Bowen’s Rule (Bowen’s Law; Bowen’s Revenue Theory of Cost)
Howard Bowen (1908-1989) wrote about the “revenue theory of cost” in regard to higher education; the theory has been called “Bowen’s Law” and “Bowen’s Rule” since the 1990s and 2000s. It states:
1. The dominant goals of institutions are educational excellence, prestige, and influence.
2. In quest of excellence, prestige, and influence, there is virtually no limit to the amount of money an institution could spend for seemingly fruitful educational needs.
3. Each institution raises all the money it can.
4. Each institution spends all it raises.
5. The cumulative effect of the preceding four laws is toward ever increasing expenditure.
Bowen’s Rule shows that colleges can have wildly different cost-per-student averages. The rule has been used to explain the increasing costs of a college education.
Wikipedia: Howard Bowen
Howard Rothmann Bowen (October 27, 1908 – December 22, 1989) was an American economist and college president, serving as the president of Grinnell College from 1955 to 1964 and as the fourteenth President of the University of Iowa from 1964 to 1969. Bowen then served as president of Claremont Graduate University from 1970 to 1971. He is remembered for the formulation of “Bowen’s Law,” a description of spending in higher education.
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Costs of Higher Education is best known for Bowen’s Revenue Theory of Costs, sometimes called Bowen’s Law:
...at any given time, the unit cost of education is determined by the amount of revenues currently available for education relative to enrollment. The statement is more than a tautology, as it expresses the fundamental fact that unit cost [i.e., the cost of education] is determined by hard dollars of revenue and only indirectly and distantly by considerations of need, technology, efficiency, and market wages and prices. (p. 19)
Bowen’s book provided plentiful evidence that higher education institutions of similar size, situation and repute had radically different costs per student, and spent each dollar differently from one another. Their different costs were a function of their different histories in raising money.
OCLC WorldCat record
The costs of higher education : how much do colleges and universities spend per student and how much should they spend?
Author: Howard Rothmann Bowen
Publisher: San Francisco : Jossey-Bass Publishers, 1980.
Series: Carnegie Council series.
Edition/Format: Book : English : 1st ed.
Google Books
The Costs of Higher Education:
How much do colleges and universities spend per student and how much should they spend?
By Howard R Bowen
San Francisco, CA: Jossey-Bass
1980
Pg. 17:
The Revenue Theory of Cost Summarized
Pg. 19:
1. The dominant goals of institutions are educational excellence, prestige, and influence.
Pg. 20:
2. In quest of excellence, prestige, and influence, there is virtually no limit to the amount of money an institution could spend for seemingly fruitful educational ends.
3. Each institution raises all the money it can.
4. Each institution spends all it raises.
5. The cumulative effect of the preceding four laws is toward ever increasing expenditure.
Google Books
Straight Talk about College Costs and Prices:
Report of the National Commission on the Cost of Higher Education
By James Harvey, et al.
Phoenix, AZ: Published at the request of the National Commission on the Cost of Higher Education by the American Council on Education and the Oryx Press
1998
Pg. 86:
Bowen’s law: “universities will raise all the money they can and spend all the money they raise” (“raising money” means generating funds from all possible sources, not just from gifts). Bowen’s law follows directly from the economic theory of non-profit entities.
Google Books
Pruning the Ivy:
The Overdue Reform of Higher Education
By Milton Leontiades
Charlotte, NC: IAP/Information Age Pub.
2007
Pg. 19:
William Bowen (1967), a former university president, observed that costs move up to meet perceived needs and coined what is commonly known as Bowen’s Law: “Universities will raise all the money they can and spend all the money they raise.”
Google Books
Globalization’s Muse:
Universities and Higher Education Systems in a Changing World
By John Aubrey Douglass, C. Judson King and Irwin Feller
Berkeley, CA: Public Policy Press/Center for Studies in Higher Education: Institute of Governmental Studies
2009
Pg. 131:
Bowen’s Rule
All universities, and in particular major institutions with or seeking elite status, will use any and all funds they receive for the pursuit of perceived excellence and improvement.
Inside Higher Ed
Breaking the Cost Spiral
August 7, 2009 - 3:00am
Robert Martin and Andrew Gillen
In 1980, Howard R. Bowen’s revenue theory of cost was put forth to explain the financial trends of higher education. The basic idea was that colleges and universities will spend everything they have, so if you increase their revenue, you should expect their costs to go up too, creating a spiral.
Google Books
Doing More with Less:
Making Colleges Work Better
By Joshua C. Hall, editor
New York, NY: Springer
2010
Pg. 23:
The ravenous need o schools for money was originally described as “Bowen’s Rule—All universities, and in particular major institutions with or seeking elite status, will use any and all funds they receive for the pursuit of perceived excellence and improvement. Bowen’s Rule has been confirmed by others such as Charles Clotfelter, who, as Wilkinson (2005) noted, showed that colleges “increased their prices and general spending because they could get away with it—not to make money in itself but to buy the best of nearly everything.” (Emphasis original)
ACTA (American Council of Trustees and Alumni)
George Will, Bowen’s Law, and the Case for Quality
Posted by wgonch on May 21, 2012 at May 21, 2012 09:38 AM
George Will’s column reminds us of Bowen’s law: the cost of education is determined by the available resources. Colleges compete on reputation and prestige, not quality and price; snazzy building projects and expensive new academic programs enhance their prestige. Their incentive is to raise tuition as much as possible: over the past 25 years they have raised it 440%.
We cannot control costs by throwing money at schools because they will eat as much money as we give them.
Reuters
Why is NYU building?
By Felix Salmon JULY 9, 2012
(...)
In both cases, it seems, the faculty seems pretty happy with the state and status of the university as it stands, and are looking for low-risk stewardship. The trustees, by contrast, are much more aggressive, and are looking for growth and full-bore engagement in the higher-education arms race known as Bowen’s Rule. Here’s how Howard Bowen put his five-point rule in 1980:
1. The dominant goals of institutions are educational excellence, prestige, and influence.
2. In quest of excellence, prestige, and influence, there is virtually no limit to the amount of money an institution could spend for seemingly fruitful educational needs.
3. Each institution raises all the money it can.
4. Each institution spends all it raises.
5. The cumulative effect of the preceding four laws is toward ever increasing expenditure.
Twitter
Gerry Canavan
@gerrycanavan
Bowen’s rule states colleges raise all the money they can + then spend it on an unlimited list of projects that seemingly enhance ‘quality.’
7:32 PM - 1 Nov 12