Applying Economics to Institutional Research (review)

For those with administrative responsibilities or hoping to pursue an administrative career in higher education, Applying Economics to Institutional Research is required reading. This economics primer edited by Toutkoushian and Paulsen is written in prose understandable to individuals who possess only a slight familiarity with economic principles, to graduate students enrolled in planning and budgeting courses, and to institutional researchers. While the volume targets researchers, all administrators should understand the potential that economic theory possesses to serve as a framework for understanding budgeting, enrollment management, and faculty workload, among other administrative processes in higher education.

Toutkoushian and Paulsen open the volume with a brief overview of basic economic theory, using examples from higher education to illuminate their points. Although this is an excellent and clearly written overview, individuals with no prior exposure to economic theory may want to consult some of the supplemental references on basic economic theory cited in the text. Readers with some familiarity of economics will find the first chapter a good refresher on basic economic concepts and how these concepts can be related to higher education.

The volume continues with four chapters, each demonstrating how economics can be applied to specific administrational issues in higher education. While all of these chapters address the role that the institutional researcher might play in these analyses, for the most part, this volume does not address the specific procedures required to conduct the analyses. Readers looking for specific instruction on procedures and more technical information are advised to consult the referenced research and sources such as the Association for Institutional Research.

Cheslock's Chapter 2 examines how economics can help institutional researchers understand revenues in higher education—an increasingly important factor as institutions pursue revenue streams beyond tuition, endowments, and state support to enhance resources. Cheslock is quick to remind the reader that opportunity costs are associated with increasing revenues and must be considered.

Experienced administrators may not need the short section comparing public and private revenue sources, but novice practitioners and students may find it beneficial. I particularly liked the illustration of rising tuition and subsequent negative impact on enrollment, reminding us that increasing price does not always increase revenue. We can appreciate the complexities of tuition setting as a major driver, not only for revenue, but also for enrollment management.

The Brinkman chapter moves the volume from revenue to cost. Simply, cost can be thought of as price, but Brinkman illustrates more complex and hopefully more precise methods of determining costs. He begins the chapter with a very fundamental discussion of what "costs" are, then compares methods for determining costs, including useful examples of cost functions. While this chapter does not equip an inexperienced institutional researcher with the tools to conduct cost studies, it does go beyond the basic notion of instructional costs divided by FTE.

In the fourth chapter, DesJardins and Bell take the basic economic concepts presented throughout the book and apply them to enrollment management. They make the important point that enrollment management is a complex balance of supply and demand variables. The authors do an excellent job of using higher education examples to illustrate economic principles, such as using elasticity of demand to describe the impact of a change in tuition price at one institution on the enrollment at a second institution.

Knowing the enormous personnel costs in higher education, the constructs related to faculty, introduced in the fifth chapter, are especially useful. Toutkoushian focuses on four broad categories of institutional research on faculty—external reporting for the institution, internal reporting for the institution, internal analyses of the faculty for administrators, and scholarly research. He applies the economic theory of scarcity to illustrate the allocation of faculty time, introducing the influence that compensation and perspectives of external constituencies have on faculty time allocation. Another important issue for faculty is the labor market. Toutkoushian uses labor market models to explain how relationships among buyers (institutions...