The greatest barriers to estimating the output of higher education derive from the fact that most institutions are multi-product firms.2 Large research universities produce undergraduate, professional and graduate degrees, research (including patents and pharmaceutical development), medical care, public service activities (especially at land grant universities), entertainment (such as cultural and athletic events), and other goods and services from a vector of capital, labor, and other inputs. Community colleges produce remedial education, degree, and certificate programs designed for graduates entering directly into careers, academic degree programs that create opportunities for transfer to four-year institutions, and programs designed to meet the needs of the local labor market and specific employers. It is admittedly extremely difficult to develop accounting structures that capture the full value of these outputs which accrue to both private and public entities.3

Firms and sectors in other areas of the economy produce multiple goods and services as well. An automobile manufacturer, for example, may produce cars, trucks, and airplane parts; a bank may offer loans as well as an automatic teller machine, checking accounts, and a range of other services. While it can be difficult to specify a functional form that represents the technological input-output relationships that exists for multi-product producers, it has been done (Christensen, Jorgensen, and Lau, 1973; Diewert, 1971). The range and nature of outputs produced by higher education, however, makes such estimation much more complex than for most other industries.

Though the panel’s recommendations in Chapters 5 and 6 focus on improving measurement of instructional inputs and outputs, research, and other scholarly and creative activities should be acknowledged in a comprehensive accounting because they are part of the joint product generated by universities. Among the difficult analytical problems created by joint production are how to separate research and development (R&D) production costs from degree production costs; how to compare the relative value of research and degree output; and how to assign faculty and staff time inputs into each (which raises the problem of separating different kinds of research, whether done at a faculty member’s initiative or with outside sponsorship). Judgments must be made in the process of separat-


2Triplett (2009:9) writes:

Measuring medical care output is difficult. Measuring the output of education is really hard.… The fundamental difficulty in education has little to do with test scores, class sizes and similar attributes that have figured so intensively in the discussion so far, though those measurement problems deserve the attention they are getting. More crucially, the output of educational establishments is difficult to measure because they are multi-product firms. They do not produce only education, they produce other things as well.

3McPherson and Shulenburger (2010) provide an excellent description of the multi-product nature of higher education institutions, plus a sensible first attempt to separate these into educational and other components. On the regional impact of universities, see Lester (2005).

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