How Much Is a College Campus Worth?

How Much Is a College Campus Worth?

A university campus in Vermont has come up for auction. The minimum opening bid for the 155-acre grounds of now-defunct Green Mountain College, appraised four years ago at $20 million, is $3 million.

I can’t afford it myself. Still, I can’t help asking: What if a wealthy benefactor bought the place, started a new college or university, and put really smart people in charge? Could they sidestep the varied problems in higher education today — the high cost, the mediocre teaching, the excess political correctness?

Sadly, I think the answer is no.

First, hiring would be difficult. Even if enough people wanted to move to Vermont, this new university would basically have to re-create the talent pool at other, more established institutions, thus replicating their basic character. If anything, the new school probably would have to hire the malcontents, as they are the most likely to leave their current jobs for a new and untested venture. If you think existing universities have too much infighting and rancor, wait till you see this new project.

You might think that the leaders of the new college could shape and improve the incentives of their faculty. But that isn’t easy. For many talented people, the key incentives are outward-facing — they will be looking to get published and win rewards, prizes and eventually job offers from the outside world. Creating a new institution does not change these basic incentives, for better or worse.

Alternatively, you might try to make their rewards more inward-looking — pay them a big bonus if they contribute to campus life in the right way. But that tends to be expensive and to reward people who are good at gaming the system, again increasing the risk of fractiousness. Nor would it attract academic superstars, who typically excel at marketing themselves to the wider and wealthier outside world.

Maybe you could market your university as a kind of safe haven for professors who were “canceled” for their controversial pronouncements at their previous institutions. That would not change the fact that their larger reputations would remain ruined for some time, however undeservedly.

What possible advantages might the new university have?

Maybe it could economize by hiring relatively few administrators. But that’s not necessarily a selling point for prospective students. In the opening years, what would the school have to offer compared to public universities in such states as Wisconsin or Texas, much less Harvard or Princeton?

The record of new colleges and universities is not encouraging. My home institution, George Mason University, which dates from the 1970s, is one of the relatively few successes. But even with a rapidly growing region behind it and a succession of above-average presidents, it took the school almost 50 years to become recognized as a top research university.

You might wonder why a list of top schools, as measured in 1911, is close to that same list today, except of course that newer schools such as Stanford arose on a West Coast that was rapidly being settled and developed. You couldn’t find the same persistence of quality in any other sector in the U.S., except perhaps professional baseball.

The issue is how to attract a cluster of talent. Smart people wish to go to Harvard because other smart people go there, and that creates a self-reinforcing dynamic. This is in contrast to the corporate world, where top talent is (sometimes) willing to join risky new ventures because of the financial reward. If you were an early employee at Facebook, for example, you are probably much wealthier now than if you had gone to work for Yahoo or AOL.

Non-profit academic institutions, obviously, are not able to offer new employees options or equity. While the best of them accumulate wealth, they don’t have much in terms of a distributable surplus. For-profit universities, meanwhile and for whatever reasons, have been an unmitigated disaster. Many did not have strong incentives for long-term value creation and are now disgraced or bankrupt.

So, about that auction: It’s scheduled for Aug. 18. I am sorry to report, however, that if you want to create a top new academic institution, you will need to consider a bolder move than buying a slightly used college campus at a steep discount.

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

Tyler Cowen is a Bloomberg Opinion columnist. He is a professor of economics at George Mason University and writes for the blog Marginal Revolution. His books include "Big Business: A Love Letter to an American Anti-Hero."

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