The most popular explanation why the cost of education has increased is bloat. Elizabeth Warren and Chris Christie, for example, have both blamed climbing walls and lazy rivers for higher tuition costs. Paul Campos argues that the real reason college costs are growing is “the constant expansion of university administration.” Redundant administrators are also commonly blamed for rising public school costs.In other words there is some increase in administrative costs, but they are rising at the same rate as the cost of instruction and remain a small part of the overall picture.
The bloat theory is superficially plausible. The lazy rivers do exist! But the bloat theory requires longer and lazier rivers every year, which is less plausible. It’s also peculiar that the cost of education is rising in both lower and higher education and in public and private colleges despite very different competitive structures. Indeed, it’s suspicious that in higher education bloat is often blamed on competition–the “amenities arms race“–while in lower education bloat is often blamed on lack of competition! An all-purpose theory doesn’t explain much.
More importantly, the data reject the bloat theory. Figure 8 shows spending shares in higher education. Contrary to the bloat theory, the administrative share of spending has not increased much in over thirty years. The research share, where you might expect to find higher lab costs, has fluctuated a little but also hasn’t risen much. The plant share which is where you might expect to find lazy rivers has even gone down a little, at least compared to the early 1980s.
Baumol's Cost Disease, a theory that says as most of the economy becomes more labor efficient, costs in areas where labor does not become more efficient rise exponentially. Since education is done at the same ratio of teachers to students, the cost goes up every year.
I find this significant because Tabarrok at least is a libertarian prone to blaming bureaucracy for everything, so if he find that administrative bloat can't explanation rising college costs, I tend to believe him.