Yet Baumol’s cost disease has its theoretical and practical limits. There is nothing in his work that suggests that rising costs are inevitable across the entire institution. Colleges are large, complex enterprises with significant administrative services that parallel those seen in the for-profit world. Review an organizational chart, particularly at a research university, and you will see a vast number of vice presidents overseeing finance, facilities, human resources, technology, legal affairs, and communications and marketing. Just like Apple or General Motors, colleges run payroll, manage technology, build out the physical plant, and participate in a growing architecture of compliance, reporting, and media scrutiny. Look at these areas across time and you’ll see that any number of breakthroughs, particularly in technology, have streamlined these functions.
Higher education therefore contains two spheres. One is the instruction-and-research core that defines Baumol’s cost disease. The other is an administrative and operational infrastructure that, in principle, should behave more like the increasingly efficient sectors of the economy. Treating these as one undifferentiated “cost problem” produces bad governance and misguided policy: We chase illusory savings in the classroom while resigning ourselves to rising costs in areas that should be getting cheaper per student, faculty member, and staff member.
This is not to exempt the core from scrutiny. At some institutions the use of technology has become a central part of scaling teaching and has allowed for dramatic improvement in access. AI holds great promise for making advising, registration, and career services much more efficient. But for those institutions that remain wedded to the human interactions we find so valuable, technology may only help at the margins, leaving the most educationally valuable activities such as discussion, mentoring, supervision, and individualized assessment, firmly in place. Many of the proposed “productivity” gains at the core of higher education are simply reductions in the quality of the product — larger classes, thinner feedback, fewer contact hours, more contingent labor.