Measuring cost escalation in the formative era of U.S. higher education, 1875–1930

Abstract

ABSTRACT Cost escalation in higher education in the United States prior to 1930 has scarcely been studied, even though the period from the 1870s to the 1920s was formative for U.S. higher education. This article develops and explains a method to measure the cost during this period. The authors then compile more accurate cost data than have been available, calculate new cost indexes for higher education from 1875 to 1930, and compare these indexes to economy-wide indexes. The striking findings inform the two leading economic theories of cost escalation, advanced by economists Howard R. Bowen and William G. Bowen. Cost escalation in total expenses of higher education occurred consistently between 1875 and 1930, and exceeded the worrisome rate that economist Howard Bowen found for the period from 1930 to 1977. Cost escalation did not occur in the more salient per capita terms. This latter finding, combined with recent historical research, supports the “revenue theory of cost” of Howard Bowen and challenges the “cost disease theory” of William Bowen.