Professor Bainbridge...on law, politics, religion, culture & food

I thought elite law schools (or most of them) were run for a profit.  It’s not a profit that’s distributed to shareholders, but it’s a profit that enhances the accumulated wealth of the university with which the law school is associated.

Cornellian: It’s certainly true that many law schools regard themselves as profit centers for the university that, in effect, end up subsidizing stuff like Sanskrit. And they’re probably right.

And let’s not forget all that grant money, either. Admittedly, this is an intermittent issue in law schools, but is absolutely vital to most of the university.

"Anyway, it’s interesting to ponder what tuition and faculty salary structures would look like if elite law schools were run for profit.”

If that were the case, professor salaries wouldn’t be of concern to most current professors, since the wouldn’t be able to compete.  Heck, that’s why half of them are professors, in the first place.

What about other costs the Law School incurs, like the electricity bill, cleaning lady, admins, etc.

Or the costs to the whole university, like landscaping and lawnmowing, or property taxes?

Surely the professor does not think he can accrue 100% of the tuition.  More like 10%.

As any for-profit business person could tell you, you forgot to account for overhead and capital costs. In my own business, compensation for front line employees (non-management) is about 20% of total revenue.

We have nothing like the grandious, gothic infrastructure of a law school, but let’s be generous. At 20% your cut would be worth $445,000, assuming that each student was really only using three profs at any one time.

I would bet that the proportion of non-direct teaching costs is actually much higher since higher ed is little focused on cost control and instead focuses on revenue maximization.

Teaching hours aren’t hours as the world knows them. You taught a total of three 3 credit courses and a seminar??? over two semesters. Each three hours course takes 3 hours a week, for about 20 weeks, so the whole thing works out to about 1,000 teaching hours. Take makes a salary look a little more realistic than the 10 hours number does.

If one of those courses was a “lecture hall” course, it might have had 200 students. OTOH, one of your courses could have had 3 students. When schools move to a model that defines course offerings as “those we can make a profit on”, offerings get pretty thin.

And of course, you need course 1234-123 for graduation but it is only offered every five years and it was offered last year.

Now, if students would pay more for a course with fewer participants…

Run the numbers backwards. Let’s assume that the UNM professors are at least as productive as you (253 students and 10 credit hours per year) and that the students average 30 credit hours per year (so the prof ‘earns’ 1/3 of their tuition).

For every $1000 in tuition, you see a shade over $84,000 per professor. If you assume 50% is going to over head (air conditioning/heating, mowing the grass, etc). That would have a university that charged $5000 in tuition a year (a bargain), having $210K per professor.

The problem though is that for every faculty member, there is at least one administration person. http://www.outsidethebeltway.com/archives/2008/03/university_administrators_outnumber_faculty_/

So the problem isn’t that you are generating $2M+ in tuition, the problem is that you aren’t generating enough to pay for the administration that decides that you are being subsidized.

Am I seeing some sort of “profit sharing” plan being advocated here?

Steve, I considered a similar calculation not long ago in PJM, looking at the amount of money spent per student in the New York City school system.

It turns out that somehow, one teacher in an NYC school, with 24 students, accounts for $339,000 of revenue.

So who are they subsidizing?

Unless each of your 253 students took a full 10 credit hours of classes from you, you are greatly overestimating your revenue.

This must also be true for elementary school teachers.  Since each student represents about $12,000 budget expenditure, and there are about 25 students for every teacher, this means one class represents $300,000.  But wait, service organizations usually payout about half of their revenues in payroll and benefits.  And there are also administrators, and they are approaching a 1-to-1 parity with teachers.

So an elementary school teacher making about $75,000 in salary and benefits seems ballpark to me.

So if you are not outsourcing any of your service activities to other staff (such as branding & marketing), then I agree with dcpi that you have a case to be earning about half a mil in salary and benefits.

Tout D. Suite beat me to it. 
I bet it’s more like 2 or 3 credit hours per student, times 253 students; not 10 times 253.

$900/credit hour x 3 credits hours/ student x 253 students comes to $683,100 by my calculations.  Still a handsome amount of revenue, but not 7 seven figures…

This analysis is laughably bad.  Not only has the professor made a basic mathematical error (see above comments), but he is also guilty of 1) cherry picking the year (how are we to count sabbaticals?); 2) cherry picking the teaching style (Professor Bainbridge prefers lecturing over the Socratic method or other styles of teaching which require a higher teacher/student ratio); 3) drawing incorrect conclusions from his analysis (he seems to be applying a labor theory of value – I never realized he was a Marxist!). 

Of course the intent is to critique the original analysis cited by Tyler Cowen, which I will not defend because I did not read the study.  However, from the article cited, it seems a thoughtful tool to help evaluate the costs and benefits of an educational program.  I am looking forward to UCLA Law’s version of a “Financial Sustainability Analysis”. (And I suspect Professor Bainbridge would come out rather well – as would any Business Organizations teacher.)

I’d like to see them apply a similar analysis to the school’s administration and their salaries…