[Excerpt] I have conducted research and taught classes on the economics of higher education for almost 20 years. I spent the last three years as a senior central administrator and executive officer of Cornell University. ... My experiences in this position opened my eyes to the use and uselessness of economic analysis in trying to help guide a major university and what I have learned is the focus of this essay.
I begin by asking whether it is useful to view universities in a utility-maximizing framework, as I and others have done in the past. I show that the way universities are organized often guarantees that the utility-maximizing model is unlikely to be the correct approach. I then proceed to discuss a number of resource allocation issues that we faced at Cornell and reflect upon how concepts that are obvious to economists, and that we teach in principles of economics courses, helped or hindered decision-making at the university. The message that I hope comes through is not that economic concepts are irrelevant in operating a university, but rather that it takes a long time to explain to all the actors in the system why they should matter and even longer to make them actually matter.