This post builds on Michael’s recent post.Â Â I focus on two changes to the incentive system. Â Al Roth shared the 2012 Nobel Prize (with my colleague Lloyd Shapley) for his work on mechanism design. Â Â This subfield offers some clues for how to achieve our worthy goal of a better education at a relatively low cost.
1. Â The University of Chicago’s Booth School of Business gives each MBA student a fixed amount of “currency” to bid on enrolling in classes. Â Prices adjust so that the aggregate demand for each class equals the total capacity for the class (perhaps 60 people). Â Professors receive a bonus and recognition if their course prices are high. Â Â Students face key tradeoffs. Â Do they pay a high price to take a class with Cochrane, Fama, or Goolsbee but then must enroll in “Average Joe” sections for their other courses? Â Or, do they substitute away from superstar teachers and enroll in a set of very good classes? Â Why can’t the UC campuses adopt some version of this? Â Intro and intermediate classes have several sections. Â At the upper division level, departments offer multiple electives that could be bench-marked relative to each other. Â Â Today, the UC has an inefficient enrollment system that maximizes “mismatch”. Â Each quarter, there are dozens of students signing up for my class Â and then dropping out while dozens of other students send me sad emails about why they have always wanted to take my class but again they are locked out. Â A price system would allocate the scarce resource efficiently as my classes would enroll the students who want to be there. Â Â The time averaged market prices (perhaps over 3 years) Â would give Deans the material they need to evaluate teacher quality. Â An economist would allow students to buy more of the “course bidding currency” but I have the feeling that the RBC would oppose this.
2. A second idea for improving UC undergraduate teaching is to allow the campuses to set their own tuition. Â Weak teaching institutions would charge a lower tuition price. Â Each professor at the UC would be required to post a lecture (chosen at random by Oakland) to YouTube so that potential students could judge “the goods”. Â The UC President’s Office could conduct some random audits where “students” sit in lectures and listen. Â While of course academic freedom must be protected, such accountability audits would increase Professor effort. Â With floating tuition, Deans would be incentivized to nudge Department Chairs and to invest more in Ph.D. graduate students who might have some skills as Teaching Assistants. Â Department Â Chairs would think harder about new faculty hires, Â the assignment of incumbent professors to classes and the attributes of new admits to their Ph.D programs. Â Â Rules matter!