Antioch R.I.P.

Antioch College announced its demise late last week. This is pretty unusual in higher education, a remarkably stable industry where institutions rise and fall but rarely drop off the board altogether. Since the last time the general public heard of Antioch was in the early '90s, when its parody-defying sexual conduct policy became a totemic example of P.C. excess, the college's downfall has inspired many people to note that there are apparently theoretical limits to hard-left ridiculousness, even in academia. Some of this commentary, like Michael Goldfarb's piece in yesterday's New York Times, has been pretty thoughtful. The rest, like the utterly predictable cackling at NROnline, not so much.

But the Antioch story also says a lot about modern higher education finance. One of the main reasons college tuition goes up so much every year is that, despite the increases, the vast majority of students still pay less than the market rate. For students attending public colleges and univerisities, that's because governments subsidize and control the price. At private institutions with selective admissions policies, tuition is below the market rate by definition (there are obviously limits to this, since selecitivity is in many ways the most important thing these institutions are selling, but there's little doubt that Yale could increase tuition or enrollment substantially without depressing demand).

The only institutions really out there on the ragged edge of the market, staying open purely with the revenue that customers are willing to pay for their services, are the relatively non-selective private colleges with small endowments. There are a lot more places like this than many people realize, particularly in the Midwest, where prior to the development of land-grant colleges and public higher education systems in the 19th century, states took a laissez-faire approach to chartering private colleges, most of which--like Antioch--had religious origins.

Some colleges are coping by becoming increasingly sophisticated at price discrimination, where instead of charging all customers the equilibrium market rate, a firm figures out how to walk up the demand curve and charge each customer the maximum amount they're willing to pay. Sports teams do this by selling courtside seats to rich people for phenomenal prices, even though the seatts are only marginally closer to the action than much cheaper seats a few rows back. Retailers do it by starting with an above-equlibrium price and then steadily dropping prices through sales. Colleges do something similar--start with very high tuition rates that only a few students pay in full, and then offer "discounts" on a case by case basis. Colleges are in a unique position to price-discriminate effectively because they--unlike sellers in a normal market--require customers to disclose incredibly detailed information about their ability to pay, in the form of financial aid forms, before they decide how much to charge them. (Erin Dillon wrote about this trend last year.)

But apparently if your enrollment drops low enough and your management is bad enough and your endowment has long since been squandered, it's possible to drive an institution like Antioch, despite a long and proud history that, in its totality, few colleges can match, into the ground. It's a shame.