivities of the university on the other hand, could the current view of the university as an insulated island, an isolated community of scholars and students, arise.

Continued efforts to treat the university as an economically in­dependent entity can only tend to bring about results that must be described as disastrous. To the ex­tent that the power changes forced by student or faculty pressure re­sult in an institution out of line with the goals of its supporters (private or government), the out­come must inevitably be a tend­ency towards the erosion of their support. A university, the control of which is the issue between com­peting power groups, is not a given asset being contested for by rival claimants. An asset’s ex­istence does not depend on the identity or the motives of its pos­sessor; a university’s existence depends on the availability of sup­port—which cannot be expected to be provided without regard to the purposes of those under whose stewardship the university rests.

Supporters May Share Responsibility But Cannot Avoid It

In a free society the erosion of the support for a given existing institution does not necessarily mean a long term net loss from the view of society. Support with­drawn from one institution may be available for the support of other, or new, institutions. But to the extent that established insti­tutions suffer decay and decline, society itself suffers “short-run” losses (which may, by the by, per­sist for a long time). And of course to friends of existing institutions the prospect that eventually new institutions will emerge to replace the old, is small comfort. It is not merely the past supporters of the established institutions who suffer losses when they discover that their investments in these insti­tutions have gone sour. The ero­sion of such support represents a social loss, to the extent that the capital sunk into these existing in­stitutions obtained its value from the expectation of continued sup­port.

The point being made here is not that the supporters of a uni­versity, philanthropic or govern­mental, should have the power to control the university. The point is simply that the economic facts of life mean, ultimately, that they do have this power. (And let it be noticed that from the neutral perspective of the economist, this ultimate control is not at all in­efficient. With a given distribution of resources, a society “should”—as a matter not of ethical right­ness but of efficiency—get the uni­versities which are desired by those willing to make the sacrifices needed for them. And this does not prevent the economist from recognizing that what donors de­sire may be quite “wrong” from the educational and cultural point of view.)

Moreover, recognition of this ultimate economic control does not, at all, necessarily spell the impossi­bility of free academic inquiry. Hopefully, supporters will delib­erately seek to shape an institu­tion designed to promote free in­quiry and to respect the intellectual integrity of its faculty and stu­dents. But we must recognize that this is a hope which depends on the willingness to do so on the part of those whose resources sup­port the university. (An entirely appropriate question in this re­gard is that touched on briefly by Professor Stigler in his well-known essay, “The Intellectual and the Market Place,” of whether state support is more or less likely to conduce to an atmosphere of academic freedom than private philanthropic support.)

And once again, let it be stressed that supporters may well elect to delegate wide powers to faculty and to students. To differing ex­tents this is, indeed, the almost uni­versal practice. And it may be an entirely desirable policy to extend this practice further. The point being made here has nothing to do with this possibility. It deals only with the demands and procedures for power shifts within the uni­versity that rest upon the call for the surrender (partial or total) of the ultimate responsibility and power that rest on the supporters of the university. It is the calls for this kind of surrender which are both economically unrealistic and socially harmful.