Improving higher education using the principles of market-based management®

Abstract

In The Wealth of Nations Adam Smith described the perverse incentive structures found in certain universities. Smith (1776, 350) wrote, "In the university of Oxford, the greater part of the public professors have, for these many years, given up altogether even the pretence of teaching..All that such superiors..can force him to do, is to attend upon his pupils a certain number of hours, that is, to give a certain number of lectures in the week, or in the year". Smith acknowledged the power of incentives that allow teachers to underperform and fail to deliver long-term value to students. We believe that Smith hit the nail on the head when he explained, "the discipline of colleges and universities is in general contrived, not for the benefit of the students, but for the interest, or, more properly speaking, for the ease of the masters" (Smith, 352). It is, but perhaps should not be, surprising how little has changed in more than 200 years. This paper suggests practical steps toward improving higher education using the basic ideas of economics and the management philosophy Market-Based Management (MBM). © 2010 Springer Science+Business Media, LLC.